News / Monitor to consult on framework

Monitor will consult later this year on using consolidated financial data within its compliance framework.

In a September bulletin to FTs, the regulator said: ‘It is likely this consultation will propose that financial risk ratings, prudential borrowing limits and the private patient income cap should all be calculated on the basis of consolidated financial data.’ It added that this would include consolidated charities where they met the relevant control tests for accounting purposes.

As part of the move to international financial reporting standards, international accounting standard IAS 27 requires the consolidation of subsidiaries where certain control tests are met. At the start of the year, the Department of Health agreed with the Treasury that the new accounting treatment would be deferred for a year to enable further discussion about the change and in particular any impact on an NHS charitable fund’s charitable status.

NHS trusts and FTs were asked to notify the Department by the end of September where they were would be seeking to change charitable funds’ existing corporate trustee arrangements to independent trusteeship.

A spokesman for the Department told Healthcare Finance: ‘The Department is currently working with NHS organisations and other relevant parties to ensure that these requirements are applied appropriately from 2010/11.’

The Department is expected to write to NHS organisations with a progress report soon.

Monitor acknowledged that there were arguments for and against using consolidated data in its compliance framework. However, it pointed out that using consolidated data was consistent with the treatment of other FT entities and would ensure quarterly returns could be reconciled to audited accounts.

The Department is understood to be considering its approach on managing financial performance if consolidation proceeds.