Comment / NEDs key to early warning

‘More trusts considered for financial special measures. Board upheaval at governance failure trust.’ ‘Provider bailouts shake-up after “nasty surprise” warnings.’ These are just three recent headlines that demonstrate that, after six years of austerity and continued unprecedented growth in demand, finances across the NHS are tighter than ever.

The sustainability and transformation fund is helping providers to meet some of these pressures. But the regime around this fund – including the requirement to deliver against control totals – has increased the pressure on boards to forecast accurately and deliver forecast results quarter by quarter, or even month by month.

This would be tough enough to achieve at a time of organisational stability. But at NHS Improvement, we are aware that we are asking trusts to deliver against tough financial targets, while simultaneously committing their management to the substantial strategic review required by the sustainability and transformation plan (STP) project and its ambitious timetable.

We are now into the new planning round. On the one hand there is good news that we are proposing a two-year budget, which should allow organisations more breathing space to make plans that run beyond just a 12-month period, and which will allow some flexibility in tackling deficits across the STP footprints. But on the other hand, the timetable for agreeing these two year plans is tighter than normal – can we try to get everything done before Christmas?

How can non-executives help hard-pressed management to meet these potentially conflicting demands for their attention? No-one wants to be part of a failing board, and the pressure to deliver on all fronts seems relentless. So, if I were the finance director of a trust today, what would I want from my audit committee?

Well, never has the definition of a non-executive director as a critical friend seemed more appropriate – perhaps with the emphasis on ‘friend’. This is no time for a ‘them and us’ approach to the situation, boards have to pull together and focus on the priorities. And the absolute priority has to be the safety of the patient and the quality of the care we offer to service users.

But, as the NHS Improvement stresses in recent board papers, we firmly believe that high quality sustainable services have to be underpinned and can only be guaranteed by affordable and sustainable financial plans.

Audit committees have a vital role in questioning and testing every assumption underlying the budget setting process. Non-executives have the time to stand back from the daily pressures and should think about what is going on in their locality.

Do the plans make sense in terms of forecast demand? We have seen far too many projections that fell over almost as soon as they were written because demand just continued to rise. Perhaps now is the time to ramp up conversations with the other non-executives in your stakeholder and partner organisations. Triangulation of opinions and assumptions across the patch will be crucial.

Finally, be sensitive to the pressure that management feels it is under. Think laterally about the behaviours this can cause and what it can do to risk appetites. Hiding bad numbers, mishandling invoices, suppressing bad performance news might be deliberate fraud, but it might also be wishful thinking, or organisational double-think.

If the finances are holding up in a surprising way, then spend extra time looking at the quality and safety indicators. We are all very conscious of how thin the corporate elastic can get as it is pulled in so many different directions. The job of the audit committee is to monitor where it is stretched to breaking point and shout a warning before it snaps.