Comment / Year-end accounts: not such a quiet year

Take the HFMA year-end survey

As the sun shines and we get more out of office messages, for providers the year-end accounts are a dim and distant memory. For those working in successor bodies to clinical commissioning groups, the preparation of three-month accounts is in full swing.

As 2021/22 was a relatively stable year, financial reporting-wise there did not seem to be much to ask in a year-end survey. In the run-up to the year-end, it appeared as if all the key changes in terms of financial reporting related to the annual report, rather than the accounts. The performance report was making a come back after a two-year absence during the height of the Covid-19 pandemic. And there were changes to the fair pay disclosures in the remuneration report.

There were no new accounting requirements for the year. Despite this, anecdotally, we are hearing that it was a difficult year-end process.

The message from NHS bodies is that the audit was difficult – that changes to audit teams mid-audit meant that they answered the same question several times, of lists of audit queries running into the hundreds, of increased sample sizes and last minute audit requests.

Auditors report a downward trajectory in the quality of draft accounts and working papers. Also, there is talk of unsupported transactions and a lack of understanding of the audit process.

As always, there are reasons for this on both sides. The impact of Covid-19 is still being felt in every walk of life. New variants have created surges in cases that were not fully anticipated and these have been accompanied by further increases in staff absence. Even without new Covid challenges, NHS staff across the board are tired from two years of intensive response to the pandemic and are trying to come to terms with what is likely to be the new normal.

For NHS finance teams, the deadline for submitting the draft accounts coincided with the re-submission of 2022/23 plans, which meant that there was less time and resource to prepare the accounts. The work needed to produce these plans cannot be underestimated. There is significant pressure to return to financial sustainability at a time when demand for NHS services is soaring and changes in allocations and uplift arrangements – in response to rising inflation and the pay settlement – have required further reworking of plans.

On the audit side, the whole audit market is under considerable pressure from its regulators and this is affecting the risk appetite of audit firms. Where there is an assessment of increased risk, then sample sizes, testing and levels of review will increase. Audit firms are struggling with staff recruitment and retention, particularly in the public sector.

Our year-end survey is shorter this year and is intended to identify the issues that arose and whether there is anything the HFMA can do to help the process for next year.

Please complete the survey if you were involved in any way in the year-end process. We would like to hear from everyone, not just one person from each organisation. The deadline for completing the survey is 9 September. We will publish the results of the survey during September.