making sense of the accounts. objectives to help you understand: your responsibilities in relation...
TRANSCRIPT
Making Sense of the
Accounts
Objectives
To help you understand:
• your responsibilities in relation to financial matters
• the format of the FT’s annual report and accounts
• what the primary financial statements report
• the role of the external auditor
• Monitor’s financial risk ratings
Making Sense of the Accounts3
Governors’ responsibilities in relation to financial matters
Financial matters
Governors’ responsibilities:
• to represent interests of members & partners in local health economy
• to receive FT’s annual report and accounts, and auditors report on accounts
- presented to governors at AGM
- opportunity to comment but not change
- informs governors about their other statutory duties
- forum for governors to ask questions
Making Sense of the Accounts5
Format of the annual report and accounts
Format of annual report and accountsAnnual report comprises:
• Directors’ report including and management commentary on the performance of the FT
• Remuneration report
• Code of Governance disclosures
• Quality report
• Sustainability, equality and diversity disclosures
Format of annual report and accountsAnnual accounts comprise:
• Foreword
• Four primary statements
- Statement of Comprehensive Income
- Statement of Financial Position
- Statement of Changes in Taxpayers’ Equity
- Statement of Cash Flows
- Notes to the accounts
• Directors’ Statement of Responsibilities
• Statement on Internal Control
• Auditor’s report
Making Sense of the Accounts8
What the primary financial statements report
What the primary financial statement reportStatement of Comprehensive Income
• records the FT’s income and expenditure for the year with any other recognised gains and losses
• includes cash items e.g. expenditure on staff and supplies, and non- cash e.g. change in value of the FT’s assets
• If income exceeds expenditure FT is in surplus, if expenditure exceeds income there is a deficit
What the primary financial statements reportStatement of Financial Position
• snapshot of the FT’s financial position at 31 March
• assets - what the FT owns or is owed,
• liabilities - what the FT owes
• taxpayers’ equity – public funds invested in the FT
What the primary financial statements reportStatement of Changes in Taxpayers’ Equity
• shows changes in Reserves & Public Dividend Capital over the year:
- Public Dividend Capital is the public sector equity finance based on the excess of assets over liabilities when the predecessor NHS Trust was established
- no prescribed format for this statement but Monitor includes an approach it its FT Annual Reporting Manual
What the primary financial statements reportStatement of Cash Flows
• summarises the cash flows in and out of the FT during the financial year
• cash flows are analyses under three headings:
- operating activities
- investing activities
- financial activities
• focus is on cash implications of FT actions
What the primary financial statements reportNotes to the Accounts
• further analysis of items on the face of the primary statements
- operating income and expenses
- property plant and equipment
• additional disclosures
- accounting policies
- critical accounting estimates and judgements
- Private Patient Income cap
- Prudential Borrowing Limit
Making Sense of the Accounts14
The role of the external auditor
The role of the external auditor
External auditors:
• satisfy themselves that the FT has:
– prepared its accounts properly
– made proper arrangement for securing economy, efficiency and effectiveness in its use of resources
• review the annual report to assess whether it is consistent with the financial statements
• report main audit findings to ‘Those Charged with Governance’ (Audit Committee)
• give an opinion to governors as to whether accounts are ‘true and fair’
Making Sense of the Accounts16
Monitor’s financial risk ratings
Monitor’s financial risk ratings
• Risk rating is an indication of the likelihood of a FT
breaching the terms of its authorisation
• Four key criteria:– achievement of financial plan– underlying performance – financial efficiency– liquidity
Objectives
To help you understand:
• your responsibilities in relation to financial matters
• the format of the FT’s annual report and accounts
• what the primary financial statements report
• the role of the external auditor
• Monitor’s financial risk ratings
Next steps
• Draft accounts ready for audit by 22 April
• Audited 2010/11 accounts and annual report due to be sent to Monitor by 7 June