NHS LA Finance

02 September 2014

Introductions

Tom Fothergill – Director of Finance & Corporate Planning Jean McFarlane – Management Accountant Steve Cain – Head of Financial Accounting Catherine O’Sullivan – Business Support Manager

Objectives

By the end of the session, you will be able to: Understand NHSLA Funding sources - Tom Read and understand a Statement of Financial Position -

Tom Read and understand a budget statement - Jean Read and understand workforce reports - Jean Understand the importance of purchase orders & coding -

Steve Understand Contracting and procurement rules -

Catherine

Your Finance Team

Deputy Director of Finance

Debbie EnglandExt. 2783

Head of Financial AccountingSteven CainExt. 2789

Payments TeamAnastasia &

KayleighExt. 2845 &

2796

Income TeamDorrett & Miran

Ext. 2885 & 2799

Management Accountant

Jean McFarlaneExt. 2798

Assistant Business

AccountantAlex Malpass

Ext. 2881

Sources of Funding

£6m £1.1m

NCAS

£111m ELS/Ex RHA Funding CNST Membership £1 bn

£0.65m Equal Pay LTPS Membership £55m

£0.99m FHSAU PES Membership £5m

Overhead Departments

£0.39m £11.6m

NHSLA

£1.2 bn

Department of Health

Funding

Private

Funding

Financial ControlsBudgets

The Director of Finance has corporate responsibility for the financial governance of the NHS LA and assurance and advice to the Board.

Financial Controls

The Board receive regular reports on the financial position of the NHS LA.

The Standing Orders, Standing Financial Instructions (SFIs) , Scheme of Delegation and Accounting procedures set out how we manage our financial responsibilities and our business. They are designed to ensure the NHS LA financial transactions are carried out in accordance with best practice.

Budget and Variance Reports

The budget for each directorate is set on an annual basis. The NHS LA produces Directorate Budget reports on a monthly basis for distribution to budget holders. These are summarised for reporting to the Board.

Capital Programme

The Capital Programme sets out the NHS LA’s investment priorities. Funding for the capital programme is agreed with the Department of Health each year as part of the business planning process.

Audit

The NHS LA internal auditors are the Health Group internal auditors who take any Audit Reports to the Audit Committee throughout the year. The National Audit Office (NAO) are the NHS LA external auditors and review the NHS LA on an annual basis.

Annual Statement of Accounts

The NHS LA’s financial year end is 31 March and the Annual report and Accounts are published in the summer following audit and the public meeting.

Statement of Financial Position

The statement of financial position is one of the primary financial statements that the NHS LA publish. The purpose of the balance sheet is to give users an idea of the NHS LA’s financial position along with displaying what it owns and owes.

Example Statement of Financial Position

Guys & St Thomas NHS Foundation Trust

Statement of Financial Position as at 31 March 2014

31 March 31 March2014 2013£000 £000

Non-current assets:Property, plant & equipment 1,028,006 884,350Intangible assets 35,637 33,156Investments in associates 71 71Trade and other receivables 2,006 1,804Other Financial Assets 3,500 0Total-non current assets 1,069,220 919,381

Current assets:Inventories

Trade and other receivables 10,855 6,790Other Financial Assets 0 3,500

Cash and cash equivalents 135,878 129,389 Total current assets 254,248 216,522

Total assets 1,323,468 1,135,903

Current liabilities:Trade and other payables (126,997) (133,784)Tax Payable (14,278) (13,972)Other Liabilities (21,180) (15,962)Provisions (3,437) (3,503)Borrowings (2,953) (625)Total current liabilities (168,845) (167,846)

Non-current assets plus/less net current assets/liabilities 1,154,623 968,057

Non-current liabilities

Trade and other payables 0 (147)

Other Liabilities (329) (772)

Provisions (9,273) (8,720)

Borrowings (96,448) (29,405)Total non-current liabilities (106,050) (39,044)

Assets less liabilities 1,048,573 929,013

Long term assets that the company will hold for at least one year.

Liquid assets that can be readily converted into cash.

All liabilities of the business that are to be settled in cash within the fiscal year.

A business's long-term financial obligations that are not due within the present accounting year.

This is a copy of Guys & St Thomas’ statement of financial position

Exercise: Statement of Financial Position

Please take 5 minutes to review the NHS LA Statement of financial position and note any comments/observations

NHS LA Statement of Financial PositionStatement of Financial Position as at 31 March 2014

31 March 31 March2014 2013£000 £000

Non-current assets:Property, plant & equipment 1,749 1,737Intangible assets 600 402Total-non current assets 2,349 2,139

Current assets:Trade and other receivables 10,855 6,790Cash and cash equivalents 21,533 18,992

Total current assets 32,388 25,782

Total assets 34,737 27,921

Current liabilities:Trade and other payables (29,335) (21,432)Provisions for liabilities and charges - known claims (1,122,000) (1,127,693)Provisions for liabilities and charges - IBNR (143,000) (105,000)Total current liabilities (1,294,335) (1,254,125)

Non-current assets plus/less net current assets/liabilities (1,259,598) (1,226,204)

Non-current liabilitiesProvisions for liabilities and charges - known claims (9,408,097) (8,466,262)Provisions for liabilities and charges - IBNR (15,430,000) (13,259,000)

Total non-current liabilities (24,838,097) (21,725,262)

Assets less liabilities (26,097,695) (22,951,466)

Management Accounts

Debbie EnglandJean McFarlane

02 September 2014

Management Accounting

Whilst there is no legal requirement to prepare management accounts, few businesses could expect to survive or thrive without them. Management accounts are prepared to meet the specific needs of the user and typically include both financial and non financial information.

Management accounts have the following characteristics:

• Record, plan and control the activities of a business

• assist in the decision-making and decision-taking processes.

• Can be prepared for any period of time such as daily, weekly, monthly or yearly.

• Reports can be both forward looking or historic or a mix of both.

What is a Budget?

A “Budget” is a plan expressed in financial terms for a defined

period of time usually showing expenditure and/or income

employed to attain a given objective.

In this capacity budgets are meant to serve several purposes. These are to:

- enable planning- enable performance monitoring- co-ordinate activity- allow the implementation of the plan- communicate- motivate- authorise action

Structure of Budget Reports

Budgets contain details of expenditure and income in all or part of thefollowing categories: -

Income Department of Health Funding Private Income

Expenditure Pay (salaries of NHSLA employees, secondees and agency staff) Non Pay (consumable items e.g. stationery, rent, travel etc…)

Manual Accounting Adjustments

• Accruals may be necessary for goods and services that have been received in the period being reported but for which no invoice has yet been received and registered on the payments system.

• Likewise prepayments made for goods and services that are in the future (e.g. rent), will need to be removed from the current period accounts.

• These adjustments ensure that the correct expenditure is reflected in the accounts for the period being reported.

Responsibilities of Budget Holders

The following are the responsibilities of Budget Holders:

• to contain expenditure within budget.

• to ensure that all expenditure attributed to the budget has been requisitioned and authorised by an appropriate designated officer or the Budget Holder using an official purchase order.

• to review budgetary information on a regular basis and undertake any corrective action that may be required to bring it in line with the plan.

• to liaise with the Finance Department to assist in the setting of budgets on an annual basis.

.

Responsibilities of the Finance Department

The following are the responsibilities of the Finance Department with respect to budgets:

• to prepare budget reports in a timely, accurate and meaningful fashion.

• to investigate, in conjunction with the Budget Holder, and report variances in the financial, activity and manpower information contained within the budgets.

• forecast income and expenditure outturn, in conjunction with the Budget Holder, based on the most up-to-date information available

• to support and maintain the system controlling and authorising expenditure

• to advise Budget Holders on current and future financial issues and opportunities

• to assist in the preparation on budgets

• to produce additional information that may be required by the Budget Holder to enable their effective management of resources.

Example Budget StatementJune 2014

Annual Current Month (WTE)

Budget (£) Budget (£) Exp/Inc (£) Variance (£) Budget In Post Variance

INCOME

Department of Health Funding (702,585) (175,646) (175,646) 0

TOTAL INCOME (702,585) (175,646) (175,646) 0

PAY EXPENDITURE

DEPT A 403,662 100,916 94,328 (6,587) 9.50 9.00 (0.50)

TOTAL PAY EXPENDITURE 403,662 100,916 94,328 (6,587) 9.50 9.00 (0.50)

NON PAY EXPENDITURE

Postage 375 94 298 204

Printing & Stationery 500 125 0 (125)

Photocopying 600 150 115 (35)

Archiving 500 125 638 513

Staff Welfare 300 75 0 (75)

Hospitality 200 50 33 (17)

Courier Costs 400 100 0 (100)

Accommodation Costs 2,875 719 1,084 365

Travel & Subsistence 6,700 1,675 1,013 (662)

Professional Subscriptions/Education 300 75 0 (75)

Pro Advice/Legal Services/Advert 111,356 27,839 24,658 (3,181)

IT 4,600 1,150 2,300 1,150

Communications 3,500 875 650 (225)

Rates 25,000 6,250 6,250 0

Rent 37,532 9,383 9,383 (1)

Insurance 15,000 3,750 3,000 (750)

Facilities Expenses 81,032 20,258 19,283 (976)

Other Legal Costs 92,060 23,015 25,056 2,041

Other/Misc 0 0 0 0

TOTAL NON PAY EXPENDITURE 298,923 74,731 73,394 (1,337) - - -

TOTAL EXPENDITURE 702,585 175,646 167,723 (7,924)

(UNDER)/OVER SPEND 0 0 (7,924) (7,924)

2014/15 Year to Date

Exercise: Budget Statement

Please spend 15 minutes reviewing the following budget statement and answer the 5 questions

Budget Statement ExerciseAdministration (Dept A)

Income and Expenditure Account

June 2014

Annual Current Month (WTE)

Budget (£) Budget (£) Exp/Inc (£) Variance (£) Budget In Post Variance

INCOME

Department of Health Funding (702,585) (175,646) (175,646) 0

TOTAL INCOME (702,585) (175,646) (175,646) 0

PAY EXPENDITURE

DEPT A 403,662 100,916 147,653 46,737 9.50 7.00 (2.50)

TOTAL PAY EXPENDITURE 403,662 100,916 147,653 46,737 9.50 7.00 (2.50)

NON PAY EXPENDITURE

Postage 375 94 57 (37)

Printing & Stationery 2,500 625 1,500 875

Photocopying 6,000 1,500 0 (1,500)

Archiving 500 125 150 25

Staff Welfare 300 75 38 (37)

Hospitality 200 50 33 (17)

Courier Costs 400 100 0 (100)

Accommodation Costs 10,275 2,569 1,778 (791)

Travel & Subsistence 6,700 1,675 4,200 2,525

Professional Subscriptions/Education 300 75 0 (75)

Pro Advice/Legal Services/Advert 100,000 25,000 56,452 31,452

IT 4,600 1,150 1,150 0

Communications 3,500 875 650 (225)

Rates 25,000 6,250 0 (6,250)

Rent 37,532 9,383 0 (9,383)

Insurance 15,000 3,750 3,750 0

Facilities Expenses 81,032 20,258 4,400 (15,858)

Other Legal Costs 96,016 24,004 22,156 (1,848)

Other/Misc 0 0 0 0

TOTAL NON PAY EXPENDITURE 298,923 74,731 90,136 15,405 - - -

TOTAL EXPENDITURE 702,585 175,646 237,789 62,142

(UNDER)/OVER SPEND 0 0 62,142 62,142

2014/15 Year to Date

1. What is the anomaly with Pay Expenditure?

2. What could be the reason for the variances on Printing & Stationery and Photocopying?

3. Comment on the variances for Rates and Rent.

4. Pro Adv/Legal Service/Advert is heavily overspent. Give reasons why this could be and what corrective action can be taken.

5. Comment on the overall position of the department.

Workforce Reports

• These are produced to enable managers to confirm to us that the staff charged to their budget statements are the correct ones.

• The information comes from the payroll system (ESR).

• Report shows:

• Permanent staff with the actual gross cost (i.e. the full cost to the employer including N.I. and pension) broken down by pay type and the WTE.

• Details of agency staff including a calculated WTE based on an estimate of their hours worked in the month

• It is an audit requirement that workforce reports are verified by managers.

Example Workforce ReportStaff Number

Dept Payscale Description Position Title

First Name

Last Name

AfC Spinal Point

WTE Ctr Hrs Assignment Category

Employee Category

Basic Pay Local Agreed Grp Pay

Non Consol Pay NP

Net Pay Cost

Employer's Contributions

Annual Pay

Budget

Gross Pay Budget

Actual Gross Pay Cost

Variance WTE Budget

WTE Variance

11111111 Dept A Non Review Body Band 6 Manager Jackie Smith 29 1.00 37.50 Permanent Full Time 8,633 0 86 8,719 1,890 42,516 10,629 10,609 (20) 1.00 0.0011111112 Dept A Non Review Body Band 6 Manager Jim Smith 27 0.50 18.75 Permanent Part Time 4,010 0 0 4,010 754 39,164 9,791 4,765 (5,026) 1.00 (0.50)11111113 Dept A Non Review Body Band 6 Manager James Smith 22 1.00 37.50 Permanent Full Time 6,706 0 0 6,502 1,389 33,452 8,363 7,891 (472) 1.00 0.0011111114 Dept A Non Review Body Band 6 Manager Jamie Smith 27 1.00 37.50 Permanent Full Time 7,942 0 0 7,623 1,679 39,873 9,968 9,302 (666) 1.00 0.0011111115 Dept A Non Review Body Band 6 Manager Julie Smith 22 1.00 37.50 Permanent Full Time 7,756 0 0 7,756 1,667 33,452 8,363 9,423 1,060 1.00 0.0011111116 Dept A Non Review Body Band 6 Manager Jack Smith 29 1.00 37.50 Permanent Full Time 8,633 25 86 8,744 1,900 42,516 10,629 10,644 16 1.00 0.0011111117 Dept A Non Review Body Band 4 Assistant Jill Smith 11 1.00 37.50 Permanent Full Time 4,735 0 0 4,735 379 24,243 6,061 5,113 (947) 1.00 0.0011111118 Dept A Non Review Body Band 4 Assistant Jane Smith 17 0.50 18.75 Permanent Part Time 2,752 0 28 2,780 460 12,962 3,240 3,239 (1) 0.50 0.0011111119 Dept A Non Review Body Band 4 Assistant Joan Smith 15 1.00 37.50 Permanent Full Time 5,316 0 0 5,316 1,072 25,952 6,488 6,388 (100) 1.00 0.0011111120 Dept A Non Review Body Band 4 Assistant Jordan Smith 11 1.00 37.50 Permanent Full Time 4,735 0 0 4,735 926 24,243 6,061 5,661 (400) 1.00 0.00Grand Total 9.00 61,216 25 201 60,919 12,117 318,371 79,593 73,036 (6,557) 9.50 (0.50)

Pay Type Description Jun 14 Year To Date

The funded establishment is set out in the Annual Business Plan, together with the staff budget.

Produced to enable managers to confirm to us that the staff charged to their budget statements are the correct ones and that they agree with the pay type description their staff have been paid under.

Exercise: Workforce Report

Please spend 15 minutes reviewing the following workforce report and answer the 4 questions

Workforce Report Exercise

1. Give an explanation for Jim Smith's underspend.2. Give an explanation for Julie Smith's overspend.3. Give an explanation for Joan Smith's overspend.4. Comment on the overall position of the department and what action needs to

be taken if any.

Staff Number

Dept Payscale Description Position Title

First Name

Last Name

AfC Spinal Point

WTE Ctr Hrs Assignment Category

Employee Category

Basic Pay Local Agreed Grp Pay

Non Consol Pay NP

Agency Pay

Net Pay Cost

Employer's Contributions

Annual Pay

Budget

Gross Pay Budget

Actual Gross Pay Cost

Variance WTE Budget

WTE Variance

11111111 Dept A Non Review Body Band 6 Manager Jackie Smith 29 1.00 37.50 Permanent Full Time 8,633 0 86 0 8,719 1,890 42,516 10,629 10,609 (20) 1.00 0.0011111112 Dept A Non Review Body Band 6 Manager Jim Smith 27 0.50 18.75 Permanent Part Time 4,010 0 0 0 4,010 754 39,164 9,791 4,765 (5,026) 1.00 (0.50)11111113 Dept A Non Review Body Band 6 Manager James Smith 22 1.00 37.50 Permanent Full Time 6,706 0 0 0 6,706 1,389 33,452 8,363 8,095 (268) 1.00 0.0011111114 Dept A Non Review Body Band 6 Manager Jamie Smith 27 1.00 37.50 Permanent Full Time 7,942 0 0 0 7,942 1,679 39,873 9,968 9,621 (347) 1.00 0.0011111115 Dept A Non Review Body Band 6 Manager Julie Smith 22 1.00 37.50 Permanent Full Time 7,756 0 0 0 7,756 1,667 33,452 8,363 9,423 1,060 1.00 0.0011111116 Dept A Non Review Body Band 6 Manager Jack Smith 29 1.00 37.50 Permanent Full Time 8,633 25 86 0 8,744 1,900 42,516 10,629 10,644 16 1.00 0.0011111117 Dept A Non Review Body Band 4 Assistant Jill Smith 11 1.00 37.50 Permanent Full Time 4,735 0 0 0 4,735 379 24,243 6,061 5,113 (947) 1.00 0.0011111118 Dept A Non Review Body Band 4 Assistant Jane Smith 17 0.50 18.75 Permanent Part Time 2,752 0 28 0 2,780 460 12,962 3,240 3,239 (1) 0.50 0.0011111119 Dept A Non Review Body Band 4 Assistant Joan Smith 15 1.00 37.50 Permanent Full Time 5,316 0 0 0 5,316 1,072 0 0 6,388 6,388 0.00 1.0011111120 Dept A Non Review Body Band 4 Assistant Jordan Smith 11 1.00 37.50 Permanent Full Time 4,735 0 0 0 4,735 926 24,243 6,061 5,661 (400) 1.00 0.00

Dept A Agency staff Temp 1.00 0 0 0 3,725 3,725 0 0 0 3,725 3,725 0.00 1.00Grand Total 9.00 61,216 25 201 3,725 65,167 12,117 292,420 73,105 77,284 4,179 8.50 1.50

Jun 14 Year To Date

The Importance of Purchase Orders

Steve Cain02 September 2014

What is a Purchase Order?

A purchase order is a document that is sent by a buying organisation to a supplier of goods or services detailing;

• Quantity of goods / details of services

• Price per unit / service provided

• Delivery address

• Billing address

Why use a Purchase Order?

• Enables an organisation to keep track of committed expenditure.

• Enables an organisation to forecast expenditure in relation to goods/services ordered not delivered / invoiced.

• Ensure that goods / services are purchased according to an organisations agreed authority levels.

• Ensure accurate accounting of expenditure in term of which budgets expenditure is charged to.

• Match goods received against original order.

Coding The financial codes used at the Authority are 7 or 9 digit codes, which are broken down into 2 elements as follows:

Cost code – this is a four digit alphanumeric element. It identifies the department to which the income or expenditure relates.

01-10

Expense code – this is a 3 to 5 digit numeric element. It describes the type of income or expenditure.e.g. travel expenses, photocopying

260- / 260-04

The NHSLA has a policy of 'source coding’ that gives the responsibility of coding to the person generating the cost or income. It is the responsibility of the budget holder, therefore, to ensure that accurate coding takes place at all times.

Procedure for raising a purchase order1) Raise a Purchase Requisition• A PR is a document that details the PO,

the PR would normally be raised after a discussion and would, if available, include a quote / documentation of agreed price, quantity etc.

2) Requisition is approved converted to PO.• Individuals with the appropriate

authority would review.• If ok would approve the PR- converts

PR to PO.• If not ok- reject back to requisitioner

– review and resubmit.

3) Requisition approved and PO sent to supplier. • Post• Email• In some cases not required.

4) Goods received

Left open (part matched) Closed (fully matched)

Closed

Invoice Received

Invoice matched and Paid.

Yes No

Issue preventing invoice from being matched to Invoice, referred back to RO

Exceptions to Purchase without a PO

Non staff expenses (Secondees)

Season tickets

Payroll costs PAYE / NI / Childcare voucher

Cycle to work invoices

Agreed list of expenditure to be purchased or corporate credit card.

Procurement and Contracting

Catherine O’Sullivan02 September 2014

Government and Procurement- Background

• Francis Maude, Minister for the Cabinet Office, set up the Efficiency and Reform Group (ERG) in 2010. Its aim is to make sure departments work together to reduce waste and improve accountability across a range of areas, including information and communications technology (ICT), procurement, projects, HR and property.

• The Efficiency and Reform Group (ERG) works in partnership with HM Treasury and government departments to deliver efficiencies, savings and reforms on behalf of UK taxpayers. ERG aims to save money, transform the way public services are delivered, improve user experience and support UK growth

• As an ALB NHS LA works with DH procurement to ensure we too deliver the agenda of the ERG.

Procurement and Contracting

The NHS LA is committed to the efficient management of non-pay costs and supports an approach for the purchase of goods and services in a way which is:

• Appropriate to and fully aligned with the organisations business objectives and service delivery requirement;

• Fully compliant with Government and European Union public sector procurement principles and rules;

• Supports the Cabinet Office agenda for working with Small and Medium Sized Enterprises (SME’s)

• Best able to deliver value for money (VFM), that being the optimum combination of whole life cost, quality and fitness for purpose to meet requirements; and

• Compliant with the Standing Financial Instructions (SFI’s) to the organisation.

Sourcing Goods and Services with estimated value of between £3,000 - £10,000

• Is there an existing NHS LA contract through which the requirement can be fulfilled. The corporate governance team can advise on this.

• If there is no existing NHS LA arrangement, if the good or service required is part of an Efficiency and Reform Group (ERG)common goods and services then you must procure the required good or service through the Department of Health mandated arrangement (which may be a CCS framework).

• If the required good or service is not ERG, then you must purchase the good or service through the Crown Commercial Service (CCS)

• If the good or service cannot be procured through any of the above routes then you must obtain and retain a minimum of three written quotations

Sourcing Goods and Services with estimated value between £10,000 and OJEU limit

• Is there an existing NHS LA contract through which the requirement can be fulfilled. The corporate governance team can advise on this.

• If there is no existing NHS LA arrangement, if the good or service required is part of an Efficiency and Reform Group (ERG)common goods and services then you must procure the required good or service through the Department of Health mandated arrangement (which may be a CCS framework).

• If the required good or service is not ERG, then you must purchase the good or service through any other available Crown Commercial Service (CCS)

• If the good or service cannot be procured through any of the above routes then you must conduct either a request for quotation or tender process as advised by the procurement lead depending on the value and complexity of the purchase. In any event that opportunity must be advertised on the public sector Contracts Finder website.

Questions?