Audit Briefing No 74
report by Audit Scotland provides an overview of the main issues arising from
the 2002/03 audits of NHS boards and trusts.
auditors found that the expenditure of NHS bodies were in line with legislation
and guidance issued by Scottish Ministers and that the key financial systems and
controls in place at trusts and NHS boards were generally of a good standard,
there were a number of concerns.
A number of trusts experienced
wide variances between the actual and budgeted expenditure, indicating that scope
remains to improve budgetary control arrangements across NHS bodies.
were also concerns that the planned integration of NHS boards and trusts is likely
to result in a period of uncertainty and upheaval as systems are integrated while
staff responsibilities and reporting lines/ accountabilities are bedded in. Audit
Scotland state that it is important during this transitional period that senior
officers and board members are clearly engaged with baseline budgets so as to
give them a clearer understanding of the underlying cost base of the new organisations
and to monitor closely outturn against budgets.
auditors reporting that general arrangements at trusts and NHS boards for the
prevention and detection of fraud appeared to be satisfactory during 2002/03,
there were some concerns over FHS (Family Health Service) expenditure for 4 Primary
Care Trusts and 7 NHS health boards.
The CSA also estimates
that, overall, 3% to 8% of claims from practitioners may be fraudulent, representing
some £40million to £100 million per annum. Based on a sample of claims the Counter
Fraud Services unit of the CSA estimated that invalid exemptions might have amounted
to £12.6million across Scotland in 2002/03.
achievement of financial targets (both Capital Resource Limit's (CRLs) and Revenue
Resource Limits (RRLs)) remains a challenge for NHS bodies. Auditors identified
3 main tools which enabled RRLs to be met during 2002/03
re-routing of underspends within NHS systems
use of non-recurring funding streams
use of cash releasing efficiency savings
Scotland is concerned that the fact that re-routing is necessary is indicative
of the financial pressures which continue to face NHS bodies, however there is
still a need to identify and address underlying recurring deficits if financial
balance is to be achieved in the foreseeable future.
estimated that in 2002/03 trusts generated £266 million non-recurring funding,
some 4.4% of the total funding of trusts. Audit Scotland is state that while these
sources of funding can be used to alleviate in-year deficits, it is important
that NHS bodies do not depend on these as a recurring funding source when planning
year on year financial balance.
Many NHS bodies have developed
financial recovery plans which include the implementation of cash releasing efficiency
savings. Audit Scotland feels that it is important that NHS bodies continue to
review the way in which services are provided and to seek efficiency savings whenever
possible. However the extent to which NHS bodies can continually make efficiency
savings is finite without impacting on the quality of service provided. The auditors
of several NHS bodies have concerns about the ability to deliver savings plans
and thus the viability of financial recovery plans.
reported that the main cost pressures were the New Deal for junior doctors, nationally
agreed pay awards, the introduction of the EU working time directive and increases
to employers' National Insurance contributions. Many Primary Care Trusts (PCTs)
also experienced significant cost pressures arising from increased GP drugs prescribing.
Scotland is concerned that the Scottish Executive Health Department (SEHD) does
not know precisely the implications of future cost pressures. It is clear however
that the introduction of new contracts for the employment of consultants and for
the provision of General Medical Services together with the recruitment of substantial
members of new staff will consume much of the additional funding being made available.
The 2001/02 NHS overview report highlighted
that many NHS areas would continue to face financial difficulties and remain dependent
on sources of non-recurring income to achieve breakeven. Auditors expressed concerns
about the ability of three specific trusts to achieve financial balance in the
future. The auditor of Fife NHS Board also raised significant concerns in 2002/03
over the ability of local trusts to meet planned savings targets.
University Hospitals NHS Trust (LUHT)
LUHT's March 2003
financial plan forecast a cumulative shortfall of nearly £180 million in the five
years to 2007/08. As at 30 September 2003, however, LUHT reported an adverse variance
of £6.6 million against its budget for 2003/04.
In 2002/03 without non-recurring income, the
recurring operational deficit across NHS Argyll and Clyde could have been as high
as £31.4 million. A new financial recovery plan was drawn up which assumed less
reliance on non-recurring income, but it did not include any potential costs arising
from service reviews. The auditor considers that NHS Argyll and Clyde's cumulative
deficit could reach £60–70 million by 2007/08 and may be irrecoverable.
University Hospitals NHS Trust (GUHT)
In 2002/03, GUHT
recorded an excess of expenditure of £5.2 million against its RRL of £260.2 million.
GUHT has agreed a plan that will enable it to repay the brokerage to SEHD and
recover its accumulated deficit by the end of 2005/06. However, the trust needs
to address a number of significant issues and cost pressures if financial recovery
is to be achieved.
recorded an underlying deficit of £9.6million, with their RRL targets only achieved
by non-recurring funding.
A review of financial monitoring
and recovery plans found several aspects of good financial management but also
scope for improvement. NHS Fife has welcomed the auditor's report and is taking
action to address its findings.
Although this briefing is mainly for information
purposes, branches may wish to identify the implications for their area.
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