EXECUTIVE SUMMARY. REPORT TO: Trust Board DATE: Thursday 3 January 2019 AGENDA NO: 3.1 AGENDA ITEM: Financial Report November 2018 SPONSOR:

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1 EXECUTIVE SUMMARY REPORT TO: Trust Board DATE: Thursday 3 January 2019 AGENDA NO: 3.1 AGENDA ITEM: Financial Report November 2018 SPONSOR: Angela Hibbard, Director of Finance PREPARED BY: Colin Dart, Deputy Director of Finance PRESENTED BY: Colin Dart, Deputy Director of Finance Purpose To present to the Committee the Trust s financial position at 30 Decision November 2018 and to provide assurance on the level of management Approval action being taken on managing the risk to delivery of the plan. Receive Ratify Link to Strategic Objective(s) This paper supports delivery of the following strategic objectives, by demonstrating a financial plan that demonstrates no worsening of the performance within the NHS constitutional targets within a highly constrained financial environment. The plan is set at a level that is both challenging yet deliverable. 1. High quality 2. Sustainable local services 3. Integrated health and social care 4. Flexible, fulfilled and multi-skilled workforce 5. Efficient and effective 6. Promote independence and well-being. 7. Support individuals and communities to have more influence Key Issues Revenue & CIP The approved financial plan for 2018/19 is a 11.9m deficit The Plan requires an 8m savings programme to be delivered Risk to delivery of the forecast outturn of 4.8m driven by under delivery of CIP and agency spend within divisions Forecast financial deficit of 16.7m. The underlying Single Oversight Framework is assessed at level 4 (of 4) being high with a forecast of level 3 being moderately high. Capital The current capital programme for 2018/19 is 6.1m, including charitable funds. At the end of November, 1.7m of capital expenditure has been incurred against 3.5m of resource limit an underspend of 1.8m. 3.2m of orders placed and other committed expenditure against the capital programme at the end of November. Approved 1.2m slippage utilisation plan to ensure full utilisation of the Capital Resource Limit. Equality-Related Impact The Trust is committed to an inclusive NHS that is fair and accessible to all; to upholding the principles of human rights and equality of people who use our services and of those who work in them. This paper has been assessed to have the following equality-related impact: Positive Impact Negative Impact No Impact Risk Trust Secretariat Page 1 of 14

2 Board/Committee Prompts Is the Board satisfied on the level of scrutiny that has taken place by management on the month 8 financial position and reforecast deficit outturn? Is the Board assured that management are responding to the financial risk that has been identified? Is the Board assured that management are considering the controls expected from NHS I in terms of managing the position? References CIP Board report to finance committee Capital report to finance committee Trust Secretariat Page 2 of 14

3 1. Summary Financial Objectives Deliver a 11.9m deficit Achieve 8.0m of savings Current Performance 2.9m year to date adverse variance to plan. Current FOT formally reported to NHSI is a 0.4m variance to plan being the impact of the national pay award Net risks of 4.8m remain after on-going work to map actions being taken and impact on forecast. Board approved to adverse movement in FOT of 4.8m against plan. NHS I have agreed a change in forecast in month 9 reporting. 1.7m year to date savings achieved against NHSI plan of 4.7m. 1.9m forecast slippage, reflected in risk above after application of non-recurrent mitigations. 2. Statement of Comprehensive Income (SOCI) Detailed Income & Expenditure Plan Actual Variance Plan Forecast Variance 30/11/ /11/ /11/ /03/ /03/ /03/2019 YTD YTD YTD Year ending Year ending Year ending '000 '000 '000 '000 '000 '000 Income Patient Income - NHS 111, , , ,305 1,757 Patient Income - Local Authority Incld Devon Cares 11,488 10,936 (552) 17,232 17,232 0 Other Patient Income (154) 1,307 1,307 0 Operating Income 6,810 7,955 1,145 10,562 11, CIP Reserves Total Income 130, , , ,159 2,510 Pay Substantive (76,630) (77,894) (1,264) (115,350) (115,791) (441) Bank (3,438) (5,092) (1,654) (5,278) (5,998) (720) Agency (4,277) (5,366) (1,089) (5,478) (6,722) (1,244) CIP Reserves Total Pay (84,345) (88,352) (4,007) (126,106) (128,511) (2,405) Non Pay Drugs (11,674) (11,214) 460 (17,430) (17,430) 0 Clinical Supplies (10,005) (10,242) (237) (14,925) (14,925) 0 Purchase of Social Care - Devon Cares (8,168) (7,140) 1,028 (12,252) (12,252) 0 Other Non-Pay (23,538) (24,633) (1,095) (35,132) (35,657) (525) CIP Reserves Total Non-Pay (53,385) (53,229) 156 (79,739) (80,264) (525) Total Expenditure (137,730) (141,581) (3,851) (205,845) (208,775) (2,930) Total Non-Operating Costs (Pre IFRS) (1,063) (998) 65 (2,182) (2,094) 88 OPERATING SURPLUS / (DEFICIT) (8,702) (11,624) (2,922) (12,378) (12,710) (332) Trust Secretariat Page 3 of 14

4 2.1. Year to date variances Type Income from Patient Care Other Operating Income Pay Current Performance ( 0.3m) adverse to NHSI plan. 1.2m favourable to plan. ( 4.0m) adverse to plan. Cause Under recovery of income against Dental and Bowel screening contracts, offset in part by phasing RTT contract income. Net under-recovery of Local Authority income including Devon Cares off-set by reduced expenditure below. 0.2m Education and Training 0.4m Staff funding 0.6m Other including EHR funding. See section 3 CIP non-delivery and Agency key drivers. Obstetrics (consultant & staff grade) General Medicine (consultant & trainee grades) Paediatrics (trainee grades) A&E (staff grades & training grades) Future Impact/Action Understanding of basis of setting contract volumes on variable contracts and assessment of achievability against current capacity Recurrent nature being reviewed. Recruitment actions have been reflected in forecast outturn. CIP non-delivery also reflected in forecast outturn. Re-focus of divisional performance meetings to ensure financial accountability. Non Pay 0.2m favourable to plan. 0.5m favourable on Excluded Drugs and Devices. 1.0m favourable on expenditure through Devon Cares. ( 0.2m) adverse on expenditure for clinical supplies. ( 1.1m) adverse on other non pay including 0.5m of CIP slippage. No impact as pass through. Off-set by adverse in patient income above. No impact as pass through. Off-set by adverse in patient income above. Review recurrent opportunity. Reviewed and reflected in forecast outturn risk. The full Statement of Comprehensive Income is attached as Appendix A. Trust Secretariat Page 4 of 14

5 3. Forecast out turn risk 3.1. The reported forecast outturn to NHS Improvement is an over spend against plan of 0.4m reflecting the cost pressure on transferring the agenda for change pay award to the Sodexo staff. DoH&SC have issued guidance that gives the potential for this pressure to be funded; if successful this will improve the FOT position. The Board has been briefed on these risks and the Executive team continues to review the risk position to deliver the revised FOT. Type NET CIP Under delivery Divisional Overspends Contract Income Risk Excluded drugs growth Other contingencies AfC Pay Deal - Sodexo Total FOT risk -4.8 Risk to Current Position plan m -1.7 Raw outrun against baseline plan of 4.0m risk offset by 2.3m of contingencies and NR mitigations. Focus on CIP through steering group and CIP board -3.2 Agency key drivers Obstetrics (consultant & staff grade) General Medicine (consultant & trainee grades) Paediatrics (trainee grades) A&E (staff grades & training grades) -0.6 Variable contract underperformance against plans. Largely Dental and Bowel Screening -0.8 Increase in drugs costs outside of block contract 1.9 Technical adjustments & release of contingencies Future Impact/Action Unlikely to develop significant mitigations that impact on this financial year but continuing to focus on possible actions. Drive to start planning for 2019/20 CIP Recruitment actions are reflected in forecast levels of spend. Review coding capacity to ensure receiving payment for activity under variable contracts. Review planning assumptions and recurrent impact of commissioner QIPP. Negotiation of drugs growth for 2019/20 Continued validation of decisions on funding to ensure an overriding patient safety and quality issue to support need for priority funding -0.4 Already reflected in FOT Taking through NHSI in accordance with national process. Trust Secretariat Page 5 of 14

6 3.2. Work continues on testing the robustness of the forecast and ensuring that all future actions are built into the financial risk assessment. There is a level of consistency at 4.8m risk to planned outturn. 4. Cost Improvement Programme 4.1. The month 8 CIP position demonstrated achievement of 1.7m savings against a re-phased internal trajectory of 2.1m an underachievement of plan of 0.4m. This reflects a more rigorous evidencing of CIP delivery The plan submitted to NHSI has a slightly different phasing as it was set before the CIP plan was fully developed and had a more ambitious phasing year to date. Against the NHSI phasing the variance at month 8 is therefore 3.0m under delivered The month 8 forecast against the original baseline plan continues to demonstrates slippage of 4.0m (month 7 3.3m). This has maintained the overall RAG to RED Highlights of the forecast deterioration against plan includes: Significant slippage against the private patients work stream due to a main consultant suffering long term illness Slippage on the Procurement target Against this baseline slippage non recurrent mitigations have been identified of 2.3m which takes the overall forecast delivery to 6.3m with a resultant variance against plan of 1.7m 4.6. The FYE of schemes continues to highlight the reliance of NR savings within both corporate services and the 1% divisional savings. This assessment is being challenged back to the organisation as part of assessing the 2019/20 operational and financial plan. Trust Secretariat Page 6 of 14

7 5. Statement of Financial Position 5.1. The Statement of Financial Position is set out in Appendix B. Type Cash and Liquidity Current Performance Aged Receivables Cash Better Payment Policy Current Position The level of total aged debt stands at 3.4m. 1.4m not yet due 0.8m over 90 days Low risk with reduction seen in month 8. The Trust continues to utilise its current Revolving Working Capital Facility. 4.4m cash more than plan due to final STF bonus, capital programme slippage and RTT income received (expenditure in forecast outturn) 97% performance within 30 days on value and volume with improvement on 2017/18 levels. Future Impact/Action Implementation of Tradeshift improving NCA settlement. Continued focus on working capital management and recovery from out of area commissioners. Continue to undertake 3 month rolling cash flow forecasts to inform the cash requirement going forwards in accordance with the requirements of a deficit financial plan. Obtain Board approval in January 2019 to ensure a working capital facility can be easily put in place to receive 5m increase in deficit. Will benefit from the above. Risk if financial plan not delivered Further risk to cash flow will materialise in March 2019 if the FOT risk outlined in section 3 if the working capacity facility required to support the position is not put in place To support the forecast position the Board will be asked separately to approve a proposed schedule of drawdowns against a working capital facility drawdown to support the cash impact that will streamline the process and provide NHSI and HM Treasury with assurance on process. Trust Secretariat Page 7 of 14

8 6. Enhanced Financial Controls 6.1. The Committee is reminded of the range of controls NHSI has issued at the last meeting and theses are detailed in appendix D for information The Executive Committee continues to ensure that decisions taken that have a negative financial consequence on achievement of plan are to address those significant patient safety issues raised as a priority by the Trust board and that control over expenditure continues despite the deficit position we are in. 7. Single Oversight Framework 7.1. The overall rating at month 8 is 4 (Plan = 3). The following table sets of the elements of the NHSI risk rating: Category Capital Service Cover Plan Rating Actual Rating 4 4 Liquidity 3 3 I&E Margin 4 4 Distance from Financial Plan Agency Rating Comment The indicator will remain at 4 due to the underlying deficit run-rate of the Trust s approved financial plan. The indicator reflects the favourable cash balance held at the month end but is off-set by the underlying operating expenditure run-rate. The Committee has been previously provided with assurance of the historic trends in this area that includes: Cash management is a daily priority for the finance department; Trust contract income instalments are received by 15 th of the month; The highest payment volumes are either 19 th (PAYE and Pension) or 27 th (Payroll) of the month; Working Capital Loan Facility arrangements upto value of planned deficit The indicator will remain at 4 due to the underlying deficit run-rate of the Trust s approved financial plan. The indicator will move to 4 due to the approved deterioration of the financial plan by 4.8m. Medical agency expenditure continues to be incurred in General Medicine and Obstetrics and Gynaecology contributing to the net overspend on pay. NHS Infrastructure (A&C) expenditure being incurred in Medical Records due to slippage on implementation of RFID. Trust Secretariat Page 8 of 14

9 8. Movement of Forecast to NHS Improvement 8.1. Following Board approval on 4 th December the Director of Finance and Performance and Chief Executive formally discussed and agreed with NHS Improvement an adverse movement to forecast outturn of 4.8m at month 9 reporting. 9. Capital 9.1. The Capital Programme is 1.8m under spent at month 8, predominantly due to the profiled phasing of depreciation and the actual payment profile against TrakCare EHR project and backlog maintenance. Overall there are 3.2m of orders and other committed expenditure against the capital programme at the end of November The Executive team approved a plan to utilise the remaining 1.2m of capital resource limit following recommendation by the capital steering group to bring forward capital spend form the 2019/20 plan and address so some of the high risk replacement equipment requirements. 000 YTD FOT Total Source of Funds 3,526 6,112 Planned Developments 540 1,537 Backlog Maintenance Equipment (inc. other) 512 1,965 Smartcare 482 1,428 IM&T Other Total Applications 1,709 6,112 Under/(Over) 1, Recommendation The Board is asked to note the content of this report and to be assured on the level of rigour and scrutiny undertaken in identifying the level of financial risk at 30 November The Board is asked to note that assurance has been given on the overall deliverability of the financial plan and as previously approved the forecast outturn at month 9 reporting to NHSI will worsen by the 4.8m reported risk. Trust Secretariat Page 9 of 14

10 Appendix A Statement of Comprehensive Income Detailed Income & Expenditure Plan Actual Variance Plan Forecast Variance 30/11/ /11/ /11/ /03/ /03/ /03/2019 YTD YTD YTD Year ending Year ending Year ending '000 '000 '000 '000 '000 '000 Income Patient Income - NHS 111, , , ,305 1,757 Patient Income - Local Authority Incld Devon Cares 11,488 10,936 (552) 17,232 17,232 0 Other Patient Income (154) 1,307 1,307 0 Operating Income 6,810 7,955 1,145 10,562 11, CIP Reserves Total Income 130, , , ,159 2,510 Pay Substantive (76,630) (77,894) (1,264) (115,350) (115,791) (441) Bank (3,438) (5,092) (1,654) (5,278) (5,998) (720) Agency (4,277) (5,366) (1,089) (5,478) (6,722) (1,244) CIP Reserves Total Pay (84,345) (88,352) (4,007) (126,106) (128,511) (2,405) Non Pay Drugs (11,674) (11,214) 460 (17,430) (17,430) 0 Clinical Supplies (10,005) (10,242) (237) (14,925) (14,925) 0 Purchase of Social Care - Devon Cares (8,168) (7,140) 1,028 (12,252) (12,252) 0 Other Non-Pay (23,538) (24,633) (1,095) (35,132) (35,657) (525) CIP Reserves Total Non-Pay (53,385) (53,229) 156 (79,739) (80,264) (525) Total Expenditure (137,730) (141,581) (3,851) (205,845) (208,775) (2,930) Total Non-Operating Costs (Pre IFRS) (1,063) (998) 65 (2,182) (2,094) 88 OPERATING SURPLUS / (DEFICIT) (8,702) (11,624) (2,922) (12,378) (12,710) (332) Staff Group Costs Plan Actual Variance Plan Forecast Variance 30/11/ /11/ /11/ /03/ /03/ /03/2019 YTD YTD YTD Year ending Year ending Year ending '000 '000 '000 '000 '000 '000 Registered Nursing - Substantive 22,719 21,006 1,713 33,975 34,449 (474) Registered Nursing - Bank 864 1,112 (248) 1,295 1,295 0 Nursing Agency (194) Total Registered Nursing 23,887 22,616 1,271 35,723 36,197 (474) Scientific, Ther & tech (Qual) - Substantive 11,925 11, ,862 17,936 (74) Scientific Thera, Tech - Bank Scientific, Thera, Tech - Agency (248) (201) Total Scientific, Ther and Tech 12,272 11, ,378 18,653 (275) Qualified Ambulance Staff - Substantive (98) (4) Qualified Ambulance - Agency Total Qualified Ambulance Staff (93) (4) Support to Clinical - Substantive 12,862 13,065 (203) 19,374 18, Support to Clinical Bank 912 1,156 (244) 1,368 1,368 0 Support to Clinical Agency (126) (150) Total Support to Clinical 13,784 14,357 (573) 20,754 20, Medical & Dental - Substantive 16,685 20,236 (3,551) 26,094 26,796 (702) Medical & Dental bank 1,046 2,115 (1,069) 1,691 1,691 0 Medical & Dental Agency 3,903 4,076 (173) 4,929 4,929 0 Total Medical & Dental 21,634 26,427 (4,793) 32,714 33,416 (702) NHS Infrastructure Support - Substantive 11,102 11,596 (494) 16,044 16,920 (876) NHS Infrastructure - Bank (172) NHS Infrastucture - Agency (353) (300) Total NHS Infrastructure Support 11,426 12,445 (1,019) 16,530 17,706 (1,176) Others Substantive 1, ,809 1,809 0 Unallocated CIP 0 0 Total Other Substantive 1, ,809 1,809 0 Total Staff Costs 84,345 88,352 (4,007) 126, ,511 (2,405) Trust Secretariat Page 10 of 14

11 Appendix B Statement of Financial Position Audited PY Plan Actual Variance 31/03/ /11/ /11/ /11/2018 Year ending YTD YTD YTD '000 '000 '000 '000 Non-current assets Intangible assets 8,886 9,029 8,632 (397) Property, plant and equipment: other 67,515 67,127 65,890 (1,237) Trade and other receivables: due from non-nhs/dhsc Group bodies 1,036 1, (179) Total non-current assets 77,437 77,192 75,379 (1,813) Current assets Inventories 3,049 3,049 2,734 (315) Trade and other receivables: due from NHS and DHSC group bodies 8,660 4,699 2,352 (2,347) Trade and other receivables: due from non-nhs/dhsc Group bodies 5,140 5,262 4,070 (1,192) Cash and cash equivalents: GBS/NLF 4,042 1,200 5,550 4,350 Cash and cash equivalents: commercial / in hand / other Total current assets 20,900 14,219 14, Current liabilities Trade and other payables: capital (416) (175) (48) 127 Trade and other payables: non-capital (14,021) (15,695) (13,950) 1,745 Borrowings (711) (711) (711) 0 Other liabilities: deferred income (2,903) (2,526) (2,659) (133) Total current liabilities (18,051) (19,107) (17,368) 1,739 Total assets less current liabilities 80,286 72,304 72, Non-current liabilities Borrowings (8,247) (8,970) (12,310) (3,340) Provisions (29) (29) (29) 0 Total non-current liabilities (8,276) (8,999) (12,339) (3,340) Total net assets employed 72,010 63,305 60,387 (2,918) Financed by Public dividend capital 56,304 56,304 56,304 0 Revaluation reserve 7,562 7,562 7,557 (5) Income and expenditure reserve 8,144 (561) (3,475) (2,914) Total taxpayers' and others' equity 72,010 63,305 60,386 (2,919) Borrowings Audited PY Plan Actual Variance 31/03/ /11/ /11/ /11/2018 Year ending YTD YTD YTD '000 '000 '000 '000 Current Borrowings: other (non-dhsc) Total current borrowings Non-current Borrowings: DHSC working capital / revenue support loans 6,929 8,364 11,703 3,339 Borrowings: other (non-dhsc) 1, Total non-current borrowings 8,247 8,970 12,310 3,340 Trust Secretariat Page 11 of 14

12 Appendix C Statement of Cash Flows Audited PY Plan Actual Variance 31/03/ /11/ /11/ /11/2018 Year ending YTD YTD YTD '000 '000 '000 '000 Cash flows from operating activities Operating surplus/(deficit) 8,779 (7,640) (10,629) (2,989) Non-cash income and expense: Depreciation and amortisation 6,214 3,664 3,594 (70) Impairments and reversals Income recognised in respect of capital donations (cash and non-cash) (263) (266) (50) 216 (Increase)/decrease in trade and other receivables (2,508) 3,839 7,378 3,539 (Increase)/decrease in inventories Increase/(decrease) in trade and other payables (928) 1,433 (439) (1,872) Increase/(decrease) in other liabilities (612) (377) Increase/(decrease) in provisions Net cash generated from / (used in) operations 11, (484) Cash flows from investing activities Interest received Purchase of intangible assets (1,870) (793) (507) 286 Purchase of property, plant and equipment and investment property (4,726) (2,784) (1,423) 1,361 Proceeds from sales of property, plant and equipment and investment property Receipt of cash donations to purchase capital assets (217) Net cash generated from/(used in) investing activities (6,310) (3,303) (1,838) 1,465 Cash flows from financing activities Public dividend capital received 1, Loans from Department of Health and Social Care- received 4,389 5,274 4,774 (500) Loans from Department of Health and Social Care - repaid (3,977) (3,839) 0 3,839 Other loans repaid (712) (712) (712) 0 Capital element of PFI, LIFT and other service concession payments (341) Interest paid (128) (68) (40) 28 Interest element of PFI, LIFT and other service concession obligations (1,056) PDC dividend (paid)/refunded (2,314) (845) (845) 0 Net cash generated from/(used in) financing activities (2,875) (190) 3,177 3,367 Increase/(decrease) in cash and cash equivalents 2,449 (2,840) 1,508 4,348 Cash and cash equivalents at start of period 1,602 4,051 4,051 0 Cash and cash equivalents at end of period 4,051 1,211 5,559 4,348 DHSC loan facilities cash flows 31/03/ /11/ /11/ /11/2018 Year ending YTD YTD YTD '000 '000 '000 '000 Revenue support loans Interim revenue support loans - Received 4,389 5,274 4,774 (500) Interim revenue support loans - Repaid (3,977) (3,839) 0 3,839 Trust Secretariat Page 12 of 14

13 Appendix D Enhanced financial controls Control No posts can be authorised without first having been approved at a Vacancy Control panel meeting chaired by either the DoF or CEO Ensure VCP terms of reference enable flexibility to avoid operationally delaying opportunities for savings e.g. fast track with qualifying criteria to be considered by VCP. Review any regular overspends on locum and agency staff impose caps where possible; ensure overspends link to patient safety needs. Hold weekly agency meetings across all staffing groups with Agency overspends, attended by DoF and key stakeholders, to review and attempt to reduce Agency spend. Impose greater controls over agency usage e.g. self-imposed cap on agency spend; senior sign-off of locum spend; ensure clear Board accountability defined and communicated across Trust; improve communication of planned clinic cancellations to agency/bank teams. Any overtime; additional sessions and waiting list initiatives must be approved in advance by a Director. Temporary ban on usage of non-clinical agency staff, with exceptions authorised by an executive director, e.g. 2 week ban over Christmas; Consider options for shorter agency/bank shifts to reduce costs (consider quality impact) Consider small savings / benefits that set the tone for financial improvement, e.g. Car parking prices/discounts availability Canteen prices/discounts availability Charges for personal use of mobile phones Charges for staff accommodation Flex divisional targets where benchmarking or in-year performance indicates that a Division has scope to achieve larger savings. Executive Team Action Vacancy Panel process updated and published. Stronger controls and focus on medical vacancies. As above As above To be reviewed as part of divisional performance meetings being instigated by interim COO with DoF to be part of process As above Suggestion for requests to be brought to vacancy panel Need to review to understand impact due to trakcare Reviewed as part of divisional 1% targets Current forecasting under delivery across all clinical areas. Review needed on Trust Secretariat Page 13 of 14

14 Seek options for rapid repatriation/bringing in-house of outsourced activity and/or reduced prices for outsourced activity. Review facilities maintenance areas for scope and price savings e.g. Office cleaning; Ground maintenance Security arrangements Cleaning of non-clinical areas Third party control of stock or discretional spend areas Review relevant Carter benchmarks for savings Establish a robust purchase ordering (PO) system to enable the implementation of a No PO, No Payment rule, and no retrospective PO s to help control expenditure. Establish process to monitor and address non-compliance. corporate areas N/A block contracts Part of facilities 1% divisional efficiency Collaborative work between Finance and Procurement to improve PO usage. Trust Secretariat Page 14 of 14