This exam paper is in two sections. You should try to complete every task in both sections.

Transcription

1 Exam question paper NVQ/SVQ Level 4 in Accounting Drafting Financial Statements (National Health Service) (DFSH) 2003 Standards Wednesday 5 December 2007 (morning) Time allowed - 3 hours plus 15 minutes reading time Important: This exam paper is in two sections. You should try to complete every task in both sections. We recommend that you use the 15 minutes reading time to study the exam paper fully and carefully so that you understand what to do for each task. However, you may begin to write your answers within the reading time, if you wish. We strongly recommend that you use a pen rather than a pencil. You may not use programmable calculators or dictionaries in the exam. Do NOT open this paper until instructed to do so by the Supervisor. DFSH

2 This exam paper is in TWO sections. You must show competence in BOTH sections. So, try to complete EVERY task in BOTH sections. Section 1 contains 5 tasks and Section 2 contains 3 tasks. You should spend about 60 minutes on Section 1 and about 120 minutes on Section 2. Please use the answer booklet provided. You should include all your workings and essential calculations in your answers. The answer booklet includes the following pro-formas: Working paper for journal Statement of Financial Activities (SoFA) Balance sheet Section 1 You should spend about 60 minutes on this section. Data You are the Financial Accountant to the Hillbark Strategic Health Authority (SHA). The introduction of Resource Accounting and Budgeting (RAB) by the Department of Health has required changes to the way in which finance managers control their performance and year-end outturn positions. The major features of the RAB method are: a resource limit which represents allocation funding available for the year a cash (drawing) limit representing the amount of cash available to spend in the year an operating cost statement which includes income other than that included in the resource limit, that is, excluding allocation income a general fund as a component of the balance sheet (which includes both revenue and capital) a statement of financial balance. Task 1.1 Compare and contrast the requirements of resource accounts to the previously used income and expenditure accounts. In particular, indicate where additional information is now required. Task 1.2 Explain how RAB limits the amount of flexibility available to your Director of Finance. Include in your considerations the two scenarios where the SHA: (a) (b) forecasts to undershoot its resource limit forecasts to overshoot its resource limit. 2

3 Data The table below gives figures for cash limit, payments against provisions, and an allowance to charge new provisions to the operating cost statements (OCS). East Kirkby SHA West Kirkby SHA m m Initial cash limit Cash payments against provisions 15 5 New provisions to be charged to OCS 5 35 Task 1.3 Calculate the initial resource limit for each of the above Strategic Health Authorities. 3

4 Data A stand-alone resource limit cuts off the ability of the Health Authority to finance expenditure through the balance sheet. The records of two SHAs given below show balance sheets of differing strengths. Balance Sheets Prentown SHA Oldferry SHA Fixed assets 3, Current assets Stocks 0 0 Debtors NHS 12,000 5,000 Debtors Non-NHS 3,000 1,000 Cash at Bank Total current assets 15,080 6,040 Current liabilities less than one year Creditors NHS 4,000 8,000 Creditors Non-NHS 6,000 7,000 Provisions for liabilities and charges 2,000 5,000 Total current liabilities less than one year 12,000 20,000 Net current assets 3,080 (13,960) Liabilities greater than one year Creditors NHS Provisions for liabilities and charges 2,000 2,900 Total liabilities greater than one year 2,080 3,040 Net assets 4,000 (16,500) Task 1.4 (a) (b) Identify the differences in financial strength between the two balance sheets. Give reasons for the differences. Indicate where and how changes in the balance sheet can be used in the context of Resource Accounting and Budgeting by the Director of Finance owning such balance sheets. 4

5 Data As a result of strong cash management and forecasting, Hillbark SHA has found, at mid-year review point, that it will have a surplus of 9 million in cash. However, three PCTs within the SHA region are forecasting deficits totalling 8 million. Task 1.5 Identify the cash flow opportunities available, under RAB arrangements, to the Finance Directors of the SHA and the PCTs. Clearly indicate how both resource and cash (drawing) limits are managed. 5 Note: Please turn over for Section 2.

6 Section 2 You should spend about 120 minutes on this section. Data You are the Charitable Funds accountant to the Southern and Eastern NHS Trust, and you are responsible for completing the 2006/07 annual accounts for the NHS Funds Held on Trust. The accounts are to be prepared in accordance with the Charity Statement of Recommended Practice. Funds registered with the Charity Commissioners included both an unrestricted fund and a fund restricted to providing monies solely for the benefit of lung cancer research. The trial balance as at 31 March 2007 is given below. Trial Balance Debit Credit Legacies 185 Investment income 125 Donations 65 Fundraising events 40 Raffles 25 Income from trading (accommodation) 70 Staff welfare payments 32 Patients welfare payments 68 Staff accommodation expenditure 63 Publicity 8 Fixed asset investments: Equity investments 1,500 Government stock 420 Special deposits 250 Cash held (investment managers) 60 Cash at bank and in hand 19 Capital funds: Endowments 100 Income funds: Unrestricted 1,750 Restricted (lung cancer research) 60 2,420 2,420 6

7 Additional information not yet included in the trial balance on page The Trust s management and administration fee is 30,000 for the financial year. 2. The capital endowment fund is fully invested in government stock which generates a 6% return. The income generated in this way is included in the investment income figure in the trial balance. 3. The investment income also includes 2,000 in bank interest which is to be allocated to the lung cancer research fund. 4. In February 2007 executors of the will of a former patient of the Trust have advised that a bequest of 75,000 has been made in favour of general purpose trust funds held at the hospital. Payment is likely to be received before the end of the next financial year. 5. A donation of 2,000 received on 30 March 2007 was neither entered in the cash book nor banked until 3 April Proceeds from raffles held in March 2007 and amounting to 5,000 were paid into the bank in the middle of April A rebate of 6,000 is due from HM Revenue & Customs in respect of a donation made under the Gift Aid Scheme. The net amount is included in the trial balance figure. 8. The figures for the equity investments and government stock represent the values at 1 April During 2006/07 equity investments with a value of 200,000 were sold for 250,000 and the proceeds invested in other equities. At 31 March 2007 the equity investments were valued at 2,000,000. There was no change in the value of the government stock. Task 2.1 Using the pro-formas in your answer booklet: (a) (b) Enter any journals required in respect of notes 1-8 above. You do not need to give narratives. For the Funds Held on Trust at 31 March 2007, complete: (i) the Statement of Financial Activities (SoFA) (ii) the balance sheet. Note: Clearly show all workings in compiling these statements. Data You are presenting the accounts to the Trust s Charitable Funds Sub-Committee and you have been asked to explain: (a) (b) (c) (d) the main types of fund which can be registered with the Charity Commissioners the difference between a SoFA and an income and expenditure account the accounting treatment of donated assets the basis upon which the management and administration fee should be apportioned, given that there may be more than one fund. Task 2.2 Prepare brief notes to cover the points (a) to (d) above. Note: Please turn over for Task

8 Data As part of the modernisation of support services in the NHS in England and Wales, the finance function is undergoing substantial changes with the introduction of business process/support centres ( shared services ). As a senior finance officer in a Trust, you have been asked to brief the Audit Committee as to how the new business arrangements will affect the roles and responsibilities in both the Trust and the shared services. Task 2.3 Prepare a short report to: (a) (b) explain how the working environment in the finance function is changing briefly outline the roles and responsibilities of both the Trust and the shared services in the new business arrangements. 8

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12 NVQ/SVQ qualification codes Technician (2003 standards) - 100/2942/4 / G Unit number (DFSH) Y/101/ Association of Accounting Association Technicians of Accounting (AAT) Technicians (AAT) Aldersgate Street, London 140 Aldersgate EC1A 4HY, Street, UK London EC1A 4HY, UK t: +44 (0) t: f: (0)20 (0) f: +44 (0) e: aat@aat.org.uk w: e: aat@aat.org.uk w: