Cash Management and Forecasting FINACC-01

Transcription

1 Cash Management and Forecasting FINACC-01

2 Procedure Title: Supersedes: Cash Management and Forecasting Various, in the regions Description of Amendment(s): This is a consolidation of best practice in London, Anglia and Essex regions. This procedure will impact on: Financial Accounts & Governance Department CCGs Financial Implications: If cash management process is not accurate and robust: Inefficient use of cash resources High level of penalties (currently notional) Adverse impact on CCG s Financial Control Environment selfassessment Procedure Area: Financial Accounts Version No: 1.0 Issued By: Author: Document Reference: Financial Accounts & Governance Department Jasmine Lee, Deputy Director of Financial Accounts FINACC-01 Effective Date: October 2015 Review Date: October 2017, and whenever significant new guidance is issued APPROVAL RECORD Committees / Groups / Individual Date Consultation: Financial Accounts Aug 2015 Approved by: Name: Harry Turner Title: Director of Finance Signed: Date: This is a controlled document. Whilst this document may be printed, the electronic version posted on the NEL CSU Blue N Drive and the intranet is the controlled copy. Any printed copies of this document are not controlled. As a controlled document, this document should not be saved onto personal drives, but should always be accessed from either the intranet or the specified N drive. 2

3 Contents 1 Introduction Roles & Responsibilities Bank Accounts, Cashbooks and Authorising Payment Runs Cash Targets and Notional Penalties Cashflow forecasting Key Considerations Cash Drawdown Submissions Cash and Bank Reconciliations Monitoring Appendix 1 Additional Guidance

4 1. Introduction 1.1. Aim of this Procedure Note To ensure that the NEL CSU Financial Accounts & Governance Department follow a robust and consistent approach in meeting the requirements of its CCG clients relating to cash matters To ensure that the relevant NEL CSU staff are aware of the key pieces of NHS England guidance and of the appropriate deadlines for the completion and / or submission of cash drawdown request forms Background NHS Clinical Commissioning Groups are required to: operate within Maximum Cash Drawdown limits; meet both monthly and year end closing cash balance targets; ensure payments runs during the month are within the tolerance of forecasted values; submit cash drawdown requests for both main and supplementary drawdowns by deadlines specified by NHS England; A full cash management service is currently within the scope of the service specification of the Financial Accounts and Governance team. Client CCG involvement in the cash process may vary by individual CCG This procedure manual should be read in conjunction with the latest NHS England Guidance. A full listing of relevant guidance is at Appendix 1. 4

5 2. Roles and Responsibilities 2.1. Budget Holders and Others The impact and contribution budget holders have on cash management and the income cycle is significant. Budget holders are responsible for: Identifying and requesting the raising of Sales Orders for income due to their budgetary area; Assisting in ensuring that this income is collected in cash terms; Authorising expenditure invoices for payment within 30 days, and resolving disputed invoices promptly Other teams within NEL CSU (eg Contracting, Continuing Healthcare for some CCGs) may be responsible for checking and /or authorising a significant proportion of CCG expenditure. It is the responsibility of these teams to inform the Financial Accounts team, in a timely manner, of matters which may impact on normal, anticipated cash flows NEL CSU Financial Accounts team The NEL CSU Financial Accounts team has overall oversight on CCG cash management, and depending on individual client requirements, will: complete and submit monthly and supplementary (if any) drawdown requests; complete and submit cash flow forecasts; monitor cash flow requirements against forecasts monitor against Maximum Cash Drawdown (MCD) confirmed by NHS England NHS Shared Business Services (SBS) SBS produce daily cash books and forecasts, and issue daily s advising of cash available for that day s payment runs Client CCGs The extent of actual involvement in cash management varies according to the individual CCG, and is summarised at Appendix 2. 5

6 3. Banks Accounts, Cashbooks and Authorising Payment Runs 3.1. Bank Accounts Each of the CCGs has two bank accounts. The Royal Bank of Scotland (RBS) account operates at an overdrawn position each day until Government Banking Services (GBS) carry out a sweep from Citibank to RBS to clear the overdrawn position at the end of each calendar month The two bank accounts are treated as an aggregate account at any point in time. Electronic access to the bank accounts is only accessible by NHS SBS From December 2015, this banking model will be replaced with a single bank approach provided by RBS, sitting within their NatWest brand. GBS will continue to manage the contract Daily Cashbooks and Forecasts Each day, by 10am latest, NHS SBS s to the relevant contacts at NEL CSU a cashbook and a cashflow forecast NHS SBS has issued a short guidance note to assist users with the interpretation of these documents, and this is at Appendix Payment Runs If a CCG has a payment run scheduled for that day, an is sent advising NEL CSU of the resources available on that day, based on forecast to date compared to actuals to date The payment run can only be submitted if the total value is within the cash position entered in the system. All users with the XXX_NHS_PAYMENTS_SUPERUSER will receive notification of the cash position along with details of the payment run If the organisation s cash position has not been updated it will not be possible to submit the payment run. The cash position will be updated by 10:00am. If it is after this time and the cash position is still showing as not updated, contact should be made with the NHS SBS Cash Management contact Cash position negative - If the total value of the payment run exceeds the cash position notified to the organisation, the payment run cannot be submitted. The payment run will need to be amended, so that the total value is the same or less than the cash position value, to enable submission If the organisation believes the cash position is different to that advised by NHS SBS, you will need to contact the NHS SBS Cash Management contact, providing additional forecasting information before 12:30. The cash position can then be amended by NHS SBS Cash position positive - If the payment run total is within the available cash balance, the payment run can be submitted. Confirm that the payment run is to be submitted by informing the NEL CSU Accounts Payable lead, or submit the run by clicking ok. The Submission alert confirms that no amendments can be made once the run has been submitted. 6

7 Confirmation - Once the payment run has been submitted, the NHS Selected Payment Schedules Report will be automatically issued to all approvers, confirming what has been submitted on the approved payment run. 7

8 4. Cash Targets and Notional Penalties 4.1. Maximum Cash Drawdown (MCD) and Annual / Quarterly Forecasts NHS England s (NHSE s) current process is to issue in June a Maximum Cash Drawdown (MCD) figure to each CCG. The MCD is the maximum cash drawdown available to a CCG in the financial year This is based on the planned and adjusted Month 3 Revenue Resource Limit (RRL), adjusted for: any cash at bank on the 31st March of the previous financial year; less a charge in respect of depreciation based on a notional overall NHS England %. This depreciation charge is adjusted at a later date to reflect depreciation incurred solely on CCG owned assets, and any movement in these assets; any planned surplus or deficit; any RRL adjustments during periods 1 to Thereafter, any further RRL adjustments will either increase or reduce the MCD accordingly It is expected that forecast submissions will be required in months 6 and 9 to further confirm the forecast outturn (FOT) requirements. Any change in FOT or movement in working capital will impact upon the MCD accordingly Each month, around Working Day 3, the CCG and nominated individuals within the CSU receive a Cash report which shows the following information: Monthly cash drawdowns, year to date Prescribing and drugs cash top-slices, year to date Maximum Cash Drawdown Available Continuing Healthcare (CHC) Risk Pool Contribution Capital Allocation and Drawdowns Primary Care Co-Commissioning adjustments 4.2. Closing cash balance targets The CCGs will be expected to hold a low level of cash at the end of each month, currently (as from January 2015) 1.25% of the month s draw down At the end of the financial year, the CCGs will be expected to manage the closing cash down to a limit of less than 1.25% of the month s draw down Notional Penalties NHS England levies notional (currently) charges for inaccurate forecasts. These charges are calculated by a formula within the SBS Cash Flow Forecast, which looks at the variance between the forecasted figures and the actual figures. The variances between forecast and actual which are subject to notional charges are as follows: Daily variance in BACS and CHAPS/Faster payment figures Monthly variance to Monthly BACS payment total Total monthly payments for all payment types including RFT 8

9 If there is no forecast for a payment type on a particular day and a payment is made the whole payment value becomes a variance Where a forecasted run is cancelled and rescheduled, the variance is the total of the original forecast and the payment made For runs scheduled on weekends and bank holidays the whole payment becomes a variance In order to calculate the sum of the notional charge the above variances are multiplied by the following percentages; these reflect the actual charges from the Treasury to the DH: CHAPS/Faster payment daily variance % on any variance to forecast on a daily basis BACS Daily Variance % on any variance to forecast on a daily basis BACS Monthly Variance % on any variance which falls out of a 5% tolerance. Overall Monthly Variance % on any variance which falls out of a 5% tolerance allowed across the month. 9

10 5. Cashflow Forecasting Key Considerations Cashflow forecasting is required in order to ensure that drawdowns are accurate, supplementary runs are not required, and to ensure that CCGs manage within the MCD envelope they are given At the same time, CCGs must ensure that the following financial commitments are met each month: provider SLA payments, both NHS and non-nhs, and in particular local authorities; payroll, including Tax and National Insurance, and pension payovers; payments to GP practices; Other key considerations are: the need to limit the funds remaining in the bank to under 1.25% of the cash drawdown; creditor payments are, wherever possible, paid within the BPPC target, whilst retaining minimal balances in the bank at each month end; the need to report on Better Care Fund cash flows to NHS England; forecast requirements are being made six to ten weeks in advance; the contractual commitment to pay NHS SLA invoices by the 15 th of each month, making this the least flexible element; any available knowledge around funds likely to be withheld for whatever reason, such as underperformance, contract disputes etc The points below (from a guidance note issued by NHS England) are basic checks to be performed when submitting the CFF1 Cash Forecast in order to better improve the accuracy of cash forecasting: Ensure all payments are scheduled to clear on a weekday, and that the cash flow forecast accurately reflects the day that the payment will clear; Ensure payroll is entered on the day it clears employee s bank accounts; Ensure that account is taken of payments that will not clear due to bank holidays in a month; Enter BACs payments on the day they clear rather than the day they are processed, remembering it takes 4 days to process a BACs with SBS (if a run BACs payment run is approved on a Monday day 1, it will clear the bank on Thursday day 4); Contract payments are usually paid on the 1st and 15th of the month and they should be entered on those dates. Please note that if the 1st of the month falls on a weekend/bank holiday, payment will move to the first working day of the month. The 15th payment date will be brought forward to the preceding working day (13th or 14th depending on which weekend/bank holiday the 15th falls). Please note, to ensure a payment is made on the 15 th, invoices need to be approved as soon as possible and before 4pm on the 14th at the very latest. Invoices approved on the 14th may miss the run if there are any holds applied. Some organisations currently have their payment runs prepared the day before the actual payment date. Therefore, approvals need to be made before 4pm on the day prior to the payment run as opposed to the payment date. 10

11 Pensions and Tax/NI are scheduled to be paid by SBS on the 19th and 22nd of the month respectively, unless it is a weekend/bank holiday where it will be the preceding working day; Enter any regular income on the day funds are usually available at the bank, remember to also include any non-invoiced income such as VAT refunds; Forecasting the timing of cheques cashed is challenging therefore known payment date methods (BACs, RFT, etc.) should be used for high value payments. 11

12 6. Cash Drawdown Submissions Main Drawdown Around the 16th of the month each CCG has to complete a CFF1 form, even if the amount of cash they wish to request is zero. This is sent to the SBS Cash Management Team and NHS England. The CSU will complete the form on behalf of the CCG, using local knowledge and the analysis of trends from previous months. There is currently an additional tab for the cashflow relating to Better Care Fund schemes The funds are transferred to the CCG bank account on the 1 st day of the next month It is possible for CCGs to request supplementary drawdowns in the month. However, this needs to be supported by a business case, which justifies why the funds are required However, supplementary cash drawdowns will adversely affect the CCG s Financial Control Environment assessment. The deadline is around mid-month, with the cash being credited or debited to the CCG s bank account a few days later The NHS England 2015/16 timetable for submissions of these forms is at Appendix The CFF1 form also requires an estimated cash drawdown figure for the following month The SBS Cash Management Team will use the forecast section of the form to populate the SBS Cash Flow Forecast for the following month NHS England will use the CFF1 forms from each CCG to request a consolidated ISFE drawdown from the Department of Health NHS England will only accept forms from an authorised individual for each CCG (which can also be a member of NEL CSU staff), and from an NHS net account, ed to nhsenglandcash.management@nhs.net 12

13 7. Cash and Bank reconciliations By around Working Day 6, NHS SBS issues a formal reconciliation of the control codes for each of the bank accounts; cash in hand; cash in transit; cash clearing and cash at bank. These reconciliations include a bank statement to ledger reconciliation pack as well as cash book to bank statement and ledger Detail of the process employed by NHS SBS in producing this pack is shown in the NHS SBS Procedure Note at Appendix Arrangements for the review and clearance of reconciling items differs according to the agreements in place with individual CCGs. The differing arrangements are summarised below: the Financial Accounts team review the cash and bank reconciliations. Reconciling items from the bank reconciliations received from SBS are investigated on a monthly basis by the Financial Accounts Team as part of the review process. Where necessary, SBS are instructed to take corrective action. The bank reconciliations are included and signed off by the relevant Financial Control Manager; alternatively, the Financial Accounts team forward the reconciliations to the CCGs, highlighting any items which the CCG needs to clear or action Key cash information is included in the Financial Accounts Monthly Reporting packs to CCGs (where this is provided). 13

14 8. Monitoring 8.1. Compliance Compliance with the procedures laid down in this document will be monitored by the Financial Accounts & Governance Department, together with independent reviews by the CSU s Internal Auditors/Service Auditors and the CCG s external auditors, on a periodic basis The Deputy Director of Financial Accounts is responsible for the monitoring, revision and updating of this document Equality Impact Assessment This document forms part of NEL CSU s commitment to create a positive culture of respect for all staff and service users. The intention is to identify, remove or minimise discriminatory practice in relation to the protected characteristics (race, disability, gender, sexual orientation, age, religious or other belief, marriage and civil partnership, gender reassignment and pregnancy and maternity), as well as to promote positive practice and value the diversity of all individuals and communities As part of its development this document and its impact on equality has been analysed and no detriment has been identified Version Control Tracker Version Number Date Author Status Comment/Reason for Issue Various April 2013 Various in London, Anglia and Essex Final 1.0 October 2015 Jasmine Lee, Deputy Director of Financial Accounts Final Consolidate best practice across the 3 regions 14

15 Appendix 1 Additional Guidance Source Date Issued Description Guidance NHS England July /16 Month 3 Cash Guidance Month 3 NHS England CCG and CS NHS England June /16 Timetables for submission of CFF1 and Supplementary drawdown forms Monthly Drawdown Timetabl Supplementary Draw NHS England July 2015 Current version of CFF1 form CFF1 3 Digit Reference of Organi NHS SBS Oct 2014 Cashflow Forecasting SBS Cashflow forecasting V 5.0 Oc 15