Board s corporate objectives for outline a requirement to provide best value for resources and deliver financial balance.

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Board Paper 2017/12 Shetland NHS Board Meeting: Shetland NHS Board Date: 18 April 2017 Paper Title: Finance monitoring report (2016-17) to 28 February 2017 Author: Colin Marsland Job Title: Director

1 Board Paper 2017/12 Shetland NHS Board Meeting: Shetland NHS Board Date: 18 April 2017 Paper Title: Finance monitoring report ( ) to 28 February 2017 Author: Colin Marsland Job Title: Director of Finance Decision / Action required by meeting: The Board is asked to note: the over spend against budget of 224.7k for the financial year to date. This equates to an over spend on budget of 0.45%; compared to the Local Delivery Plan trajectory at the end of February ( 200k over spend) this is an adverse variance of 24.7k against the plan; that savings achieved for the year to date total 3,205.4k. This is a favourable variance of 98.4k against the planned trajectory however the source of the favourable variance is entirely from purely non recurring measures; High Level Summary: This report updates the Board on the management of financial resources and outlines the overall financial position at the end of Month 11 (February 2017). Corporate Priorities and Strategic Aims: Board s corporate objectives for outline a requirement to provide best value for resources and deliver financial balance. Key Issues for attention of meeting: The Board is slightly behind trajectory on the overall financial plan out-turn position. However that masks a material issue in respect of recurring efficiency savings will be significantly below that planned in Therefore significant management action is still required to ensure the Board can achieve recurring financial balance through the implementation of efficiency savings schemes to address the gap. In respect of out-turn subject to selling no more properties the Board out-turn submission to the Scottish Government for the February monitoring report was that a 100k under spend was anticipated in year. However, on 30 March 2017, the Board sold one of the two properties held for sale releasing a surplus on sale. The financial plan assumes the forecast under spend and surplus on the asset sale is carried forward to non recurrently support local service provision. Implications: Service Users, Patients and Communities: None identified

2 Human Resources and Organisational Development: Equality, Diversity and Human Rights: Partnership Working Legal: Finance: Assets and Property: Environmental: Risk Management: No specific issues identified. The delivery of individual savings schemes may affect individual staff members or teams. Each scheme will have impact assessment. This has no implications for the Board s overall compliance. However any significant action plans to address either short-term or underlying issues will require an EQIA to be undertaken. None identified None identified Highlights potential financial risks associated with the revenue position. None directly identified None directly identified Organisation has reputational damage if it fails to achieve financial balance at year-end. Policy and Delegated Authority: Previously considered by:

3 SHETLAND NHS BOARD FINANCE MONITORING REPORT (2016/17): APRIL 2016 TO FEBRUARY Purpose of Paper The paper advises the Board of the expenditure against Revenue Resource Limit at month eleven of , highlights financial issues together with the actions to manage these to ensure the year-end out-turn meets the statutory obligation to breakeven. 2. Background The Board agreed the financial plans at the meeting held on 24 May This report provides an update on progress against this plan. Shetland NHS Board s statutory requirement is to break even at the year-end. To achieve this in will be dependent on the good financial stewardship of revenue budgets in line with the financial plans whilst managing emerging costs. 3. Revenue Resource Limit The Board s core Revenue Resource Limit baseline allocation for is 45,779k. However, the anticipated overall Revenue Resource Limit in the financial plan approved by the Board in May 2016 was 54,855k. As at 28 February 2017, the Board s confirmed Revenue Resource Limit is 56, 756k. The difference between these values reflects the Scottish Governments process of allocating additional funding in bundles for specific strategic aims such as the New Medicines Fund and non-recurring funding such as Waiting Times and Treatment Time Guarantee (TTG) delivery support. 4. Overall Financial Position to end of February 2017 The overall position at the end of February 2017 is 224.7k overspent against budget. This equates to the year to date position being 0.45% over spent on budget. This compares to an assumption made in LDP financial plan that the Board would be 200.0k over spent. Appendix A, presents this position in-line with the annual accounts reporting format and Appendix B in the manner, which reflects the local analysis of services. 4.1 Analysis of Expenditure for April 2016 to February 2017 The Board s overall expenditure, comparing the period to February 2017 with the period February 2016, has increased by 1, 717k or 3.4%. The single significant item behind the increased costs is the 859.7k attributable to the Social Fund payment to Shetland Island Council in-line with funding from the Scottish Government plan to increase funding for IJB with Health Service funding

supporting social care. Locally this fund is 1,024k of which the IJB local action plan has 86k retained by NHS Shetland to employ staff for the reablement programme.

4 supporting social care. Locally this fund is 1,024k of which the IJB local action plan has 86k retained by NHS Shetland to employ staff for the reablement programme. This movement also includes increased pay costs of 887.2k, a 3.5% increase on last year. The underlying causes are the recurring 1% pay award paid from 1 April 2016 and just under a 2% cost increase stemming from the removal of the National Insurance rebate for staff contracted out of the full UK pension scheme (SERPs). In addition, non-recurrently there has also been an increase in Anaesthetic and General Medicine Consultant locums, junior doctor locums, and diagnostic locums cover (as per table 1 and Appendix E). The other locums and pay costs referred to in table 1 occurred last year so do not materially affect this growth increase. They are however still a cost pressure to the Board as expenditure level is above budget. Off island, health care costs have increased by 256.6k, up 3.7% on last year. Primarily due to the planned increase in funding to NHS Grampian outlined in the , Local Delivery Plan and inflation uplifts applied. Expenditure on drugs has increased by 333.3k; this is up 6.4% on last year. High Cost New Medicines account for 222.3k of these increased costs. The Board has received a specific allocation in respect of High Cost New Medicines; however, this at 251.1k is less than the actual costs incurred at month 11. GP prescribing costs are broadly in-line with costs year to date adjusted for anticipated inflation. Appendix B outlines in full the income and expenditure position for the Board by service area and this is summarised in Table 1 below. Table 1: Summary Financial Position for April 2016 to February 2017 The Acute and Specialist Services directorate are aware that action is required to address pressure through both strategic long-term sustainability reviews and immediate short-term actions. The in year current year pressures are the result of Anaesthetic Consultant, General Medicine Consultant staffing, Obstetrics medical staffing, Junior Doctor Locum usage, use of locum staff in the Laboratory Service and nursing pay costs in the hospital. Similarly, although there is still additional expenditure resulting from GP Locum costs, principally now in Yell and Unst, the Community Health and Social Care Services directorate is aware that action is required to address this pressure through both strategic long-term sustainability reviews and immediate short-term actions.

5 Appendix E provides an analysis of the underlying short-term pressure issues against the assumptions in the financial plan. In terms of setting the cost increase against changes in the Board s underlying funding at the start of 2016/17 the Board received an uplift of 1.7% to the core revenue resource limit (RRL). However, a significant number of the additional funding allocations the Board will receive will have a 7.5% reduction applied. Due to the anticipated timescale for delivering savings, the board s financial plan for , as agreed in the Local Delivery Plan, does not assume a breakeven position will be achieved at the end of every month. The annual plan and current performance against the plan is outlined in graph 1 below whilst the detailed figures behind graph 1 are outlined in full in Appendix C. Graph 1: Shetland NHS Board Financial Plan Trajectory Out-turn at Month 11 shows an adverse variance against the LDP plan of 24.7k.This adverse variance is equivalent to a 12.4% from the planned trajectory. The adverse variance is primarily the result of the use of locums to fill gaps in staffing, bank staff leading to over establishment against budgets, primarily in Acute Services, 746.3k. Offsetting these costs, non-pay costs are currently 508.1k under spent over a number of specific budget areas covered in Table 1 above. The Executive Management Team will continually review required actions to maintain progress against the plan and ensure required actions are progressed. 4.2 Progress against Savings Plans Audit Scotland in both and external annual audit report highlighted their concern that the Board s reliance on non-recurring savings is not sustainable in the long term.

To return to financial balance the Board would need to achieve recurring efficiency savings of 3,712.9k in 2016-17.

6 To return to financial balance the Board would need to achieve recurring efficiency savings of 3,712.9k in However, the financial plan for only included a recurrent savings requirement target of 2,311.8k as part of the threeyear plan to return to recurring balance. The overall target comprises - 1,461.9k ( brought forward from ) - 1,194.0k ( % savings target) - 1,057.0k ( additional savings target) At the end of February, efficiency savings of 3, 205.4k have been achieved year to date. Table 2 along with Graph 2 outlines the position with further detail in Appendix D. The split of achieved savings is 1, 425.0k on a recurrent basis and 1,780.4k made on a non-recurrent savings basis. Table 2 Summary Savings Position as at February 2017 Graph 2: Shetland NHS Board Savings Plan Trajectory The planned trajectory for the board s savings plan, contained within the 2016/17 local delivery plan, outlined in graph 2 below, assumed that by the end of February 2017, 3,107.0k in savings would have been achieved. The Board has therefore a favourable variance of 98.4k against the year to date target, or 3.2% expressed in relative terms.

7 However, this headline figure masks the true underlying position. Again this year there is an over reliance on non-recurring efficiency savings to address the gap in resources in year only. As this favourable variance is a result of non-recurring factors, it does not address the underlying deficit that may widen this year by 700k to 2.1m. The underlying financial gap in resources continues to grow year on year. Therefore, the implementation of significant service redesigns to create sustainable services within the available financial resources in a timely manner is essential for the Board to comply with our statutory obligation as set out in the National Health Services (Scotland) Act Actions Being Taken Work is ongoing to develop detailed Project Initiation Documents (PIDS) for the efficiency schemes required to address the underlying recurring gap in the financial plan. Once these are finalised the Finance Department can reflect these schemes in the management accounts and begin the in year monitoring process. The Finance Department continues to work with managers to ensure further ideas for savings are generated, scrutinised for risk and assessed for impact upon other services and once agreed as part of the board s plan that they are then delivered. The Finance Department also continues to work with relevant budget managers to monitor and predict out-turn positions especially in the key risk areas. The Executive Management Team collectively will continue to monitor in year progress of savings plan and work on the development of interim non-recurrent schemes to tackle in year shortfalls that develop whilst implementing recurring plans. Work will also continue to develop schemes to address the projected roll forward recurrent gap of 2.1m in Risks to the Financial Plan The financial out-turn for 2016/17 and beyond carry a degree of risk, given the level of efficiencies required to allow for the planned reinvestment in services while also achieving financial balance. There are ongoing management actions to address the short-term issues and establish long-term sustainable solutions. These are being progressed as part of the Board s efficiency and redesign programme. The four key risk areas under close monitoring are delivery of savings targets, medical staffing locum costs, prescribing and patient travel. 7. Year end Projection In respect of out-turn subject to selling no more properties the Board outturn submission to the Scottish Government for the February monitoring report was that a 100k under spend was anticipated in year. However, on 30 March 2017, the Board sold one of the two properties held for sale releasing a surplus on sale. This may still be subject to change due to currently unplanned or unknown developments.

8 8. Cash In addition to balancing the revenue resource allocation, the Board has a cash allocation and the target balance to hold on account at the year-end. The Board s yearend cash target is currently 100k. 9. Summary At the end of February 2017, the board is 224.7k over spent (an adverse variance of 0.45%). 10. Recommendation The Board may note that the financial position as at month eleven of the financial year the savings achieved this year the projected out-turn risk need to be addressed and the actions required to be taken collectively by all staff to manage progress towards the achievement of the board s financial plan in Author: Colin Marsland Job title: Director of Finance Colin.Marsland@nhs.net Date: 5 April 2017 Appendices: Appendix A: Financial Position stated in Annual Accounts pro-forma Appendix B: Summary Income and Expenditure Statement Appendix C: Local delivery plan variance trajectory and historical data Appendix D: Local delivery plan saving trajectory and historical data Appendix E: Assumptions in the financial plan

9 SHETLAND NHS BOARD Appendix A STATEMENT OF COMPREHENSIVE NET EXPENDITURE AND SUMMARY OF RESOURCE OUTTURN FOR THE PERIOD ENDING 28 FEBRUARY 2017 FEBRUARY 2016 FEBRUARY Note Clinical Services Costs 34,155 Hospital and Community 4 35,722 1,306 Less: Hospital and Community Income 8 1,339 32,849 34,383 12,985 Family Health 5 13, Less: Family Health Income ,645 13,136 45,494 Total Clinical Services Costs 47,519 1,840 Administration Costs 6 1, Less: Administration Income ,553 1,694 3,716 Other Non Clinical Services 7 3, Less: Other Operating Income ,963 2,514 50,010 51,727 SUMMARY OF CORE REVENUE RESOURCE OUTTURN FEBRUARY 2016 FEBRUARY 2017 '000 '000 50,010 Net Operating Costs 51,727 1,279 Total Non Core Expenditure 1,372 1,107 FHS Non Discretionary Allocation SFR1 1,308 0 Donated Asset Income 0 0 Endowment Net Operating Costs 0 47,624 Total Core Expenditure 49,047 47,431 Core Revenue Resource Limit 48,822 (193) Saving/(excess) against Core Revenue Resource Limit (225) Overall Excl. HITs Monetary Value of Increase in Net Operating Costs '000 1,717 0 Percentage Increase in Net Operating Costs % 3.4%

10 SHETLAND NHS BOARD Appendix A BALANCE SHEET FOR THE PERIOD ENDING 28 FEBRUARY 2017 FEBRUARY 2016 FEBRUARY Non-current assets: 30,572 Property, plant and equipment 29, Intangible assets 36 Financial assets: 0 Available for sale financial assets 0 0 Trade and other receivables 0 30,617 Total non-current assets 29,237 Current Assets: 450 Inventories 388 Financial assets: 1,213 Trade and other receivables 1, Cash and cash equivalents Available for sale financial assets 0 0 Derivatives financial assets 0 0 Assets classified as held for sale 0 1,799 Total current assets 2,159 32,416 Total assets 31,396 Current liabilities (512) Provisions (551) Financial liabilities: (4,971) Trade and other payables (6,262) 0 Derivatives financial liabilities 0 (5,483) Total current liabilities 0 (6,813) 26,933 Non-current assets plus/less net current assets/liabilities 24,583 Non-current liabilities (429) Provisions (561) Financial liabilities: 0 Trade and other payables 0 (429) Total non-current liabilities (561) 26,504 Assets less liabilities 24,022 Taxpayers' Equity 15,667 General fund 13,747 10,837 Revaluation reserve 10,275 0 Other reserves 0 26,504 Total taxpayers' equity 24,022

12 Appendix C Shetland Health Board: Cumulative Analysis of Year to Date Financial Variance Against Planned Trajectory for April May June July August September October November December January February March LDP Plan Actual Out-turn Surplus / Deficit Surplus / Deficit % % % % % -52.1% -29.2% -24.9% -46.8% -51.6% -40.6% -12.4% Shetland Health Board: Analysis of Year to Date Financial Variance form to Actual Out-turn April May June July August September October November December January February March

13 Appendix C continued

14 Appendix D Shetland Health Board: Cumulative Analysis of Savings Achieved Against Planned Trajectory for April May June July August September October November December January February March LDP Plan , , , , , , ,712.0 Recurring , , ,425.0 Non Recurring , , , Achieved , , , , ,205.4 Surplus / Deficit Surplus / Deficit % -55.0% -54.9% -33.7% -21.2% -17.5% -16.9% -3.0% 2.7% 15.1% 8.2% 3.2% Shetland Health Board: Analysis of Recurring Savings Achieved to April May June July August September October November December January February March , , , , , , , , ,425.0 Shetland Health Board: Analysis of Non-Recurring Savings Achieved to April May June July August September October November December January February March , , , , ,780.4 Shetland Health Board: Analysis of Efficiency Savings Achieved to April May June July August September October November December January February March , , , , , , , , , , , , , , , , , , ,205.4

Board s corporate objectives for outline a requirement to provide best value for resources and deliver financial balance.

Board s corporate objectives for outline a requirement to provide best value for resources and deliver financial balance. Board Paper 2017/04 Shetland NHS Board Meeting: Shetland NHS Board Date: 14 February 2017 Paper Title: Finance monitoring report (2016-17) to 31 December 2016 Author: Colin Marsland Job Title: Director