Rebuilding our National Health Service, published in May 2001, said:

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1 GUIDANCE TO NHS SCOTLAND: PREPARATION OF LOCAL NHS ANNUAL REPORTS AND SUMMARY FINANCIAL REPORTS Summary This paper provides guidance to NHS Boards and their constituent Trusts on the preparation of annual reports and summary accounts for the financial year ending March The guidance has been discussed with and agreed by NHS Chief Executives and other senior staff. Each local NHS system is expected to publish a single annual report conveying the activities of the NHS Board and their constituent Trusts. NHS Boards and Trusts are not expected to publish separate individual annual reports. This guidance supersedes all previous guidance on annual reports, particularly the relevant sections of MEL(1994)80. This guidance also applies to Special Health Boards (paragraph 7). 2. Rationale for Reporting The principal purpose of the local NHS annual report is to account to the local community and other local stakeholders for key aspects of its performance during the year. NHS Boards will also be accountable to the Scottish Executive through annual Accountability Reviews. The Performance Assessment Framework will form the basis of the mandatory core framework for assessing the performance of the NHS in Scotland and will also form the basis of the annual NHS Accountability Review process. Rebuilding our National Health Service, published in May 2001, said: Assessments of performance based on the Performance Assessment Framework will be open and transparent. NHS Boards will publish in their annual reports performance information relating to all significant aspects of their work, including the results of independent assessments. They will also publish the Department s overall assessment letter. [The Department] will issue guidance on what minimum performance information is to be included in NHS annual reports, to aid clarity and to assist inter-area comparisons. Effective local accountability arrangements go wider than annual reporting. NHS Boards will work with their local communities to improve further their approach to communicating with local people and other stakeholders. (Refers paragraphs )

2 3. Presentation The presentation, structure, design, format and distribution of local NHS annual reports is a matter for individual NHS Boards to consider in collaboration with their constituent Trusts. The key principles to be followed in annual reporting should include: - accessibility: how the report and the information it contains can be made accessible to as many local people and interests as possible, through adopting appropriate presentation, style and media; - communications: can the report be used to achieve a range of communications objectives, including communicating key messages to staff, patients, the public, key partners such as local authorities, and representative groups such as local MSPs and councillors? - transparency and openness: annual reports are an important part of the accountability process by which the local community can measure the effectiveness of local NHS services. NHS Boards will want to give careful consideration before deciding on the length, style and format of their reports. Use of alternative formats such as video, CD-Rom, Web-based or other electronic form of communication would be welcomed probably in support of a traditional medium if this is judged locally as likely to enhance accessibility to the community. We would expect all materials to reflect clearly the NHSScotland corporate identity, consistent with guidance previously issued. The level of resource invested in the annual report should be commensurate with a professional and effective end product. The NHS Board should feel that the costs are justified, can be defended to the local community, and represent value for money. The NHS Board should be prepared to say how much it has cost to produce and distribute the report, if asked. NHS Boards should consider how they will obtain feedback from the local community following publication of the annual report, and how they might use this feedback to inform the production of annual reports in subsequent years. 4. Content Annual reports represent an important element in the overall accountability of NHSScotland. They will facilitate clear and honest communication between the NHS system and the local community. a) To help achieve consistency and comparability across Scotland, it is suggested that the seven fields of the Performance Accountability Framework should form the core elements around which content will be structured.

3 The seven fields are: 1. Health improvement and reducing inequalities 2. Fair access to health services 3. Quality and effectiveness of healthcare 4. Patient s experience including service quality 5. Involving public and communities 6. Staffing 7. Organisational and financial performance and efficiency Within each field, the report should contain a narrative presentation, and quantitative and qualitative information drawn from the PAF. It would be consistent with the principles of transparency and openness set out above for information to cover areas of both strong performance and where improvement was sought. Where possible, the narrative should include actual examples of activity. It should include comparisons of performance over time, including aspects of performance where there is a decline in achievement; and should include inter-area comparisons with other NHS Board areas across Scotland. This can be drawn from existing data sources available to the NHS The outcome of the annual Accountability Review to be provided in a letter from the Health Department to each NHS Board following the Review should be published within the context of the annual report. b) Progress against the key national clinical priorities should also be covered for 2001/2002 annual reports. These key priorities include, but need not be restricted to: Cancer CHD and Stroke Mental Health Children Older People Waiting c) A summary of assessments or inspections carried out during the year, although not necessarily the detail of the outcome (provided this detail is otherwise available upon request). d) Other information expected to appear in the NHS Board annual report includes: NHS Board membership Key plans and service delivery milestones milestones for the following year, together with relevant targets Major capital investments progress and plans e) The reporting of financial information in NHS Board annual reports was covered originally in HDL(2001)58. For 2001/2002 and future years, NHS Board reports are expected to contain a minimum set of consolidated summary financial information. sets out how this information should be presented. Full sets of individual annual accounts are also to be published separately by NHS Boards and NHS Trusts, although full accounts are not required to be included in the annual report.

4 5. Timetable NHS systems are expected to publish their local annual reports no later than 31 October This allows two months from the end of the annual Accountability Review cycle. NHS Boards reviewed earlier in the review programme are encouraged to publish their reports sooner if possible. NHS Trusts must complete their accounts by 30 June 2002, and NHS Boards by 31 July In both cases, the accounts must be laid before the Scottish Parliament before they can be published or otherwise made available to the public. Accounts can still be laid during Parliamentary recess. The Scottish Executive Health Department is responsible for laying the accounts before Parliament. In order for the accounts to be laid before Parliament, a final signed, audited version of the accounts must be received by the Scottish Executive Health Department from Audit Scotland. The Trust and Board auditors will submit the accounts to Audit Scotland on behalf of Trusts and Boards. Audit Scotland will then review the accounts for any additional necessary reports before sending them to the SEHD Director of Performance Management and Finance. Once the accounts have been laid before Parliament, SEHD will confirm this in writing to NHS Boards and individual Trusts. This will normally take 2-3 weeks from when they are received at SEHD. 6. Annual General Meeting The National Health Service (Scotland) Act 1978 prescribes for Boards, as the National Health Service and Community Care Act (1990) prescribes for Trusts, that public meetings should be held to present their audited accounts. However, there are many examples of good practice which go beyond the traditional AGM, whereby local NHS systems interact innovatively and constructively with their local communities. We wish to give all encouragement to the continuation and extension of such good practice. Therefore, it is for local NHS systems to decide how and on what basis they use meetings held in public for presenting audited accounts, and for what other purposes they might use such meetings. 7. Special Health Boards Special Health Boards should also have regard to paragraph 4 above in determining the content of their reports. The requirement to publish the information identified in paragraphs 4 (c-e) applies equally to Special Health Boards as it does to NHS Boards. The information identified at paragraphs 4 (a-b) will apply to varying degrees depending on the functions and responsibilities that are unique to each of the Special Health Boards. The principle of using quantitative and qualitative information drawn from the respective PAFs that are being produced by Special Health Boards remains the same.

5 8. Further Information: General communication issues: Performance management issues: Lynda Sawers Andy Smith Financial issues: Janice Macphail Scottish Executive Health Department April 2002 Appendices: 1

6 Unified Financial Statements within Local NHS Annual Reports Preparation of Unified Financial Statements for inclusion in the Annual Report 1. For 2001/2002 and future years, NHS Board reports are expected to contain a minimum set of consolidated summary financial information covering the financial activities of all NHS bodies in the area. The Consolidated Financial Statements will comprise an Income and Expenditure Account and a Balance Sheet as originally outlined in HDL (2001) 58, and updated in the annual Accounts manual for NHS Boards. 2. An example set of Financial Statements and detailed instructions on preparing them are provided below. Income & Expenditure Account 3. The Income and Expenditure Account is based on the current structure of the NHS Trusts Income and Expenditure Account. The expenditure headings are more detailed than currently provided on the face of the Income & Expenditure account of NHS Trusts as there will not be any notes to the Consolidated Financial Statements. 4. All inter-area income and expenditure will need to be eliminated by the NHS Board when preparing the statement and any Trust deferred income will also need to be removed from the expenditure reported in the NHS Board I&E account. Balance Sheet 5. The top part of the Balance Sheet is common to both NHS Boards and NHS Trusts. However, the Financing (or bottom) half of the Balance Sheet will require standardisation given that Boards and Trusts account for financing differently. NHS Trusts currently have Public Dividend Capital (PDC) and an I&E Reserve. Health Boards, however, have a Capital Reserve and Balance Due to/(from) SEHD. The Consolidated Balance Sheet would simply consolidate each of the above into a General Fund. 6. In preparing the Consolidated Balance Sheet, the Health Board should initially simply add together the relevant figures for all NHS bodies within their Unified Health Board Area. Inter area debtor and creditor balances should be removed as consolidation adjustments. 7. It is important that Health Boards and Trusts within a Health Board Area have full agreement on debtor and creditor balances. The Health Board will need to remove any provisions in their accounts in respect of Trust liabilities.

7 Unified Financial Statements within Local NHS Annual Reports... UNIFIED HEALTH BOARD AREA CONSOLIDATED INCOME AND EXPENDITURE ACCOUNT FOR THE YEAR ENDED 31 MARCH 20xx 20xx INCOME 110 Income from Activities 120 SEHD 130 Other NHSScotland 140 Other 150 Total Income from Activities 190 Other Operating Income 200 Total Income 300 EXPENDITURE 310 Continuing Operations 320 Hospital and Community 330 Family Health 380 Total Clinical Services 400 Clinical Support 410 Clinical/Medical Negligence Costs 420 Property Costs 450 Other Costs 490 Total Expenditure 500 Effect of Revaluation of Properties 510 Capital and Debt Write Off 520 Profit/(Loss) on Disposal of Fixed Assets 600 Surplus/(Deficit) before Financing Costs 650 Interest Receivable 660 Interest Payable 700 Surplus/(Deficit) for the Year 750 Less Cost of Capital 800 Retained Surplus/(Deficit) for the Year

8 Unified Financial Statements within Local NHS Annual Reports... UNIFIED HEALTH BOARD AREA CONSOLIDATED BALANCE SHEET FOR THE YEAR ENDED 31 MARCH 20xx 20xx FIXED ASSETS 110 Tangible Assets 200 CURRENT ASSETS 210 Stocks and work in progress 220 Debtors 230 Investments 240 PGO Account Balance 250 Cash at bank and in hand 300 CURRENT LIABILITIES 310 Creditors due within one year 350 Net Current Assets/(Liabilities) 400 Total Assets Less Liabilities 450 Provisions for Liabilities and Charges Financed By: 510 General Fund 520 Revaluation Reserve 530 Donation Reserve 540 Other Reserves 550

9 Example & Guidance Notes for Completion of Unified Financial Statements Income & Expenditure Account INCOME Health NHS Unified Board Trusts Statement Source Notes Income from Activities SEHD 390, ,218 HB Form A1.0, line 110 Other NHSScotland 0 10,680 10,680 Trusts Note 2, lines 110 to 130 Need to remove inter-trust income Other 0 8,773 8,773 Trusts Note 2, lines 150 to 180 Total Income from Activities 390,218 19, ,671 Other Operating Income 38 23,874 23,912 HB SFR 4a, lines 115, ,200 + Trusts Note 3 total Remove income from host board relating to ACT and R&D from Trusts Note 3. Total Income 390,256 43, ,583 Also, remove inter-trust income. EXPENDITURE Continuing Operations Clinical Services HCH 55, , ,235 HB Note 3 total, excl line 115 & Trusts Note 4.1,line 100 FHS 113, ,167 Trusts Note 4.1,line 110 Total Clinical Services 55, , ,402 Need to identify and eliminate any intertrust expenditure Clinical Support 0 15,014 15,014 Trusts Note 4.1, line 130 (hotel services) Need to identify and eliminate any intertrust expenditure Clinical/Medical Negligence Costs HB Note 18, line Trusts Note 4.1, line 190 Property Costs ,616 35,615 HB Note 6 line 160 less cost of capital + Trusts Note 4.1, line Other 5,552 36,974 42,526 HB Note 17 + HB Note 18 total excl lines 440,855 + HB Note 6 total excl line Trusts Note 4.1, lines 140,150,170,200 & 210 Need to identify and eliminate any intertrust expenditure Total Expenditure 62, , ,643

10 Example & Guidance Notes for Completion of Unified Financial Statements Income & Expenditure Account (. cont) Health NHS Unified Board Trusts Statement Source Notes Effect of revaluation of properties HB Note 18, line Trust I&E, line 130 Capital and Debt Write Off HB SFR 4a, line Trust I&E, line 140 Profit/(Loss) on Disposal of Fixed Assets HB SFR 4a, line Trusts I&E, line 150 If HBs are showing a loss will need to adjust premises costs above Surplus/(Deficit) before financing costs 9,809 Interest Receivable HB Note 2, Line Trusts I&E, line 170 For HBs will need to adjust other income above Interest Payable HB Note 2, Line Trusts I&E, line 180 For HBs will need to adjust other expd from Management Costs Note 6 above Surplus/(Deficit) for the financial year 10,769 Cost of Capital ,342-14,671 HB Note 2, Line Trust I&E line 220 (PDC Dividend) Retained Surplus/(Deficit) for the year -3,902

11 Example & Guidance Notes for Completion of Unified Financial Statements Balance Sheet Trusts Board Total Consolidation Adjustments Unified Board Inter Trust Trust/Board Other '000 '000 '000 '000 '000 FIXED ASSETS Intangible Assets 0 0 Tangible Assets 246,814 5, , , ,814 5, , ,152 Notes CURRENT ASSETS Stocks and work in progress 3, ,213 3,213 Debtors 16,487 12,175 28,662 (1,267) (71) 27,324 Need to ensure full agreement of balances Investments PGO account balance 2,550 2,550 2,550 Not specified in Trust Accounts. Cash at bank and in hand 8, ,581 8,581 28,281 14,725 43,006 (1,267) (71) 0 41,668 CREDITORS : Amounts falling due within one year NET CURRENT ASSETS / (LIABILITIES) TOTAL ASSETS LESS CURRENT LIABILITIES CREDITORS: Amounts falling due after more than one year PROVISIONS FOR LIABILITIES AND CHARGES (27,457) (12,624) (40,081) 1, (38,743) Need to ensure full agreement of balances 824 2,101 2, , ,638 7, , , Need to ensure full agreement of balances (1,627) (3,788) (5,415) (5,415) Need to remove any provisions in Board accounts in respect of Trust liabilities 246,011 3, , ,662

12 Example & Guidance Notes for Completion of Unified Financial Statements Balance Sheet (.cont) Trusts Board Total Consolidation Adjustments Inter Trust Trust/Boar Other d '000 '000 '000 '000 '000 FINANCED BY: CAPITAL & RESERVES Public Dividend Capital 242, ,931 (242,931) 0 Income & Expenditure (4,849) (4,849) 4,849 0 Capital Reserve 3,362 3,362 (3,362) 0 Balance Due To/(from) SEHD (1,687) (1,687) 1,687 0 General Fund 0 239, ,757 To standardise reporting Revaluation Reserve 6,458 1,976 8,434 8,434 Donation Reserve 1,471 1,471 1,471 Other Reserves ,011 3, , ,662