Report to: Public Trust Board Agenda item: 2.2 Date of Meeting: 12 May 2010

Transcription

1 Report to: Public Trust Board Agenda item: 2.2 Date of Meeting: 12 May 2010 Title of Report: Status: Board Sponsor: Author: Appendices Finance report Discussion Catherine Phillips, Director of Finance Beverley Goddard, Deputy Director of Finance Income & expenditure summary as at 31 st March 2010 Savings position as at 31 st March 2010 Balance sheet (statement of financial position) as at 31 st March (unaudited) Statement of cash flows as at 31 st March 2010 (unaudited) Capital programme as at 31 st March 2010 Indicative Financial Risk Ratings for 2009/10 Financial risks 2010/11 1. Purpose of Report (Including link to objectives) The purpose of this report is to set out the Trust s financial performance for the year to 31 st March 2010, including: Income and expenditure; Savings plans; Capital expenditure. This report is linked to the Trust s strategic objective for 2009/10 of ensuring the business health of the Trust. 2. Summary of Key Issues for Discussion This report details performance against each of the Trust s main financial duties for the year ended 31 st March 2010, subject to confirmation through the annual audit process. 3. Recommendations (Note, Approve, Discuss etc) The Board should note the Trust s financial performance for the financial year ended 31 st March 2010, which is subject to audit (see section 1). Action: All The Board should note the basis of the Trust s income for 2009/10 (see section 2.2). Action: All The Board should note the technical adjustment to the Trust s financial statements Agenda Item: 2.2 Page 1 of 17

2 following the revaluation of the Trust s estate and the impairment charge to the income and expenditure account, which does not affect the Trust s financial performance or the achievement of its control total (sections 3.4 to 3.7). Action All. To understand the key risks for 2010/11 and the actions being taken to mitigate them (section 4 and Appendix 6). Action All. 4. Standards for Better Health (which apply) C7 d accountability in the use of resources 5. Legal / Regulatory Implications (NHSLA / ALE etc) ALE implications: all themes (Financial Reporting, Financial Management, Financial Standing, Internal Control and Value for Money) 6. Risk (Threats or opportunities link to risk on register etc) See section 5: Financial Risks 7. Resources Implications (Financial / staffing) Not applicable 8. Equality and Diversity Not applicable 9. Communication Not applicable 10. References to previous reports Standing item 11. Freedom of Information Public Agenda Item: 2.2 Page 2 of 17

3 The Trust s Financial Performance as at 31 st March 2010 (Month /10) 1 Summary Performance Financial Duties 1.1 The table below summarises performance against the financial duties of the Trust for the financial year ended 31 st March All information is provided subject to audit of the Trust s annual accounts. The audited results will be confirmed and presented to the Trust Board before publication in June Financial Duties Target Forecast Outturn Unaudited results Balancing Income & 0 Break even Achieved Expenditure in year Meeting the planned surplus + 5.8m + 5.8m Achieved Achieving the External - 3.3m - 3.3m Achieved Financing Limit Achieve the Capital Resource Limit 11.5m 11.5m Achieved In addition the Trust has subsidiary duties: Capital Cost Absorption Rate 3.5% 3.5% Achieved Better Payments Practice Code 95% 92% 95% number (non NHS creditors) Better Payments Practice Code value (non NHS creditors) 95% 85% 90% The Trust has achieved the planned breakeven against budget in 2009/10, which has enabled the Trust to meet its control total of 5.8m surplus, as agreed with the South West Strategic Health Authority. This surplus is necessary for the Trust to make its loan repayments in 2009/10. The outcome of the Trust s Financial Recovery plan that supported this achievement is summarised in section 2.4 below. The Trust s reported surplus has been adjusted for a planned impairment charge of 4.4m, following the review of the Trust s estate and the reduction in value of its fixed assets on the balance sheet. 1.5 Although the impairment charge reduces the surplus shown by the Trust to 1.4m for the year, in assessing the Trust s financial performance the impairment charge is treated as a technical accounting adjustment and does not affect the Trust s contribution to its break-even duty of 5.8m, nor the achievement of its control total of 5.8m. Agenda Item: 2.2 Page 3 of 17

4 The Trust complied with its External Financing Limit through the management of cash and working balances, and the planned repayment of the loan. The Trust s capital investment for the year was within its Capital Resource Limit (see section 3). The Trust s Capital Cost Absorption rate (CCA) was 3.5% in 2009/10. The Trust has been working to improve its Better Payment Practice Code performance in 2009/10 as demonstrated by the achievement against plan shown above. 2. Income and Expenditure 2.1 The Trust achieved break-even against its total planned budgets for the year as shown in Appendix 1. This position is summarised below: Financial outturn for 2009/10 as at 31 st March 2010 subject to audit Income Additional Income from contracts (forecast in FRP) -2.9 Central Top Slice returned to Trust (forecast in FRP) -1.5 Other income (forecast in FRP) -0.2 Other income (not forecast in FRP) -0.5 Additional income earned in 2009/ Expenditure Pay variance to budget 2.1 Non pay variance to budget 4.2 Savings variance to budget 2.4 Other income (in divisional positions in FRP) -0.9 Capital charges variance to budget (before impairment) -1.2 Development funds per FRP Final position on income and expenditure budgets 2009/ Income and Activity The Trust s income position (as shown in Appendix 1) is based on the 2009/10 financial envelope agreed with NHS B&NES and NHS Wiltshire. The financial envelope resolved the 2009/10 contract through a variation to the 2008/09 contract. It gave the Trust sufficient income to offset the over performance target of 4.2m (part of the 2009/10 savings plans The income shown in Appendix 1 also includes over-performance on other contracts and other activity-related income for the full year. Agenda Item: 2.2 Page 4 of 17

5 Expenditure The Trust overspent by 7.8m compared to its planned expenditure budget in the financial year ended 31 st March Key expenditure variances for the year ended 31 st March 2010 Budget Planned Expenditure Actual Expenditure Variance to plan Pay Medical staff establishment Locum doctors Medical staff waiting list initiatives Nursing establishment Nurse bank Agency nursing Other pay costs Non pay APO activity (April July) Other non pay Divisional income Fines Unmet CRES Total variances Actions to control expenditure must be sustained in 2010/11 to ensure that the Trust maintains financial stability. These actions form part of the divisional savings plans in the new financial year Financial recovery plan In September, each division was asked to review its expenditure and cost controls and to draw up a Financial Recovery plan that would regain financial balance and enable the Trust to achieve its statutory financial duties in 2009/10. These plans have been reviewed and assessed by the Trust Board and Management Board every month and revised accordingly. A review of the forecast planning compared to actual results for March show that financial recovery plans did not meet the required target. The variances to initial plans total 4.3m for the year. This was offset by other actions identified through the financial recovery process as set out below: Agenda Item: 2.2 Page 5 of 17

6 Other income (not forecast in FRP) -0.5 RUH 2010 (additional provider to provider settlement not assumed in FRP) -0.8 Reduction in capital charges due to revaluation of estate -1.2 Development funds per FRP -1.5 FRP contingency -0.3 Total other actions Savings The Trust had an initial savings requirement of 17m for the financial year and worked to deliver this target through cash savings and overperformance on contracted activity and income. Appendix 2 summarises the outturn against the Trust s savings plans for 2009/ m of savings were found in year, leaving savings of 2.4m unachieved. These unachieved savings are part of the Trust s final financial position set out in sections 2.1 and 2.4 of this report. The Trust must ensure that all savings plans are fully identified and implemented in 2010/11. Divisional plans will be monitored through the performance management framework to ensure that they are being delivered. 3. The Trust s Balance Sheet including cash and debt Appendix 3 details the balance sheet as at 31 st March This is an extract from the Trust s unaudited accounts for 2009/10, and is presented for information subject to audit confirmation. Its format is compliant with International Financial Reporting Standards (IFRS), under which it is renamed as the statement of financial position for the year. The statement of financial position as at 31 st March 2010 shows the outcome of the full review of the Trust s estate that was undertaken during 2009/10. This review was part of a rolling programme of revaluations that replaces the requirement for NHS organisations to revalue their estate every five years. The review found that the value of the Trust s land and buildings had fallen as might be expected in the current economic climate, reducing the Trust s fixed assets and revaluation reserves. The decrease in value in the Trust s estate amounted to 38m and was offset by a reduction in the revaluation reserve of 34m. The resulting impact on the Trust s income and expenditure account for 2009/10 was an impairment charge of 4.4m. Appendix 1 shows the impairment as an exceptional item reducing the Trust s planned surplus. Agenda Item: 2.2 Page 6 of 17

7 3.6 Although the impairment charge reduces the surplus shown by the Trust to 1.4m for the year, in assessing the Trust s financial performance the impairment charge is treated as a technical accounting adjustment and does not affect the Trust s contribution to its break-even duty of 5.8m, nor the achievement of its control total of 5.8m Cash position The Trust met its External Financing Limit (EFL) and planned cash balance at 31 st March The Trust s cash flow for the year is shown in the statement of cash flows in Appendix 4; this is an extract from the Trust s unaudited accounts for 2009/10, and is presented for information subject to audit confirmation. Its format is compliant with IFRS. Movements in cash and working capital (debtors and creditors) are shown in the graph below. 4 0,0 00 T ru st W o rk in g C a p ita l M o ve m e n ts 3 0, , ,0 00 ' C a sh S to c k (1 0,0 0 0) D e b to rs (< 1 y e a r) C re d ito rs (< 1 y e a r) (2 0,0 0 0) N e t c u rre n t a sse ts (3 0,0 0 0) (4 0,0 0 0) Apr-09 M a y -09 Jun -09 Jul-09 Aug-09 S e p -09 O ct-09 Nov -09 De c -09 Ja n -10 Fe b -10 M a r Better Payment Practice Policy During 2009/10, the Trust developed an action plan to improve its overall Better Payment Practice performance The Trust s Better Payment Practice percentages over the past twelve months are shown in the graph below. The Trust has consistently paid over Agenda Item: 2.2 Page 7 of 17

8 90% of its invoices within 30 days since April 2009, with the average for the financial year being 95% % P a id w ith in 3 0 d a ys P a id w ith in 1 0 d a ys Apr-09 M a y -09 Jun-09 Jul-09 Aug-09 S e p -09 O ct-09 Nov -09 De c -09 Ja n -10 Fe b -10 M a r Outstanding Debts Owed to the Trust An analysis of income earned by the Trust but unpaid as at 31 st March 2010 is shown in the table below: Debt Total Not due Up to 30 days Up to 60 days Up to 90 days Older NHS Non-NHS Total Of the NHS debt outstanding for more than thirty days at 31 st March, 0.4m is owed by the Royal National Hospital for Rheumatic Diseases Foundation Trust (RNHRD FT). The position is being closely monitored and has been escalated to Directors of Finance Capital Resource Limit and Capital Expenditure Appendix 5 details the capital programme of the Trust and investment in capital projects for the year. The Trust had an initial Capital Resource Limit (CRL) for 2009/10 of 8.5m, Agenda Item: 2.2 Page 8 of 17

9 which increased to 11.5m when the Trust received additional funding from central emergency capital for the NICU project. It was a condition of the funding that it must be spent in the financial year 2009/ Expenditure on capital schemes for the year totalled 11.5m as shown in Appendix 5, and therefore the Trust met its Capital Resource Limit. The Trust s final accounts for the year will include further information on the Trust s capital expenditure for the year, including donations received for capital investment. 5. Financial Risks The Trust s indicative risk rating for the financial year ended 31 st March 2010 is shown in Appendix 6. This shows that, if assessed against the criteria set by Monitor for foundation trusts, the Trust would have had a risk rating of 4 based on its unaudited financial performance for 2009/10. The Trust would need a risk rating of at least 3 to become a foundation trust, whilst a score of 5 would be the equivalent of a high-performing foundation trust. The Trust has assessed its financial risks for 2010/11 through the business planning process, and a summary of the Trust s financial for the year are set out in Appendix 7. These risks, comments and actions form part of the Trust s normal planning and risk management processes, and the Board will be updated regularly on the Trust s progress in these areas. 6. Conclusion The Trust has complied with all its statutory financial duties for the financial year ended 31 st March 2009/10, subject to confirmation through the audit of the Trust s annual accounts (see section 1). The Trust has balanced its income and expenditure in 2009/10 and achieved the 5.8m surplus required to meet its planned loan repayments (see sections 1 & 2). 7. Recommendations 7.1 The Board should note the Trust s financial performance for the financial year ended 31 st March 2010, which is subject to audit (see section 1). Action: All Agenda Item: 2.2 Page 9 of 17

10 The Board should note the basis of the Trust s income for 2009/10 (see section 2.2). Action: All The Board should note the technical adjustment to the Trust s financial statements following the revaluation of the Trust s estate and the impairment charge to the income and expenditure account, which does not affect the Trust s financial performance or the achievement of its control total (sections 3.4 to 3.7). Action All. To understand the key risks for 2010/11 and the actions being taken to mitigate them (section 4 and Appendix 6). Action All. Agenda Item: 2.2 Page 10 of 17

11 Appendix 1: Income and Expenditure Summary as at 31 March UNAUDITED RESULTS Appendix 1: Income and Expenditure 2009/10 Budget for Actual for In month Variance (Favourable)/adv Budget year to Actual year to Year to date Variance (Favourable) Annual Budget month month erse date date /adverse 000s 000s 000s 000s 000s 000s 000s TOTAL CONTRACT INCOME FROM ACTIVITIES (179,559) (16,597) (16,880) (283) (179,559) (181,596) (2,037) OTHER INCOME (incl. divisional income) (36,892) (2,171) (3,755) (1,584) (36,892) (40,933) (4,041) TOTAL INCOME = TRUST REVENUE (216,451) (18,768) (20,635) (1,867) (216,451) (222,529) (6,078) OPERATING EXPENSES PAY 135,712 12,611 12,408 (203) 135, ,850 2,138 NON PAY 60,585 6,486 7, ,585 64,797 4,212 CRES (2,417) (277) (2,417) 0 2,417 RESERVES 1,472 1,472 0 (1,472) 1,472 0 (1,472) TOTAL OPERATING EXPENSES 195,352 20,292 19,557 (735) 195, ,647 7,295 EBITDA * (21,099) 1,524 (1,078) (2,602) (21,099) (19,882) 1,217 Capital Charges INTEREST PAYABLE 1, ,418 1,418 0 INTEREST RECEIVABLE (25) (3) (23) (20) (25) (48) (23) PDC 5, (30) 5,600 4,766 (834) DEPRECIATION 8, (360) 8,306 7,946 (360) Capital Charges 15,299 1, (410) 15,299 14,082 (1,217) NET (SURPLUS) / DEFICIT before impairment (5,800) 2,837 (175) (3,011) (5,800) (5,800) (0) IMPAIRMENT FOR ESTATE REVALUATION 4,401 NET (SURPLUS) / DEFICIT after impairment (1,399) * Earnings before, interest, taxation, depreciation and amortisation Agenda Item: 2.2 Page 11 of 17

12 Appendix 2: Savings 2009/10 summarised Appendix 2: Savings monitoring Savings targets OUTTURN Plan Actual Variance 000s 000s 4% Plan 7,300 7,300 Actual - 4,883 Variance - 2,417 RUH 2010 Plan 4,200 4,200 Actual - 4,200 Variance - 0 Income & activity assumptions Plan 5,500 5,500 Actual - 5,500 Variance - - Total savings Plan 17,000 17,000 Actual - 14,583 Variance - 2,417 Agenda Item: 2.2 Page 12 of 17

13 Appendix 3: Statement of financial position (balance sheet) at 31 st March 2010 SUBJECT TO AUDIT CONFIRMATION STATEMENT OF FINANCIAL POSITION 31 March 31 March 1 April Non-current assets Property, plant and equipment 145, , ,463 Intangible assets Other financial assets Trade and other receivables 1,762 1,476 1,320 Total non-current assets 148, , ,017 Current assets Inventories 3,139 3,309 3,237 Trade and other receivables 11,526 13,926 13,827 Other financial assets Cash and cash equivalents 690 1,470 2,465 Total current assets 15,416 18,760 19,529 Total assets 163, , ,546 Current liabilities Trade and other payables (11,522) (13,813) (12,682) Other liabilities (24) (24) (24) Department of Health Working capital loan (7,000) (6,800) (8,600) Borrowings (233) (246) (170) Provisions (1,680) (1,175) (1,563) Net current liabilities (5,043) (3,298) (3,510) Total assets less current liabilities 143, , ,507 Non-current liabilities Borrowings (497) (649) (893) Department of Health Working capital loan (13,700) (20,700) (27,500) Provisions (903) (743) (568) Other liabilities 0 (24) (48) Total assets employed 128, , ,498 Financed by taxpayers' equity: Public dividend capital 130, , ,545 Retained earnings (44,425) (45,860) (51,650) Revaluation reserve 37,356 69,302 77,055 Donated asset reserve 5,060 6,114 6,548 Government grant reserve Total Taxpayers' Equity 128, , ,498 Agenda Item: 2.2 Page 13 of 17

14 Appendix 4: Statement of cash flows as at 31 st March 2010 SUBJECT TO AUDIT CONFIRMATION STATEMENT OF CASH FLOWS 2009/ / Cash flows from operating activities Operating surplus 7,571 10,674 Depreciation and amortisation 9,299 10,757 Impairments and reversals 4,402 1,805 Transfer from donated asset reserve (1,127) (931) Transfer from government grant reserve (17) (24) Interest paid (1,419) (1,680) Dividends paid (4,723) (3,822) Decrease/(increase) in inventories 170 (72) Decrease/(increase) in trade and other receivables 2,114 (455) (Decrease)/increase in trade and other payables (2,823) 1,273 (Decrease)/increase in other current liabilities (24) 0 Increase/(decrease) in provisions 654 (162) Net cash inflow from operating activities 14,077 17,363 Cash flows from investing activities Interest received Payments for property, plant and equipment (10,373) (8,714) Proceeds from disposal of plant, property and equipment 28 5 Payments for intangible assets (595) (90) Payments for other investments 0 (359) Net cash outflow from investing activities (10,892) (8,411) Net cash inflow before financing 3,185 8,952 Cash flows from financing activities Public dividend capital received 3,000 0 Public dividend capital repaid 0 (1,100) Loans repaid to the DH (6,800) (8,600) Capital element of finance leases (165) (247) Net cash outflow from financing (3,965) (9,947) Net decrease in cash and cash equivalents (780) (995) Cash and cash equivalents at the beginning of the financial year 1,470 2,465 Cash and cash equivalents at the end of the financial year 690 1,470 Agenda Item: 2.2 Page 14 of 17

15 Appendix 5: Capital report 2009/10 Appendix 5: CAPITAL REPORT FOR FINANCIAL YEAR as at 31st March 2010 Annual budget as at 31 March 10 Spend (ytd) Commitments (ytd) Balance remaining Over/(Under) Description OPERATIONAL CAPITAL Estates 5 year programme 2,387 2, Information Management &Technology programme Servers PCs rolling replacemt Sunquest ICE (8) Management Information System (1) Opthalmology IT system Endoscopy IT system Risk Management IT system Single Sign on programme Diabetes clinical IT system Voice Recognition System Total IM&T 1,056 1,053 0 (3) Medical Equipment Committee programme Medical Equipment Committee rollling replacement 1,194 1,188 0 (6) Ward Equipment & lights rolling replacement (1) Total Medical Equipment Committee 1,494 1,487 0 (7) Leased assets TOTAL OPERATIONAL CAPITAL 4,975 4, STRATEGIC CAPITAL Projects team Linac bunker Scope Decontamination 1,027 1, Central Pre-Operative Assessment Pharmacy Robot enabling works (16) NICU Cardiac 2nd phase William Budd ward 1,104 1, Radiology Privacy and dignity MES enabling works (12) Pathology compliance Gastro Quiet Rooms HR Director and Patient Affairs Offices (1) Lansdown Restaurant Theatre Refurbishment West Wards PAW theatre Other projects and retentions Total Projects team 6,525 6,523 0 (2) TOTAL STRATEGIC CAPITAL 6,525 6,523 0 (2) TOTAL CAPITAL REQUIREMENT 11,500 11,500 0 (0) CAPITAL FUNDING Depreciation (Purchased Assets) 9,500 Loan Repayment (1,000) Additional Public Dividend Capital 3,000 TOTAL CAPITAL FUNDING 11,500 Agenda Item: 2.2 Page 15 of 17

16 Appendix 6: Indicative Risk Ratings for 2009/10 Calculating the Trust's indicative Financial Risk Rating under the Foundation Trust Regime Financial Criteria Weight % Metric to be scored Calculation Outturn rating 2009/10 Outturn scores 2009/10 Achievement of plan 10 EBITDA, % achieved E / PE 4 92% Underlying performance 25 EBITDA margin E / R 4 9% Financial efficiency 20 Return on Assets (ROA) Ret / A 5 6% 20 I&E surplus margin (NS + FAI) / R 5 3% Liquidity 25 Liquid ratio (NCE + assumed WCF) / TC x days in period 3 19 Weighted indicative score 4 Data Code Description Outturn (unaudited) 2009/10 Revenue R Total income EBITDA E Earnings before interest, taxation, depreciation and amortisation 20.0 Planned EBITDA PE As set out in operating plans for the year 21.8 Net surplus NS Surplus or deficit for the period 1.4 Fixed asset impairments FAI Impairments written off to the I&E account 4.4 Return Ret Net surplus plus PDC dividend payable plus impairments 10.6 Assets A Average assets over period: fixed assets + stock + current debtors + cash + less current creditors Net cash equivalents NCE Cash + debtors + accrued income less trade creditors less other creditors less accruals 0.7 Working Capital Facility WCF Arrangement between bank & FT similar to an overdraft - estimated for this Trust 10.0 Total costs TC Total costs excluding impairments, interest, taxation, depreciation and amortisation Agenda Item: 2.2 Page 16 of 17

17 Appendix 7: Financial risks 2010/2011 Issue Description of Risk Controls in Place Healthcare Core organisational Standard Domain objective affected affected Likelihood of Risk Severity of Risk Potential value Risk Score Delivery of savings As a result of the divisions not meeting their savings targets there is a risk that the Trust's surplus for the year will not be achieved which means that Trust's expenditure would exceed its plan and the Trust may not achieve its planned surplus of 6.0m and the scheduled repayment of the legacy debt resulting in a breach of statutory duty Detailed savings plans have been developed by the divisions which will be monitored throughout the year Governance Business health Possible Moderate 3m Low Finalising contract and business rules NHS TC transfers and disinvestment As a result of Trust's contract with commissioners for 2010/11 not being finalised, including 'business rules' proposals, there is a risk that the Trust may not earn enough income to make its planned surplus of 6.0m and the scheduled repayment of its legacy debt resulting in a breach of statutory duty. As a result of unplanned changes in the activity flow to other providers there is a risk that the Trust will incur additional costs or lose additional income which means that the Trust may not achieve its planned surplus and the scheduled repayment of its legacy debt resulting in a breach of statutory duty Negotiations continue with commissioners to close the contract with income at the level set out in the 'most likely' financial management plan Governance Business health Possible Moderate 3m Low Divisions are developing disinvestment plans to reduce their cost base in response to activity transfers to NHS TC which will be monitored throughout the year. Processes set up to ensure that activity transfers to treatment centres as planned. Governance Business health Likely Moderate 1m Medium Fines within final contract As a result of the terms of the final contract there is a risk that the Negotiations continue with commissioners Governance Business health Possible Moderate 3m Medium Trust may incur fines which will result in unplanned expenditure which to close the contract without excessive means that the Trust may not achieve its planned surplus of 6.0m and the scheduled repayment of its legacy debt resulting in a breach of statutory duty fining; the Trust is also planning to meet its performance target and minimise exposure to fines Agenda Item: 2.2 Page 17 of 17