SOMERSET PARTNERSHIP NHS FOUNDATION TRUST OPTIONS FOR THE FUTURE MANAGEMENT OF CHARITABLE FUNDS. Report to the Trust Board 25 March 2014

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1 SOMERSET PARTNERSHIP NHS FOUNDATION TRUST OPTIONS FOR THE FUTURE MANAGEMENT OF CHARITABLE FUNDS Report to the Trust Board 25 March 2014 Sponsoring Director: Author: Purpose Links to Strategic Objectives: Director of Finance and Business Development. Director of Finance and Business Development supported by Deputy Director of Finance. The purpose of the report is to request the Board to review the arrangements of Charitable funds with a purpose of amalgamating to one organisation. Strong financial management supports all of the Trust s strategic objectives. Links to the NHS Constitution: Links to CQC Outcomes: Legal or statutory implications/ requirements: Public/Staff Involvement History: Previous Consideration: Recommendation: This report does not apply to any specific rights or pledges. This report does not relate to any specific CQC outcomes. Not applicable. Not applicable. None. The Board is requested to discuss the report and approve the recommendation to amalgamate the Charitable funds. Executive Summary 1. The options for the future management of charitable funds report sets out the options in relation to the management of the charitable funds for the Trust. DIRECTOR OF FINANCE AND BUSINESS DEVELOPMENT March 2014 Public Board - 1 -

2 SOMERSET PARTNERSHIP NHS FOUNDATION TRUST OPTIONS FOR THE FUTURE MANAGEMENT OF CHARITABLE FUNDS 1. INTRODUCTION 1.1 Donations received by Somerset Partnership NHS Foundation Trust are held in charitable trusts and may be used to support the provision of health services. 1.2 The Trust has its own charity in which donations received in respect of mental health services are credited. It is the corporate trustee for this charity. 1.3 For community health services, the individual funds are designated to specific community hospitals or activities (eg Community services), but are held within Charitable Trusts administered by Taunton and Somerset NHS Foundation Trust and Yeovil District Hospital NHS Foundation Trust. These organisations are the Corporate Trustees of the charities themselves. 1.4 Taunton and Somerset NHS Foundation Trust identify the costs for administering the funds under their charity and apportion the costs across the funds, which are approximately 15,000 per year. These costs include finance staff costs as well as investment fees. Investment returns are similarly spread across the portfolio and are estimated to be approximately 33,000 per year. 1.5 Yeovil District Hospital NHS Foundation Trust charge a flat fee as part of their Service Level agreement with the Trust. These costs are borne by the Trust rather than the charitable funds. The actual amount is 5,000. Investment income is minimal. 1.6 Table 1 below shows the total funds held at 31 December Details of the individual funds that make up these balances is given in Appendix 1. Table 1 Funds held at 31 December Taunton and Somerset NHS Foundation Trust 488 Yeovil District Hospital NHS Foundation Trust 49 Somerset Partnership NHS Foundation Trust 78 TOTAL 615 March 2014 Public Board - 1 -

3 1.7 The objective of this paper is to consider the options available in respect of the ongoing management of these funds. 2. ISSUES 2.1 The external organisations that currently administer the funds have different investment management policies. The investment policy of Taunton and Somerset NHS Foundation Trust is to hold 75% of invested funds in equity and 25% in debt based instruments. The investment policy of Yeovil District Hospital NHS Foundation Trust is to invest in a floating rate investment account. 2.2 They have different policies in respect of operation of the funds including different: thresholds for the requirement for a formal business case to be submitted to the Charitable Trust Committee for approval; processes for accessing the funds; definitions in respect of appropriate use of funds. 2.3 The Trust does not control the direction of the policies in respect of its own funds, nor the application of those policies. Representation at Committee meetings differs between the providers. Lindsey Blackford attends the Charitable Fund Committee of Taunton and Somerset NHS Foundation Trust, although is not a Member and has no voting rights. There is no representation at the meeting of the Yeovil District Hospital NHS Foundation Trust s Committee. 3. OPTIONS 3.1 Maintain the existing arrangements. 3.2 Consolidate the management of all the funds into one of the two current providers (Third Party Provision). In order to achieve this, a Statutory Instrument would be required to formally transfer the funds from one provider to another. Based on the current spread of funds it would be more logical to consolidate the management of the funds with Taunton and Somerset NHS Foundation Trust. 3.3 Transfer the funds to the Somerset Partnership NHS Foundation Trust charity. This would need to be done by Statutory Instrument. March 2014 Public Board - 2 -

4 4. EVALUATION 4.1 Within the existing arrangement it is not possible to set consistent policies and procedures across the organisation. For this reason maintaining the existing arrangements should be discounted as a possible option. 4.2 Table 2 sets out the various other factors that could determine the appropriate option to adopt. Table 2 Factors to influence the decision Factor Third party provision In-house Provision Department of Health minimum threshold for Trusteeship ( 500,000) Combined funds (with either current provider) would be in excess of 1.5m The size of the fund would be around 0.5m, just above the threshold Accounting processes Established accounting processes in place. Established accounting processes in place, but currently very low level of transactions Experience of accounting team Experienced team in place with dedicated personnel Experienced team in place, but currently very low level of transactions Factor Third party provision In-house Provision Governance structure Cost Impact of application of International Financial Reporting Standards (IFRS) Established governance structure in place. Informal discussions have indicated that T&S would be willing to consider changes to their Committee to reflect role of third party Fixed costs spread across larger fund portfolio No impact on the financial results of Somerset Partnership NHS Foundation Trust as there is clear separation of control of the funds. Established governance structure in place Duplication of costs in particular in respect of annual accounts, audit, investment management and governance. Likely requirement for Somerset Partnership NHS Foundation Trust to consolidate the results of the fund into its own financial accounts (IAS 27). The issues here are: Volatility in the reported results of the Trust Increased pressure on the reporting timetable The charity s result may have to be prepared under UK Gaap for the purposes of the Charity Commission and IFRS for consolidation purposes. March 2014 Public Board - 3 -

5 Factor Third party provision In-house Provision Control of investment policy Restricted ability to influence investment policy. Control of own investment policy Control of definition in respect of appropriate use Restricted ability to influence definitions of appropriate use Control of own definitions in respect of appropriate use 5. CONCLUSION 5.1 The funds need to be consolidated, and the recommendation of the Charitable Accounts Committee is for the funds to be consolidated and managed by Taunton and Somerset NHS Foundation Trust. 5.2 The Trust Board is asked to discuss the report and approve the recommendation. DIRECTOR OF FINANCE AND BUSINESS DEVELOPMENT March 2014 Public Board - 4 -

6 Appendix 1 Schedule of Funds held by location/service Funds administered by Taunton and Somerset NHS Foundation Trust As at Location/service Burnham Hospital 63,285 Minehead Hospital 51,691 Bridgwater Hospital 1,578 Wellington Hospital 7,380 Dene Barton Hospital 5,467 Williton Hospital 14,735 Frome Hospital 328,311 Shepton Mallet Hospital 2,791 West Mendip Hospital 3,689 Community services 9,456 TOTAL 488,383 Funds administered by Yeovil District Hospital NHS Foundation Trust As at 30/11/13 Location/service South Petherton Hospital 3,422 Crewkerne Hospital 15,693 Wincanton Hospital 648 Chard Hospital 26,796 Community Nursing 1,944 TOTAL 48,504 Funds administered by Somerset Partnership NHS Foundation Trust - As at 31/01/14 Location/service Adult Community 8,934 Elderly Community 14,893 St Andrews 1,960 Pyrland 8,933 Willow 6,271 Rydon/Holford 4,945 Magnolia 4,212 Rowan 556 Summerlands restricted 14,924 Post Graduate Education 3,772 Help me Smile 1,790 CAMHS 2,520 Child and adolescent research 1,595 Learning Disabilities 251 Psychiatric nurse training 439 Zanzibar 1,773 Unallocated 76 TOTAL 77,775 March 2014 Public Board - 5 -

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