Health Development Agency

Transcription

1 Health Development Agency Annual Accounts Presented to the House of Commons pursuant to section 98 (1C) of the National Health Service Act 1977 Ordered by the House of Commons to be printed 19th July 2005 LONDON: The Stationery Office HC

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3 Health Development Agency Annual Accounts Presented to the House of Commons pursuant to section 98 (1C) of the National Health Service Act 1977 Ordered by the House of Commons to be printed 19th July 2005 LONDON: The Stationery Office HC

4 Foreword to the accounts Basis of accounts These accounts have been prepared in accordance with a direction given by the Secretary of State, with the approval of the Treasury, under Section 98(2) of the National Health Service Act Background information The Health Development Agency (HDA) was established in January 2000 by Statutory Instrument 1999 No It was a special health authority created to support and enhance efforts to improve health and reduce inequalities of people living in England. Working with a range of national and regional partners, it played an important role in assessing and then disseminating information to improve the public s health. It offered expert advice and guidance, support for the development of standards, and resources and training for those involved in improving public health. The HDA s mission was to improve public health. Financial results and year end position The agreed financial targets for the agency for were: To ensure that the HDA s use of resources in the financial year does not exceed the revenue and capital resource limits specified for the agency by the Secretary of State for Health Cash balance of 0 at 31 March % of creditors paid within 30 days (Better Payment Practice Code) Financial Target Achievement Achievement Revenue and capital Revenue Breakeven Revenue underspend of 64K resource limits Capital underspend of 4K Capital underspend of 1K Cash balance nil Balance of 0 Balance of 0 90% of creditors paid 88% by number and 85% by number and within 30 days 87% by value 84% by value Summary of results from to This table contains extracts from the operating cost statement and the cashflow statement. The net operating costs represent the gross operating costs less operating income (income other than Parliamentary funding) Parliamentary funding 11,992 12,943 Total operating income 1,477 1,099 Net operating costs 11,828 12,967 Review of activity Details of the HDA s operational activities in are described in the annual report, which will be available on the NICE website at d

5 Fixed assets During the year 109k was spent on fixed assets. Of this, 96k related to preparation of system integration with NICE to ensure an easy marriage of the two systems and preparation for a new Disaster Recovery and Back Up of systems. The balance of the capital expenditure was spent on routine IT purchases and office equipment. HDA activities Dissolution of the Health Development Agency and transfer of its functions On 22 July 2004 the Secretary of State for Health announced in a written statement to the House of Commons, that the number of NHS bodies that work at arms length from the Department of Health would be reduced. A report, Reconfiguring the Department of Health s Arm s Length Bodies, was published which detailed the bodies that would merge, be abolished or see their functions transferred. On 30 November 2004, the Secretary of State published An Implementation Framework for Reconfiguring the Department of Health s Arm s Length Bodies, setting out the principles, processes and timescales by which the change programme would be implemented. This resulted in the dissolution of the Health Development Agency as a separate body at 31 March 2005, with the transfer of its function to the National Institute of Clinical Excellence from 1 April The new organisation is known as the National Institute for Health and Clinical Excellence and will use the acronym NICE. These accounts are therefore the last which will be presented by the Agency. During its last year of operation the Agency continued to develop and build the evidence base and to produce a wide range of publications to support practice and practitioners saw therefore publications dealing with alcohol misuse, grading of public health evidence, public health economics, transport, health equity audit, work and worklessness and health, physical activity, prevention of youth suicide, achieving a smoke free NHS, social capital and health, risk and coronary heart disease, cancer, health inequalities, drug misuse prevention, smoking, teen pregnancy, qualitative and quantitative evidence, and accidental injuries and health inequalities, among others. New NICE has since published inherited HDA products on smoking cessation and breastfeeding. The legacy of all the HDA's publications and those inherited by NICE can now be found on the NICE website During the year the White Paper Choosing Health was published. The teams at the HDA made a significant contribution to providing evidence for the White Paper and a number of briefing papers. These may also be viewed on the NICE website. The year saw the winding up of a number of former HDA activities and preparations for the changeover to the new organisation. A new Centre for Public Health Excellence has been established in NICE and much of the evidence and guidance work which the old HDA used to do will be located there. As the new organisation gets into its stride, the possibilities which arise because of the linking together of the evidence base work which the HDA had done with the guidance systems which NICE have since developed offer an exciting opportunity for public health. Board membership Board membership during was as follows: Chair: Yve Buckland Executive directors: Paul Streets, Chief Executive (until 8 December 2004) Andrew Dillon, Chief Executive (from 9 December 2004) Dr Jeff French, Director of Knowledge Management and Communication (until 13 March 2005) Carolyn Hughes, Director of Corporate Services (until 17 October 2004) Joanna Sheehan, Director of Corporate Services (from 20 September 2004) 3

6 Professor Mike Kelly, Director of Evidence and Guidance Dr Viv Speller, Director of Development and Regions (until 10 September 2004) Maggie Rae, Director of Regions (from 12 July 2004) Non-executive directors: Tahera Aanchawan Professor Michael Adler (until 31 October 2004) Denise Campbell Ken Crossland Professor Christine Godfrey (until 31 October 2004) Liam Hughes Michael Peters Dr Michael Varnam (until 31 October 2004) Audit committee members: Tahera Aanchawan Ken Crossland (Chair) Michael Peters Policy in relation to disabled employees An employment priority for the Agency was that its policies and activities were modified in order to eliminate discrimination based on disabilities. The HDA created equal opportunity for people with disabilities to work and develop. Employee consultation The HDA continued to inform and consult with staff on a wide range of issues. The team briefing scheme ensured, through briefings and feedback, that there was an involved and effective workforce committed to the success of the Agency. Better Payment Practice Code The public sector Better Payment Practice Code requires public bodies to pay 90% of suppliers invoices within 30 days. The HDA aimed to observe the principles of this policy and in the Agency paid 88% of invoices within 30 days and 96% within 60 days. Auditors The accounts have been audited by the Comptroller and Auditor General in accordance with the National Health Service Act 1977 as amended by the Government Resources and Accounts Act 2000 (Audit of Health Service Bodies) Order 2003 No The Audit Certificate can be found on pages 9 and 10. The Comptroller and Auditor General is Sir John Bourn. His address is: National Audit Office Buckingham Palace Road Victoria London SW1W 9SP Andrew Dillon Chief Executive and Accounting Officer 11 July

7 Statement of the Board s and Chief Executive s responsiblities Under the National Health Service Act 1977 and directions made thereunder by the Secretary of State with the approval of Treasury, the Health Development Agency was required to prepare a statement of accounts for each financial year in the form and on the basis determined by the Secretary of State, with the approval of Treasury. The accounts were prepared on an accruals basis and must give a true and fair view of the Health Development Agency s state of affairs at the year end and of its net resource outturn, recognised gains and losses and cash flows for the financial year. The Accounting Officer for the Department of Health appointed the Chief Executive of the Health Development Agency as the Accounting Officer, with responsibility for preparing the Agency s accounts and for transmitting them to the Comptroller and Auditor General. In preparing the accounts, the Board and Accounting Officer were required to: observe the accounts direction issued by the Secretary of State, including the relevant accounting and disclosure requirements, and applied suitable accounting policies on a consistent basis; make judgements and estimates on a reasonable basis; state whether applicable accounting standards had been followed and disclosed and explained any material departures in the financial statements; and prepared the financial statements on a going concern basis, unless inappropriate to presume that the Health Development Agency will continue in operation. The Chief Executive's relevant responsibilities as Accounting Officer, including responsibility for the propriety and regularity of the public funds and assets vested in the Health Development Agency, and for the keeping of proper records, were set out in the Accounting Officers' Memorandum issued by the Department of Health. Andrew Dillon Accounting Officer 11 July

8 Statement on Internal Control Scope of responsibility The Health Development Agency (HDA) ceased to exist on 31 March On 1 April 2005 the National Institute for Clinical Excellence (NICE) took over the functions of the Health Development Agency (HDA). As part of the preparations for this transfer of functions I was appointed as Accounting Officer and Chief Executive for the HDA with effect from 9 December This was in addition to my role as Accounting Officer and Chief Executive for NICE. The Statement on Internal Control for HDA has accordingly been prepared by the National Institute for Health and Clinical Excellence as the successor body to the HDA. During the interim period, between my appointment as Accounting Officer at the HDA and the formal merger, there were separate arrangements for both bodies and a separate statement will be made concerning NICE s arrangements up to the merger date. This statement refers to the internal control arrangements at HDA up to 1 April As Accounting Officer and Chief Executive of the HDA since December 2004, I have responsibility, together with the former Board and former Chief Executive of HDA, for maintaining a sound system of internal control that supported the achievement of the organisation s policies, aims and objectives, whilst safeguarding the public funds and the organisation s assets for which I was personally responsible as set out in the Accounting Officers' Memorandum issued by the Department of Health. The following accountability arrangements related to my role in the HDA: During the first half of the year, the Board received a report at each meeting from the then Chief Executive, Mr. Paul Streets OBE, on salient performance and delivery issues, including risk management. I continued to report to the Board on this basis. The Board also agreed indicators to monitor my own performance since my arrival in post. I started work as Chief Executive of the HDA in December I had regular one to one meetings with the Chair of the HDA. Public meetings of the HDA Board were held six times a year, and there was an Annual General Meeting which was widely publicised. The Board held the Executive and myself specifically to account in terms of risk management as follows: a) through the Audit Committee (the risk management committee in the HDA) for risk management and controls assurance b) through the Resources Committee for risks associated with the use of the HDA s financial and staff resources The Executive Management Team (EMT) received reports on progress with the Board Assurance Framework during the year. With the Chair, both myself and my predecessor had quarterly meetings with officials of our sponsoring department to monitor progress against the HDA s annual Delivery Plan. The Plan included a statement of key business risks. 2. The purpose of the system of internal control The system of internal control is designed to manage risk to a reasonable level rather than to eliminate all risk of failure to achieve policies, aims and objectives; it can therefore only provide reasonable and not absolute assurance of effectiveness. The system of internal control is based on an ongoing process designed to: identify and prioritise the risks to the achievement of the organisation s policies, aims and objectives, evaluate the likelihood of those risks being realised and the impact should they be realised, and to manage them efficiently, effectively and economically. 6

9 The system of internal control had been in place in the HDA for the whole of the year ended 31 March 2005 and up to the date of approval of the annual report and accounts. 3. Capacity to handle risk The HDA s capacity to handle risk was maintained through clear leadership on managing risk during the year, as set out below: the identification and registration of risks was co-ordinated by the Board Secretary and Governance Officer, reporting to the Director of Corporate Services and thence to EMT; the Audit Committee was responsible for overseeing the process of risk management and the development of the Board Assurance Framework; because of the business risks surrounding the process of the merger with NICE, the Board received an updated Board Assurance Framework around the key business risks at every meeting. Guidance on Governance continued to be provided to staff through the personal issue to each new employee of the HDA s Standing Financial Instructions and Scheme of Reservation of Powers to the Board/Scheme of Delegation from the Board. Each new employee also had a copy of the HDA s Risk Management Policy and procedures. All these documents were available to staff on the HDA s Intranet site. 4. The risk and control framework The key elements of the Risk Management Strategy (approved by the Board in February 2003) were: A statement of the HDA s approach in relation to risk management. This established the HDA s appetite for risk in the following terms: minimising risk to all its stakeholders through a comprehensive system of internal controls, while maximising potential for flexibility, innovation and best practice. A definition of risk in the particular context of the HDA, covering both threats to the achievement of our objectives and threats to our reputation and/or stakeholders confidence in us. The role of Controls Assurance in the risk management process. The objectives of risk management in the HDA, focusing on the identification and assessment of risks, the implementation of cost effective risk control measures, the inculcation of a risk management culture in the HDA and in its business planning processes and the monitoring of the effectiveness of risk control measures. Responsibilities at individual, project and Board level for risk identification, assessment and management. The machinery for implementing risk identification, assessment and management in the HDA. The Strategy provided for risks to be treated, tolerated, terminated or avoided The means by which risk identification, assessment and management were carried out in the HDA: Because of the major potential business continuity risks associated with the transfer of functions to NICE (implemented on 1 April 2005), risk identification, assessment and management was focused on the key risks listed in the Board Assurance Framework (BAF). Risks were identified at Director level and progress in their management was closely monitored by the Audit Committee and the Board via the BAF, first introduced in the fourth quarter of the previous year. 7

10 The BAF enabled EMT, the Audit Committee and the Board to receive a statement describing, against each principal risk, the relevant control, the source of assurance and any gaps in either the control or the assurance. This was a key document to enable both myself and the Board to have assurance that the principal risks were being effectively managed. The risks were grouped against the principal objectives in the HDA s Delivery Plan. 5. Review of effectiveness As Accounting Officer, I have responsibility, together with the Board, for reviewing the effectiveness of the system of internal control. My review is informed in a number of ways. The head of internal audit provides me with an opinion on the overall arrangements for gaining assurance through the Assurance Framework and on the controls reviewed as part of the internal audit work. Executive managers within the organisation who have responsibility for the development and maintenance of the system of internal control provide me with assurances. The Assurance Framework itself provides me with evidence that the effectiveness of controls that manage the risks to the organisation achieving its principal objectives have been reviewed. My review is also informed by: The Board received a report by the Audit Committee after each of its meetings. The Audit Committee met quarterly and received copies of all Internal Audit reports and received updated versions of the BAF from the HDA s Board Secretary and Governance Officer on the management of risk in the Agency. The internal and external auditors had a right of access to the Board Chair and the Chair of the Audit Committee. The comments of the Audit Committee were particularly beneficial during the year in enhancing the process of managing and reporting on risks around the merger with NICE. I received Internal Audit reports, together with the external auditors, Chair and members of the Audit Committee and the Director of Corporate Services as well as those audited. Internal Audit s audit programme took account of the HDA s BAF. I was advised on the implications of the result of my review of the effectiveness of the system of internal control by the Board and the Audit Committee. Recommendations for future improvements to internal control will be considered by the Board and the Audit Committee of the National Institute for Health and Clinical Excellence. There were no significant internal control issues identified in this financial year that I need to highlight. Andrew Dillon Chief Executive, HDA 11 July

11 The Certificate and Report of the Comptroller and Auditor General to the Houses of Parliament I certify that I have audited the financial statements on pages 11 to 29 under the National Health Service Act These financial statements have been prepared under the historical cost convention as modified by the revaluation of certain fixed assets and the accounting policies set out on pages 14 to 18. Respective responsibilities of the Chief Executive and Auditor As described on page 5, the Chief Executive is responsible for the preparation of the financial statements in accordance with the National Health Service Act 1977 and directions made by the Secretary of State for Health with the approval of the Treasury thereunder and for ensuring the regularity of financial transactions. The Chief Executive is also responsible for the preparation of the Foreword. My responsibilities, as independent auditor, are established by statute and I have regard to the standards and guidance issued by the Auditing Practices Board and the ethical guidance applicable to the auditing profession. I report my opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the National Health Service Act 1977 and directions made by the Secretary of State for Health with the approval of the Treasury thereunder, and whether in all material respects the expenditure and income have been applied to the purposes intended by Parliament and the financial transactions conform to the authorities which govern them. I also report if, in my opinion, the Foreword is not consistent with the financial statements, if the Agency has not kept proper accounting records, or if I have not received all the information and explanations I require for my audit. I review whether the statement on pages 6 to 8 reflects the Agency s compliance with Treasury s guidance on the Statement on Internal Control. I report if it does not meet the requirements specified by Treasury, or if the statement is misleading or inconsistent with other information I am aware of from my audit of the financial statements. I am not required to consider, nor have I considered whether the Accounting Officer s Statement on Internal Control covers all risks and controls. I am also not required to form an opinion on the effectiveness of the Agency s corporate governance procedures or its risk and control procedures. Basis of audit opinion I conducted my audit in accordance with United Kingdom Auditing Standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts, disclosures and regularity of financial transactions included in the financial statements. It also includes an assessment of the significant estimates and judgements made by the Chief Executive in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Agency s circumstances, consistently applied and adequately disclosed. I planned and performed my audit so as to obtain all the information and explanations which I considered necessary in order to provide me with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by error, or by fraud or other irregularity and that, in all material respects, the expenditure and income have been applied to the purposes intended by Parliament and the financial transactions conform to the authorities which govern them. In forming my opinion I have also evaluated the overall adequacy of the presentation of information in the financial statements. 9

12 Opinion In my opinion: the financial statements give a true and fair view of the state of affairs of the Health Development Agency at 31 March 2005 and of the net resource outturn, recognised gains and losses and cash flows for the year then ended and have been properly prepared in accordance with the National Health Service Act 1977 and directions made thereunder by the Secretary of State for Health with the approval of the Treasury; and in all material respects the expenditure and income have been applied to the purposes intended by Parliament and the financial transactions conform to the authorities which govern them. I have no observations to make on these financial statements. John Bourn National Audit Office Comptroller and Auditor General Buckingham Palace Road Victoria 13 July 2005 London SW1W 9SP 10

13 Operating statement for the year ended 31 March 2005 Continuing operations Notes Programme costs ,066 13,304 Operating income 4 (1,099) (1,477) Net operating cost before interest 12,967 11,827 Interest Payable 0 1 Net Operating Cost 12,967 11,828 Net resource outturn ,967 11,828 Statement of recognised gains and losses for the year ended 31 March Notes Unrealised surplus/(deficit) on the indexation of fixed assets Recognised gains and losses for the financial year The notes at pages 14 to 29 form part of this account. 11

14 Balance Sheet as at 31 March March 31 March Notes Fixed assets: Intangible assets Tangible assets Current assets Debtors ,293 Cash at bank and in hand ,293 Creditors: amounts falling due within one year 8.1 (819) (1,287) Net current assets/liabilities (83) 6 Total assets less current liabilities Creditors: amounts falling due after more than one year Provisions for liabilities and charges 9 (570) (881) (86) (69) Taxpayers' equity General Fund 11.1 (186) (143) Revaluation reserve The notes at pages 14 to 29 form part of this account. (86) (69) Andrew Dillon Accounting Officer 11 July

15 Cash flow statement for the year ended 31 March Notes Net cash outflow from operating activities 12 (12,834) (11,685) Servicing of finance Interest paid 0 (1) Net cash (outflow) from servicing finance 0 (1) Capital expenditure and financial investment (Payments) to acquire intangible fixed assets 5.1 (51) (113) (Payments) to acquire tangible fixed assets 5.2 (58) (303) Receipts from disposal of tangible fixed assets 0 1 Net cash outflow from investing activities (109) (415) Net cash outflow before financing (12,943) (12,102) Financing Net Parliamentary funding 12,943 11,992 (Decrease)/increase in cash in the period 7 0 (109) The notes at pages 14 to 29 form part of this account. 1 Dear Accounting Officer Letter DAO(GEN) 02/04 of 12 February

16 Notes to the accounts 1. Accounting Policies The financial statements have been prepared in accordance with the Resource Accounting Manual issued by HM Treasury. The particular accounting policies adopted by the agency are described below. They have been consistently applied in dealing with items considered material in relation to the accounts. Going Concern On 30 November 2004, the Secretary of State announced the dissolution of the Health Development Agency as a separate body at 31 March 2005, with the transfer of functions into the National Institute for Clinical Excellence with effect from 1 April Accordingly, the assets, liabilities, contractual obligations and staff were transferred from 1 April 2005 to the National Institute for Health and Clinical Excellence. The Accounting Officer of the Health Development Agency therefore considers that it is appropriate to prepare the financial statements on a going concern basis. The balance sheet as at 31 March 2005 shows net liabilities of 86k. This reflects the inclusion of liabilities falling due in future years which may only be met by future funding from the Department of Health. This is because, under normal conventions applying to parliamentary control over income and expenditure, payments may not be made by the Department of Health to the Health Development Agency in advance of need. Funding for for NICE, taking into account the amounts required to meet the Agency's liabilities falling due in that year, has already been included in the Department of Health's Estimates for that year, which have been approved by Parliament, and there is no reason to believe that the Department's future sponsorship and future parliamentary approval for the activities to which this funding relates, will not be forthcoming. 1.1 Accounting Convention This account is prepared under the historical cost convention, modified to account for the revaluation of fixed assets at their value to the business by reference to their current cost. This is in accordance with directions issued by the Secretary of State for Health and approved by HM Treasury. 1.2 Income Income is accounted for applying the accruals convention. The main source of funding for the agency is Parliamentary grant from the Department of Health within an approved cash limit, which is credited to the general fund. Operating income is income which relates directly to the operating activities of the agency. It principally comprises fees and charges for services provided on a direct-cost basis to external customers, but it also includes other income such as that from the Department of Health, the Cabinet Office and the Office of the Deputy Prime Minister. It includes both income appropriated-in-aid and income to the Consolidated Fund which HM Treasury has agreed should be treated as miscellaneous income. Where income is received for a specific activity which is to be delivered in the following financial year, that income is deferred. 1.3 Taxation The agency is not liable to pay corporation tax. Expenditure is shown net of recoverable VAT. Irrecoverable VAT is charged to the most appropriate expenditure heading or capitalised if it relates to an asset. 14

17 Notes to the accounts (continued) 1. Accounting Policies (continued) 1.4 Capital Charges The treatment of fixed assets in the account is in accordance with the principal capital charges objective to ensure that such charges are fully reflected in the cost of capital. The interest rate applied to capital charges in the financial year was 3.5% ( %) on all assets less liabilities, except for cash balances with the Office of the Paymaster General (OPG), where the charge is nil. 1.5 Fixed Assets (a) Capitalisation All assets falling into the following categories are capitalised: (i) (ii) Intangible assets where they are capable of being used for more than one year and have a cost, individually or as a group, equal to or greater than 5,000. Purchased computer software licences are capitalised as intangible fixed assets where expenditure of at least 5,000 is incurred. (iii) Tangible assets which are capable of being used for more than one year, and they: individually have a cost equal to or greater than 5,000 collectively have a cost of at least 5,000, where the assets are functionally interdependent, they had broadly simultaneous purchase dates, are anticipated to have simultaneous disposal dates and are under single managerial control or form part of the initial setting-up cost of a new building, irrespective of their individual or collective cost. (b) Valuation Intangible Fixed Assets Intangible fixed assets held for operational use are valued at historical cost. Surplus intangible assets are valued at the net recoverable amount. The carrying value of intangible assets is reviewed for impairment at the end of the first full year following acquisition and in other periods if events or changes in circumstances indicate the carrying value may not be recoverable. Tangible Fixed Assets Tangible fixed assets are stated at the lower of replacement cost and recoverable amount. On initial recognition they are measured at cost (for leased assets, fair value) including any costs such as installation directly attributable to bringing them into working condition. They are restated to current value each year. The carrying values of tangible fixed assets are reviewed for impairment in periods if events or changes in circumstances indicate the carrying value may not be recoverable. 15

18 1. Accounting Policies (continued) (i) Land, buildings, installations and fittings valuations are carried out by the District Valuer of the Inland Revenue Government Department at five-yearly intervals in accordance with FRS 15. Between valuations price indices appropriate to the category of asset provided by the Valuation Office Agency and published in the Manual for Accounts are applied to arrive at the current value. The buildings indexation is based on the All in Tender Price Index published by the Building Cost Information Service (BCIS). (ii) Operational equipment is valued at net current replacement costs through annual uplift by the change in the value of the GDP deflator. Equipment surplus to requirements is valued at net recoverable amount. (iii) All adjustments arising from indexation and five-yearly revaluations are taken to the revaluation reserve. All impairments resulting from price changes are charged to the statement of recognised gains and losses. Falls in value when newly constructed assets are brought into use are also charged there. These falls in value result from the adoption of ideal conditions as the basis for depreciated replacement cost valuations. (c) Depreciation and amortisation Depreciation is charged on each individual fixed asset as follows: (i) (ii) Intangible assets are amortised, on a straight line basis, over the estimated lives of the assets Purchased computer software licences are amortised over the shorter of the term of the licence and their useful economic lives (iii) Buildings, installations and fittings are depreciated evenly on their revalued amount over the assessed remaining life of the asset as advised by the District Valuer. Leaseholds are depreciated over the primary lease term (iv) Each equipment asset is depreciated evenly over the expected useful life: Years Furniture 5 Office, information technology, and other equipment Donated Fixed Assets There are no donated fixed assets. 1.7 Stocks and work in progresss The net realisable value of publication stocks is nil. The HDA has no other stocks or work in progress. 1.8 Losses and special payments Losses and special payments are charged to the relevant functional headings, including losses which would have been made good through insurance cover had the authority not been bearing its own risks (with insurance premiums then being included as normal revenue expenditure). 16

19 Notes to the accounts (continued) 1. Accounting Policies (continued) 1.9 Pension costs Past and present employees are covered by the provisions of the NHS Pension Scheme. The Scheme is an unfunded, defined benefit scheme that covers NHS employers, General Practices and other bodies, allowed under the direction of Secretary of State, in England and Wales. As a consequence it is not possible for the Special Health Authority to identify its share of the underlying scheme liabilities. Therefore, the scheme is accounted for as a defined contribution scheme and the cost of the scheme is equal to the contributions payable to the scheme for the accounting period. The total employer contributions payable in was 722,819 at 14% (252,934 at 7% for ). The Scheme is subject to a full valuation by the Government Actuary every four years which is followed by a review of the employer contribution rates. The last valuation took place as at 31 March 2003 and has yet to be finalised. The last published valuation covered the period 1 April 1994 to 31 March Between valuations the Government Actuary provides an update of the scheme liabilities on an annual basis. The latest assessment of the liabilities of the Scheme is contained in the Scheme Actuary report, which forms part of the NHS Pension Scheme (England and Wales) Resource Account, published annually. These accounts can be viewed on the NHS Pensions Agency website at Copies can also be obtained from The Stationery Office. The conclusion of the 1999 valuation was that the scheme continues to operate on a sound financial basis and the notional surplus of the scheme is 1.1 billion. It was recommended that employers' contributions remain at 7% of pensionable pay until 31 March 2003 and then be increased to 14% of pensionable pay with effect from 1 April On advice from the actuary the contribution may be varied from time to time to reflect changes in the scheme's liabilities. Employees pay contributions of 6% (manual staff 5%) of their pensionable pay. NHS bodies are directed by the Secretary of State to charge employers pension costs contributions to operating expenses as and when they become due. Until HM Treasury paid the Retail Price Indexation costs of the NHS Pension scheme direct but as part of the Spending Review Settlement, these costs have been devolved in full. For the additional funding was retained as a Central Budget by the Department of Health and was paid direct to the NHS Pensions Agency and the employers' contribution remained at 7%. From this funding was devolved in full to NHS Pension Scheme employers and the employers' contribution rate rose to 14%. The Scheme is a final salary scheme. Annual pensions are normally based on 1/80th of the best of the last 3 years pensionable pay for each year of service. A lump sum normally equivalent to 3 years pension is payable on retirement. Annual increases are applied to pension payments at rates defined by the Pensions (Increase) Act 1971, and are based on changes in retail prices in the twelve months ending 30 September in the previous calendar year. On death, a pension of 50% of the member's pension is normally payable to the surviving spouse Research and development Research and development expenditure is charged against income in the year in which it is incurred, except insofar as development expenditure relates to a clearly defined project and the benefits of it can reasonably be regarded as assured. Expenditure so deferred is limited to the value of future benefits expected and is amortised through the operating cost statement on a systematic basis over the period expected to benefit from the project. It should be revalued on the basis of current cost. The amortisation charge is calculated on the same basis as used for depreciation, i.e. on a quarterly basis. 17

20 1. Accounting Policies (continued) 1.11 Foreign exchange Transactions which are denominated in a foreign currency are translated into sterling at the exchange rate ruling on the date of each transaction. During 2004/5 the Agency's most significant foreign currency transactions were with the World Health Organisation ( 22k), International Union for Health ( 9k) and Eurohealthnet ( 7k) Leases Assets held under finance leases and hire purchase contracts are capitalised in the balance sheet and are depreciated over their useful lives or primary lease term. Rentals under operating leases are charged on a straight line basis over the terms of the lease Provisions The Agency provides for legal or constructive obligations that are of uncertain timing or amount at the balance sheet date on the basis of the best estimate of the expenditure required to settle the obligation. Where the effect of the time value of money is significant, the estimated risk-adjusted cash flows are discounted using the Treasury s discount rate of 3.5% in real terms Change of Policy There has been no changes in policy from to General operating costs 2.1 Programme costs Notes Non-executive members' remuneration Staff costs 2.2 6,491 6,294 Capital:Depreciation and amortisation 5.1, Capital charges interest (19) (40) (Profit)/loss on disposal Premises and fixed plant 1,583 1,410 Transport and moveable plant External contractors 3,524 3,345 Publications & conferences 1,060 1,115 Establishment expenses Auditor's remuneration: audit fees* Supplies and services general ,066 13,304 *No non-audit fees were charged 18

21 Notes to the accounts (continued) Staff Costs 2.2 Executive members' remuneration and staff costs Permanently Employed Total Staff Other Salaries and wages 5,323 4,217 1,106 5,629 Social security costs Employer contributions to NHSPA Other pension costs ,491 5,385 1,106 6,294 The average number of employees during the year was: Permanently Employed Total Staff Other Number Number Number Number Expenditure on staff benefits The amount spent on staff benefits during the year totalled 61,939 ( : 54,725). Retirements due to ill health This note discloses the number and additional pension costs for individuals who retired early on illhealth grounds during the year. There were no such retirements during

22 2.3 The salary and pension entitlements of the most senior managers of the agency were as follows: (a) Remuneration Other Other Salary remuner. Salary remuner. in 5k in 5k Benefits in 5k in 5k Benefits bands bands in kind bands bands in kind Name and title Non-executive directors Yve Buckland Tahera Aanchawan Prof Michael Adler ** Denise Campbell Ken Crossland Prof Christine Godfrey ** Liam Hughes Michael Peters Dr Michael Varnam ** Executive directors Paul Streets * * 0 0 Chief Executive Dr Jeff French Director of Knowledge Management & Communications Carolyn Hughes * Director of Corporate Services Joanna Sheehan * Director of Corporate Services Prof Mike Kelly Director of Evidence & Guidance Dr Viv Speller * Director of Development & Regions Maggie Rae Director of Regions * actual part year salary shown ** left Board on 31 October 2004 Paul Streets left the Agency on 8 December Andrew Dillon, Chief Executive of the then National Institute for Clinical Excellence, was appointed as Chief Executive for the Agency to 31 March He was not remunerated by the Agency during this period. Jeff French left the Agency on 13 March 2005 Carolyn Hughes left the Agency on 17 October Joanna Sheehan was appointed, through an agency, as Director of Corporate Services for the period 20 September to 31 March Viv Speller left the Agency on 10 September Maggie Rae was appointed as Acting Director of Regions for the period 12 July 2004 to 31 March Benefits in kind relate to provision of car, child care allowance, travel allowance and reimbursement of relocation costs. The remuneration of the Chair and other non-executive members of the board is determined by the Secretary of State. The remuneration of executive board members is determined by the Remuneration Committee. 20

23 Notes to the accounts (continued) 2.3 The salary and pension entitlements (continued) (b) Pension Benefits Total accrued pension at Real increase age 60 at in pension 31 March Cash Cash Real Employer's and related 2005 and Equivalent Equivalent increase contribution lump sum related Transfer Transfer in Cash to at age 60 lump sum Value at Value at Equivalent stake- (bands of (bands of 31 March 31 March Transfer holder 2,500) 5,000) Value pension Paul Streets Chief Executive Dr Jeff French Director of Knowledge Management & Communications Carolyn Hughes Director of Corporate Services Joanna Sheehan Director of Corporate Services Prof Mike Kelly Director of Evidence & Guidance Dr Viv Speller Director of Development & Regions Maggie Rae Director of Regions Cash Equivalent Transfer Value A Cash Equivalent Transfer Value (CETV) is the actuarially assessed capital value of the pension scheme benefits accrued by a member at a particular point in time. The benefits valued are the member s accrued benefits and any contingent spouse s pension payable from the scheme. A CETV is a payment made by a pension scheme or arrangement to secure pension benefits in another pension scheme or arrangement when the member leaves a scheme and chooses to transfer the benefits accrued in their former scheme. The pension figures shown relate to the benefits that the individual has accrued as a consequence of their total membership of the pension scheme, not just their service in a senior capacity to which disclosure applies. The CETV figures, and from the other pension details, include the value of any pension benefits in another scheme or arrangement which the individual has transferred to the NHS pension scheme. They also include any additional pension benefit accrued to the member as a result of their purchasing additional years of pension service in the scheme at their own cost. CETVs are calculated within the guidelines and framework prescribed by the Institute and Faculty of Actuaries. Real Increase in CETV This reflects the increase in CETV effectively funded by the employer. It takes account of the increase in accrued pension due to inflation, contributions paid by the employee (including the value of any benefits transferred from another scheme or arrangement) and uses common market valuation factors for the start and end of the period. 21

24 2.4 Better Payment Practice Code measure of compliance Number 000 Total bills paid ,299 8,320 Total bills paid within target 6,388 7,248 Percentage of bills paid within target 87.5% 87.1% Total bills paid ,473 8,799 Total bills paid within target 6,370 7,392 Percentage of bills paid within target 85.2% 84.0% The Late Payment of Commercial Debts (Interest) Act 1998 Interest paid under the legislation 0 Compensation payments made Reconciliation of net operating cost to net outturn and revenue resource limit Net operating cost 12,967 11,828 Net resource outturn 12,967 11,828 Revenue resource limit* 12,967 11,893 (Over)/under spend against limit (0) Reconciliation of gross capital expenditure to capital Gross capital expenditure NBV of assets disposed 0 2 Net capital resource outturn Capital resource limit (Over)/underspend against limit 4 1 *The revenue resource limit comprises Parliamentary Funding of 12,830k as notified by the Department of Health plus non-cash items totalling 137k. 4 Operating income analysed by classification and activity, is as follows: Programme income: Fees & charges to external customers Income received from Departments of Health Income received from other Government Departments Other 1 1 Total 1,099 1,477 22

25 Notes to the accounts (continued) 5.1 Intangible fixed assets Software licences 000 Gross cost at 31 March Additions - purchased 51 Gross cost at 31 March Accumulated amortisation at 31 March Provided during the year 52 Accumulated amortisation at 31 March Net book value: Total at 31 March Total at 31 March Tangible fixed assets Plant and Information Furniture Buildings machinery technology & fittings Total Cost or valuation at 31 March ,136 Indexation Additions - purchased Disposals (31) (13) (44) Gross cost at 31 March ,180 Accumulated depreciation at 31 March Indexation Provided during the year Disposals (31) (13) (44) Accumulated depreciation at 31 March Net book value: Total at 31 March Net book value: Total at 31 March There were no assets held under finance leases or hire purchase contracts at the balance sheet date. 6 Debtors 6.1 Amounts falling due within one year NHS debtors Provision for irrecoverable debts (3) (3) Prepayments Other debtors Amounts falling due after more than one year 0 0 Total Debtors 736 1,293 23

26 7 Analysis of changes in cash At 31 Change At 31 March during March 2004 the year Cash at OPG 892 (892) (0) Cash at commercial banks and in hand (892) (0) (0) 8 Creditors: 8.1 Amounts falling due within one year NHS creditors Other creditors Accruals Amounts falling due after more None 819 1, Provisions for liabilities and charges Pensions for former staff Other Total At 31 March Arising during the year Utilised during the year (7) (542) (549) Reversed unused At 31 March Expected timing of cash flows: Within 1 year years Over 5 years As at 31 March 05 the Agency has made a provision of 32k in respect of redundancy costs due to the transfer of functions to NICE on 1 April A provision of 206k has also been made in respect of Early Retirement for one member of staff relating to the transfer of functions. 24

27 Notes to the accounts (continued) 10. Movements in working than cash (Increase)/decrease in debtors 557 (667) Increase/(decrease) in creditors (468) (508) 11. Reserves 11.1 The movement on the general fund in the year comprised: 000 Balance at 31 March 2004 (143) Net operating costs for the year (12,967) Net Parliamentary funding 12,943 Non-cash items: Capital charge interest (19) Balance at 31 March 2005 (186) 11.2 The movement on the revaluation reserve in the year comprised: 000 Balance at 31 March Indexation of fixed assets 26 Balance at 31 March Reconciliation of operating cost to operating cash flows Notes Net operating cost before interest for the year (12,967) (11,827) Adjust for non-cash transactions Adjust for movements in working capital other than cash (508) Increase/(decrease) in provisions 9 (310) 467 Net cash outflow from operating activities (12,834) (11,685) 13. Contingent liabilities The Agency had no known contingent liabilities at 31 March 2005 (nil at 31 March 2004). 25

28 14 Commitments under operating leases Expenses of the Authority include the following in respect of hire and operating lease rentals: Hire of plant and machinery Other operating leases Commitments under non-cancellable operating leases to pay rentals during the year following the year of these accounts are given in the table below, analysed according to the period in which the lease expires: Land and buildings Operating leases which expire: within 1 year between 1 and 5 years after 5 years Other leases within 1 year 6 4 between 1 and 5 years 3 14 after 5 years Related parties The Health Development Agency is a special health authority established by order of the Secretary of State for Health. The Department of Health is regarded as a controlling related party. During the year the Health Development Agency has had a significant number of material transactions with the Department. During the year none of the HDA's directors or members of its key management, staff or parties related to them, has undertaken any material transactions with the HDA. There were no company directorships held by Directors where such companies were likely to do business with the NHS. 16. Post balance sheet events As discussed in the Foreword and Note 1, the Secretary of State announced that sheet events the Health Development Agency would be dissolved as a separate body at 31 March 2005, with the transfer of its functions into the National Institute for Clinical Excellence with effect from 1 April