Board Paper 2016/47 Shetland NHS Board Meeting: Shetland NHS Board Date: 4 th October 2016 Paper Title: Finance monitoring report (2016-17) to 31 August 2016 Author: Colin Marsland Job Title: Director of Finance Decision / Action required by meeting: The Board is asked to note: the over spend against budget of 897.3k for the financial year to date. This equates to an over spend on budget of 4.05%; compared to the Local Development Plan trajectory at the end of August ( 590k over spend) this is an adverse variance of 307.3k against the plan; that savings achieved for the year to date total 636.9k. This is an adverse variance of 135.1k against the planned trajectory; High Level Summary: This report updates the Board on the management of financial resources and outlines the overall financial position at the end of Month 5 (August 2016). Corporate Priorities and Strategic Aims: Board s corporate objectives for 2016-17 outline a requirement to provide best value for resources and deliver financial balance. Key Issues for attention of meeting: Currently behind trajectory on the overall financial position therefore significant management action is required to be taken to ensure the Board can achieve financial balance at the year end to meet its statutory financial obligation under section 85 of the National Health Services (Scotland) 1978. Implications: Service Users, Patients and Communities: Human Resources and Organisational Development: Equality, Diversity and Human Rights: Partnership Working Legal: None identified No specific issues identified. The delivery of individual savings schemes may impact on individual staff members or teams and this impact is assessed within each scheme. No implications for the Board s overall compliance. However any significant action plans to address either short-term or underlying issues will require an EQIA to be undertaken. None identified None identified
Finance: Assets and Property: Environmental: Risk Management: Highlights potential financial risks associated with the revenue position. These are currently being managed. None directly identified None directly identified Organisation has reputational damage if financial balance is not achieved at year end. Policy and Delegated Authority: Previously considered by: Statutory obligation in respect of the organisation to achieve financial balance delegated from the Board. Executive Management Team (EMT)
SHETLAND NHS BOARD FINANCE MONITORING REPORT (2016/17): APRIL 2016 TO AUGUST 2016 1. Purpose of Paper The paper advises the committee of the expenditure against Revenue Resource Limit for the first five months of 2016-17, highlights financial issues together with the actions being taken to manage these to ensure the year-end out-turn meets the statutory obligation. 2. Background The Board agreed the 2016-17 financial plans at its meeting on 24 May 2016. This report provides an update on progress against this plan. Shetland NHS Board s statutory requirement is to break even at the year-end. To achieve this in 2016-17 will be dependent on the good financial stewardship of revenue budgets in line with the financial plans whilst managing emerging costs. 3. Revenue Resource Limit The Board s core Revenue Resource Limit baseline allocation for 2016-17 is 45,779k. However the anticipated overall Revenue Resource Limit in the financial plan approved by the Board in May 2016 was 54,855k. As at 31 August 2016 the Board s confirmed Revenue Resource Limit is 54,831k. The difference between these values reflects the Scottish Governments process of allocating additional funding in bundles for specific strategic aims such as the New Medicines Fund and also non recurring funding such as Waiting Times and Treatment Time Guarantee (TTG) delivery support. In line with normal operating procedures of the Scottish Government not all the allocations included within the plan approved by the Board have been released and some not assumed have been allocated. 4. Overall Financial Position to end of August 2016 The overall position at the end of August 2016 is 897.3k overspent against budget. This compares to an assumption made in 2016-17 LDP financial plan that the Board would be 590.0k over spent. This position is outlined in Appendix A, in-line with the annual accounts presentation and in Appendix B in a way that reflects the local analysis of services. 4.1 Analysis of Expenditure for April 2016 to August 2016 The Board s overall expenditure, comparing the period to August 2016 with the period August 2015, has increased by 745k or 3.2%.
The single significant cause of the increased costs is the 391k attributable to the Social Fund payment to Shetland Island Council in-line with funding from the Scottish Government plan to increase funding for IJB with Health Service funding supporting social care. Locally this fund is 1,024k of which the IJB local action plan has 86k being retained by NHS Shetland to employ staff for the reablement programme. This movement also includes increased pay costs of 343.1k, a 3.0% increase on last year. The underlying causes are the recurring 1% pay award paid from 1 April 2016 and just under a 2% cost increase stemming from the removal of the National Insurance rebate for staff contracted out of the full UK pension scheme (SERPs). In addition non-recurrently there has also been an increase in Anaesthetic and General Medicine Consultant locums, junior doctor locums, and diagnostic locums cover (as per table 1 and Appendix E). The other locums and pay costs referred to in table 1 were also incurred last year so do not materially affect this growth increase but are still cost pressures to the Board as costs that are above budget. Appendix B outlines in full the income and expenditure position for the Board by service area and this is summarised in Table 1 below. Table 1: Summary Financial Position for April 2016 to August 2016 The Acute and Specialist Services directorate are aware that action is required to address pressure through both strategic long-term sustainability reviews and immediate short-term actions. Currently there are outline efficiency schemes in place but the detail remains under development as outlined in Appendix E. The in year current year pressures are the result of Anaesthetic Consultant, General Medicine medical staffing and Laboratory locum use and nursing pay costs in the hospital. Similarly, although there is still additional expenditure resulting from GP Locum costs, principally now in Yell and Unst, the Community Health and Social Care Services directorate is aware that action is required to address this pressure through both strategic long-term sustainability reviews and immediate short-term actions. Again there are efficiency schemes under development which are detailed in Appendix E. Appendix F provides an analysis of the underlying short-term pressure issues against the assumptions in the financial plan. In terms of setting the cost increase against changes in the Board s underlying funding at the start of 2016/17 the Board received an uplift of 1.7% to the core revenue resource allocation. However a significant number of the additional funding allocations the Board will receive will have a 7.5% reduction applied.
Due to the anticipated timescale for delivering savings the board s financial plan for 2016-17, as agreed in the Local Development Plan, does not assume a breakeven position will be achieved at the end of every month. The annual plan and current performance against the plan is outlined in graph 1 below whilst the detailed figures behind graph 1 are outlined in full in Appendix C. Graph 1: Shetland NHS Board Financial Plan Trajectory 2016-17. Out-turn at Month 5 shows an adverse variance against the LDP plan of 307.3k.. This is equivalent to a 52.1% adverse variance from the planned trajectory. The adverse variance is primarily the result of two factors: 1. The use of locums to fill gaps in staffing, bank staff leading to over establishment against budgets, primarily in Acute Services, 450.9k. 2. Unachieved efficiency savings. The unachieved efficiency target accounts for 679.6 k which is the primary cause of the current over spend. Offsetting these costs non-pay costs are currently 199k under spent over a number of specific budget areas covered in Table 1 above. The Executive Management Team will continually review required actions to maintain progress against the plan and ensure implications of required actions are identified. 4.2 Progress against Savings Plans Audit Scotland in both 2014-15 and 2015-16 external annual audit report highlighted their concern that the Board s reliance on non recurring savings is not sustainable in the long term. To return to financial balance the Board would need to achieve recurring efficiency savings of 3,712.9k in 2016-17. However the financial plan for 2016-17 only
included a recurrent savings requirement target of 2,311.8k as part of the three year plan to return to recurring balance. The overall target comprises; - 1,461.9k ( brought forward from 2015-16) - 1,194.0k (2016-17 3% savings target) - 1,057.0k (2016-17 additional savings target) At the end of August efficiency savings of 636.9k has been achieved year to date. These are outlined in Table 2, illustrated in graph 2 and in more detail in Appendix D. These savings are split between those made on a recurrent basis of 517.3k and those made on a non-recurrent savings basis of 119.6k. Table 2 Summary Savings Position as at August 2016 The planned trajectory for the board s savings plan, contained within the 2016/17 local development plan, outlined in graph 2 below, assumed that by the end of August 2016, 772.0k in savings would have been achieved. The Board has therefore an adverse variance of 135.1k against the year to date target, or 17.5% in relative terms. Graph 2: Shetland NHS Board Savings Plan Trajectory 2016-17.
5. Actions Being Taken Work is ongoing to develop detailed Project Initiation Documents (PIDS) for the efficiency schemes detailed in Appendix E. Once these are finalised the Finance Department can reflect these schemes in the management accounts and begin the in year monitoring process. The Finance Department continues to work with managers to ensure further ideas for savings are generated, scrutinised for risk and impact upon other services and once agreed as part of the board s plan that they are delivered. The Finance Department also continues to work with relevant budget managers to monitor and predict out-turn positions especially in the key risk areas. The Board is looking into a direct engagement model for locum recruitment which will save the Board in the region of 200k per year due to VAT savings. Proposal to Patient Travel redesign options will come to the Board for consideration. Work whilst work is on-going in ensuring that the escort policy is consistency applied. The Executive Management Team collectively will continue to monitor in year progress of savings plan and also work on the development of interim non recurrent schemes to tackle in year shortfalls that develop whilst implementing recurring plans. 6. Risks to the Financial Plan The financial out-turn for 2016/17 and beyond carry a high degree of risk, given the level of efficiencies required to allow for the planned reinvestment in services while also achieving financial balance. There are ongoing management actions being taken to address short-term issues and establish long-term sustainable solutions. These are being progressed as part of the Board s efficiency and redesign programme. The five key risk areas being closely monitored are cost of services delivered by Grampian Health Board due to activity increases, delivery of savings targets, medical staffing locum costs, prescribing and patient travel. 7. Year end Projection At the current time although the projection is still that the Board will achieve a balanced position in-line with our statutory duties at the yearend this may still be subject to change due to currently unplanned or unknown developments. However a recovery plan is currently being developed to assist in delivering this position. 8. Cash In addition to balancing the revenue resource allocation the Board is also given a cash allocation and the target balance to be held on account at the year end. The Board s yearend cash target is currently 100k.
9. Summary At the end of August 2016 the board is 897.3k over spent (an adverse variance of 4.05%). The financial position in 2016-17 remains extremely challenging. Achieving the planned efficiency schemes detailed in Appendix E is critical to delivering a balanced year-end financial out-turn. 10. Recommendation The Board is asked to note; the expenditure for the first five months of the financial year the savings achieved this year the projected out-turn risk need to be addressed and the actions required to be taken collectively by all staff to manage progress towards the achievement of the board s financial plan in 2016-17. Author: Colin Marsland Job title: Director of Finance E-mail: Colin.Marsland@nhs.net Date: 24 September 2016 Appendices: Appendix A: Financial Position stated in Annual Accounts pro-forma Appendix B: Summary Income and Expenditure Statement Appendix C: Local development plan variance trajectory and historical data Appendix D: Local development plan saving trajectory and historical data Appendix E: Outline principle clinical efficiency schemes Appendix F: Assumptions in the financial plan
Appendix C continued