Ft financial regime
This presentation is the property of its rightful owner.
Sponsored Links
1 / 29

FT FINANCIAL REGIME PowerPoint PPT Presentation

  • Uploaded on
  • Presentation posted in: General

FT FINANCIAL REGIME. JANET BARKER/JOANNA MYERS Group Finance Managers Sheffield Teaching Hospitals NHSFT. Aims of Today. FT Financial regime Contract income and other funding sources Monitor regulation Q&A session on “a day in the life of…”. FT Financial Freedoms.

Download Presentation


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.

- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript

Ft financial regime



Group Finance Managers

Sheffield Teaching Hospitals NHSFT

Aims of today

Aims of Today

  • FT Financial regime

  • Contract income and other funding sources

  • Monitor regulation

  • Q&A session on “a day in the life of…”

Ft financial freedoms

FT Financial Freedoms

  • Plan driven vs Target driven

  • Can borrow commercially

  • Retain surpluses

  • Retain proceeds of asset sales

  • Invest to serve local needs

  • Can set up investment companies

  • Joint ventures with the private sector

Ft financial duties

FT Financial duties

  • Set out in terms of Authorisation

    • Must operate efficiently, effectively and economically and as a going concern

    • Disclose information to Monitor and relevant third parties

    • Comply with Operating framework, Principles of Cooperation and competition

    • Protection of mandatory services and protected assets

    • Major investments/disinvestments

Accounting officer responsibilities

Accounting Officer Responsibilities

  • Chief Executive – Delegates to DoF

  • Duty to exercise its functions effectively, efficiently and economically

  • Preparation of accounts

  • Witness before Public Accounts Committee

  • High standard of Financial Management

  • Robust financial systems and procedures

  • Safeguard assets

  • Financial considerations are reflected in FT policy decisions

  • Comply with Financial Terms of authorisation

Nhs funds flow

NHS Funds Flow


Department of Health


- Networks

  • Primary Care Trust

  • Patient Services

  • (April 13 CCGs/SCB)

Health Authority

- Education


Services Provider

Acute Provider (s)

Mental Health


Sources of income into sthft

Sources of Income into STHFT


NHS Clinical709.3

Non-NHS Clinical 7.6

R&D 14.3

Education & Training 66.2

Other income 62.7


(Source: 2011/12 Accounts)

Clinical income

Clinical income


Elective/Day cases148.0

Non-elective 158.3


A&E 12.9

Other 227.1

Block Contract (Community) 53.1



Main pct commissioners

Main PCT Commissioners

% of patient services income

Sheffield 56.9

Barnsley 4.3

Rotherham 4.1

Doncaster 2.7

Bassetlaw 1.2

Derbyshire County 4.3

SCGs 23.2

Others 3.3

How contracts are agreed

How Contracts are Agreed

  • Agreements cover:

    • Volume of Activity

    • Price of Activity

    • Quality of Activity

    • “Timing” of Activity

  • Funding historically on a local negotiation on price

  • Now funding largely based on Payment by Results (National Tariffs)

Pbr national tariffs

PbR / National tariffs

  • Payment by Results – being paid for work we carry out at national tariff

  • Tariffs are split between:

    • Elective inpatients/day case

    • Non-elective inpatients

    • Outpatients

    • A&E

How is tariff derived

How is tariff derived?

  • All Providers prepare and submit reference costs on an annual basis.

  • Based at Healthcare Resource Group level e.g. FZ17A – Abdominal Hernia > 19yrs with major CC.

  • Separate for elective and non-elective activity

  • Tariff is a national average of all Providers Reference Cost submissions.

Pricing of sth contract tariff element

Pricing of STH Contract – Tariff element

  • Approximately 69.4% of the STH services are covered by national tariffs

  • Income is calculated based on:

    -Activity x national tariff

    -Get regional price adjustment (MFF) = additional 2.9%)

  • Contract at indicative volume and case-mix, but ultimately get paid on reported actuals

Sources of capital funding

Sources of Capital funding

  • Depreciation

  • I&E surpluses

  • Sale of fixed assets

  • Public Dividend Capital

  • Donations – eg University/Charitable donation

  • Government Grants – eg Lottery/specific grant.

  • Leases

  • PFI

  • FT Financing Facility Loans – Govt bank loan up to 25 year term.

Public dividend capital

Public Dividend Capital

  • Direct allocations from DoH for specific initiatives

  • Limited – mainly applies to research e.g. BRUs

  • PDC draw down limit authorised for the year

  • Draw down to match capital spend

  • Must be able to demonstrate that Cap X exceeds Depreciation in that year (R&D exempted)



  • Operating Leases/rental

  • Finance leases

    • Recognise Fixed Asset and Creditor

    • “On-balance sheet”

  • Under IFRS it is more difficult to classify as an operating lease

Private finance initiative 1

Private Finance Initiative (1)

  • Operates on principle of primarily procuring a service rather than an asset

  • Can take many forms – e.g., design, build, finance and service a building

  • Payment is a unitary charge covering both service charges, interest charges and rental

  • Pre IFRS was mainly “Off-Balance Sheet”

  • Applies to core and non-core services – Car parks, ward blocks, equipment, whole hospitals

Private finance initiative 2

Private Finance initiative (2)

  • Operated on principle – private sector is more efficient and innovative

  • Reality was:

    • Hugely bureaucratic

    • Incurred high adviser costs

    • Long negotiation/approval processes

    • Private sector margins

  • Only value for money because of VAT savings and inclusion of costed risk

  • Sheffield FT - Sir Robert Hadfield Block

Private finance initiative 3

Private Finance Initiative (3)

  • Prime driver was avoiding Public Sector Borrowing!

  • Now largely discredited for major schemes

  • Now most schemes ‘on-balance sheet’ under IFRS

  • Potential still exists for niche schemes

    • CSSD Supercentres

    • Laboratory Supercentres

    • Non-care activities e.g. car parking

Ftff loans 1

FTFF Loans (1)

  • Non-commercial bank loans

  • FT Financing Facility is part of DoH

  • Loans up to 25 years

  • Staggered draw down

  • Interest rate fixed at date of agreement (currently 3.8% for 20 years)

  • Half yearly repayments

Limits on capital spending

Limits on Capital Spending

  • Availability of capital funding

  • Ability to afford the revenue consequences

  • Subject to internal business case approvals process

  • PFI > £25m needs DoH approval

  • Prudential Borrowing Code

Prudential borrowing limit pbl

Prudential Borrowing limit (“PBL”)

  • Approved Working Capital facility

  • Maximum cumulative long term borrowing

  • Applies to Loans and “On-Balance Sheet” PFI

  • Current loans for STH = Hadfield, NGH Critical care, NGH Laboratories

  • Predetermined as part of Authorisation/Monitor Regulation.

Monitor 1

Monitor (1)

  • Independent Regulator of Foundation Trusts

  • Monitors performance using Compliance Framework

  • Regulatory principles

    • Self certification

    • Risk based approach

    • Based on trust

    • Confidentiality

    • Minimal information requirements

Monitor 2

Monitor (2)

  • Four main components

    • Annual plan review (May)

    • In-year monitoring (Quarterly) + Accounts

    • Exception reporting

    • Escalation and intervention

  • Essentially split between: Finance and Governance

  • Finance returns (I&E, Balance Sheet, Cash Flow + variance analysis + CE commentary)

Governance risk assessment

Governance risk assessment

  • Uses traffic light system (4 lights!)

  • Derived from a number of factors:

    • Performance against national targets

    • CQC registration and ongoing performance

    • Provision of mandatory goods and services

Finance risk assessment 1

Finance risk assessment (1)

  • Based on annual plan and quarterly monitoring

  • Uses a number of primary indicators:

    • Delivery of Financial plan

    • Operating margin

    • Financial Efficiency (Return on assets)

    • Liquidity (min Cash balances)

  • Derives score for each element

  • Applies overriding rules and calculates FRR of 1- 5

Financial risk assessment 2

Financial risk assessment (2)

  • FRR of 5 = low risk – get benefit of fewer returns

  • FRR of 3 or 4 = OK – quarterly monitoring

  • FRR of 2 or lower = Monitor intervention

  • Q4 FRR determines CQC rating

    4 or 5 = “Excellent” for use of resources

    3 = “Good” for use of resources

Interpreting frr

Interpreting FRR

  • Based on actuals – get better results in first quarters of year

  • Can bias plan profile to achieve better results in-year

  • No incentive to submit an ambitious Plan

  • Liquidity element includes overdraft facility! – can manipulate score up to limit

  • Adds back exceptional items!

  • Really a mixture of performance and risk of default!

  • Easier to achieve excellent than through ALE scores

  • Realistically cannot deliver a deficit

Sth experience of monitor

STH experience of Monitor

  • Independent Performance management – Not advocate for FTs

  • Generally “light touch”

  • Information requirements not onerous (except for Annual plan)

  • OK as long as delivering satisfactorily

  • Quick to intervene if performance starts slipping.

  • Login