Loading in 2 Seconds...
Loading in 2 Seconds...
Clinical Leadership Development Programme Finance & Budgeting. James Richardson Associate Director of Finance 16 th December 2011. Patients. Agenda. Economic Climate. NHS Structure. Budget Setting. Financial Planning. External Influences. Financial Governance. Funding Flows.
Associate Director of Finance
16th December 2011
2011/12 – projected view
CIP target = 15.851m
Risk Rated PYE recurrent delivery = (5.554m)
Further management action - Rec = (2.5m)
Non-recurrent measures = (7.832m)
Total ‘unidentified’ CIP shortfall in year = 0m
Impact on 2012/13 based on current
Recurrent CIP shortfall (15.851 - 5.554) = 10.297m
Further management action = (2.5m)
Less fye of 11/12 schemes delivered in 12/13 = (2.991m)
Recurrent shortfall of 11/12 schemes C/fwd = 4.806m
PYE recurrent shortfall on 11/12 CIP = 10.297m
PYE of 11/12 schemes delivered in 12/13 = (2.991m)
Corrective action undertaken in 11/12 = (2.500m)
12/13 Monitor Assessor @ 4.4% = 9.428m
Likely Case Scenario = £14.234m
In 2010/11 CIP target was £12.8m (5%), actual delivered = £9m(3.5%)
National efficiency in tariff for 2011/12 = 4%,but due to 10/11 slippage, PCT financial position etc target = £16m(6.25%)
CIP over next 6 years = circa £57 million (not including savings required for new hospital)
New Hospital scenario – adds a further £26m of savings based on 2 to 1 site rationalisation economies
This level of saving can only be contemplated if we look at major system transformation & radical solutions as well as tried and tested options
The need for real efficiency savings!
Governance can be described as the rules, processors and behaviour that affect the way in which powers are exercised. It is therefore concerned with how an organisation is run, how it is structured and how it is led.
- Composition of Board and its sub committees
- How meetings are conducted
- Form, content and frequency of reports
- Voting procedures
- Duties and obligations of Board Members
“a financial plan that sets out in clear and concise terms the resources assigned to the delivery of service and operational targets for a defined period”
Forward planning allows the Trust to shape its future, rather than to react to events and is critical in the achievement of organisational objectives.
- Financial and/or quantitative statements
- Prepared and agreed for a specific future period
- Designed to fulfil agreed objectives
- Drawn up for separate activities/projects and for organisations
Current year budget
Next year budget
Set other reserves
Add: full year
staff, materials etc
- Prioritisation of objectives identified in the planning process and formalised via the annual plan and underpinning Service Level Agreements
- Assessment / quantification of total available resources, both financial and non financial
- SLA’s with PCTs and other NHS bodies in accordance with the National Tariff and PbRs
- Private patients, RTA’s
- Medical and non-medical training funding via the Workforce Development Directorate of the SHA
- Commercial sources of income – car parking, catering etc
- Forecast outturn at month 10 in 2010/2011 and cover direct costs under the control of the budget manager
- Pay – detailing the agreed establishment in terms of WTE, £’s by AfC and local Trust grade
- Non-pay – by subjective category e.g. drugs, M&SE, provisions, energy etc
- Internal recharges for services provided / received such as pathology, radiology etc
When assessing financial risk, Monitor will assign a risk rating using a system which looks at four criteria:
- achievement of plan;
- underlying performance;
- financial efficiency; and
Achievement against each of these criteria is scored from 5 to 1 (5 indicates low risk, 1 indicates high risk). A weighted average of these scores is then used to determine the overall financial risk rating.
The risk rating is forward-looking and is intended to reflect the likelihood of a financial breach of the Terms of Authorisation. The ratings of 5 to 1 indicate:
Rating 5 - Lowest risk - no regulatory concerns
Rating 4 - No regulatory concerns
Rating 3 - Regulatory concerns in one or more components. Significant breach of Terms of Authorisation is unlikely
Rating 2 - Risk of significant breach in Terms of Authorisation in the medium term, e.g. 9 to 18 months in the absence of remedial action
Rating 1 - Highest risk - high probability of significant breach of Terms of Authorisation in the short term, e.g. less than 9 months, unless remedial action is taken
For 2011/12 the Trust are planning to achieve a FRR 3 which assumes full delivery of the £15.8 million CIP target
If the Trust failed to deliver the CIP target this would have the effect of reducing the FRR from a 3 to a 2
This deviation from plan and reduction in the FRR to a 2 would trigger immediate action by Monitor who would implement special measures
The Trust would move to monthly / weekly reporting with a view to implementing and monitoring a corrective action plan
EBITDA Margin is the metric that Monitor use to measure underlying financial performance
Definition : EBITDA % = EBITDA Actual (Operating expenses)
Total Income actual
NTH EBITDA margin historically low in comparison to FT sector average, mainly due to structure of NTH finances – no major PFI’s
Sector average over 7% , NTH position has declined from circa 6% to 4% over the last 3 years
Monitor view is that it is an indication of deteriorating financial position that will lead to the Trust “burning cash”
What is a budget holder’s responsibility?
- understand and manage their budget
- what drives income/costs ?
- what influences outcomes/outputs ?
- deliver required quantity/quality of care/service
- maximise income, minimise cost
- Clarify objectives – what are you required to deliver?
- Understand what other organisation-wide targets you contribute to
- Maximise income – look for opportunities
- Minimise costs
- Cash releasing savings: the same work for less money
- Cost improvement: more work for the same money
- Focus on VFM
The purpose of the NHS is to serve patients and the public by whom it is funded. Clinicians seek to do this by using their skills to provide the best possible advice, treatment and care. But they can only do this if the money available to the NHS is used well. Failure to do so results in less care and lower quality. Money will only be used well if clinicians are fully engaged in managing it. Ultimately, it is clinicians who are responsible for the way in which services are delivered to individual patients and it is they who commit the necessary resources.
“The finance team have provided me with the advice, support and business understanding to enable me to develop and expand my service; increase volume, efficiency & profit which has benefited my clinical team, benefited the Trust and resulted in health gain for my patients”