Making Sense of the Accounts

1. Making Sense of the Accounts

2. To help you understand: your responsibilities in relation to financial matters the format of the FT’s annual report and accounts what the primary financial statements report the role of the external auditor Monitor’s financial risk ratings Objectives

3. Governors’ responsibilities in relation to financial matters Making Sense of the Accounts

4. Governors’ responsibilities: to represent interests of members & partners in local health economy to receive FT’s annual report and accounts, and auditors report on accounts - presented to governors at AGM - opportunity to comment but not change - informs governors about their other statutory duties - forum for governors to ask questions Financial matters

5. Format of the annual report and accounts Making Sense of the Accounts

6. Annual report comprises: Directors’ report including and management commentary on the performance of the FT Remuneration report Code of Governance disclosures Quality report Sustainability, equality and diversity disclosures Format of annual report and accounts

7. Annual accounts comprise: Foreword Four primary statements - Statement of Comprehensive Income - Statement of Financial Position - Statement of Changes in Taxpayers’ Equity - Statement of Cash Flows - Notes to the accounts Directors’ Statement of Responsibilities Statement on Internal Control Auditor’s report Format of annual report and accounts

8. What the primary financial statements report Making Sense of the Accounts

9. Statement of Comprehensive Income records the FT’s income and expenditure for the year with any other recognised gains and losses includes cash items e.g. expenditure on staff and supplies, and non- cash e.g. change in value of the FT’s assets If income exceeds expenditure FT is in surplus, if expenditure exceeds income there is a deficit What the primary financial statement report

10. Statement of Financial Position snapshot of the FT’s financial position at 31 March assets - what the FT owns or is owed, liabilities - what the FT owes taxpayers’ equity – public funds invested in the FT What the primary financial statements report

11. Statement of Changes in Taxpayers’ Equity shows changes in Reserves & Public Dividend Capital over the year: - Public Dividend Capital is the public sector equity finance based on the excess of assets over liabilities when the predecessor NHS Trust was established - no prescribed format for this statement but Monitor includes an approach it its FT Annual Reporting Manual What the primary financial statements report

12. Statement of Cash Flows summarises the cash flows in and out of the FT during the financial year cash flows are analyses under three headings: - operating activities - investing activities - financial activities focus is on cash implications of FT actions What the primary financial statements report

13. Notes to the Accounts further analysis of items on the face of the primary statements - operating income and expenses - property plant and equipment additional disclosures - accounting policies - critical accounting estimates and judgements - Private Patient Income cap - Prudential Borrowing Limit What the primary financial statements report

14. The role of the external auditor Making Sense of the Accounts

15. External auditors: satisfy themselves that the FT has: prepared its accounts properly made proper arrangement for securing economy, efficiency and effectiveness in its use of resources review the annual report to assess whether it is consistent with the financial statements report main audit findings to ‘Those Charged with Governance’ (Audit Committee) give an opinion to governors as to whether accounts are ‘true and fair’ The role of the external auditor

16. Monitor’s financial risk ratings Making Sense of the Accounts

17. Risk rating is an indication of the likelihood of a FT breaching the terms of its authorisation Four key criteria: achievement of financial plan underlying performance financial efficiency liquidity Monitor’s financial risk ratings

18. To help you understand: your responsibilities in relation to financial matters the format of the FT’s annual report and accounts what the primary financial statements report the role of the external auditor Monitor’s financial risk ratings Objectives

19. Draft accounts ready for audit by 22 April Audited 2010/11 accounts and annual report due to be sent to Monitor by 7 June Next steps