NHS LA Finance

1. NHS LA Finance 02 September 2014

2. Introductions • Tom Fothergill – Director of Finance & Corporate Planning • Jean McFarlane – Management Accountant • Steve Cain – Head of Financial Accounting • Catherine O’Sullivan – Business Support Manager

3. Objectives By the end of the session, you will be able to: • Understand NHSLA Funding sources - Tom • Read and understand a Statement of Financial Position - Tom • Read and understand a budget statement - Jean • Read and understand workforce reports - Jean • Understand the importance of purchase orders & coding - Steve • Understand Contracting and procurement rules - Catherine

4. Your Finance Team

5. Sources of Funding

6. Financial Controls Budgets The Director of Finance has corporate responsibility for the financial governance of the NHS LA and assurance and advice to the Board. Financial Controls The Board receive regular reports on the financial position of the NHS LA. The Standing Orders, Standing Financial Instructions (SFIs) , Scheme of Delegation and Accounting procedures set out how we manage our financial responsibilities and our business. They are designed to ensure the NHS LA financial transactions are carried out in accordance with best practice. Budget and Variance Reports The budget for each directorate is set on an annual basis. The NHS LA produces Directorate Budget reports on a monthly basis for distribution to budget holders. These are summarised for reporting to the Board. Capital Programme The Capital Programme sets out the NHS LA’s investment priorities. Funding for the capital programme is agreed with the Department of Health each year as part of the business planning process. Audit The NHS LA internal auditors are the Health Group internal auditors who take any Audit Reports to the Audit Committee throughout the year. The National Audit Office (NAO) are the NHS LA external auditors and review the NHS LA on an annual basis. Annual Statement of Accounts The NHS LA’s financial year end is 31 March and the Annual report and Accounts are published in the summer following audit and the public meeting.

7. Statement of Financial Position The statement of financial position is one of the primary financial statements that the NHS LA publish. The purpose of the balance sheet is to give users an idea of the NHS LA’s financial position along with displaying what it owns and owes.

8. Example Statement of Financial Position This is a copy of Guys & St Thomas’ statement of financial position

9. Exercise: Statement of Financial Position Please take 5 minutes to review the NHS LA Statement of financial position and note any comments/observations

10. NHS LA Statement of Financial Position

11. Management Accounts Debbie England Jean McFarlane 02 September 2014

12. Management Accounting • Whilst there is no legal requirement to prepare management accounts, few businesses could expect to survive or thrive without them. Management accounts are prepared to meet the specific needs of the user and typically include both financial and non financial information. • Management accounts have the following characteristics: • Record, plan and control the activities of a business • assist in the decision-making and decision-taking processes. • Can be prepared for any period of time such as daily, weekly, monthly or yearly. • Reports can be both forward looking or historic or a mix of both.

13. What is a Budget? A “Budget” is a plan expressed in financial terms for a defined period of time usually showing expenditure and/or income employed to attain a given objective. In this capacity budgets are meant to serve several purposes. These are to: - enable planning - enable performance monitoring - co-ordinate activity - allow the implementation of the plan - communicate - motivate - authorise action

14. Structure of Budget Reports Budgets contain details of expenditure and income in all or part of the following categories: - Income Department of Health Funding Private Income Expenditure Pay (salaries of NHSLA employees, secondees and agency staff) Non Pay (consumable items e.g. stationery, rent, travel etc…)

15. Manual Accounting Adjustments • Accruals may be necessary for goods and services that have been received in the period being reported but for which no invoice has yet been received and registered on the payments system. • Likewise prepayments made for goods and services that are in the future (e.g. rent), will need to be removed from the current period accounts. • These adjustments ensure that the correct expenditure is reflected in the accounts for the period being reported.

16. Responsibilities of Budget Holders • The following are the responsibilities of Budget Holders: • to contain expenditure within budget. • to ensure that all expenditure attributed to the budget has been requisitioned and authorised by an appropriate designated officer or the Budget Holder using an official purchase order. • to review budgetary information on a regular basis and undertake any corrective action that may be required to bring it in line with the plan. • to liaise with the Finance Department to assist in the setting of budgets on an annual basis. • .

17. Responsibilities of the Finance Department • The following are the responsibilities of the Finance Department with respect to budgets: • to prepare budget reports in a timely, accurate and meaningful fashion. • to investigate, in conjunction with the Budget Holder, and report variances in the financial, activity and manpower information contained within the budgets. • forecast income and expenditure outturn, in conjunction with the Budget Holder, based on the most up-to-date information available • to support and maintain the system controlling and authorising expenditure • to advise Budget Holders on current and future financial issues and opportunities • to assist in the preparation on budgets • to produce additional information that may be required by the Budget Holder to enable their effective management of resources.

18. Example Budget Statement

19. Exercise: Budget Statement Please spend 15 minutes reviewing the following budget statement and answer the 5 questions

20. Budget Statement Exercise What is the anomaly with Pay Expenditure? What could be the reason for the variances on Printing & Stationery and Photocopying? Comment on the variances for Rates and Rent. Pro Adv/Legal Service/Advert is heavily overspent. Give reasons why this could be and what corrective action can be taken. Comment on the overall position of the department.

21. Workforce Reports • These are produced to enable managers to confirm to us that the staff charged to their budget statements are the correct ones. • The information comes from the payroll system (ESR). • Report shows: • Permanent staff with the actual gross cost (i.e. the full cost to the employer including N.I. and pension) broken down by pay type and the WTE. • Details of agency staff including a calculated WTE based on an estimate of their hours worked in the month • It is an audit requirement that workforce reports are verified by managers.

22. Example Workforce Report The funded establishment is set out in the Annual Business Plan, together with the staff budget. Produced to enable managers to confirm to us that the staff charged to their budget statements are the correct ones and that they agree with the pay type description their staff have been paid under.

23. Exercise: Workforce Report Please spend 15 minutes reviewing the following workforce report and answer the 4 questions

24. Workforce Report Exercise Give an explanation for Jim Smith's underspend. Give an explanation for Julie Smith's overspend. Give an explanation for Joan Smith's overspend. Comment on the overall position of the department and what action needs to be taken if any.

25. The Importance of Purchase Orders Steve Cain 02 September 2014

26. What is a Purchase Order? • A purchase order is a document that is sent by a buying organisation to a supplier of goods or services detailing; • Quantity of goods / details of services • Price per unit / service provided • Delivery address • Billing address

27. Why use a Purchase Order? • Enables an organisation to keep track of committed expenditure. • Enables an organisation to forecast expenditure in relation to goods/services ordered not delivered / invoiced. • Ensure that goods / services are purchased according to an organisations agreed authority levels. • Ensure accurate accounting of expenditure in term of which budgets expenditure is charged to. • Match goods received against original order.

28. Coding The financial codes used at the Authority are 7 or 9 digit codes, which are broken down into 2 elements as follows: Cost code – this is a four digit alphanumeric element. It identifies the department to which the income or expenditure relates. 01-10 Expense code – this is a 3 to 5 digit numeric element. It describes the type of income or expenditure. e.g. travel expenses, photocopying 260- / 260-04 The NHSLA has a policy of 'source coding’ that gives the responsibility of coding to the person generating the cost or income. It is the responsibility of the budget holder, therefore, to ensure that accurate coding takes place at all times.

29. Procedure for raising a purchase order • 2) Requisition is approved converted to PO. • Individuals with the appropriate authority would review. • If ok would approve the PR- converts PR to PO. • If not ok- reject back to requisitioner – review and resubmit. • 3) Requisition approved and PO sent to supplier. • Post • Email • In some cases not required. 1) Raise a Purchase Requisition • A PR is a document that details the PO, the PR would normally be raised after a discussion and would, if available, include a quote / documentation of agreed price, quantity etc. 4) Goods received Closed (fully matched) Left open (part matched) Closed Issue preventing invoice from being matched to Invoice, referred back to RO InvoiceReceived Invoice matched and Paid. Yes No

30. Exceptions to Purchase without a PO • Non staff expenses (Secondees) • Season tickets • Payroll costs PAYE / NI / Childcare voucher • Cycle to work invoices • Agreed list of expenditure to be purchased or corporate credit card.

31. Procurement and Contracting Catherine O’Sullivan 02 September 2014

32. Government and Procurement- Background • Francis Maude, Minister for the Cabinet Office, set up the Efficiency and Reform Group (ERG) in 2010. Its aim is to make sure departments work together to reduce waste and improve accountability across a range of areas, including information and communications technology (ICT), procurement, projects, HR and property. • The Efficiency and Reform Group (ERG) works in partnership with HM Treasury and government departments to deliver efficiencies, savings and reforms on behalf of UK taxpayers. ERG aims to save money, transform the way public services are delivered, improve user experience and support UK growth • As an ALB NHS LA works with DH procurement to ensure we too deliver the agenda of the ERG.

33. Procurement and Contracting The NHS LA is committed to the efficient management of non-pay costs and supports an approach for the purchase of goods and services in a way which is: • Appropriate to and fully aligned with the organisations business objectives and service delivery requirement; • Fully compliant with Government and European Union public sector procurement principles and rules; • Supports the Cabinet Office agenda for working with Small and Medium Sized Enterprises (SME’s) • Best able to deliver value for money (VFM), that being the optimum combination of whole life cost, quality and fitness for purpose to meet requirements; and • Compliant with the Standing Financial Instructions (SFI’s) to the organisation.

34. Sourcing Goods and Services with estimated value of between £3,000 - £10,000 • Is there an existing NHS LA contract through which the requirement can be fulfilled. The corporate governance team can advise on this. • If there is no existing NHS LA arrangement, if the good or service required is part of an Efficiency and Reform Group (ERG)common goods and services then you must procure the required good or service through the Department of Health mandated arrangement (which may be a CCS framework). • If the required good or service is not ERG, then you must purchase the good or service through the Crown Commercial Service (CCS) • If the good or service cannot be procured through any of the above routes then you must obtain and retain a minimum of three written quotations

35. Sourcing Goods and Services with estimated value between £10,000 and OJEU limit • Is there an existing NHS LA contract through which the requirement can be fulfilled. The corporate governance team can advise on this. • If there is no existing NHS LA arrangement, if the good or service required is part of an Efficiency and Reform Group (ERG)common goods and services then you must procure the required good or service through the Department of Health mandated arrangement (which may be a CCS framework). • If the required good or service is not ERG, then you must purchase the good or service through any other available Crown Commercial Service (CCS) • If the good or service cannot be procured through any of the above routes then you must conduct either a request for quotation or tender process as advised by the procurement lead depending on the value and complexity of the purchase. In any event that opportunity must be advertised on the public sector Contracts Finder website.

36. Questions?