Audit Commission

As a cornerstone of its preparations for foundation trust status, the Trust sought to achieve excellence in the quality of review over monitoring performance against budgets. It also sought to ensure that the budget and actual were updated in a timely manner to ensure valid reporting to the board of directors of the Trust’s performance.

It wanted to use this process as a means, in particular, to achieve performance forecast savings. The Trust recognised that to do this they must have focused budget monitoring procedures; place a strong emphasis on managing budgets and cost improvement plans; and delegate responsibility to senior managers to monitor the budget to actual.

The process also provided the Board with financial information and analysis that would enable Board members to properly understand the Trust’s financial position and forecasts, have focused, informed debate and take a high level of assurance in relation to the achievement of financial targets.

The Trust undertook a formal review of its board reporting arrangements by:

• Obtaining an independent view of current NHS/ FT best practice from financial consultants.
• Involving a Board NED with significant financial and commercial experience.

The review took the best practice identified and used it to enhance existing arrangements, taking into account the Trust’s own needs and context. This included changing behaviour to:

• Ensure that profiled budgets are maintained on the main accounting system and are updated monthly/timely. This enables production of profiled (phased) information in the BoD Financial Reports.
• Monitor material variances monthly at newly created divisional finance meetings. Action plans are developed where appropriate and clinical input into action plans is obtained where necessary.
• Issue a finance report to the Trust Board, Management Board and senior managers at each month end. This contains various information elements including budgets to actual variances; savings plan monitoring, key ratios etc. The reports are predictive, focussed on larger and higher risk items, relate to operational activity indicators and are informed by risk management. These reports are challenged regularly on deviation against budget.

The outcomes can be summarised as follows:

1. The Trust managing their performance effectively resulting in the Trust achieving a surplus.
2. The Board report now:
   • contains forecasts to the year-end and 12 to 24 months ahead
   • integrates I and E, Balance Sheet and Cash, including ratios with activity in both volumes and revenue
   • includes trend analysis of revenue/ costs/ cash and activity
   • risk rates divisional financial positions
   • includes a clear summary of key issues for the Board.
3. All significant variances and actions to be taken are covered clearly and succinctly. As a result, board understanding of financial matters and the assurance it has been able to take have increased.
4. There has been fuller and targeted board debate and interrogation.
5. More accurate forecasting and earlier identification of potential financial issues and minimisation of risk. It has also helped the Trust to identify where financial flexibility exists for it to invest in other initiatives.
6. The reporting has helped the Trust to manage the achievement of its year end financial position (a surplus) better and to meet its other statutory financial duties. It has also enabled the Trust to demonstrate its longer-term financial sustainability, such as investment decisions.