The Trust had a cumulative deficit of £17.2 million at 31 March 2005. However, the Trust’s sights were set firmly on achieving foundation trust status, which meant that the Trust’s ongoing financial performance had to improve and the cumulative deficit had to be recovered.
Over the past three years the Trust has recovered the deficit and is forecasting a £12 million surplus for 2008/09. The Trust has achieved this in a number of ways, notably with significant improvements in its arrangements to manage performance against budgets.
In July 2005, the Trust reorganised its management structure, moving from 13 clinical directorates to five clinical divisions, plus a sixth division covering corporate services. The divisional structure and supporting governance arrangements deliver a number of significant benefits for the Trust:
- Maximising clinical involvement in corporate decision-making
- Placing accountability closer to the point of resource use
- Devolving authority closer to the point of service delivery
- Improving the speed of decision-making, simplifying internal communications and reducing bureaucracy.
Key to this restructuring was the decision to have a clinician as the Head of Division, who is then accountable to the Chief Executive. The Head of Division is paid to manage the division (four sessions per week) as well as undertake clinical activities and is supported by a Divisional Manager, Lead Doctor, Head of Nursing, Lead Allied Health Professional, Divisional Human Resources Manager and Divisional Finance Manager.
Having a clinician as Head of Division, who is truly accountable for the financial performance of the division, means that it is easier to engage with clinicians, which has resulted in good relationships with the clinical body and a general sign up to the direction in which the Trust is heading. Clinicians have, as a result, been involved in the process of recovery and in future developments.
In 2007/08 all divisions achieved break even or better, with one exception that reported a small deficit. This led to the Trust achieving a surplus of £12.8 million, which together with smaller surpluses in 2005/06 and 2006/07, meant that the Trust’s cumulative deficit was recovered.
Another key part of the Trust’s strategy was to minimise its reliance on non recurrent measures. The financial strategy allows for non recurrent measures to account for no more than 1 per cent of turnover. If this limit is exceeded the Director of Finance works with divisions to replace non recurrent with recurrent. At the year-end non recurrent measures are required to be translated into recurring so that they are not in place for more than one year.
The Trust has also improved reporting to the Board so that key risks are more readily apparent. A new format of finance report to the Trust Board has been introduced, which includes traffic light risk indicators for the high level summary and includes commentary on high level details of the main risks in relation to each division's financial performance. The Director of Finance has also introduced optimistic/ pessimistic/most likely projections into the quarterly finance reports to the Board.
The new format was introduced with a view to the Trust becoming a foundation trust. The report was produced as if the Trust was a foundation trust, including Monitor’s risk ratings, so that when foundation trust status was achieved no major changes were required to the reports. The Board is now better informed and, as a result, there are fewer queries from non-executive directors.
In conclusion, the Trust’s budgetary control arrangements have improved considerably over the past three years, which has resulted in the Trust being well placed to deliver significant surpluses in the short to medium term and embark on an investment programme to replace all of the Trust’s facilities that are currently unfit for purpose.