Financial management is an essential part of good corporate governance; it provides foundations for service quality and improvement and underpins accountability.
Since 1997, the Audit Commission has been an authoritative voice in the NHS through our national studies programme. Our studies report the national picture of local audit work as well as original research into relevant topics. They provide a clear view of the successes and problems in the NHS and offer improvement tools for use by auditors and NHS bodies.
In 2004 we published our first report focused directly on financial management, Achieving first class financial management. We then set out the principles of strong financial management in World class financial management in 2005.
In 2005/06 the Commission introduced the Auditors' Local Evaluation (ALE), which assessed financial management in NHS trusts and PCTs. ALE, and latterly the Use of Resources assessments in PCTs, were carried out until 2009/10. Annual reports were published showing that financial management demonstrably improved during the period of ALE. For the first time NHS bodies were benchmarked against a national framework and each other through the Commission's scored judgements, resulting in clear improvements.
In 2006, following a year of significant overspending in the NHS, the Commission carried out a review for the Secretary of State. The review resulted in several changes to the financial management regime designed to introduce greater stability and transparency.
The Commission has always responded quickly to policy change in the NHS. This has been by providing expert advice to the Department of Health through consultation responses and through relevant and timely national reports on topics such as Payment by Results and practice based commissioning.
In recent years the Commission has highlighted the importance of engaging clinicians in financial management and published a well-received study. This was followed by further work with other organisations such as the Academy of Medical Royal Colleges with whom the Commission jointly published A guide to finance for hospital doctors.
The Commission has set the agenda for financial management in the NHS through its studies programme and ALE. Through our work we have identified innovation and disseminated good practice through case studies and national recommendations.
The Commission has also worked with partners including the National Audit Office, Monitor and the Care Quality Commission, the Healthcare Financial Management Association, accountancy bodies and think tanks.