Making Sense of the
Accounts
Objectives
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
Governors’ responsibilities in
relation to financial matters
3
Making Sense of the Accounts
Financial matters
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
Format of the annual report and
accounts
5
Making Sense of the Accounts
Format of annual report and
accounts
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
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
What the primary financial
statements report
8
Making Sense of the Accounts
What the primary financial statement
report
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 noncash 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
statements report
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
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
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
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
The role of the external auditor
14
Making Sense of the Accounts
The role of the external auditor
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’
Monitor’s financial risk ratings
16
Making Sense of the Accounts
Monitor’s financial risk ratings
• 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
Objectives
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
Next steps
• Draft accounts ready for audit by 22 April
• Audited 2010/11 accounts and annual report due
to be sent to Monitor by 7 June