Trust Board Meeting: Wednesday 13 May 2015
TB2015.54
Title
Financial Plans 2015/16 (Update)
Status
To ask the Board to approve the Trust’s revised financial
plans for 2015/16
History
Trust Management Executive – 27 November 2014
Finance & Performance Committee – 10 December 2014
Trust Board – 11 March 2015
Trust Management Executive – 26 March 2015
Finance & Performance Committee – 15 April 2015
Board Lead(s)
Mr Mark Mansfield, Director of Finance and Procurement
Key purpose
Strategy
TB2015.54 Financial Plans 2015/16 (Update)
Assurance
Policy
Performance
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Oxford University Hospitals
TB2015.54
Summary
1.
This paper advises the Board about the main developments regarding the Trust’s
financial plans for 2015/16 that have taken place since the Board approved a draft
set of plans at its meeting on 11 March.
2.
The Board is asked to approve the updated financial plans for 2015/16 set out in the
appendices to the paper.
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Oxford University Hospitals
TB2015.54
Financial Plans 2015/16 (Update)
1. Introduction
1.1 At its meeting on 11 March the Trust Board approved a set of opening financial plans
for 2015/16 that enabled expenditure plans to proceed with effect from 1 April 2015.
1.2 When the Board met there remained significant uncertainties around the value of
tariffs for 2015/16 and the on-going negotiations with commissioners. Therefore the
Board agreed that revised financial plans, which took into account the estimated
impact of the tariff decision, should be presented to Finance and Performance
Committee (F&PC) at its meeting on 15 April. The Board also recognised that
commissioning contracts were unlikely to have been finalised by the April meeting of
the Committee and agreed that a further revised set of plans, which incorporated
details of the Trust’s contracts for next year, would be presented to the Board at this
meeting on 13 May.
1.3 This paper informs the Committee about the progress that has been made towards
finalising the Trust’s contracts with commissioners for 2015/16. It also asks the Board
to approve the updated financial plans for 2015/16 set out in the appendices to the
paper.
1.4 The financial plans included within this paper are those shown in the Trust’s business
plan for 2015/16 and will be included in the final set of plans due to be submitted to
the Trust Development Authority (TDA) this month.
2.
Assumptions within the financial plans
2.1 At its meeting on 15 April the Trust’s Finance & Performance Committee noted that
the following key points and assumptions were to be included in the Trust’s final set
of financial plans for 2015/16:
(a)
The Trust will be operating under a default tariff rollover (DTR) tariff regime for
all of 2015/16 (i.e. it is assumed that there will be no in-year adjustment to
prices);
(b)
The Trust will not receive CQUIN monies next year;
(c)
The Trust will receive full funding for “pass through” drugs and devices;
(d)
Full account has been taken of the 53% increase that the Trust will have to pay
in clinical negligence scheme (CNST) contributions next year;
(e)
The plans use estimates to take into account the financial impact of (i) the pay
award agreed for NHS staff, and (ii) the increase in employers’ superannuation
contributions.
(f)
The plans incorporate the estimated financial impact on non-operating items of
income & expenditure arising from (i) the District Valuer’s assessment of the
value of the Trust’s estate as at 31 March 2015, (ii) the planned capital
programme for 2015/16, and (iii) the liquidity loan the Trust will need to take out
next year should its application to become a Foundation Trust be successful.
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2.2 The revised plans also assume that the Trust will break even on Income and
Expenditure next year, rather than generating a surplus equal to 1% of turnover.
3.
Agreements with commissioners
3.1 Agreements have been reached with the Trust’s two main commissioners that will
form the basis for contracts for 2015/16:
(a)
The Trust has agreed that it will have a cost and volume contract with
Oxfordshire Clinical Commissioning Group (OCCG) for £292.3m and that no
penalties will be applied by the commissioner for failures in operational
performance.
(b)
The Trust has agreed that its contract with Wessex will be a “compliant”
contract for £354.6m, with a separate contract of £1.9m for Hepatitis C drugs.
(c)
The agreement with Wessex assumes the implementation of effective QIPP
schemes that are able to reduce demand for the Trust’s services by £7m. If
these schemes do not generate this level of savings then the value of planned
activity the Trust expects to carry out for the commissioner will be worth
£366.4m. Under the terms of a compliant contract Wessex will have to pay this
sum to the Trust. The current plan assumes income of £366.4m.
3.2 Agreements for 2015/16 have also been reached with most other, smaller
commissioners of the Trust’s services. The Trust’s total planned level of
commissioning income for 2015/16 is £768.6m.
Table 1 – Planned Commissioning Income 2015/16 by Commissioner
Commissioner
OCCG
Wessex
Others
Total
4.
Plan
2015/16
£m
292.3
366.4
109.9
768.6
Changes to non-Operating Expenditure and Technical Adjustments
4.1 The other material changes to the plans for 2015/16 to those presented to the Board
in March result from the District Valuer’s (DV) assessment of the value of the Trust’s
estate as at 31 March 2015.
4.2 The report to the Board on the 2014/15 outturn explains how this valuation led to a
large technical accounting impairment in the value of the Trust’s assets in 2014/15.
The valuation has also meant that the estimates for some of the Trust’s nonoperating items of expenditure have also been adjusted. The impact of these
changes are shown in Table 2 below:
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Table 2 – Changes to planned 2015/16 non-Operating Expenditure
Non-EBITDA Item s
Plan
Plan
March 2015
May 2015
Movem ent
£000
£000
£000
(38,424)
(35,900)
Non-Operating Item s
Depreciation
Investment Revenue
Other Gains & Losses
Finance Costs
PDC Dividend Payable
Total - Non-Operating Item s
2,524
239
238
(1)
(200)
(200)
(20,700)
(20,494)
206
(9,182)
(7,134)
2,048
(68,267)
(63,490)
4,777
4.3 The changes to non-operating items also affect the technical accounting adjustments
that are made when the Trust’s financial duty to break even is measured under NHS
accounting rules. This is shown in Table 3:
Table 3 – Changes to planned figures for technical accounting adjustments
Non-EBITDA Item s
Plan
Plan
March 2015
May 2015
Movem ent
£000
£000
£000
Technical Adjustments
IFRIC 12 Technical Deficit (PFI)
Donated Asset Additions
5.
190
437
247
(789)
(269)
520
Donated Asset Depreciation
2,439
3,408
969
Total - Technical Adjs.
1,840
3,576
1,736
Statement of Comprehensive Income
5.1 The adjustments to the original plans as set out in Sections 2 to 4 above have
resulted in revisions to the Trust’s planned Statement of Comprehensive Income
(Income and Expenditure Account) for 2015/16. The new planned Statement is
presented in Appendix A of this paper.
6.
Balance Sheet and Cashflow
6.1 The Trust plans to break even in 2015/16 instead of making the surplus proposed in
the original set of plans and this has changed the planned figures for the Trust’s
balance sheet and cashflow statement. As has been planned since 2012 the Trust
plans to take out a so-called liquidity loan to meet Monitor’s requirements for
becoming a Foundation Trust.
6.2 A revised balance sheet for 31 March 2016, and cashflow statement for 2015/16, are
presented in Appendices B and C respectively.
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7.
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Continuity of Service Risk Rating
7.1 The calculation of Monitor’s continuity of service risk rating (CSRR), based on its
revised planned Income and Expenditure and balance sheet, produce a score of “3”
for the liquidity ratio and “2” for the capital servicing capacity ratio. These metrics
result in an overall Trust score of “3” for 2015/16 under the criteria used by Monitor.
7.2 Appendix D shows the calculations of the Trust’s planned CSRR for the year.
8.
Capital Plan
8.1 Due to the change to its Income and Expenditure position, and the impact this has
upon the availability of cash, the Trust will have fewer resources to invest in capital
schemes next year. Accordingly the schemes included within the 2015/16
programme have been reviewed and it is proposed that a net £6.586m of spend is
postponed into subsequent years (subject to the overall affordability of future year
programmes). This figure takes into account additional pressures of £0.891m
identified within on-going schemes.
8.2 The original capital plan, and proposed changes to schemes, are presented in
Appendix E.
9.
Conclusion
9.1 The Board is asked to approve the revised financial plans presented in the
appendices to this report, namely:
(a)
The revised Income and Expenditure plan presented in Appendix A;
(b)
The revised balance sheet presented in Appendix B;
(c)
The revised cashflow statement presented in Appendix C;
(d)
The revised continuity of service risk rating shown in Appendix D; and
(e)
The revised capital programme presented in Appendix E.
Mr Mark Mansfield, Director of Finance and Procurement
Mr Kevin Davis, Senior Business Partner
TB2015.54 Financial Plans 2015/16 (Update)
May 2015
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Oxford University Hospitals
Appendix A
Appendix A – Planned Statement of Comprehensive Income 2015/16
Outturn
2014/15
Incom e & Expenditure
£000
Plan
Plan
Mar. 2015
May 2015
Mvm t
£000
£000
£000
774,590
768,626
(5,964)
(1,566)
Incom e
760,037
11,027
145,191
916,255
Commissioning Income
PP & Overseas Income
Other Income
Total Incom e
12,854
11,288
143,218
143,788
930,662
923,702
(6,960)
570
Expenditure
(512,797)
Pay
(507,424)
(519,427)
(12,003)
(329,223)
Non-Pay
(345,670)
(344,361)
1,309
(853,094)
(863,788)
(10,694)
77,568
59,914
(17,654)
(68,267)
(63,490)
4,777
9,301
(3,576)
(12,877)
1,840
3,576
1,736
11,141
0
(842,020)
74,235
(84,269)
(10,034)
21,527
11,493
Total Expenditure
EBITDA
Non-Operating Items
Retained Surplus/(Deficit)
Technical Adjustments
Break Even Surplus
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(11,141)
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Appendix B
Appendix B – Balance Sheet 2015/16
Opening
Balance
Planned
Balance
Movem ent
01-Apr-15
31-Mar-16
£000
652,888
654,206
1,318
11,211
19,001
7,790
NON-CURRENT ASSETS
Property, Plant & Equipment
Intangible Assets
Trade & Other Receivables
5,091
5,024
NON-CURRENT ASSETS
669,190
678,231
(67)
Inventories
14,715
14,715
Trade & Other Receivables
42,212
35,941
(6,271)
Cash & Cash Equivalents
79,383
70,911
(8,472)
136,310
121,567
(14,743)
(129,882)
(105,695)
24,187
(10,874)
(11,375)
(2,476)
(2,476)
(143,232)
(119,546)
9,041
CURRENT ASSETS
CURRENT ASSETS
CURRENT LIABILITIES
Trade & Other Payables
Borrow ings
Current Provisions
CURRENT LIABILITIES
NET CURRENT ASSETS/(LIABILITIES)
(6,922)
2,021
(501)
23,686
8,943
NON-CURRENT LIABILITIES
Borrow ings
(263,185)
(280,998)
(17,813)
Trade & Other Payables
(16,359)
(19,464)
(3,105)
Non-Current Provisions
(2,559)
(2,559)
NON-CURRENT LIABILITIES
(282,103)
(303,021)
(20,918)
TOTAL ASSETS EMPLOYED
380,165
377,231
(2,934)
208,115
208,757
25,075
21,499
145,232
145,232
1,743
1,743
380,165
377,231
FINANCED BY TAXPAYERS EQUITY
Public Dividend Capital
Retained Earnings
Revaluation Reserve
Other Reserve
TOTAL TAXPAYERS EQUITY
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642
(3,576)
(2,934)
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Appendix C
Appendix C – Cashflow Statement 2015/16
Plan
2015/16
£000
Cash Flow s from Operating Activities
Operating Surplus/(Deficit)
23,977
Depreciation & Amortisation
35,900
Interest Paid
(20,436)
Dividend Paid
(7,134)
(Increase) in Trade & Other Receivables
Increase in Trade & Other Payables
Increase in Provisions
Cash Flow from Operating Activities
6,974
(21,366)
66
17,981
Cash Flow s from Investing Activities
Interest Received
(Payments) for Fixed Assets
Cash Flow from Investing Activities
238
(35,111)
(34,873)
Cash Flow s from Financing Activities
Public Dividend Capital Received
Capital Loans - Repayment of Principal
Loans received from DH - FT Liquidity Loans
Capital Element of Finance Leases & PFI
Cash Flow from Financing Activities
642
(3,604)
22,000
(10,618)
8,420
Net Increase/(Decrease) in Cash
(8,472)
Cash - Beginning of the Period
79,383
Cash - End of the Period
70,911
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Appendix D
Appendix D – Continuity of Service Risk Rating 2015/16
2015/16
Financial Criteria
Measure
Weight
4
3
2
1
Score
Score
Liquidity Ratio
Days
50%
0
-7
-14
<-14
(5.2)
3
Capital Servicing Capacity
Times
50%
2.5
1.75
1.25
< 1.25
1.4
2
Weighted Average
2.50
Overall Rating
Calculation of
Liquidity Ratio
Operating Expenditure
One Day's Expenditure
3
2015/16
£m
(863.8)
2.40
31-Mar-16
Current Assets
121.6
Less : Inventories
(14.7)
Current Liabiliities
(119.3)
Net Liquid Assets
Liquidity Ratio (Days)
Calculation of
Capital Servicing
EBITDA
Interest Receivable
Surplus Available
(12.4)
(5.2)
2015/16
£m
59.9
0.2
60.1
2015/16
Interest Payable
(20.5)
Debt Repayment
(14.2)
PDC Dividend
PDC Repayment
(7.1)
0.0
Capital to be Serviced
(41.8)
Capital Servicing Capacity
1.4
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Appendix E
Appendix E – Revised Capital Programme 2015/16
Proposed Capital Program m e
Original
Revised
Increase
Plan
Plan
(Decr.) to
March 2015
May 2015
Plan
£000
£000
£000
Trust Funded Capital Programme
Radiotherapy: Milton Keynes
500
500
Radiotherapy: Sw indon
5,549
3,549
Respiratory Ward revised plan
1,050
1,695
Refurbishment of Level 7 w ards
1,000
76
(2,000)
645
(924)
Day Surgery Unit Churchill
1,227
1,172
(55)
Expansion of EAU Phase 5
1,080
1,281
201
ID Ward Relocation
1,500
JR 2 theatre remodelling (IR/Trauma/Cardiac)
(1,500)
50
100
1,200
1,065
(135)
900
1,505
605
EPR Implementation and staff capitalisation
1,450
1,000
(450)
IT General
1,800
1,135
(665)
Estates General
2,437
1,478
(959)
EPR Reprocurement
3,911
3,911
Lease Buyouts
1,000
320
Small schemes - various
Medical and Surgical Equipment
Horton CT
2,340
2,340
Horton Endoscopy
2,000
1,914
Genomics Designation
50
(680)
(86)
642
642
5,809
6,067
258
34,803
29,750
PFI Life Cycling
2,258
2,258
Welcome Centre
3,000
3,000
Energy Centre
9,000
9,000
500
500
Externally Funded Program m es
14,758
14,758
Total Capital Program m e
49,561
44,508
Schemes < £1m
Trust Funded Capital Program m e
(5,053)
Externally Funded Programmes
Lease Equipment
TB2015.54 Financial Plans 2015/16 (Update)
(5,053)
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