SHA/PCT Financial Close Project
Instructions for Receiver Organisations – Quick reference
guide
Department of Health
December 2013
High level principles for receiver acceptance balances
Cannot
reject non
substantive
unsupported
balances
Can query
allocation of
balance but
not value
Receiver
acceptance
of balances
Incorrect
allocation
can be
reallocated
only if
substantive
Cannot reject on
grounds of:
misstatement,
negative impact
on performance or
requires cash
payment
What the legacy team have done prior to transfer
Payment of
suppliers from
1 April to 31
August
Notify
suppliers of
successor
organisation
Allocation of
PCT and SHA
assets &
liabilities
Legacy team
responsibilities
Provide
archiving data
sets to SBS
Print and
sticker all
outstanding
invoices as at
31 August
Upload
working
papers on
QuickR
Completion of
detailed
transaction
form
Receiver Responsibilities
Review 1 April
balances
transferred to
ensure
appropriate and
complete
Liaise with
auditors early
Ensure
adjustments to
funding are
recorded in
statutory
accounts and
consolidation
schedules.
Use property
Transfer
Scheme for
substantive
misallocated
balances
Receiver
Responsibilities
Include legacy
transactions in
agreement of
balances from
month 9.
Review full pack
of legacy
information and
consider impact
on accounting
disclosure
notes.
Ensure all
invoices
received for
open balances
as at 31 August
and assume
responsibility for
payment/
collection.
Working Papers – What you need to consider and
check
When agreeing balances in Detailed Transaction Form outputs to supporting working
papers receivers should consider the following.
Is there sufficient
information in the form
outputs about each balance
to allow identification of
relevant working papers?
Has a working paper been
provided for each asset or
liability allocated to my
organisation?
Do the balances recorded
as having transferred to my
organisation per the
Detailed Transactions Form
output files appear
complete?
Does the amount in the
working paper equal the
amount in the form output?
Is the working paper clear
and detailed to enable the
nature of the balance to be
understood and managed
going forwards; and to
withstand audit scrutiny?
Does the balance appear
valid and in compliance
with accounting standards
and your organisation’s
accounting policies?
Does the balance
transferred to your
organisation create a need
to reassess the nature or
value of the balance or to
create new balances?
Does the balance
transferred to your
organisation suggest there
may be an associated
disclosure note impact you
need to calculate?
Based on your review of
working papers, do all
balances allocated to your
organisation relate to your
organisation?
Action to take if balances have been incorrectly
allocated
NO
Accept balance
Is the issue substantive?
YES
Identify correct receiver
with reference to DH
guidance & Property
Transfer Scheme
Discuss and obtain mutual
agreement with the
potential new receiver that
the balance should be
transferred.
Initial receiver accounts
for balance in Month 9
accounts Official legacy
balances reallocation
process takes place
January 2014.
Frequently asked questions
Question
Response
What basis was used for transferring balances?
Balances will generally transfer in line with legal ownership which
is denoted in Property Transfer Schemes.
The high level principles for identifying the correct receiver are:
Balances follow function, with the Property Transfer Schemes
(including any subsequent modifications REFERENCE TO LMT
GUIDANCE ON MOD PROCESS) being the legal mechanism by
which functions are transferred to receivers.
Clinical balances transfer mainly to NHS England (but see
FINMAN guidance 18 June 2013 and NHSE clarifications).
Staff related assets/liabilities transfer to the organisation where
the member of staff now works. If the individual left the system on
or before 31 March 2013 DH is the successor organisation.
Capital items transfer to the organisation specified in the transfer
scheme, e.g. land and buildings transfer to NHS Property
Services or Community Health Partnerships. In some cases, the
capital item may be being used by another party, and the terms of
that arrangement need to be accounted for using the relevant
accounting guidance (e.g. FREM, Manual for Accounts).
All cash balances transfer to DH.
Property Transfer Schemes provide the definitive answer as to
where functions transfer, and should be held by the corporate
governance section of your organisation. Guidance is available
on FINMAN detailing the key principles of functions transfers.
Annex B also contains summary information on where the main
types of balance sheet item will transfer.
Frequently Asked Questions
Question
Response
From what date do legacy
balances transfer to me?
All balances transfer to receivers on 1 April 2013.
Can I query the allocation of a
balance?
Receivers may query the allocation of a 1 April balance between receivers (i.e.
whether it has been transferred to the correct receiver organisation).
Can I query the value of balances
transferred?
No. Where the value of the balance is known to have been misstated by the
transferor at 31 March 2013, it must be transferred into the receiver’s accounts on 1
April 2013 via modified absorption accounting at this amount and subsequently
adjusted to the correct value via a 2013-14 in-year transaction.
Can I reject a balance?
Receivers cannot reject a balance on grounds that it is a) misstated; b) has a
negative impact on their financial performance or c) remains outstanding and
requires cash payment by the receiver organisation.
What do I do with an unsupported
balance?
Receivers (excluding those receivers within the NHS England Group) may reallocate
unsupported balances to DH but only where these balances are deemed substantive
(either individually or in aggregate). As it would be unusual for a substantive level of
unsupported balances to transfer to a receiver, reallocation of any unsupported
balances to DH is expected to be exception.
Non-substantive unsupported balances cannot be rejected by receivers. Rather they
must transfer the balance into their accounts on 1 April 2013 via modified absorption
accounting and write-off (i.e. reverse in full) the balance via a 2013-14 in-year
transaction if it cannot be substantiated, recording any associated income or
expenditure impact against their 2013-14 budget.
Frequently Asked Questions
Question
Response
If a balance has been incorrectly
allocated can it be reallocated?
Where a balance has been incorrectly allocated, i.e. it has been recorded against the
wrong receiver organisation in the Detailed Transactions Form when compared to
the Property Transfer Scheme (and any subsequent modifications); the issue must
be substantive to warrant reallocation of the balance to the correct receiver. A
substantive issue is one where failure to reallocate the balance would either: 1)
Result in a significant misstatement of a receiver’s statutory accounts; for example a
misstatement which may result in the qualification of those accounts or where
Management/the organisation’s Audit Committee deem leaving the misstatement as
unadjusted to be unacceptable; and/or 2) Result in insurmountable cash/budgetary
issues for the receiver organisation; for example where accepting an incorrectly
allocated balance would result in breaches of control totals or (where relevant) would
adversely affect Monitor’s Continuity of Service Risk Rating (CoSRR).
What work has been done in
advance of me being notified of
the balances being transferred?
Please refer to slide 2 and Page 5 of the SHA/PCT Financial Close Project
Instructions for Receiver Organisations.
What information will I receive?
Please refer to Page 7 of the SHA/PCT Financial Close Project Instructions for
Receiver Organisations.
What are my responsibilities on
receiving these balances?
Please refer to slide 3 and Page 8 of the SHA/PCT Financial Close Project
Instructions for Receiver Organisations
Frequently Asked Questions
Question
Response
Will I receive all of the information
at the same time?
No. DH will issue the information in batches based on when the forms are received
from Legacy Teams and pass DH’s data quality checks. DH started issuing files to
receivers during October and will continue in to early December until all are issued.
Where do I find information to
support the balances transferred?
The majority of these working papers will be in your specific receiver room on
QuickR however as some may have been transferred to you via email or in hard
copy format.
What do I do if I cannot obtain
evidence to support a balance?
If enhanced information or supporting evidence is not available receivers should
consider alternative approaches to supporting their balances. Examples are listed on
page 10, paragraph 1.5 of the SHA/PCT Financial Close Project Instructions for
Receiver Organisations.
What do I need to consider when
reviewing the detailed transaction
form?
Please refer to slide 4 and page 11 of the SHA/PCT Financial Close Project
Instructions for Receiver Organisations.
Frequently Asked Questions
Question
Response
What actions do I need to take if
balances have been incorrectly
allocated?
If you believe a 1 April balance has been included on your Detailed Transactions
Form output that does not relate to a function that has transferred to your
organisation and is not related to a function or contract referred to in the relevant
Property Transfer Scheme, you must first consider whether the issue is substantive
per the principles detailed previously. If the issue is not substantive you should
accept the balance.
If a balance is going to be
reallocated what is the process?
Please refer to Page 14 of the SHA/PCT Financial Close Project Instructions for
Receiver Organisations.
What are the bookkeeping entries
for unsupportable balances?
If an unsupported payable of £100k was allocated to a receiver they would account
for it as follows:
At 1 April 2013:
Dr General fund – modified absorption accounting loss £100k
Cr Payable £100k
Subsequent 2013-14 in-year transaction:
Dr Payable £100k
Cr Expenditure £100k
Can unsupported balances be
reallocated?
Note that this credit to expenditure will score in the receiver’s 2013-14 budget.
Where the level of unsupported balances is deemed substantive (either individually or
in aggregate) and the receiver is not part of the NHS England Group, the receiver
may reallocate unsupported balances to DH.
Frequently Asked Questions
Question
Response
What are the criteria for DH
accepting unsupported balance
reallocations?
Please refer to Page 16 of the SHA/PCT Financial Close Project Instructions for
Receiver Organisations.
Where do I record details of
unsupported balances that I wish
to reallocate to DH?
Receivers should use data input cell for “Unsupported balances reallocated to DH” in
the M9 FIMS forms/consolidation schedules to record any substantive unsupported
balances they wish to reallocate to DH, and as such need not account for these in
their M9 accounts. DH’s acceptance of these unsupported amounts will only be
confirmed during the legacy balances reallocation process in January 2014 however,
and as such, any balances rejected by DH at that stage must be accounted for by
the receiver in advance of year-end when the figure will be locked into their FIMS
form/consolidation schedule.
What are the bookkeeping entries
for recording a balance that is
incorrect?
Where a balance is found to be incorrect it should be transferred into the receiver’s
books at the value in the PCT/SHA 31 March closing balance sheet (i.e. the
misstated value) and subsequently adjusted to correct for any error.
For example, if a £100k provision is overstated by £20k because of a mathematical
error in its calculation (this is evident from the working paper that has been reviewed)
then it should be accounted for as follows:
At 1 April 2013:
Dr General fund – modified absorption accounting loss £120k
Cr Provisions – transfers under modified absorption accounting £120k
Subsequent 2013-14 in-year transaction:
Dr Provisions – provisions not required written back £20k
Cr Expenditure £20k
Frequently Asked Questions
Question
Response
What do I need to do with invoices
that are still outstanding as at 31
August 2013?
Where balances remain outstanding at 31 August 2013 these will need to be
paid/recovered by the appropriate receiver organisation to which the associated
function has transferred using their own cash. There will be no further use of DH cash
to settle payables/receivables on behalf of receivers after 31 August 2013 and no
further issue of “funding” to cover any subsequent payments made by receivers.
Worked example:
PCT1 has the following assets and liabilities recorded in its 31 March 2013 SoFP:
What accounting entries should be
recorded on the transfer of
balances as at 1 April 2013?
£1,000,000 Land (with an associated revaluation reserve balance of £200,000)
£400,000 Payable
£500,000 Cash
The PCT reviews its Property Transfer Scheme and concludes that the full land and
payables balances should transfer to NHS England as they relate to a function which
transferred to NHS England. The Legacy Team for this PCT therefore allocates the
entirety of the land and payables balances to NHS England in its Detailed
Transactions Form. NHS England is notified of these balances through receipt of the
Detailed Transactions Form output relating to PCT1.
1 April 2013 accounting entries
NHS England accounts
Dr Land £1,000,000
Cr Payable £400,000
Cr General fund – modified absorption gain £600,000
Cr Revaluation reserve £200,000
Dr General fund £200,000
Frequently Asked Questions
Question
Response
What transactions will be shown in
the detailed transactions forms
sent by DH with respect to cash
payments made by the legacy
team in the period to 31 August
2013?
Following on from the example above in 2013-14 the PCT1 Legacy Team settles the
payable in cash. The amount of cash required to settle the payable was £500,000
(i.e. the payable in the PCT1 31 March 2013 SoFP was understated by £100,000 as it
was based on an estimate).
2013-14 accounting entries
I am from an NHS Trust/ NHS
Foundation, how do I account for
payables transferred to me?
NHS England accounts
Dr Payable £400,000
Cr General fund – grant in aid £500,000
Dr Expenditure £100,000
Dr Payable £400,000
Cr PDC reserve £500,000
Dr Expenditure £100,000
I am from NHS property services,
how do I account for payables
transferred to me?
Dr Payable £400,000
Cr Equity – share capital £500,000
Dr Expenditure £100,000
Frequently Asked Questions
Question
Response
The receipts collected by the
legacy team to 31 August 2013
exceed the payments made, how
do I account for this?
A negative funding transactions will be recorded (using the same example as before
but in reverse):
The receipts collected by the
legacy team to 31 August 2013
exceed the payments made, how
do I account for this?
Following the transfer of legacy
balances I now have a significant
deterioration in financial
performance, what do I do?
Cr Receivable £400,000
Dr Cr General fund – grant in aid - £500,000
Cr Income £100,000
A negative funding transactions will be recorded. I.e. for an NHS Trust/NHS
Foundation Trust the entries would be as follows (using the same example as before
but in reverse):
Cr Receivable £400,000
Dr Cr General fund – grant in aid - £500,000
Cr Income £100,000
It is correct that the impact of legacy balances should form part of a receiver
organisations 2013-14 reported financial position as the balances and associated
transactions relate to functions now owned by that organisation. Receiver
organisations are strongly advised to use separate coding (for example a separate
cost centre or cost centres) to record the financial impact of legacy transactions and
balances, as this will enable them to explain the impact of legacy balances on their
reported financial position to their internal Management.
Frequently Asked Questions
Question
Response
Following the transfer of legacy
balances I now have a liquidity
issue, what do I do?
The Department has minimised the cash impact of legacy on receivers by paying
invoices on their behalf between 1 April and 31 August 2013 and issuing funding to
the value of the net payment (payments less receipts) rather than recovering the
cash. As such, the vast majority of legacy payments will not require cash clearance
by receivers; however any genuine payables still outstanding at 31 August will require
payment using receiver cash. The Department will not issue funding or any other form
of financial support to cover legacy payments, however, if a receiver suffers severe
liquidity issues as a result of legacy balances (e.g. is at risk of being unable to pay its
creditors) it should follow standard procedures. I.e. if the organisation was an NHS
Trust it should approach the Department requesting a public dividend capital (PDC)
issue. The level of PDC requested/issued should reflect the financial need of the
organisation and will not necessarily equal the value of the legacy balances requiring
cash payment.