REPORT TO THE COUNCIL OF THE GOVERNORS March 2015
Paper Title:
Finance report
Sponsoring Director:
Action required by the Council:
Steve Bolam, Director of Finance, Performance &
Informatics; Deputy CEO
Steve Bolam, Director of Finance, Performance &
Informatics; Deputy CEO
To provide a report to the Council on performance
against key financial targets
For information
Document previously considered by:
Finance & Performance Committee & Trust Board
Author:
Purpose:
Executive summary
Key points in the report and recommendation to the board
1. Key messages
This report is the first finance report to be provided to the Council of Governors.
The report highlights the following
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As at Month 11, the Trust is showing a deficit YTD of £9.5m which is £14.75m adverse to
the YTD target of £5.25m surplus. This is an adverse movement in month of £3.2m.
The month 11 results have seen a worsening of the position as a result of under delivery of
SLA inpatient income targets and excess costs of continuing operational pressures during
February.
In response, the Executive has taken further exceptional action to reduce expenditure in the
fourth quarter. A detailed review of all budgets and costs centres was under taken led by a
team of Senior Finance and Corporate Managers to identify areas where expenditure can
be stopped. The detailed actions identified were reviewed by the Chief Nurse and Medical
Director to remove any measures that represent a material risk to patient or staff safety.
The Trust has now seen three months of trading deficits of >£3m mainly due to lower than
planned SLA income, increasing pay costs, costs of exporting activity and expected cost
reduction not happening.
Following the m10 results the divisional best case forecasts were reviewed and the
expected gains from seasonality removed to give a likely forecast outturn of £13m
The current forecasts stand as a best case of £13.0m and a likely case of £13.7m The likely
case has been shared with monitor as part of our m11 return
The m11 reported forecasts from divisions have been triangulated against a top down
approach which ties back to the £13.7m likely case.
Key risks identified:
Key financial risks include:
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Trading losses are reducing liquidity and will force the Trust to take immediate remedial
action to a) control expenditure and b) protect liquidity by restricting capital
Trading at a deficit puts risk the ability to generate loan finance to support the important
service developments and changes we need to make
Related Corporate Objective:
Financial sustainability
Reference to corporate objective that this paper refers to.
Related CQC Standard:
Reference to CQC standard that this paper refers to.
Are services well led?
Commentary on performance in key financial indicators
Overall position
As at Month 11, the Trust is showing a year to date (ytd) deficit of £9.5m which is £14.75m adverse
to the ytd target of £5.25m surplus. This is an adverse movement in month of £3.2m. The month 11
results have seen a further worsening of the ytd position as a result of under delivery of SLA
inpatient income targets and excess costs of continuing operational pressures during February.
In response, the Executive has taken further exceptional action to reduce expenditure in the fourth
quarter. A detailed review of all budgets and costs centres was under taken led by a team of
Senior Finance and Corporate Managers to identify areas where expenditure can be stopped. The
detailed actions identified were reviewed by the Chief Nurse and Medical Director to remove any
measures that represent a material risk to patient or staff safety. The impact of these measures
began filtering through towards the end of February.
Income remains ahead of plan offset by overspends in Medical, Nursing and non pay. The Trust
position continues to suffer from a combination of the following factors :
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Increases in emergency demand and the acuity of admitted patients combined with a
shortage of beds leading to the displacement of elective activity and reductions in income,
increases in emergency activity being funded at only 30% marginal rate and staffing
pressures as we open all available escalation areas all the time and invest in further bed
capacity
Pressures arising from increasing turnover and as a result increases in vacancies set
against difficulties in recruiting and the requirements of safe staffing meaning expenditure
on agency and temporary staff continues to escalate and pay costs overall continue to rise
month on month without any corresponding increases in income to offset
Losses of income compared to planned levels in specific areas such as Project Diamond
funding to compensate for the underfunding of complex activity, education funding as we
move to education tariffs and reductions in doctors in training numbers also reduce income
Delays in the commissioning of new capacity leading to shortfalls in cost improvement
plans (CIPs) and lower than planned levels of contribution as well as a shortfall on CIP
achievement as Divisions have been unable to develop plans to fully meet the £45m target
The finance team are building a bridge to explain how these issues have contributed to the
deterioration in our financial performance over the course of the year to share with the Board and
Monitor and Governors will also be briefed on the same.
The current forecasts for the final year end position stand as a best case of £13.0m and a likely
case of £13.7m. The likely case has been shared with monitor as part of our m11 return. The m11
reported forecasts from divisions have been triangulated against a top down approach which ties
back to the £13.7m likely case.
Activity and income
The position includes additional income from commissioners for Systems resilience and additional
waiting list reduction work but to date the Trust costs are greater than this funding. Divisions have
improved marginally in their performance against in month SLA targets. There are under
performances in Surgical, Neuro and Cardiac Elective inpatients due to significant cancellations
from lack of beds and theatre capacity.
Emergency inpatients have overperformed but income for that activity has been heavily impacted
by the Non Elective emergency threshold which is set at 2012/13 levels meaning that activity over
that level is paid at 30% of tariff not 100%. The annual value of this discount to commissioners is
worth £5m and as we see more emergency activity displacing elective activity which is paid at
100% of tariff this has a seriously detrimental impact.
Critical Care bed day activity has underperformed in month due to lower case mix of emergency
medical patients compared to elective surgical patients and Paediatric activity is failing to achieve
the higher seasonal targets. Within other income, private patient has improved but is
underperforming overall. The Trust has been notified of a reduction of £2.5m YTD in its Project
Diamond, HCAS and Educational funding.
Activity charts to end Feb
SLA A&E
SLA Elective
1800
12000
1600
11000
1400
3500
10000
1200
3000
9000
1000
2500
8000
800
Apr May Jun
Jul
Aug Sep
Oct
Nov Dec
Jan
Feb Mar
SLA Daycase
4500
13000
4000
2000
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
SLA Daycase Actual 13/14
A&E Actual 13/14
A&E Target 14/15
A&E Actual 14/15
Elective Actual 13/14
Elective Target 14/15
Elective Actual 14/15
Nov
Dec
Jan
Feb
Mar
Feb
Mar
SLA Daycase Actual 14/15
Emergency
SLA Other Non Elective
Oct
SLA Daycase Target 14/15
SLA Outpatients
5000
60000
230
50000
210
190
3000
40000
170
150
30000
130
110
1000
Apr
May
Jun
Jul
Aug
Sep
Other Non Elective Actual 13/14
Other Non Elective Actual 14/15
Oct
Nov
Dec
Jan
Feb
Other Non Elective Target 14/15
Mar
20000
Apr
May
Jun
Jul
Aug
Sep
Emergency Actual 13/14
Emergency Actual 14/15
Oct
Nov
Dec
Jan
Emergency Target 14/15
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Outpatients Actual 13/14
Oct
Nov
Dec
Jan
Outpatients Target 14/15
Outpatients Actual 14/15
Expenditure
Pay costs are overspending for the year to date primarily due to premium costs of Medical Junior
Doctors cover especially in ED, Paediatrics and Surgery. Nursing budgets were increased to
match the safe staffing review levels in the summer of 2014 but nursing costs are now
overspending in month due to agency/bank nursing cover for staffing escalation areas and
maintaining safe staffing levels, covering vacancies and use of nurse specials still high. Divisions
have struggled to meet CIP targets in pay.
Non pay is overspent in drugs but the vast majority of this is high cost drugs which are largely
reclaimable from commissioners. There are pressures in other non pay costs especially the use of
private facilities for additional capacity and the roll out of the IT upgrade programme around eprescribing and clinical documentation to build an electronic patient record.
Cash
The cash balance was £10.8m at M11 (M10: £19.5m), a reduction of £8.7m in month. The Trust
took a loan in 2014 to fund the energy centre project financed by LEEF. We drew this loan down
early ahead of the anticipated expenditure profile having negotiated with LEEF to do so at zero
cost. The majority of this spend will happen in 2015/16 financial year.
There was a trading loss in February of £3.3m (IFRS) and debtors increased following the
considerable reduction last month – caused to a large extent by the receipt of long-standing debts
and also the Q4 LDA education monies in one payment in January. Some long term CCG debts
have been settled in March.
The cash position will remain under severe pressure given the current income and expenditure
performance and highly challenging trading outlook for 2015/16 and as a consequence the Trust is
continuing to exert tight management of payments.
The Trust will draw down the agreed £15m working capital loan on 23rd March
Capital
Actual capital expenditure in month 11 was £3.4m. and YTD expenditure is £34.1m against the
budget of £52.6m – an under spend of £18.6m. The IMT over spend is unchanged from M10 and
the Chief Information Officer has implemented measures to ensure IMT capital spend for the year
is contained within the control total of £10.656m.
The updated forecast indicates the Trust will generate an under spend in terms of overall capital
expenditure of £16.35m. However, the majority of this is slippage against externally financed
programmes such as major medical equipment and service developments. For cash funded
capital the Trust took action to control expenditure and manage risks in year and now the potential
overspend on cash funded capital has been mitigated the Trust funded capital position will be in
surplus compared to budget by approx. £2m at year end.