Financial Assurance Standards (FASt) for NHS Finance Teams

Financial Assurance Standards (FASt) for NHS Finance Teams

(June 2006)

Foreword

We are now half way through the Government’s planned reforms for the NHS that started with the publication of the NHS plan in 2000. The finance function has a key role to play in implementing these reforms. The demands on and expectations of finance functions are increasing rapidly and all finance departments must develop and respond to the challenges of these reforms.

Initiatives such as the development of Foundation Trusts, the full implementation of Payment by Results, the introduction of Agenda for Change and the continuing modernisation of contracts with GP’s, Dentists and Pharmacists require a strong, confident, well-trained finance function within the NHS.

Against this background, it is important that Finance Directors and their teams have a sound understanding of the standards that they should be meeting.

The NHS Finance Development Board (FDB) has commissioned the development of a set of Financial Assurance Standards as a benchmark – for NHS Finance Teams. These may be referred to as the FASt Standards.

These standards build on the Audit Commissions KLOE standards which have been designed to allow every NHS finance team to judge where it stands against a range of benchmarks and to encourage the take-up of best practice standards across the service.

Every finance department should be able to demonstrate that it is able to meet the basic and mandatory standards, and that it is working towards achieving the higher standards made explicit in this document.

As chair of the NHS Finance Development Board I hope that you will find these standards a useful aid to the continuing success of your finance team.

Anne-Marie MillarChair NHS Finance Development Board

of 36

Contents

Page

Introduction 4

Standard 1: Final Accounts 6

Standard 2: Treasury Management 8

Standard 3: Financial Systems 11

Standard 4: Internal Control & Governance 13

Standard 5: Management Accounting 16

Standard 6: Strategic Business and Financial Planning 18

Standard 7: Asset Management 20

Standard 8: Procurement & “Commercial” Trading 22

Standard 9: Inter-NHS Trading 24

Standard 10: Finance (Staff) Development 26

Standard 11: Costing 28

Standard 12: Commissioning 29

Acknowledgements 31

of 36

Introduction

This document has been produced on behalf of, and is sponsored by, the NHS Finance Development Board. It sets out a range of minimum standards against which NHS finance teams can benchmark themselves when seeking to deliver a high quality service to their organisations. It will, therefore, assist Finance Directors (FDs) in ensuring that their departments are fit for purpose. This will be of particular benefit to those FDs charged with bringing together new departments in the light of Commissioning A Patient-Led NHS, but the document will also be of great help to FDs in existing organisations.

The document builds on, and sits alongside, the Key Lines of Enquiry (KLoE) initiative recently introduced by the Audit Commission to support its Auditors’ Local Evaluation (ALE) assessments: NHS Audit 2005/06: Key Lines of Enquiry for Auditors Local Evaluation Assessments (Audit Commission, October 2005), available at the following web-site: http://www.audit-commission.gov.uk/kloe/downloads/ALE_KLoE.pdf. The intention is that these standards will support finance teams in assessing their performance against the KLoEs and areas related to, but not specifically covered by, them. The emphasis of the KLoEs is very much on each NHS organisation having the appropriate systems and processes in place to ensure that it is being managed properly. It should be noted that compliance with the KLoEs and these standards is not an end in itself, but will, rather, serve as evidence that the organisation is being managed appropriately.

To avoid duplication, the requirements of the KLoE initiative are not reproduced in full within the main body of this document. However, where a KLoE is relevant to a particular standard it appears as the first element (or elements) of that standard. So, for example, the first elements of the Annual Financial Reporting Standard (Standard 1) are KLoEs 1.1 (“The organisation produces annual accounts in accordance with relevant standards and timetables, supported by comprehensive working papers.”) and 1.2 (“The organisation promotes external accountability.”). Each point covered by the KLoEs is, therefore, included within the standards by default.

The principal idea behind the standards is that they should set out in a simple, yet structured, way those key things that NHS finance teams should be looking to achieve to ensure that they are providing a good service to their organisations and achieving the requirements set out in the KLoEs. The standards set out a range of good practice and, wherever possible, a link to guidance on the Internet has been provided for each element within the standards. The links may be to mandatory guidance from the Department of Health (e.g. the Manual for Accounts) or to useful advice from other relevant sources (e.g. CIPFA’s advice on achieving earlier closure of accounts). The document should, therefore, serve as a useful reference tool for Finance Directors and their staff as they seek to develop their services. The standards are not in themselves mandatory (though it should be recognised that some of the practices to which they refer are mandatory e.g. the agreement of inter-NHS balances at month 9), nor will performance against them be measured by the Department of Health. Each organisation will, therefore, be able to improve its performance against the standards in accordance with its own stage of development and not according to an artificially imposed central timetable.

In keeping with other Finance Development Board initiatives, the standards are developmental, in that each element of a standard is given a “level”. To ensure consistency with the scoring system used in the KLoEs the elements have been graded as follows:

2. a minimum requirement; an element that is mandatory or considered to be “basic practice”;3. a requirement that is above the minimum; an element that demonstrates “good practice”;4. a requirement that is well above the minimum; an element that demonstrates “best practice”.

of 36

http://www.audit-commission.gov.uk/kloe/downloads/ALE_KLoE.pdf

It is anticipated that every finance team in the NHS should be able to demonstrate compliance with the level 2 elements immediately, while the better developed departments should be looking to achieve those at level 3 and 4. Over time it is anticipated that every department will move towards achieving each element of every standard.

As has been stated above, the standards will not be subject to measurement or monitoring by the Department of Health. However, external auditors will expect evidence to be provided to demonstrate compliance with those elements of the standards that are included within the KLoEs; it is also anticipated that organisations will wish to produce additional evidence to support the fact that other, non-KLoE related, elements of the standards are being achieved. Given that such additional evidence is likely to be produced, organisations may decide that it should be made available annually to the Audit Committee and/or Board, as a supplement to the evidence provided for the KLoEs. This is, however, a decision to be taken by individual organisations and such an approach will not be imposed by the Department of Health.

Finally, it should be noted that as well as the specific guidance highlighted in this document, a range of general guidance is available to finance teams. An excellent bibliography of such guidance is included in the appendices to the recently issued NHS Finance Development Board document, The Role of the Finance Director in a Patient-Led NHS: A Guide for NHS Boards, www.fsdnetwork.com.

of 36

Standard 1: Financial Reporting

This standard deals with the way in which an organisation’s financial position is reported in line with statutory requirements and how organisations prepare for such reporting during the year. This area is covered substantially by the first two KLoEs. The standard draws out some of the key pieces of preparatory work that NHS organisations need to undertake during the year and encourages Finance Directors to take future developments in areas such as International Financial Reporting Standards (see www.iasb.org), International Audit Standards and the capital accounting regime, into consideration when planning the work of their team.

Web links Practice Level Level

1.1 Compliance with Key Lines of Enquiry

1.1.1 The organisation produces annual accounts in accordance with relevant Department of Health (DoH), audit and professional standards and timetables, supported by comprehensive working papers.


http://www.info.doh.gov.uk/doh/finman.nsf/ManualDownload?OpenView

Mandatory See KLoE 1.1

1.1.2 The organisation promotes external accountability. http://www.audit-commission.gov.uk/kloe/downloads/ALE_KLoE.pdf



1.2 Preparation during year

1.2.1 All balance sheet accounts are reconciled on a monthly basis, with a full balance sheet review every quarter.

Basic practice 2

1.2.2 Inter-NHS balances are agreed and reconciled:- at month 9 and year-end; or- at month 6, month 9 and year-end; or- on a quarterly basis.

http://www.info.doh.gov.uk/doh/finman.nsf/ManualDownload?

MandatoryGood practiceBest practice

234

of 36















http://www.iasb.org/

OpenView

Web links Practice Level Level1.2.3 An agreed dispute resolution mechanism is in place with major NHS debtors and creditors

to ensure that disputes are resolved in a timely manner.Good practice 3

1.2.4 Where organisations host shared services and include those services’ income and expenditure within their statutory accounts, all “inter-company” balances are agreed and reconciled:

- annually; or- half-yearly; or- quarterly.


234

1.2.5 A set of fully reconciled summary accounts and relevant supporting notes is produced for the organisation:



234

1.2.6 Preparation for amendments to future reporting requirements (e.g. International Financial Reporting Standards,International Accounting Standards, new capital regime) is undertaken during the year and working practices updated accordingly.

Best practice 4

1.2.7 The organisation works with its external auditors to ensure that the pre-final accounts “interim” audit focuses on areas that will reduce the workload during the final accounts audit.

Good practice 3

1.3 Year-end1.3.1 The timetable for accounts’ closure ensures closedown in accordance with the required

timescale. The timetable and the named responsible officer for each action are agreed in advance of year-end.

http://www.cipfa.org.uk/pt/download/topical_briefing_faster_closing.pdf

http://www.hfma.org.uk/news.cfm?item_id=2437

Basic practice 2

1.4 Working Papers1.4.1 All financial records are kept in accordance with the NHS Code of Practice for Records

Management (April 2006).http://www.dh.gov.uk/

Mandatory 2

of 36

http://www.dh.gov.uk/PolicyAndGuidance/OrganisationPolicy/RecordsManagement/fs/en









PolicyAndGuidance/OrganisationPolicy/RecordsManagement/fs/en

Standard 2: Treasury Management

This standard is concerned with the way in which NHS organisations manage their working capital, in particular their cash. This area is not covered in any particular depth by the KLoEs; there are, however, references to cash-flow forecasting and cash management in KLoE 2.1 – these are reflected in the standard. The standard also covers those mandatory targets that organisations are required to meet – it should be noted that some relate only to PCTs and others only to Trusts. Monitor, the Independent Regulator for NHS FoundationTrusts, has developed a range of guidance in this area. Links are provided to the key guidance available at the time of publication; it is, however, recommended that NHS organisations check the Monitor website (www.regulator-nhsft.gov.uk) on a regular basis for the latest guidance.



2.1.1 The organisation’s medium-term financial strategy/plan, budgets and capital programme are soundly based and designed to deliver its strategic priorities.

- The organisation prepares reliable cash-flow forecasts and has a treasury management strategy which it reports to the Board on a regular basis throughout the year.

- Trusts only: The Board can demonstrate that the organisation’s treasury management policies procedures structures and systems would meet the requirements of the NHSFT regime. Monitor strongly encourages NHSFTs:

to invest surplus operating cash in ‘safe harbour’ investments; and to have a written treasury management policy.


http://www.regulator-nhsft.gov.uk/documents/Monitor_Investment_Risk_Evaluation_final.pdf

http://www.regulator-nhsft.gov.uk/documents/Managing_cash_final.pdf


2.2 Other requirements: all organisations

2.2.1 The organisation ensures that it meets the requirements of the Better Payment Practice Code, as required by the NHS Manuals for Accounts.

http://www.payontime.co.uk/

Mandatory 2

of 36













http://www.regulator-nhsft.gov.uk/




2.2.2 The organisation complies with Department of Health guidance on cash management. http://www.info.doh.gov.uk/doh/finman.nsf/526655e250fd75150025673e0036b174/90986529fbc36796802570a10032d7eb/$FILE/FMWP%20Revenue%20Monitoring%20(04-05)%2012.doc

Mandatory 2

2.2.3 The organisation has a banking policy that is in accordance with Department of Health cash management guidance.

Basic practice 2

2.2.4 Debtor and creditor balances are reported to the Board or an appropriate Board committee:- annually; or- half-yearly; or- quarterly

and any significant changes between periods are fully explained.

Basic practiceGood practiceBest practice

234

2.2.5 The cash-flow implications of investment decisions are routinely considered during the preparation of business cases

Basic practice 2

2.2.6 The organisation complies with HM Customs and Excise rules to prevent money laundering.

http://www.info.doh.gov.uk/doh/finman.nsf/4db79df91d978b6c00256728004f9d6b/06ddd0305be9dd1e80256ea7003c4108?OpenDocument

Mandatory 2

of 36




http://www.info.doh.gov.uk/doh/finman.nsf/526655e250fd75150025673e0036b174/90986529fbc36796802570a10032d7eb/$FILE/FMWP%20Revenue%20Monitoring%20(04-05)%2012.doc




2.3 Other requirements: PCTs only

2.3.1 The PCT remains within its annual cash limit.(Ref: KLoE 3.1)

Mandatory 2

2.3.2 The PCT does not draw down cash in advance of need (see section 2.2.2 above). Mandatory 2

2.4 Other requirements: Trusts only

2.4.1 The Trust monitors actual External Financing Limit (EFL) performance against plan, throughout the year.

Basic Practice 2

of 36

Standard 3: Financial Systems

This standard deals with financial systems in the widest sense, from systems relating to Accounting Officer requirements to specific electronic systems supporting services. It aims to ensure that all financial systems adhere to best practice. It also covers the systems requirements relating to shared service arrangements and seeks to ensure that NHS organisations follow best practice guidance from the Purchasing and Supply Agency when procuring new systems. Finally, it seeks to encourage finance teams to move towards using systems that are fully integrated with other electronic systems in their organisation.


3.1 General Systems

3.1.1 The organisation complies with the NHS Accounting Officer requirements. http://www.info.doh.gov.uk/doh/finman.nsf/ManualDownload?OpenView&Start=1&Count=30&Expand=6#6

Mandatory 2

3.1.2 The organisation should have Standing Orders (SOs) and Standing Financial Instructions (SFIs) based on the standard NHS models, and should ensure that its financial systems comply with those SOs and SFIs.

http://www.dh.gov.uk/PublicationsAndStatistics/Publications/PublicationsPolicyAndGuidance/PublicationsPolicyAndGuidanceArticle/fs/en?CONTENT_ID=4132060&chk=veqzBX

Mandatory 2

3.1.3 Systems comply with minimum audit standards for data and user security. Mandatory 2

3.1.4 There are written procedure notes available to staff for all financial systems, including a data-security manual.

Good practice 3

3.1.5 A register of all current hardware and software is maintained. Good practice 3

3.1.6 The organisation has ensured that its financial systems are:- capable of generating reliable results within appropriate timescales;- sufficiently flexible to meet changing requirements;- capable of interfacing with national shared service systems ;- designed to ensure that internal control measures are fully embedded; and

Basic practice 2

of 36




http://www.info.doh.gov.uk/doh/finman.nsf/ManualDownload?OpenView&Start=1&Count=30&Expand=6#6



supported by appropriate maintenance agreements.

of 36


3.1.7 Financial systems are supported by appropriately qualified IT staff and / or services, including routine system back-up, disaster recovery plans and appropriate technical support.

Basic practice 2

3.2 Shared Services

3.2.1 If the organisation’s financial services are provided by a third party organisation, the services are subject to a contract and a detailed specification of services, including clear audit arrangements.

Basic practice 2

3.2.2 Contracts for third party provision of financial services are supported by appropriate, active and regular performance monitoring.

Basic practice 2

3.2.3 Contracts for third party provision of financial services are supported by written agreements in respect of governance arrangements and risk sharing.

Basic practice 2

3.3 New Services

3.3.1 If the organisation procures new systems outside national arrangements or shared service networks, it should be able to demonstrate that it has secured value for money by so doing and the procurement should follow current best practice guidance

www.pasa.doh.uk/computing

Basic practice 2

3.3.2 All procured systems are supported by detailed system manuals. Basic practice 2

3.4 Integration

3.4.1 All financial systems are fully electronically integrated. Basic practice 2

3.4.2 All financial systems are fully electronically integrated on a real-time basis. Good practice 3

3.4.3 Financial systems are electronically integrated with all relevant non-financial systems (e.g. activity, ESR/HR, Supplies, Estates)

Good practice 3

3.4.4 Financial systems are electronically integrated with all other systems on a real-time basis. Best practice 4

3.4.5 Budget holders have on-line access to relevant financial information to encourage their involvement in, and responsibility for, budget management.

Best practice 4

of 36

http://www.pasa.doh.uk/computing

http://www.pasa.doh.uk/computing

Standard 4: Internal Control & Governance

Internal Control and Governance are covered in depth by KLoEs 4.1, 4.2 and 4.3. This standard covers the financial elements of the KLoEs and seeks to provide a range of best practice guidance and links to appropriate web-sites. It should be noted that the Board of an organisation retains responsibility for ensuring that appropriate internal control and governance measures are in place. This standard covers the Finance Director and Finance Department’s contributions to the governance framework: it does not, in any way, detract from the Board’s overall responsibility. A CIPFA briefing paper on Good Governance for Public Services is available from their website, http://www.cipfa.org.uk/pt/download/good_governance_briefing.pdf.



4.1.1 The organisation manages its significant business risks.

The Finance Director and finance staff should contribute the financial elements of the risk management processes within the organisation. The Finance Director should contribute to the wider process as part of his/her role as a Director of the organisation.



4.1.2 The organisation has arrangements in place to maintain a sound system of internal control.

The Finance Director should ensure that the financial elements of the system of internal control (e.g. Standing Financial Instructions, Internal Audit function, procedure notes, accounting systems and records) are effective and properly maintained.



4.1.3 The organisation has arrangements in place that are designed to promote and ensure probity and propriety in the conduct of its business.

The Finance Director and finance staff should contribute the financial elements of the organisation’s systems that are designed to promote and ensure probity and propriety in the conduct of its business. The Finance Director should contribute to the wider systems as part of his/her role as a Director of the organisation.



4.2 Specific financial requirements

4.2.1 Finance staff contribute to any internal quality management processes in place within the organisation; e.g. ISO9001 or EFQM.

http://www.iso.org/iso/en/iso9000-14000/index.html

http://www.efqm.org/

Best practice 4

of 36

http://www.efqm.org/













http://www.cipfa.org.uk/pt/download/good_governance_briefing.pdf


4.2.2 The Finance Director signs up to the Codes of Conduct and Accountability for NHS Boards, which the organisation should formally have adopted.

http://www.dh.gov.uk/PublicationsAndStatistics/Publications/PublicationsPolicyAndGuidance/PublicationsPolicyAndGuidanceArticle/fs/en?CONTENT_ID=4093864&chk=/Asdrw


4.2.3 The Finance Director works with colleagues in Human Resources to ensure that the contracts of senior finance staff include a requirement to comply with The Code of Conduct for NHS Managers.

http://www.dh.gov.uk/assetRoot/04/06/04/81/04060481.pdf

Basic practice 2

4.2.4 Finance staff contribute to and comply with DoH guidance on complaints procedures. http://www.dh.gov.uk/PolicyAndGuidance/OrganisationPolicy/ComplaintsPolicy/NHSComplaintsProcedure/fs/en

Mandatory 2

4.2.5 The organisation complies with the Secretary of State’s Directions to NHS bodies on Counter Fraud Measures 2004 (as amended by Directions to NHS Bodies on Counter Fraud Measures (Amendment) 2005) and the DoH Fraud Manual.

The Finance Director ensures that he/she discharges his/her responsibilities according to these Directions.



http://www.cfsms.nhs.uk/

Mandatory 2

of 36

http://www.cfsms.nhs.uk/pub/cfs/index.html








http://www.dh.gov.uk/PolicyAndGuidance/OrganisationPolicy/ComplaintsPolicy/NHSComplaintsProcedure/fs/en









pub/cfs/index.html

of 36



4.2.6 Finance staff comply with DoH guidance on whistle-blowing (HSC 1999/198: The Public Interest Disclosure Act: Whistle Blowing in the NHS), as it is applied within their organisation.


Basic practice 2

4.2.7 The Finance Director seeks to ensure that the organisation’s Audit Committee complies with the guidance in the Audit Committee Handbook 2005, issued by the Department of Health and the HfMA.


Basic practice 2

4.2.8 The Finance Director and finance staff ensure that they do not take any action that may be considered ultra vires and take legal advice whenever appropriate.

Mandatory 2

of 36







Standard 5: Financial Management / Management Accounting

Financial Management and Management Accounting are covered in depth by KLoEs 2.1 and 2.2. This standard seeks to provide a range of best practice guidance and links to appropriate web-sites.






5.1.2 The organisation manages performance against budgets. http://www.audit-commission.gov.uk/kloe/downloads/ALE_KLoE.pdf


5.1.3 The organisation has established arrangements for managing its financial and other resources which demonstrate value for money is being managed and achieved.



5.2 Specific Requirements

5.2.1 The organisation’s financial plans are prepared on a rolling basis, showing the current year, future years’ forecasts and prior year comparators.

- rolling 3 year basis (current year, 1 prior year and 1 year’s forecast); or- rolling 5 year basis (current year, 1 prior year and 3 years’ forecasts); or- rolling 8 year basis (current year, 2 prior years and 5 years’ forecasts).


234

5.2.2 Cash releasing efficiency savings (CRES) plans cover a minimum of three years and clearly differentiate between recurrent and non-recurrent savings.

Basic practice 2

5.2.3 Achievement against in-year CRES plans is reported to the Board on a monthly basis with a commentary and action plans to bring performance back into line, where necessary.

Good practice 3

of 36











5.2.4 The financial report to the Board follows best practice guidelines (e.g. HfMA / CIMA’s Raising the Standard of Performance Reporting in the NHS: A Guide to Best Practice in Performance Reporting to NHS Boards) and includes a forecast year-end position and the key assumptions underpinning the forecast.

http://www.cimaglobal.com/cps/rde/xbcr/SID-0AAAC544-CEEA8985/live/RaisingStandPerfRep_techguide_2004.pdf

Good practice 3

5.2.5 The requirements of those to whom the Board report is addressed are taken into consideration when it is being written.

http://www.cipfa.org.uk/shop/download/FM000.pdf

Good practice 3

5.2.6 The Board report is based on the financial accounting position as per the General Ledger and an evidenced reconciliation produced each month.

Basic practice 2

5.2.7 External performance reports (to the SHA, DoH and /or Monitor) are prepared on the same basis, and from the same source data, as internal Board reports.

Basic practice 2

5.2.8 Budgets are profiled appropriately and expenditure is not accrued to budget without good cause.

Basic practice 2

5.2.9 An evidenced record of budget profiles and all accruals to budget is maintained and reviewed at least half-yearly.

Good practice 3

of 36







Standard 6: Strategic Business and Financial Planning

This standard covers strategic business and financial planning, an area that Monitor is keen to see improved in those Trusts that wish to apply for Foundation Trust status. The area is partly covered by KLoE 2.1 and the standard provides further details on those elements not covered by the KLoE, such as capital project review and PFI.






6.2 Other issues6.2.1 The organisation should improve the accuracy of its medium and long-term financial

forecasts and should engage in appropriate scenario modelling. The accuracy of forecasts is compared to actual performance at appropriate intervals.

Good practice 3

6.2.2 Corporate / Business plans are published annually before the start of the financial year, and include relevant, detailed financial plans and assumptions, including appropriate risk and sensitivity analysis.

Basic practice 2

6.2.3 Significant capital projects are subject to appraisal / review upon completion.

(The Treasury Green Book is an excellent guide to appraisal and evaluation of significant projects.)

http://www.dh.gov.uk/PublicationsAndStatistics/Publications/PublicationsPolicyAndGuidance/PublicationsPolicyAndGuidanceArticle/fs/en?CONTENT_ID=4119896&chk=ZZZYaj

http://greenbook.treasury.gov.uk/

Basic practice 2

of 36











6.2.4 PFI schemes, where relevant, are supported by appropriate financial advice, obtained from external sources if necessary.

Basic practice 2

6.2.5 The organisation works closely with local public sector organisations to develop strong partnership working and to ensure that full advantage is taken of opportunities to develop pooled budgets under Section 31 of the Health Act 1999, where appropriate.


Good practice 3

of 36




Standard 7: Asset Management

KLoE 2.3 specifically covers asset management; however, it suggests that it only applies to organisations with a significant asset base. This standard recognises that there are elements of asset management that relate to all organisations, whatever the size of their asset base.



7.1.1 The organisation manages its asset base.

The Audit Commission guidance states that KLoE 2.3 is only applicable to those organisations with a “significant asset base”. It is, however, expected that ALL organisations would meet the criteria set out at level 2 of the KLoE, i.e.

The organisation has:- an estate strategy which reflects the requirements of the Local Delivery Plan and

has been agreed with key stakeholders and users and approved by the board;- an up to date asset register;- calculated the level of risk-adjusted backlog maintenance;- a costed equipment replacement programme;- a capital programme [that] gives priority to potential capital projects based on a

formal, objective approval process.


http://www.regulator-nhsft.gov.uk/documents/Protected_Assets_FINAL_15_10_04.pdf

Mandatory / Good practice

See KLoE 2.3

7.2 Other Issues

7.2.1 A capital expenditure programme is agreed by the Board before the start of each financial year.

Basic practice 2

7.2.2 All components of the capital expenditure programme are subject to investment appraisal and are shown to represent a net present value to the organisation rather than a net present cost.

Basic practice 2

7.2.3 Reports on performance against the agreed capital expenditure programme are taken to the Board, at least quarterly.

Basic practice 2

of 36








7.2.4 The value of assets as recorded in the general ledger is reconciled to the values in the asset register:



234

7.2.5 The value of assets recorded in the general ledger and asset register reflects the most recent independent valuers’ valuation, subject to changes due to depreciation, amortisation, indexation and other appropriate accounting changes.

Basic practice 2

7.2.6 Depreciation, amortisation, indexation and other necessary accounting changes are applied in accordance with appropriate accounting standards and guidance, as per the Manual for Accounts.


Mandatory 2

7.2.7 The Finance Director contributes, as appropriate, to the annual report to the Board on performance against the organisation’s estates strategy / service development strategy.

Good practice 3

of 36




Standard 8: Procurement & “Commercial” Trading

This standard covers the procurement of goods and services by NHS organisations and the planning and monitoring of non-direct healthcare activities the purpose of which is primarily to generate income.


8.1 Procurement

8.1.1 The organisation follows the NHS Purchasing and Supply Agency’s (PASA) best practice framework for procurement of all goods and services, whether revenue or capital in nature.

http://www.pasa.nhs.uk/bestpractice/bp_framework.stm

Basic practice 2

8.1.2 The organisation ensures that its Standing Orders and Standing Financial Instructions (SFIs) comply with PASA best practice and with relevant EU procurement legislation.


Basic practice / Mandatory

2

8.1.3 The organisation uses a professional procurement service, whether provided in-house or by a third party.


Basic practice 2

8.1.4 The organisation ensures that it applies competitive tendering or competitive quotation procedures for the procurement of all material goods and services, in accordance with its SFIs.

Basic practice 2

8.1.5 The organisations ensure that all relevant staff are aware of, and appropriately trained to allow them to discharge, their responsibilities in respect of procurement.

Basic practice 2

8.1.6 Where financial services are provided internally, they should be formally market-tested against equivalent shared service providers.

Best practice 4

8.2 Commercial Trading

8.2.1 Where services are provided by the organisation primarily for the purposes of income generation, full trading accounts, including appropriate charges for overheads and indirect costs, are produced on an annual basis and reported to the Board, at least in summary format.

Good practice 3

8.2.2 Income generating services should not be run at a loss nor should NHS funding be used to cross-subsidise income generation activities.

Mandatory 2

of 36











8.2.3 The organisation should only enter in to trading activities after an appropriate business plan, incorporating a full analysis of risk and a full income and expenditure forecast, has been drawn up for, and agreed by, the Board.

Good practice 3

8.2.4 The organisation should only enter in to a Joint Venture (JV) after:

- taking appropriate legal advice;- ensuring that the JV is consistent with the organisation’s business plan / service

development strategy; and- completing a full appraisal, including a risk analysis.

Good practice 3

of 36

Standard 9: Inter-NHS Trading

This standard covers trading between NHS organisations. It covers Payment by Results and other inter-NHS trading such as shared and hosted services.


9.1 Payment by Results (PbR)

9.1.1 NHS organisations should follow current PbR guidance and the Code of Conduct for PbR as published by the DoH.

http://www.dh.gov.uk/PolicyAndGuidance/OrganisationPolicy/FinanceAndPlanning/NHSFinancialReforms/fs/en


Mandatory 2

9.2 Other Inter-NHS trading

9.2.1 For all non-PbR inter-NHS trading, the organisation should ensure that all arrangements (e.g. direct healthcare services not covered by PbR, hosted services, shared services, support service provision etc.) are supported by agreed and signed:

- memoranda of agreement;- governance arrangements;- risk-sharing arrangements; and,- current service level agreements (SLAs), including key performance indicators that

are actively managed.

Basic practice 2

9.2.2 Payments for inter-NHS services are made strictly in accordance with the agreed SLA and ensure that there is no cash-flow benefit to either party.

Basic practice 2

9.2.3 Service providers adhere to relevant quality standards. Basic practice 2

9.2.4 Staff in the provided service should be managed under appropriate Human Resource practices (e.g. transfer of undertakings / retention of employment).

Mandatory 2

of 36








9.2.5 Both parties to inter-NHS trading arrangements should operate their financial arrangements in relation to the service(s) provided on an “open book” basis.

Good practice 3

9.2.6 The provision and/or purchase of services should be subject to appropriate appraisal, including comparison with in-house alternatives and consideration of relevant opportunity costs.

Good practice 3

9.2.7 SLAs and contracts are managed and maintained by the appropriate line managers and not seen as the responsibility of the finance department.

Good practice 3

of 36

Standard 10: Finance (Staff) Development

This standard covers Finance Development issues. It mirrors the approach outlined in the national strategy Healthy Options by looking at development under three headings: learning and development, excellence and leadership. It also refers to the Knowledge and Skills Framework that underpins Agenda for Change. There are links to the relevant areas on the FSD website, www.fsdnetwork.com. The standard also takes into account the initiative recently implemented by the National Finance Development Board, by looking at the financial development of the wider organisation, rather than simply the finance department. A key part of this wider organisational development is to ensure that Boards of NHS organisations are fully aware of their corporate responsibility to manage their organisations’ finances.


10.1 General

10.1.1 The Finance Director should ensure that the finance department is working towards the objectives and minimum standards outlined by the Finance Development Board in the Finance Staff Development Strategy Healthy Options:

www.fsdnetwork.com Basic practice 2

10.2 Learning and development

10.2.1 All finance staff have an agreed Knowledge and Skills Framework (KSF) outline and a personal development plan (PDP) and are working towards achieving the relevant elements of their KSF.

www.fsdnetwork.com Mandatory 2

10.2.2 The Finance Director and Deputy / Second-in-Line are CCAB qualified accountants. Basic practice 2

10.2.3 All qualified staff are participating in the CPD scheme of their professional Institute. Mandatory 2

10.3 Excellence

10.3.1 Finance teams are working to achieve accreditation in accordance with the Towards Excellence programme and / or the arrangements within their local Strategic Health Authority.

www.fsdnetwork.com Good practice 3

10.4 Leadership

10.4.1 The responsibility of the Finance Director to ensure that finance staff are fully engaged in appropriate finance development activities is reflected in the Director’s job description.

Basic practice 2

of 36

http://www.fsdnetwork.com/





10.4.2 The Finance Director ensures that the Board and all staff with financial responsibilities are sufficiently well trained in financial matters to enable them to carry out the functions required of them and to play their part in the financial management of the organisation.

Basic practice 2

10.4.3 The Finance Director ensures that there is a member of staff in the finance team who has direct line responsibility for finance staff development (“the FSD Lead”) and that this responsibility is reflected in the individual’s job description.

Good practice 3

of 36

Standard 11: Costing

This standard seeks to ensure that NHS organisations comply with the NHS Costing Manual and with Payment by Results guidance, including the recently issued Code of Conduct. Neither the Manual nor the Code are reproduced in the standard but there are links to the relevant web-sites from which further guidance can be obtained.


11.1 Compliance with NHS Costing Manual and Payment by Results (PbR) best practice

11.1.1 Service providers ensure that they follow the NHS Costing Manual and the PbR Code of Conduct and best practice guidance when undertaking costing exercises.




Mandatory 2

11.1.2 PCTs follow the appropriate guidance on Programme Budgeting. http://www.info.doh.gov.uk/doh/finman.nsf/ManualDownload?OpenView

Mandatory 2

of 36













Standard 12: Commissioning

This standard sets out sources of best practice guidance for contracting, practice based commissioning collective commissioning and specialised commissioning, with which commissioners are expected to comply. As with Standard 11, none of the guidance is reproduced in the Standard, but there are links to the relevant web-sites from which the guidance can be obtained.


12.1 General Commissioning / Contracting

12.1.1 PCTs only: Commissioning is undertaken on the basis of appropriate clinical service strategies, patients’ needs, clinical advice and within the organisation’s financial framework.

Basic practice 2

12.1.2 PCTs only: DoH guidance on “Establishing the Responsible Commissioner” is followed. http://www.dh.gov.uk/assetRoot/04/13/32/14/04133214.pdf

Basic practice 2

12.1.3 PCTs only: The PCT ensures that The NHS Contractors’ Companion is used as the basis for drawing up contracts, wherever possible.

http://www.dh.gov.uk/PolicyAndGuidance/OrganisationPolicy/PrimaryCare/PrimaryCareContracting/PrimaryCareContractingArticle/fs/en?CONTENT_ID=4065460&chk=XR1/UI

Good practice 3

12.1.4 NHS Trusts only: The Trust’s business plans / service development strategies is based on Commissioners’ requirements.

Basic practice 2

12.1.5 The organisation should ensure that working relationships in commissioning / providing services are based upon an equitable partnership.

Good practice 3

12.2 Practice Based Commissioning (PCTs only)

12.2.1 The PCT’s finance department rolls out and supports Practice Based Commissioning (PBC) according to national timetables and a local strategy, as per latest guidance.

http://www.dh.gov.uk/PolicyAndGuidance/OrganisationPolicy/

Mandatory 2

of 36

http://www.dh.gov.uk/PolicyAndGuidance/OrganisationPolicy/Commissioning/PracticeBasedCommissioning/fs/en








Commissioning/PracticeBasedCommissioning/fs/en

of 36




12.2.2 Local PBC strategies are drawn up in agreement with GP practices and cover issues such as governance arrangements, risk sharing, links to current commissioning plans and provision of management support.

Basic practice 2

12.2.3 The PCT ensures that PBC is supported by appropriately qualified finance staff. Basic practice 2

12.3 Specialist Commissioning (PCTs only)(i.e. the commissioning of those services designated as specialist by the National Specialist Commissioning Advisory Group, NSCAG.)

http://www.advisorybodies.doh.gov.uk/NSCAG/index.htm

12.3.1 The PCT ensures that it has appropriate arrangements in place for the commissioning of specialist services.

Basic practice 2

12.3.2 The PCT is aware of, and follows, the latest guidance on specialised commissioning. http://www.dh.gov.uk/PolicyAndGuidance/OrganisationPolicy/Commissioning/CommissioningSpecialisedServices/fs/en

Basic practice 2

12.4 Collective Commissioning (PCTs only)(i.e. the commissioning of services across a wide geographical area by PCTs working together)

12.4.1 Where the PCT is involved in collective commissioning arrangements it should ensure that they are supported by appropriate governance arrangements, including:

- memoranda of agreement;- risk-sharing arrangements; and,- current, signed service level agreements (SLAs), including key performance

indicators that are actively managed.

Basic practice 2

of 36

http://www.dh.gov.uk/PolicyAndGuidance/OrganisationPolicy/Commissioning/CommissioningSpecialisedServices/fs/en






Acknowledgements

Thanks are due to the following individuals for their input to this project:

Mick Batters Audit Manager, York Hospitals Trust

Ray Beale-Pratt Consultant, Teamwork

Paul Brickwood Director of Finance, Knowlsey PCT

Terry Brodie CIPFA

Sharon Cannaby Head of Health Sector Policy, ACCA UK

Peter Chambers Director, Government and Public Sector, PricewaterhouseCoopers LLP

Tim Crowley Director, Mersey Internal Audit Agency

Pam Dyson National Head of Finance Staff Development

David Ellcock Finance Staff Development Project Manager, Cheshire & Merseyside SHA

Barry Elliott Director of Finance, Surrey and Sussex SHA

Paul Gillot Regional Business Development Manager – North, CIMA

Ian Hanley Assistant Director of Finance (Accounting), Royal Liverpool Children’s NHS Trust

Chris Jeffries Associate Director of Education and Learning Resources, Greater Manchester SHA

Emma Knowles Financial Management Specialist, Health Directorate, Audit Commission

Sotiris Kyriacou Finance Staff Development Manager - London (North West)

Kieran Lappin PACS National Implementation, Department of Health

Tanuja Pandit Monitor, the Independent Regulator of NHS Foundation Trusts

Neville Smith Head of Finance & Capacity (Future Healthcare), Liverpool & North Mersey PCTs

Simon Wombwell Deputy Director of Finance & Procurement, Oxford Radcliffe Hospitals NHS Trust

of 36

Financial Assurance Standards (FASt) for NHS Finance Teams

Documents

Transcript of Financial Assurance Standards (FASt) for NHS Finance Teams