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REPORT TO CROYDON CLINICAL COMMISSIONING GOVERNING BODY

Meeting in Public

28 May 2013

Title: 2013/14 FINANCE REPORT: PERIOD 1

Lead Director Mike Sexton Chief Finance Officer

Report Author Phil Wheelhouse Deputy CFO

Contact details mike.sexton@croydonpct.nhs.uk phil.wheelhouse@croydonpct.nhs.uk

Committees which have previously discussed/agreed the report

Finance Committee Senior Management Team (Verbal)

Committees that will be required to receive/approve the report

Purpose of Report Information

Recommendations:

1. That the Governing Body note:

That the new financial systems, ledgers, transaction processing arrangements and controls have been implemented and have been operational since the beginning of April 2013.

That new reporting formats for the CCG are being developed for Month 2 reporting.

2. That the Governing Body note:

The period 1 reported figures are largely based on Plan, given the limited availability of performance data available in for April 2013.

The forecast outturn is to achieve plan: £19.9m deficit. 3. That the Governing Body note that there are a number of risks that will be managed

within the overall position to achieve the planned deficit position. A new risk is the allocation for estates costs (£0.8m) as notified by NHS England (London).

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Executive Summary:

The report presents the financial position for the first month of 2013/14. The key financial objective is to achieve the target for 2013/14, a planned deficit of £19.932m, which is included in the CCG’s Financial Improvement Plan, covering the three years 2013/14 to 2015/16. This Improvement Plan is still subject to approval by NHS England (London Region). The CCG’s 2013/14 QIPP plan is critical to achieving this objective. The CCG continues to deploy mitigating actions against risk and to reduce adverse variances.

Key Messages and Issues (making reference to paragraph within report)

Annex 2 Summary Financial Performance

Section 4.6: Risk and Mitigations

Governance:

Conflicts of Interest (indicate any conflicts of interests and how they were managed)

N/A

Clinical Leadership Comments where appropriate

CLG is supportive of GP Engagement Scheme and is leading QIPP programme.

Financial Implications

Stated within paper

Implications for other CCGs

SWL Risk Sharing agreement has been agreed by SWL CCG

Equality Impact Assessment

N/A

Patient and Public Involvement

N/A

Information Privacy Issues

N/A

Reputational Issues

Delivery of financial plan

Communication Plan On-going with Communications Team

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Report Title: Finance Report 2013/14 – Period 1

1. CONTENTS

The report is structured as follows:

Main Report

Annex 1 Revenue Resource Reconciliation

Annex 2 Summary Statement of Financial Performance

Annex 3 Statement of Financial Position (as at 30 April 2013)

Annex 4 2013/14 QIPP Plan

2. INTRODUCTION 2.1 This Finance Report sets out the financial performance for the first period of 2013/14. The

availability of performance data is very limited at this point in the year. Based on the contractual reporting timetables, the first performance data will be available for Month 2.

2.2 From 1 April 2013, the NHS financial reporting system has been changed to ISFE (Integrated Single Financial Environment), which the CCG must use. This system enables standardised information and reporting at all levels to be centrally collated. Whilst implementation has progressed well (including CCG budgets uploaded ahead of the final deadlines), there are severe limitations in the coding structure, and therefore reporting capability, that needs to be addressed locally and nationally.

3. FINANCIAL SYSTEMS: Integrated Single Financial Environment (ISFE)

3.1 The ISFE is the new transaction processing and ledger solution for CCGs across England. The ledger system is on an Oracle platform and provided by NHS Shared Business Services Ltd (SBS) under a national contract let by NHS England.

3.2 The implementation and go-live on 1 April 2013 has been successful, with the system

operational from the first working day in April, payments to NHS providers processed as normal by the 15th of the month, and transactions being processed through purchase ordering system and the accounts payable system. The interface with the payroll feeder systems have also been successful in April. Croydon CCG was one of the few CCGs to meet the original national deadline for uploading budgets into the ISFE system

3.3 The local CSU Financial Management team has successfully delivered training to all key

users of the system. With many managers having previous experience with Oracle and the SBS services, the transition has been simpler that in other parts of London/England.

3.4 It should be noted that as currently configured the ISFE has very restrictive coding

structures that do not meet the local needs for budget management in key areas. The issue is being worked through with the NHS England to allow greater local flexibility on sub-analysis codes. The risk, if not satisfactorily resolved, is limitations in reporting to support budget management, that can only be mitigated by time-consuming off-ledger analysis.

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3.5 The system is designed so that NHS England can monitor CCG financial performance

directly from the viewing the ledger reports.

4. FINANCIAL PERFORMANCE SUMMARY

4.1 Financial Performance Target The 2013/14 operating framework requirements (Everyone Counts: Planning for Patients

2013/14) to: (i) deliver an in-year 1% control total underspend (£4m), and (ii) maintain a 2% development and financial risk reserve (£8m), have been suspended for this year, and a deficit Plan (£19.9m) has been submitted to NHSE(L); in accordance with the Directions and Conditions of Authorisation applicable to this CCG, NHSE(L) must sign-off before the Plan can be regarded as final.

The key focus for the year, apart from observing strict financial control and management obligations, is to finalise and deliver the £14m QIPP plan, and to conclude, receive approval for, and deliver against the 3-Year Financial Improvement Plan.

4.2 Financial Performance

4.2.1 The current position against Key Performance Indicators is summarised below:

Financial

Performance

Target/

Indicator

Measure Target Forecast Status Performance

Trend

Planned Duties

Revenue Resource Limit (RRL)

Planned deficit (£19.932m) (£19.932m) Green

Capital Resource Limit (CRL)

Stay within CRL Nil Nil Green

Cash Resource Limit

Stay with Cash Limit

Breakeven £20m cash support to be agreed

Red

Administration Duties

Better Practice Payment Policy

Payment of valid invoices within 30 days

90% Not

Available Amber

Other Significant Financial Targets

QIPP Delivery of Programme

Savings £14.0m £14.0m

Red (see Annex 4)

Running Costs Stay within

running cost envelope.

£9.111m £9.111m Green

4.2.2 Given the limited level of data for Month 1, the CCG is forecasting that it will achieve the £19.9m deficit target for 2013/14. This includes delivery of £14m QIPP programme (Annex 4). The financial position is summarised below and outlined in Annex 2.

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4.2.3 Whilst the year-to-date position shows an adverse variance, this should not be interpreted as reflecting an underlying trend. Variances will be reviewed and updated when performance data is received from Month 2 reporting.

4.3 Data Availability For Period 1 there is very limited actual performance data available. The following summarises the data available: Acute Services Only monthly contract payment data available Mental Health Only monthly contract payment data available Out of Hospital Care 1 months data Prescribing Not available Running Costs 1 month’s data

4.4 Resource Limit Changes

There have been some small changes in the Revenue Resource Limit in Period 1. Additional allocation for premises and GP IT have been received. Adjustments for primary care and the anticipated correction have been made to comply with central reporting requirements – with discussion continuing with NHSE to secure the funding.

4.5 GP Member Engagement on Financial Objectives

The CCG has developed a Clinical Engagement Scheme that rewards GP Members for engagement in commissioning responsibilities, actively undertaking specific QIPP schemes (e.g. Waiting List Initiative), and for remaining within their share of the commissioning budget.

Statement of Financial Position For the period ended 30 April 2013

Actual

(£000s) Budget

(£000s) 2013/14 Plan

(£000s) Acute

20,449

20,064

240,768

Out of Hospital Care

4,695

4,226

50,709

Primary Care Services

3,693

4,118

49,413

Mental Health

4,012

4,012

48,148

Learning Disabilities

489

489

5,867

Running Costs/Exclusions

982

1,114

13,375

Reserves & Contingencies

1,485

1,485

17,818

Total Costs

35,805

35,508

426,098

Revenue Resource Limit (33,847) 33,847 406,166 Planned Deficit (1,958) (1,661) (19,932)

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The scheme now has the support of the LMC and practices are signing up to the scheme.

Practice and GP Network level budget setting information is being shared as is reporting arrangements for Month 2 onwards.

4.6 QIPP Plan

4.6.1 The 4th cut of the QIPP Plan for inclusion in the Operating Plan was submitted on 26 March 2013. At this time, £14.0m worth of net savings had been identified. The PMO assessed and risk-rated each project in the QIPP Plan and applied a standard risk-adjustment across the plan (red risk = 50% achievement of target, amber risk = 75% achievement of target, green risk = 100% achievement of target) to give a risk-adjusted forecast of £10.3m.

4.6.2 The projects included in the QIPP Plan as at 26 March 2013 have undergone further scrutiny and iterations to refine the saving and reinvestment assumptions. This has resulted in a number of projects revising their net saving target and a small number of projects have subsequently been removed from the QIPP Plan as not being viable in-year. Furthermore, the Non-Elective Threshold Adjustment has been calculated and included, which reduced the saving target of the projects aimed at reducing Non Elective Admissions by £1,113k. This is offset by a significantly greater opportunity on PLD commissioning. The latest version of the QIPP Plan, dated 15 May 2013, now forecasts a net saving of £14.2m, with a PMO risk-adjusted forecast of £10.0m. .

4.6.3 Croydon CCG have engaged the support of PWC over the last 2 months to assist in the development of the Financial Improvement Plan, which includes a suggested list of options for additional QIPP savings that are either stretch of existing schemes or brand new initiatives. A member of the PwC team will be working with Project Managers over the next 3-4 weeks to further develop these plans and refine the additional saving assumptions. These will then be fed into the QIPP Plan for monitoring in-year.

4.6 Risk Analysis

4.6.1 There are a number of risks which may impact on the delivery of the CCG’s 2013/14 Revenue Plan, which include risks associated with key NHS policy initiatives. The CCG has limited reserves to manage these risks.

4.6.2 The key generic financial risks the PCT is exposed to in 2013/14 are:

Allocation assumptions, including specialised commissioning, premises and primary care

Inability to strengthen the robustness of savings/QIPP initiatives to deliver the required £14m savings plan

Continued increases in acute and non-acute (incl prescribing) activity in excess of growth estimates and overperformance reserves

The actual value of continuing care restitution claims in relation to the provisions from PCTs.

Effective application of contract levels to enforce financial penalties for non-compliance with activity and quality contract terms.

4.6.3 There are a number of mechanisms in place to manage risk, in line with NCB guidance:

All provisions and reserves are excluded from individual budgets in favour of centralised control and application.

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The demographic and residual growth reserves (acute and non-acute) have been created to mitigate against the risk of increased demand in service areas caused generally as a result of population and demand growth.

The contingency (0.5%) reserve is, as in prior years, entirely uncommitted and is expected to contain any unforeseen pressures that the CCG may face or be required to fund during 2012/13.

The CCG has entered into a financial risk sharing agreement, as agreed by the Governing body in March 2013, to share risk with other SWL CCGs on in-year unknown risks. All members will contribute 0.5% and programme cost for the Better Services Better Value strategy. This expenditure is funded from the 2% headroom contingency, leaving £4.8m uncommitted. The agreement requires a Financial Review Group (FRG) to be established to govern the agreement. This agreement satisfies one of the outstanding conditions from authorisation.

The CCG has also engaged PwC to support it to strengthen QIPP savings schemes and the delivery of them. The external clinical engagement input has been extended in May to move initiatives to Project Initiation stage and to develop detailed implementation plans.

The risk analysis and mitigations are summarised below:

Croydon CCG - Risk AnalysisDown Side2 Down Side1 Base Case Upside

Plan

£000s £000s £000s £000s

Financial Plan (19,932) (19,932) (19,932) (19,932)

Enforcability of Activity Planning Assumptions (old KPIs) (2,700) (1,259) 0 0

Prescribing Outturn 0 0 0 800

Allocations (946) (237) 0 0

Activity +/- 1% Growth (5,200) (2,600) (2,600) 0

QIPP Delivery (4,000) (2,000) (2,000) 0

Running Costs 0 0 0 500

CQUIN Performance (SLAM / CHS) 0 0 0 250

Investment Slippage 0 0 0 1,000

Continuing Care Restitution Provision (2,500) (2,500) 0 1,000

Total Risks (15,346) (8,596) (4,600) 3,550

Reserves

0.5% Contingency 2,048 2,048 2,000 2,000

Activity Reserve 2,600 2,600 2,600 2,600

Further Development of QIPP 2,000 1,900 0 0

SWL Risk Share (contribution back) 2,048 2,048 0 0

SWL Risk Share (additional call) 6,650 0 0 0

Total Reserves 15,346 8,596 4,600 4,600

Net Position (19,932) (19,932) (19,932) (11,782)

0 0 0

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5. Statement of Financial Position and Cashflow

5.1 The Statement of Financial Position (as at 30 April 2013) is summarised in Annex 3. The position is relatively simple with £10m of creditors offset by cash £6m. The difference reflecting that the CCG drew down less than 1/12 of its annual cash limit. This under drawn cash is available in future months.

5.2 Transfer of PCT Assets and Liabilities to Successor Bodies

The current understanding of the timetable for agreeing transfer of liabilities to successor bodies is outlined below: Audited PCT Annual Accounts submitted to Dept of Health (DH) 10 June 2013 Legacy Team (DH) continue to pay invoices and collect debts 30 June 2013 Legacy Team map assets and liabilities to successor bodies 31 July 2013

CCG to receive assets and liabilities September 2013

The mapping is expected to follow the functions transfer as agreed in the Transfer Orders and in general the functional responsibilities of the new organisations.

6. RECOMMENDATIONS 6.1 That the Governing Body note:

That the new financial systems, ledgers and transaction processing arrangements have been implemented and have been operational since the beginning of April 2013.

That new reporting formats for the CCG are being developed for Month 2 reporting.

6.2 That the Governing Body note:

The period 1 reported figures are largely based on Plan, given the limited availability of performance data available in for April 2013.

The forecast outturn is to achieve plan: £19.9m deficit.

6.3 That the Governing Body note that there are a number of risks that will be managed within the overall position to achieve the planned deficit position. A new risk is the allocation for estates costs (£0.8m) as notified by NHS England (London).

Mike Sexton Chief Finance Officer NHS Croydon CCG

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Annex 1: Movement in Allocations

Revenue

Resource

Limit

Expected

Impact:

Expenditure

Impact:

Net Financial

Position

Comment

£000s £000s £000s

2013/14 Financial Plan (30 April 2013) 405,210 425,142 (19,932)

Adjustments:

Correction to CCG Allocation (HCAS/CEA) (964) (964) 0 Allocation still anticipated

NCB Further Adjustment (Primary care etc) 374 374 0 Final adjustment still being negotiated

Premises Allocation 808 808 0 NHSE indicate this allcoation may not be confirmed

GP IT Allocation 738 738 0 Agreed

Total Adjustments 956 956 0

Period 1 406,166 426,098 (19,932)

Revenue Resource Limit Allocation 2013/14

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Annex 2: Summary Financial Performance (Period 1)

Annual <------------ In Month - -----------> <------------ Year To Date - -----------> <-----------> <----------->

Budget Budget Actual Variance Budget Actual Variance Forecast Forecast Var

-------------- ------------- -------------- ------------- ------------- -------------- ------------- <-----------> <----------->

£000s £000s £000s £000s £000s £000s £000s £000s £000s

150001 MENTAL HEALTH CONTRACTS 36,138 3,011 3,011 0 3,011 3,011 0 36,138 0

150006 CHILD AND ADOLESCENT MENTAL HEALTH 453 38 38 0 38 38 0 453 0

150016 IMPROVING ACCESS TO PSYCHOLOGICAL THER 1,145 95 95 0 95 95 0 1,145 0

150021 LEARNING DIFFICULTIES 5,867 489 489 0 489 489 0 5,867 0

150031 MENTAL HEALTH SERVICES - ADULTS 2,631 219 219 0 219 219 0 2,631 0

150041 MENTAL HEALTH SERVICES - COLLABORATIVE 1,015 85 85 0 85 85 0 1,015 0

150046 MENTAL HEALTH SERVICES - NOT CONTRACTE 537 45 45 0 45 45 0 537 0

150051 MENTAL HEALTH SERVICES - OLDER PEOPLE 1,950 163 163 0 163 163 0 1,950 0

150056 MENTAL HEALTH SERVICES - OTHER 506 42 42 0 42 42 0 506 0

150061 MENTAL HEALTH SERVICES - SPECIALIST SE 3,773 314 314 0 314 314 0 3,773 0

150071 ACUTE COMMISSIONING 217,616 18,135 18,749 614 18,135 18,749 614 217,616 0

150076 ACUTE CHILDRENS SERVICES 0 0 25 25 0 25 25 0 0

150086 AMBULANCE SERVICES 11,511 959 1,192 233 959 1,192 233 11,511 0

150091 CLINICAL ASSESSMENT AND TREATMENT CENT 1,077 90 90 0 90 90 0 1,077 0

150101 END OF LIFE 243 20 20 0 20 20 0 243 0

150106 HIGH COST DRUGS 1,167 97 0 (97) 97 0 (97) 1,167 0

150116 NCAS/OATS 4,917 410 0 (410) 410 0 (410) 4,917 0

150126 URGENT CARE 4,479 373 373 0 373 373 0 4,479 0

150146 COMMISSIONING SCHEMES 998 83 83 0 83 83 0 998 0

150151 LOCAL ENHANCED SERVICES 962 80 145 65 80 145 65 962 0

150156 MEDICINES MANAGEMENT - CLINICAL 468 39 39 0 39 39 0 468 0

150166 OXYGEN 544 45 45 0 45 45 0 544 0

150171 PRESCRIBING 40,563 3,380 3,380 0 3,380 3,380 0 40,563 0

150182 CHC ADULT FULLY FUNDED 13,639 1,137 1,137 (0) 1,137 1,137 (0) 13,639 0

150187 CHC CHILDREN 1,777 148 148 (0) 148 148 (0) 1,777 0

150191 FUNDED NURSING CARE 4,200 350 350 (0) 350 350 (0) 4,200 0

150211 COMMUNITY SERVICES 24,800 2,067 2,067 0 2,067 2,067 0 24,800 0

150226 INTERMEDIATE CARE 6,135 511 511 0 511 511 0 6,135 0

150236 PALLIATIVE CARE 1,862 155 155 0 155 155 0 1,862 0

150256 COMMISSIONING - NON ACUTE 3,618 301 301 0 301 301 0 3,618 0

150261 COMMISSIONING RESERVE 7,578 632 632 0 632 632 0 7,578 0

150271 INTERPRETING SERVICES 314 26 26 0 26 26 0 314 0

150281 NON RECURRENT RESERVE 8,191 683 683 0 683 683 0 8,191 0

151751 ADMINISTRATION & BUSINESS SUPPORT 0 0 9 9 0 9 9 0 0

151756 ASSURANCE 0 0 0 0 0 0 0 0 0

151771 CEO/ BOARD OFFICE 1,375 115 12 (102) 115 12 (102) 1,375 0

151776 CHAIR AND NON EXECS 1,191 99 40 (60) 99 40 (60) 1,191 0

151786 CLINICAL GOVERNANCE 338 28 16 (13) 28 16 (13) 338 0

151796 COMMISSIONING 1,193 99 60 (40) 99 60 (40) 1,193 0

151816 CORPORATE COSTS & SERVICES 7,344 612 693 81 612 693 81 7,344 0

151821 CORPORATE GOVERNANCE 103 9 9 0 9 9 0 103 0

151846 ESTATES AND FACILITIES 121 10 12 2 10 12 2 121 0

151851 FINANCE 273 23 23 0 23 23 0 273 0

151856 GENERAL RESERVE 2,048 171 171 0 171 171 0 2,048 0

151921 QIPP 215 18 8 (10) 18 8 (10) 215 0

151931 RECHARGES 1,222 102 102 (0) 102 102 (0) 1,222 0

TOTAL EXPENDITURE 426,098 35,508 35,805 297 35,508 35,805 297 426,098 0

 

REVENUE RESOURCE LIMIT 406,166 33,847 33,847 0 33,847 33,847 0 406,166 0

 

NET FINANCIAL PERFORMANCE () = Deficit (19,932) (1,661) (1,958) (297) (1,661) (1,958) (297) (19,932) 0

2013/14 Financial Performance (Period 1)

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Annex 3: Statement of Financial Position (Period 1)

Opening* Period 1

1/4/13 30/4/13

£000s £000s

Non-Current Assets

Fixed Assets 0

Intagible Fixed Assets 0

Other Non-Current Assets 0

Total Non-Current Assets 0 0

Current Assets

Cash 0 5,930

Accounts Receivable 0 0

Inventory 0 0

Investments 0 0

Other 0 0

Total Current Assets 0 5,930

TOTAL ASSETS 0 5,930

Current Liabilities

Accounts Payable 0 47

Accrued Liabilities 0 9,988

Total Current Liabilities 0 10,035

Long Term Liabilities

Provisions - Continuing Care 0 0

Provisions - Other 0 0

Total Long Term Liabilities 0 0

Tax Payers Equity

General Fund - Opening 0 0

Retained Earnings In Year** 0 (4,105)

Other Reserves 0 0

Total Tax Payers Equity 0 (4,105)

TOTAL EQUITY + LIABILITIES 0 5,930

* Note that the CCG Opening Balance sheet is still to be determined.

** Retained Earnings = Cash funding less accruals based net expenditure.

Statement of Financial Position

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Annex 4: QIPP Savings Programme

See Next Sheet