Technical review – December 2019

The HFMA has published a briefing on accounting for leases under IFRS 16 to help non-finance staff understand this key change in accounting practice. The new standard will radically alter how lessees account for leases – removing the distinction between operating and finance leases. IFRS 16 will apply to NHS bodies in 2020/21 and the HFMA warns it cannot be dealt with by financial reporting experts in the finance team alone – engagement with staff throughout each organisation will be needed, as well as changes to systems and reporting arrangements. The briefing sets out what a lease is and how the accounting arrangements are changing. It identifies the potential impact on the financial position of NHS bodies as well as providing examples to allow non-finance staff to start to ask the right questions of their financial reporting colleagues.

NHS England has published details of the resource allocation models for community services and mental health. The new community services model was developed for the 2019/20 allocations round and introduced a separate community services component for the clinical commissioning group services target formula. In previous allocation rounds, the resources for community services were distributed using the general and acute component of the formula. The mental health model is a refreshed person-based formula that more accurately reflects current patterns of need and takes account of the use of improving access to psychological therapies (IAPT) services. Both the publications provide practitioners with more details about these key changes to the allocation methodology.

The HFMA and CIPFA have published an updated introduction and glossary to NHS and local government finance and governance in England. The briefing updates a earlier 2017 version and outlines the role of relevant national and local NHS and government bodies. It also covers partnership working between the two sectors including the use of pooled budgets and the move to sustainability and transformation partnerships and integrated care systems.

NHS England and NHS Improvement have updated their IFRS16 implementation FAQs. The FAQs include new questions and updated answers. The former include questions on the timing at which a CDEL charge is incurred, the information collected from NHS organisations and the application of Treasury guidance to subsidiaries that prepare accounts under IFRS 16 or FRS 102.

The HFMA has responded to the National Audit Office’s consultation on the Code of audit practice, which comes into force in April 2020, applying to audits from 2020/21. Key changes apply to the auditor’s work on economy, efficiency and effectiveness of corporate arrangements and reporting the results of the auditor’s work. The association has welcomed the new audit approach to assessing and reporting on value for money and maximising the impact of local audit work. However it has raised concerns about the potential impact of any extra work on audit fees, which would be an additional pressure on NHS resources.

The HFMA has raised concerns about the feasibility of implementing the blended payment model for maternity services, especially given the need for local maternity systems to take on an additional financial planning role. The move to blended payment was proposed in a tariff engagement document setting out the key areas of work for the 2020 national tariff, published by NHS England and NHS Improvement for feedback during November. In its response to the document, the association also called for greater clarity on the transition to new market forces factor rates and for more details about the onward review of specialised top-ups