Year-end: non-executives’ critical role

by Lisa Robertson

21 February 2020

Are non-executive directors and lay members ready for the year-end annual report and accounts process?

Getting the annual report and accounts right is really important. They ensure that the story of an NHS organisation is accurately reflected for the public while also including correct figures to feed into national reporting and analysis. Non-executive directors and lay members have a key role to play in making sure these are right.

It is an important statutory requirement for every NHS organisation to have an audit committee that reviews the integrity of the financial statements before they are approved. But it is also important to recognise that non-executive directors and lay members are often best placed to understand, review and challenge the organisational position.

Audit committees are encouraged to review the financial position and governance issues throughout the year, not only at year-end. As the year-end approaches, this will enable them to have the knowledge and understanding of what they are expecting to see in the annual report and accounts. However, with constant adjustments within an organisation and to reporting requirements, it can be difficult for non-executive directors and lay members – both new and experienced – to keep abreast of changes and the implications for their oversight role.

The HFMA pre-accounts planning conferences held in January covered a number of issues for the current financial year and how these are being dealt with by organisations. These have been pulled together in two briefings: 2019/20 year-end reminders for finance and 2019/20 year-end reminders for non-executive directors and lay members.

The latter highlights the key issues that non-executive directors and lay members need to be aware of and sets out some possible questions that could be asked as part of their year-end review.

One of the key areas for 2019/20 that it would be hard not to have heard about is the new leases standard, IFRS16. Although IFRS16 does not come into force in the NHS until 2020/21, it is likely to be a key issue in the preparation and audit of the 2019/20 annual report and accounts.

It is clear this is a complex area for finance staff to implement but as a non-executive director and lay member, how much do you need to know? This is not just a technical exercise, but will have a significant impact on future available resources for capital projects.

Knowing why it is important – what exercises are being done nationally and locally and that there are new disclosure requirements for 2019/20 – will enable the right questions to be asked of officers. While the subject is covered in the year-end reminders, the HFMA has produced a number of outputs to support members with the introduction of IFRS16, including a briefing aimed at non-finance staff, Accounting for leases: why it affects you.

Non-executive directors and lay members are in a fantastic position to be able to review the overall position reported in the annual report and accounts – including items disclosed in the annual governance statement - and ensure they appropriately reflect their understanding of the organisation. There is also an important governance role to ensure quality review arrangements are in place and appropriate to enable all to be sufficiently comfortable to approve and sign the annual report and accounts.

A good understanding and knowledge – gathered across the year from officer updates, auditor reports and national and local training and guidance – is crucial to being able to robustly review and challenge the annual report and accounts.  As we approach the year-end, it is a good time to reflect upon whether arrangements and understanding is in place to do this well.

Related HFMA briefings:

201920 year end reminders briefing2019/20 year-end reminders for finance

201920 year end reminders briefing NEDS and lay members 11-2-202019/20 year-end reminders for non-executive directors and lay members.