by Debbie Paterson
26 July 2021
‘It’s been a difficult year’, ‘these unusual times’, ‘unlike any other’ – phrases that we have heard again and again this year. And they can be applied to the preparation and audit of the 2020/21 annual report and accounts.
We’ve heard stories from finance staff and auditors about the issues that they have encountered. But have these issues all been the result of Covid-19 or are there other factors at play?
Certainly, the pandemic hasn’t helped – remote working and auditing makes asking simple questions more difficult. We’re all very tired – the headlines may be rightly about the strain that NHS frontline staff are feeling, but back-office staff and those providing services to the NHS have been affected too. We know that as human beings we don’t deal well with change – the past 15 months have been nothing but change, the uncertainty and inability to make plans is draining.
The change to the financial regime in response to the pandemic and its impact on the NHS was very welcome. However, it meant that tried and tested accounting arrangements needed to be reassessed and new documentation was required. Year-end assessments, such as accruals for annual leave and partially completed patient spells, had to be completely reviewed and revised.
New arrangements put in place at pace, such as Nightingale hospitals and lighthouse labs needed to be accounted for. New supply chains were introduced at the start of the year for personal protective equipment (PPE), but this needed to be accounted for in the right set of accounts at the right amounts.
The whole audit market is under increased regulatory pressure and the Department for Business, Energy and Industrial Strategy (BEIS) is consulting on widescale changes. This means that all audits, whether they are of a company or a public sector body, are subject to more internal and external review and auditors are expected to undertake more testing and apply more scepticism. For public sector auditors, 2020/21 was the first year that the new Code of audit practice applied with its changes to the arrangements for assessing and reporting on value for money.
More and more NHS bodies considering or trying to appoint new auditors are finding that audit firms do not want to bid for the work. Auditors have reported that they were asked to bid for new audits during the year-end audit period – unsurprisingly, they declined the opportunity.
2021/22 is also likely to be a year unlike any other. The financial regime has changed again and the arrangements for the second half of the year are uncertain. It is unlikely that the implementation of the international financial reporting standard on leasing, IFRS 16, will be pushed back any further so that work will need to be dusted down and updated. Assuming that the Health and Care Bill is enacted, most commissioning organisations will be closing down an organisation and establishing new ones.
The annual HFMA year-end survey is now open to collect feedback from both NHS finance staff and auditors. Responses are completely anonymous and can be submitted either on behalf of an organisation or as your own personal views. We welcome feedback from anyone that was involved in the year-end process – no matter their grade or the level of their involvement. There is only one question that must be answered – the type of organisation you work for.
The results are fed back to the Department of Health and Social Care, NHS England and NHS Improvement and the National Audit Office – and we use them to inform our work programme for the year so that our briefings, webinars and conferences address the key issues. The survey closes at the end of August.
We look forward to hearing your thoughts.
Access the HFMA 2020/21 year-end survey
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