Comment / Time to apply the local principle

April sparked the usual frenzy in NHS finance departments as NHS organisations finalised their draft accounts for submission to the Department of Health, Monitor and auditors. For many practitioners, this will have involved many hours and long days to hit the challenging deadlines.

But while this is always a busy period, 2012/13 is surely one of the most challenging years that financial accountants have experienced. There have been a few technical changes to cope with. But the overriding issue has been dealing with the consequences of the transition to the new commissioning structure. Out go primary care trusts and strategic health authorities. In come clinical commissioning groups and NHS England area teams.

Perhaps the most direct challenges have come in those organisations going through abolition. There will have been a continual drain of resources and experience as colleagues secured roles in new organisations or moved on. There will have been significant reliance on temporary staff. And the transition teams may have experienced a bewildering variation in the quality of information being passed to them to ‘help’ complete the accounts.

But providers have also been affected. As they have watched the staff changes in their commissioning organisations, they will also have waved goodbye to those all-important contacts that they have relied on over the years to sort out local issues, act as sounding boards and agree major balances. We should applaud the effort and industry that goes into this annual task.

The 2012/13 year-end accounts process was always going to be challenging. But we have had plenty of notice. Forward-looking organisations (both old and new) will have put arrangements in place to support their teams and ensure the process was as painless as possible.

However, I do have some concerns. We have been on a journey towards principle-based accounting manuals over the past few years. Despite this, there still appear to be many organisations that expect to be spoon-fed by the centre on issues relating to accounting treatment.

This was evident during question and answer sessions at the HFMA’s pre-accounts planning conferences earlier this year. Some of the questions suggest that a number of organisations have failed to understand that a consequence of moving to principles-based accounting manuals is that they have to evaluate the substance of a local transaction and apply those principles.

There have been some specific transactions this year that have arisen as a result of the organisational changes. And guidance on these has been given either in manuals or on the Finman website.

But for some, the default position still seems to be to ask representatives from the Department or Monitor how to account for a transaction. They often give only a scant and incomplete summary of the transaction, both in terms of structure and intent, and then rely on that advice if there is any challenge to the accounting treatment adopted.

Finance teams must be more proactive in identifying transactions where a decision on the accounting treatment needs to be made. They then need to apply the principles set out in manuals and agree a local interpretation that has audit support.

In previous issues of Healthcare Finance, I have called for senior finance staff to provide more support to the resolution of debts. This is needed with the demise of SHAs as the overseer and arbitrator of balance disputes. Now I have to urge those same finance staff to use the financial expertise and knowledge that they have to apply the principles (set out in the accounting manuals issued by the Department and Monitor) to the transactions of their organisation. They then need to stand by their interpretation and take local responsibility for local accounting of local transactions.

David Bacon is chair of the HFMA’s Accounting and Standards Committee