Feature / Finance explained: Closing in on close down

The implementation of the Health and Social Care Act requires the largest ever transition programme in the history of the NHS, writes Steve Brown. Strategic health authorities (SHAs) and primary care trusts (PCTs) will cease operating from 1 April, with their existing functions separated out and handed over to the organisations that will form the new landscape.

The Department of Health is always keen for organisations to work together to ensure a smooth and effective year-end accounts process. This is no different in 2012/13. However, the abolition of SHAs and PCTs – alongside the creation of new organisations such as clinical commissioning groups and the transfer of some responsibilities to new area teams within the NHS Commissioning Board – make this year’s task all the more challenging.

NHS deputy chief executive David Flory told Healthcare Finance in December that the NHS finance profession’s ‘dependability’ had? become a ‘core strength’. And it is clear that the Department?will be looking for the profession to draw on this strength in delivering another efficient year-end, despite the additional challenges.

While understandably the focus of the outside world is on the new organisations and new structures, the close down of old organisations presents a lengthy to-do list. All assets and liabilities will need to transfer to hundreds of receiving organisations within the NHS and also local government. Organisations will need to continue to pay creditors and staff on time and ensure that any income due is received in a timely way.

PCTs and SHAs also need to deliver their agreed control totals, produce a full set of statutory accounts, have these audited without movement between draft and final versions and support the production of the Department’s own resource account. And this must be completed in a period when PCTs and SHAs are no longer statutory organisations.

There has been significant preparation. NHS chief financial controller Janet Perry (pictured) has been chairing an NHS Accounts Delivery Working Group with stakeholders from both current and new system organisations. This group has been developing national finance guidance to support the accounts process and finance transition.

In August 2012 Sir David Nicholson confirmed a shift in management responsibility to leaders within the new system. NHS Commissioning Board and NHS Trust Development Authority leaders were made accountable to their new organisations for future planning and development while also being accountable to PCTs/SHAs for relevant delivery and performance in the current system for 2012/13.

In doing so, the NHS chief executive established arrangements to embed new system leaders in the current system, providing continuous leadership and minimising complexity for staff carrying out roles relating to the current and new system.

A letter from Mrs Perry to accountable officers in December 2012 confirmed what this meant for the delivery of 2012/13 PCT and SHA accounts. In addressing ‘unique transition issues’, she identified specific needs for PCTs and SHAs to:

• Maintain capacity to produce audited accounts
• Maintain capacity for accounts preparation performance management and arbitration within local health economies
• Ensure those accounts were subject to appropriate independent scrutiny
• Maintain appropriate capacity to support the preparation of the Department’s resource accounts
• Confirm accountability arrangements.

NHS Commissioning Board area team finance directors (PCT finance directors in London) are now finalising the establishment of delivery teams to undertake the financial closedown, prepare and support sign-off of accounts and supporting statements, and provide support for the completion of the Department’s resource account. Members of these teams are being sourced primarily from organisations within the new system, but importantly, most team members will have experience of completing close down for the organisations to which they will be assigned.

However, the demise of PCTs and SHAs on 1 April will also mean the loss of the scrutiny function historically provided by audit committees. To fill this gap, SHA and PCT cluster audit committees will be established as sub-committees of the Department’s Audit and Risk Committee.

Again, specific knowledge and experience of PCTs and SHAs will be retained by sourcing members for these committees from the existing pool of cluster audit committees. Those accepting appointments to other NHS organisations are eligible for appointment. In addition, there will be revised terms of reference to reflect a narrower scope of work.

‘There are undeniably challenges in securing the close down of such a large number of organisations, while new organisations are being created,’ Mrs Perry told Healthcare Finance. ‘But it is important that we continue the good performance we have delivered in preparing final accounts in previous years and the preparation we have undertaken should stand us in good stead.’

Further guidance, as needed, along with frequently asked questions on the finance transition are expected to be published on the Department’s Finance manual website.