HFMA survey highlights impact of Covid on year-end process

The association surveys members about the year-end process annually, to inform its accounting and standards committee work programme, the pre-accounts planning conferences and to support national bodies’ year-end reviews. This year the inevitable focus was on the effect of Covid on the accounts process.

Overall, 86 responses were received from providers, commissioners and national bodies. Many said the pandemic had affected the preparation and audit of their annual report and accounts for 2019/20, though the impact was greater in some than in others.

Only half of respondents were able to work from home for the whole period of accounts preparation. Most were able to work at home for some of the time, though three said they had to go into work – one because they did not have the technical ability to work from home.

Some respondents told the HFMA that their employer had not put arrangements in place at the time the accounts were being produced in late March – which was later rectified – although only a small number said they felt unsafe when in the office.

Just over half of respondents said their accounts team was unaffected, but others reported they had fewer staff due to sickness, shielding or looking after children and not being able to work from home. A significant proportion of staff were deployed in other parts of the organisation.

At the beginning of the lockdown, implementation of IFRS16 was delayed by a year until 2021/22. The deadline for draft accounts was moved from 24 April to 27 April 2020, but providers could extend this to 11 May if they wished.

Although the IFRS16 deferral was widely welcomed, there was a mixed response to the deadline changes. More than a third (37%) said it was just the step needed. More than 40% said the extensions made little difference, and 21% said they were helpful but NHS England and NHS Improvement could have done more.

A number of finance staff felt the new deadlines put pressure on already hard-pushed accounts teams.

One respondent described the addition of three days for draft accounts as ‘insulting’, as two of those days fell at the weekend.

The April deferral had the knock-on effect of putting pressure on teams to close accounts as close as possible to the 27 April deadline.

As one respondent said: ‘No-one wanted to be last and also audit needed to get going asap, so 11 May wasn’t really a viable option. There was still a lot of pressure internally for an early completion date.’

While it was felt that audit went well, there were concerns about remote auditing – particularly with auditors unable to be present for stock takes – as well as the focus
of auditors’ work and access to senior auditors.

One respondent said the change in deadlines seemed to favour auditors, with the audited accounts deadline extended to 25 June. And an increase in the threshold for agreement of balances made little difference as auditors still asked for evidence of items below the threshold.

However, overall, 56% supported the increase in the threshold.

Finance teams said they have learnt to make better use of Microsoft Teams and to shift the year-end timetable to ensure information is provided earlier.

To overcome the difficulties around stock takes, some respondents suggested that in 2020/21 they would hold stock takes, with auditors present, in months 9 and 12, allowing the month 9 data to be used if auditors were not allowed on site on 31 March 2021.

Almost eight in 10 respondents supported making the move to electronic accounts submission permanent. Also, when appointing external auditors, accounts teams want auditors that can facilitate remote working.

The year-end survey comes amid wider concerns about the audit process and particularly about organisations’ ability to appoint suitable auditors. Competition for audits has driven prices down, while the expectations on auditors have increased.

Some auditors suggest public sector contracts are no longer viable and there are some reports of trusts struggling to appoint.

HFMA director of policy and research Emma Knowles (pictured) said: ‘We are aware that there are problems brewing in the NHS external audit market, in some cases resulting in fewer firms bidding for NHS audit work.

‘Some organisations have struggled to appoint an auditor or have only had one firm bidding for the work. Worryingly, finance teams may be unaware of this until they are looking for a new auditor. Over the coming weeks, we will be looking into the factors behind the issue and asking members for their views.’