Further guidance issued for 2019/20 report and accounts

The Covid-19 virus is presenting significant challenges to the NHS on the frontline as it looks to ramp up intensive care capacity and provide care for those needing to be admitted to hospital. But there are knock-on implications for other NHS staff as they look to meet statutory reporting requirements while providing support for the operational response.

For finance teams, a key question has been the annual accounts process. This always requires a major effort with long hours for those involved. But this year, the added challenge will be having most finance team members working from home, reducing finance team numbers (as they become ill themselves or have to self-isolate) and, for some, potential restricted access to systems.
So, the month’s delay to the accounts process and the further delay to the IFRS 16 leasing standard, announced at the end of March, were pragmatic steps. Final accommodations have now been made after the Treasury got approval from the Financial Reporting Advisory Board for its approach across public bodies.

In turn, the Department of Health and Social Care (DHSC) and NHS England and NHS Improvement (NHSE&I) have all issued further guidance on the annual report and accounts for 2019/20.

The notifications of final changes and requirements at the end of the financial year is not unusual. However, the DHSC has now published three versions of its additional guidance document, including a version released towards the end of March and then, hot on its heels, a final version just before the Easter break.  

Between them these two final versions update three of the original FAQs published in December and introduce six new FAQs

The three updates include:

• a reminder that assets donated to the NHS should be excluded from the public dividend capital dividend calculation as usual and confirmation that assets purchased as a result of the Covid-19 pandemic should also be excluded from average net assets
• clarification that the modified absorption accounting approach for assets transferred from NHS Property Services to NHS providers only relates to the impact of the transfer on reserves. The guidance on pre-transfer activity, valuation, accumulated depreciation and revaluation reserves, in paragraphs 4.238 to 4.243 of the Group accounting manual (GAM), applies equally to the modified absorption approach
• a reference to the guidance issued on the NHS Improvement website on accounting for the grossing up of central employer pension contributions.

New guidance

The completely new guidance reflects some of the recent changes. For example, the GAM has been updated to reflect the deferral of the IFRS 16 leasing standard (and the IFRS 17 insurance contracts standard). NHS England and NHS Improvement have issued an example accounting policy disclosure in relation to IFRS 16.

The guidance also acknowledges the recent announcement around eliminating providers’ historic debt, converting this to PDC. It confirms that this is an adjusting event after the reporting date. Interim capital and revenue loans that will be converted to PDC in 2020/21 should be disclosed as current liabilities in 2019/20 – as the liability will be repaid within the year – rather than being split between current and non-current liabilities.

Providers eligible for quarter four bonus payments relating to the Provider Sustainability Fund or the Financial Recovery Fund will receive payment in 2020/21, and so should recognise a contract receivable in their year-end accounts for 2019/20. However, to avoid a circular effect of the ensuing increase in PDC dividend having an impact on the bonus calculation, providers should exclude the receivable from the calculation of net relevant assets for the purpose of calculating the PDC dividend. This is the same approach taken for 2018/19, but the arrangement remains under review year-to-year.

The guidance also clarifies the comparative information that should be included in the disclosure of exit packages to ensure the exit package note is consistent with the remuneration report and losses and special payments note. It also sets the accounting treatment for any excess allowances held under the now closed Carbon Reduction Commitment energy efficiency scheme and for any payments due under the successor Climate Change Levy scheme.

To reduce the reporting burden, the performance analysis section of the annual report has been made optional and NHS bodies can also choose whether or not to include sickness absence data - the alternative being simply linking to NHS Digital data on absence rates.

The same FAQ on year-end reporting requirements makes it clear that, for government departments and NHS foundation trusts, there is no expectation that annual reports and accounts will be laid before the Parliamentary summer recess.

This has little impact locally with NHS bodies still having to comply with the timetable issued on 23 March by NHS England and NHS Improvement, which calls for audited accounts to be submitted by 25 June. However, it provides more wriggle room for the preparation of consolidated accounts.

Providers have been told that the deadline for the preparation of quality accounts is not expected to be enforced and foundation trusts will not be required to include a quality report in their annual reports for 2019/20. However, there is no indication that the quality account will not have to be prepared and foundation trusts are encouraged to include the quality report information in their quality account when it is prepared.

NHS England and NHS Improvement have now issued annual governance statements and year-end certificates for NHS trusts in word and in pdf format. These have been updated to replace references to the quality account with references to data quality.

For foundation trusts, the annual governance statement and other extracts from the FT Annual reporting manual have also been issued in word format to reflect changes.

Finally, the NHS Business Services Authority has provided the NHS pension scheme disclosure note for 2019/20 – the key change from last year is the change to the employer’s contribution rate.

The delay to the accounts submission deadline and the deferment of IRFS 16 make the task facing finance teams more manageable. Changes to the content of the annual report ease pressure on organisations in general, but will have a more minor impact for finance teams. However, local positions in terms of staffing levels and readiness to work remotely are likely to remain the key factors in teams’ abilities to meet accounting requirements on time.

Debbie Paterson is HFMA policy and technical manager

The HFMA has published a 2019/20 annual report and accounts checklist

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