TRUST BOARD MEETING TUESDAY 1 ST APRIL 2014 ANNUAL BUDGETS 2014/2015 1 Introduction The Budgets for 2014/15 have been prepared in line with the principles and processes agreed by the Trust Executive Management Team in October 2013. The expenditure budgets have been worked up in detail at cost centre level and discussed with all relevant divisional and departmental managers. The income budgets are based on the current status of negotiations with Commissioners’ and have been informed by the national guidance issued by the NHS Trust Development Authority, Monitor and the NHS England. The overall funding plan for the National Health Service continues to be for a “flat cash settlement” and therefore this is not a period of developments in services, rather for managing within existing funds and for driving efficiency improvements whilst maintaining high standards of patient safety and care. 2 Overview The year ahead will be a challenge for the Trust, which is in a transition through the Trust “organisational form” procurement process, operating with a recurrent deficit and with the need for a clear focus on quality and patient safety, consistently achieving key performance indicators and delivering the savings programme of £4,500k. The financial management of expenditure and income by Budget Holders will be critical to enable the financial plan to be delivered. All budgets have been signed off by budget holders and all divisions’ budgets have also been signed off by Divisional Managers. 3 Income and Expenditure Budget 2014/15 27 March 2012 K:\Board Papers\Board Papers 2012\April\Open\Agenda Item 728 12 Budgets 20122013
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TRUST BOARD MEETING
TUESDAY 1ST APRIL 2014
ANNUAL BUDGETS 2014/2015
1 Introduction
The Budgets for 2014/15 have been prepared in line with the principles and processes agreed by the Trust Executive Management Team in October 2013. The expenditure budgets have been worked up in detail at cost centre level and discussed with all relevant divisional and departmental managers. The income budgets are based on the current status of negotiations with Commissioners’ and have been informed by the national guidance issued by the NHS Trust Development Authority, Monitor and the NHS England. The overall funding plan for the National Health Service continues to be for a “flat cash settlement” and therefore this is not a period of developments in services, rather for managing within existing funds and for driving efficiency improvements whilst maintaining high standards of patient safety and care.
2 Overview
The year ahead will be a challenge for the Trust, which is in a transition through the Trust “organisational form” procurement process, operating with a recurrent deficit and with the need for a clear focus on quality and patient safety, consistently achieving key performance indicators and delivering the savings programme of £4,500k. The financial management of expenditure and income by Budget Holders will be critical to enable the financial plan to be delivered. All budgets have been signed off by budget holders and all divisions’ budgets have also been signed off by Divisional Managers.
3 Income and Expenditure Budget 2014/15
The Budgets have been prepared in line with the principles and processes and framework of the Trust. The key principles and assumptions include:
Inflation – Pay reserve of 1% based on estimated national pay awards. Following the NHS employers’ announcement in late March 2014 the actual cost of the award will be calculated and applied to budgets in April 2014. Non pay inflation has mostly been included in relevant budgets as part of the agreement of cost pressures.
Staff costing – All staff posts were re-costed based on payroll information from October 2013 and where there were vacant posts they were costed at bottom of the salary scale. The value of incremental drift included is £340k (£230k Agenda for Change & £110k Medical).
Vacancy Factor – A vacancy factor of 1% is applied on all pay budgets with a Whole time equivalent in excess of 5.00.
Cost pressures – The cost pressures which are agreed as unavoidable have been included in the budgets for 2014/15. This has included recognition of some very substantial pressures including medical staffing, nurse staffing, drugs and a 9.2% increase in the cost of the Trust’s Clinical Negligence Scheme for Trusts (CNST), managed by NHS Litigation Authority.
Service developments – The establishment of the Clinical Decision making unit (CDU) and the Surgical Assessment Unit (SAU) during the winter period has proved to be successful for providing high quality, rapid and effective patient care. This was funded using the additional winter funds that we attracted in 2013/14. The Trust has decided to continue with these services on a recurrent basis and this has therefore been funded in 2014/15.
The essential service developments required by commissioners or deemed necessary by the Director of Nursing to address patient safety concerns have been funded as part of the 2014/15 budget setting process. This includes the additional Saturday clinic, on alternate weekends, for the WISH centre.
There has been an increase in the funded establishment from 2013/14 into 2014/15 which is mainly in the nursing establishment.
The budgets include the project costs for expenditure and income associated with the Trust’s open procurement process that provides for either an acquisition by another NHS Body or an operating type franchise agreement.
The budgets include the additional external support required to deliver on the major clinical efficiency programme which will lead to release of savings in the current year.
3.1 Income and Expenditure
The key points to note are:
The Statement of Comprehensive Income in Table 1 shows a planned deficit of £4.95m.
The contract income with North Somerset CCG has been agreed for 2014/15.
The income position is still subject to final negotiations on contract income with other commissioners’.
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The income values based on current income expectations are reflected in the income plan for the year and are summarised in Table 2.
The Trust will be operating on a fully variable Payment by Results contract in 2014/15 which presents opportunities and risks regarding the income for the year. There will be a risk share agreement for non elective in patients with North Somerset CCG.
Table 3 shows the summary budgets for all Divisions and Departments.
The value of the Savings Programme is £4,500k which is 4.28% of Expenditure including Capital charges and Depreciation.
A summary of the cost pressures and developments that have been funded in the budgets is shown in Table 7.
The overall reserves of £6,025k are detailed in Table 8 and these are fully committed in the year. This presents no flexibility for in year variations.
The recurrent deficit and the major movements from the outturn 2013/14 to the budget for 2014/15 are detailed in Table 9.
The Trust estimated expenditure run rates are shown in Table 10. They have been profiled based on expected expenditure by month and a profile of the £4,500k savings using current planned profile from documented project plans. The summary information for the savings plans (SIP) are shown in Tables 4, 5 and 6.
3.2 Capital, Cash Flow and Statement of the Financial Position
A Capital Plan is shown in Table 11 which indicates the resources anticipated and the proposed plans for 2014/15.There will be a regular review process through the Capital Planning Committee. The plan includes estimates for a number of centrally funded schemes which will be funded by exceptional public dividend capital (PDC) capital support of £2,424k if successful. The largest scheme is for the replacement of the Cerner patient administration system which is currently going through a procurement process. Also included in the plan are the prioritised schemes for Estates, Medical equipment, IT equipment and systems development. The programme will use priority ratings to ensure that the resource limit is not exceeded.
The Cash Flow Plan is shown in Table 12 which is formulated on the £4.95m deficit and this therefore includes in year exceptional PDC revenue support funding which has been phased into the cash flow. This funding is subject to approval of a financing application by the Independent Trust Financing Facility.
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The Statement of Financial Position is shown in Table 13 and shows a deteriorating position due to the £4.95m deficit.
3.3 Financial risk ratings
Table 14 estimates the forecast ratios under the Foundation Trust financial regime and highlights the major issues with a planned deficit impacting on income, expenditure and cash.
3.4 Contract Activity and Bed Capacity
Tables 15 and 16 show the estimated Contract Activity analysed by Commissioner and Speciality.
The funded bed capacity is shown in Table 17 and includes all current wards based at the hospital including the new Clinical Decision and Surgical Assessment Units and the Rowan ward based at the adjoining Long Fox facility for rehabilitation services.
3.5 Funded establishment
Table 18 shows the funded establishment for the 2014/15 budgets and includes a comparison to the budgets for the previous year. This illustrates the increase in the establishment which is due to the increase in nursing posts.
4 Key Risks
The major risks and opportunities to the Plan are:
PBR Activity against contracted levels – income impact and ability to change/flex revenue expenditure
CQUIN achievement QIPP plans Penalties/fines Best practice tariffs Delivery of savings plans Robust Budget management Recruitment to medical vacancies Failure to deliver key statutory duties
5 Next Steps
4
This paper sets the proposed Trust financial plans and budgets for the year. The income negotiations need to be concluded with the other commissioners and, with the final agreement on the cash settlement, will ensure that the Trust is in a viable financial position for the whole year.
It is critical that all Divisions and Departments manage expenditure and income within the budgets, deliver the planned level of SIP savings and that emerging risks are mitigated throughout the year to enable a reasonable financial outcome. The aim will be to minimise the deficit where possible whilst continuing to maintain high quality and safe patient care services.
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LIST OF TABLES
Table 1 Statement of Comprehensive Income
Table 2 Sources of Income
Table 3 Summary of Divisional Budgets
Table 4 Final SIP Savings allocations - efficiency requirements by Division
Table 7 Summary of Cost pressures and Developments funded
Table 8 Summary of Reserves
Table 9 Analysis of recurrent deficit
Table 10 Trust Expenditure run rate
Table 11 Capital Plan
Table 12 Statement of Cash Flows
Table 13 Statement of Financial Position
Table 14 Financial Risk Ratings
Table 15 Planned Activity Summaries by Specialty
Table 16 Planned Activity Summaries by Specialty and Commissioners’
Table 17 Bed Capacity
Table 18 Summary of Funded whole time equivalents
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Weston Area Health NHS Trust Table 1
ANNUAL BUDGET
£'000
INCOME
Clinical Commissioning Groups 79,315Specialist Services Commissioning 4,973Local Authorities 1,239Overseas patient income 1Education and Training 3,044NICE 230Road Traffic Accidents (RTA's) 400Divisional Income 4,992Divisional Income - Private Patients 738Divisional income - Cancer Drugs Fund 447Divisional Savings Target 648Total Income 96,027
Additional Colorectal consultant 118 1.00Additional Urology Locum Consultant (NR) 50 1.00Permanent establishment of Surgical Assessment & Clinical Decision Units 845 24.37Optometrist supporting Seashore - UHB visiting service 34Vascular visiting services - UHB recharges 26Portering - Allowance to cover Annual leave and stat mand training 26
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Weston Area Health NHS Trust Table 8SUMMARY OF RESERVES 2014-15
£000 £000Pay Inflationary pressuresPay award -all staff 665Clinical Excellence Awards 60Medical Locum premiums 780Nurse Agency Premiums 480Additional WLIs 120
2105
General ReservesNICE drugs 295Procurement 600Maternity payments 250Savings programme project support 600Contingency 510Development reserves 175Corporate reserve - Savings programme risk 850Corporate reserve - Income risk 640
3920
Uncommitted reservesAvailable funding Nil
TOTAL 6025
ANNUAL BUDGET
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Weston Area Health NHS Trust Table 9
Analysis of Recurrent Deficit
Movement from 2013/14 outturn to 2013/14 underlying position £'000
Forecast Deficit -4,950
Non recurring IncomeNorth Somerset CCG activity 865Somerset CCG activity 173Injury recovery income -35Winter resilience income -1,825Procurement project -600Other CCG income -850Non recurring savings 55
-2,217
Non-Recurring savings 0
Non Recurring PayNon-Recurring savings -656Winter resilience expenditure 1,705
1,049
Non Recurring Non PayProcurement project 600Non-Recurring savings -584Winter resilience expenditure 120Savings project support 917One off recruitment fees 115Other 778Depreciation 23
FinancingDepreciation and Dividend payments on PDC -313 -313Recurring expenditure changes -858 -1,947 -2,805
Projected 2014-15 Deficit -5,251 301 -4,950
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Weston Area Health NHS TrustTable 10
7300
7400
7500
7600
7700
7800
7900
8000
April May June July August September October November December January February March
£000
Month
Trust expenditure run rate against budget (Including SIP)
Total Expenditure 13-14 Forecast Expenditure 13-14 Total Budget 14-15
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Weston Area Health NHS Trust Table 11Capital Programme 2014/15
£Capital Resource Limit 3,858,000 Safer Hospital, Safer Wards year 2 124,000 Improving Birthing Environments 50,000 Technology Fund - Vitalpacs 250,000 Replacement PAS / EPR 2015 2,000,000 Total capital allocation 6,282,000
Project nameCapital 2014/15
£West sw itch room upgrade - Linking generators 300,000 STOR bringing generators on-line to reduce demand on grid, reduce costs at peak times and create FIT income
120,000
2013/14 carry forward Total 420,000
Ward refurbishment programme ITU 550,000 Ward refurbishment programme Theatres 550,000 Recovery space for Endoscopy 500,000 Legionella w orks including replacing w ater tanks 100,000 Compliance: (Fire, DDA) 100,000 Phase 2 Internal Improvements 55,000 Improving Birthing Environments 50,000 Estates capital project manager 40,000 Theatres laminar f low /ventilation 40,000 Central Storage Area For Waste bins & Soiled Linen (by Pathology)
25,000
Theatres electrical upgrade 10,000 Estates Total 2,020,000
Piped medical gases 100,000 Endoscopy flexiscopes 20,000 Video Stack 50,000 Electric Profiling Beds 13,000 Anaesthetic Machines 58,000 Medical Equipment Total 241,000
Main ED & inpatient plain f ilm room. 300,000 Replacement for obstetric ultrasound machine used by imaging in ultrasound room 2 for obstetric screening.
75,000
Imaging Room/equipment Total 375,000
IT Infrastructure / hardw are PC's 50,000 IT Infrastructure / hardw are 10,000 IT Hardw are Total 60,000
Order Communications (n.b. £124,000 w ith 50% fund match from Tech Fund)
248,000
Replacement PAS / EPR 2015 2,607,296 Technology Fund - Vitalpacs 250,000 Intranet 50,000 IT Systems Total 3,155,296
Grand Total 6,271,296
Under / (Over) commitment 10,704
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Weston Area Health NHS TrustTable 12
Statement of Cash Flow 2014/15
2013/14 Full Year FOT
2014/15 Full Year Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
£000s £000s £000s £000s £000s £000s £000s £000s £000s £000s £000s £000s £000s £000sCash Flows from Operating ActivitiesOperating (Deficit) (3,671) (3,121) (449) (348) (328) (275) (273) (232) (292) (286) (284) (284) (38) (32)Depreciation and Amortisation 3,653 3,858 321 321 322 321 321 323 321 321 322 321 321 323Impairments and Reversals 465 0 0 0 0 0 0 0 0 0 0 0 0 0Dividend (Paid) (1,900) (1,985) (993) (992)Increase/(Decrease) in Trade and Other Payables 41 (137) 400 (537)Provisions Utilised (428) (363) (363)Increase in Movement in non Cash Provisions 387 0Net Cash (Outflow) from Operating Activities (1,453) (1,748) 272 (27) (6) 46 48 (902) 29 35 38 37 283 (1,601)
NET CASH INFLOW/(OUTFLOW) BEFORE FINANCING (6,757) (7,176) (127) (134) (172) (181) (160) (1,222) (894) (314) (264) (1,318) (258) (2,132)
CASH FLOWS FROM FINANCING ACTIVITIESNew Public Dividend Capital received in year: PDC Capital 154 2,424 10 11 10 10 11 530 30 70 811 60 61 810New Public Dividend Capital received in year: PDC Revenue 7,900 4,950 1,238 1,237 1,237 1,238Public Dividend Capital repaid in year: PDC Revenue (2,950) 0Net Cash Inflow from Financing Activities 5,104 7,374 10 1,249 10 10 11 1,767 30 1,307 811 1,298 61 810
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (1,653) 198 (117) 1,115 (162) (171) (149) 545 (864) 993 547 (20) (197) (1,322)
Cash and Cash Equivalents at Beginning of the Period 1,987 334 334 217 1,332 1,170 999 850 1,395 531 1,524 2,071 2,051 1,854
Cash and Cash Equivalents at the end of the period 334 532 217 1,332 1,170 999 850 1,395 531 1,524 2,071 2,051 1,854 532
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Weston Area Health NHS Trust Table 13
STATEMENT OF FINANCIAL POSITION 2014/15
Forecast as at 31
March 2014
Forecast as at 31 March
2015
£'000 £'000
Non-current assets63,192 Property, plant and equipment 62,7672,228 Intangible Assets 5,083
500 Trade and other receivables 50065,920 68,350
Current assets1,345 Inventories 1,3452,825 Trade and other receivables 2,825
334 Cash and cash equivalents 5324,504 Total current assets 4,702
Current liabilities(8,108) Trade and other payables (8,456)
(368) Provisions (411)(3,972) NET CURRENT ASSETS (LIABILITIES) (4,165)
61,948 TOTAL ASSETS LESS CURRENT LIABILITIES 64,185
Non-current liabilities(220) Provisions (193)
61,728 TOTAL ASSETS EMPLOYED 63,992
Financed by taxpayers' equity:
62,829 Public dividend capital 70,203(14,064) Retained earnings (19,174)13,056 Revaluation reserve 13,056
(93) Other reserves (93)
61,728 63,992
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Weston Area Health NHS Trust
Financial Risk RatingsAs at 31/03/2014 Table 14
Risk Ratings Financial Metric
Forecast Year to 31-
Mar-14Forecast Year to 31-Mar-15
£000s £000sEBITDA YTD from SoCI 447 737
Underlying Operating Income YTD from SoCI 97,453 96,027performance EBITDA Margin metric (%) 0.46 0.01
EBITDA Margin rating 1 1Financial Efficiency Net return after financing costs, YTD from SoCI (5,110) (5,110)Return on Capital Net return after Financing metric (17) (12)
Net return after financing rating 1 1Deficit YTD from SoCI (5,575) (5,110)
Financial Efficiency I & R (Impairments & restructuring) expenses YTD from SoCI (465) 0I&E Surplus Margin Operating Income YTD from IS 97,453 96,027
I&E Surplus margin metric (%) (5.2) (5.3)I&E Surplus margin rating 1 1Overall Financial Efficiency rating 1 1Net liquid Assets (net working capital less stock) 2,656 2,337Operating expenditure less depreciation 97,006 95,290
Liquidity Notional Working Capital Facility 7,973 7,847WCF in terms of Operating Expenditure YTD 30 30Liquidity days metric (WCF limited to 30 days) 10 9Liquidity rating 1 1
Overall Financial Risk Ratings Limit due to overriding rules 1 1
Continuity of Services RatingsWorking Capital Balance (5,317) (5,510)
Liquidity Ratio Annual Operating Expenses 97,006 95,290(days) Liquidity Ratio Days (20) (21)
Liquidity Ratio Metric 1 1Revenue Available for Debt Service 447 737
Capital Servicing Capacity Annual Debt Service 1,912 1,997(times) Capital Servicing Capacity (times) 0 (1)
Capital Servicing Capacity metric 1 1
Continuity of Services Rating Continuity of Services Rating for Trust 1 1
KeyWorking capital balance (Current assets less inventories - current liabilities + wholly comitted lines of credit available) Annual operating expensesRevenue available for capital service (surplus or (deficit) for year (pre dividend) + depreciation + annual interest + restructuring costs + other exceptionals)Annual debt service (All interest, prinicpal payable on borrowings & finance leases + annual PDC dividend payable)
Liquidity
Capital service capacity
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Weston Area Health Trust Table 15
Operating Framework 2014-15
Draft Planned activity- Summary by Specialty 2014/15