SFI-PGN-14-01 · 2017. 9. 5. · SFI-PGN-14-01 –Losses and Special Payments V01 – Issue 2 – Issued July 2017 Part of NTW(O)51-Standard Financial Instructions Policy 4 Special

Standard Financial Instructions Practice Guidance Note

Losses and Special Payments - V01

Date Issued Planned Review PGN No:

Issue 1 – July 2014

Issue 2 – July 2017

Jan 2018 SFI-PGN-14-01 Part of NTW(O)51-Standard Financial Instructions Policy

Author / Designation Tracey Sopp – Head of Accounting and Processing

Responsible Officer / Designation

James Duncan, Deputy Chief Executive / Executive Director of Finance

Contents

Section Description Page No.

1 Introduction 1

2 Delegated Limits 3

3 Losses 4

4 Special Payments 6

5 Fraud Reports 7

6 Security Incidents 8

7 Completion of Return for Annual Accounts 8

8 Accounting for Losses and Special Payments – The Register 8

9 Approval and Monitoring 10

10 Additional Relevant Policies 10

Appendices – listed separate to PGN

Appendix 1 Authorisation Requirements and Limits for Losses and Special Payments

Appendix 2 Losses and Special Payments Extract from NHS Trusts – Manual for Accounts

1 Introduction

1.1 Detailed guidance on “Losses and Special Payments” is contained in Chapter

6 of the NHS Foundation Trust’s – Annual Reporting Manual. Paragraph 6.9

defines the reporting requirements required in the annual accounts. Paragraph

6.10 refers to guidance on the definitions of ‘losses and write offs’ found in

annex 4.10 and ‘special payments’ found in annex

4.13 of HM Treasury’s ‘Managing Public Money,’ which is available on the

HM Treasury Website. This Guidance applies to Foundation Trusts in full.

1 Northumberland, Tyne and Wear NHS Foundation Trust

SFI-PGN-14-01 –Losses and Special Payments V01 – Issue 1 - Issued July 2014 Part of NTW(O)51-Standard Financial Instructions Policy

2 Northumberland, Tyne and Wear NHS Foundation Trust SFI-PGN-14-01 –Losses and Special Payments V01 – Issue 2 – Issued July 2017 Part of NTW(O)51-Standard Financial Instructions Policy

1.2 Paragraphs 6.9 and 6.10 are included in Appendix B – Section 1 and the

relevant annexes are included in Appendix B – Section 2. Appendix B is

hereafter referred to as “the Guidance”.

1.3 The purpose of this Procedure is to summarise the main points of the Guidance

and to summarise what is required of the Trust.

1.4 Losses and Special Payments are items that Parliament would not have been

taken into consideration when Health Service funding was agreed or legislation

passed. By their nature they are items that ideally should not arise and are

therefore subject to Special Control Pprocedures compared with the generality

of payments, and special notation in the accounts, to draw them to the attention

of Parliament. They are divided into different categories, which govern the way

each individual case is handled. Losses and Special Payments are charged to

the relevant functional headings in expenditure on an accruals basis, including

losses which would have been made good through insurance cover had NHS

Foundation Trusts not been bearing their own risks (with insurance premiums

then being included as normal revenue expenditure).

1.5 All losses incurred and special payments made by the Trust need to be

notified to the Assistant Financial Accountant, who is responsible for the

issues relating to the Losses Register. This information is required for the

following reasons:

To enable the compilation of the Trust's Losses and Special

Payments Register and for year-end accounting purposes;

Funding implications;

To enable lessons to be learnt not only within the Trust but also

for dissemination to other NHS bodies and consequently reduce

the risk of a re-occurrence;

1.6 Please note the following with regard to ‘Equality and Diversity’:

If a version of this Procedure or an individual form used in the Procedure is required in a larger font-size, please contact the ‘Author’ (see front sheet) to request;

If any part or all of this Procedure is required in a language other than English, please contact the ‘Author’ to discuss your requirement;


2 Delegated Limits

2.1 Northumberland, Tyne and Wear NHS Foundation Trust (the Trust) is able to

authorise its own Losses which fall into Delegation Group 1 in box A4.10A included in the Guidance in Appendix B. Treasury retains control over any Losses which fall into Delegation Group 2 (as per box 4.10A) and the Treasury should be consulted if the Losses:

Involve important questions of principle;

Raise doubts about the effectiveness of existing systems;

Contain lessons which might be of wider interest;

Are novel or contentious;

Might create a precedent for other departments in similar

circumstances;

Arise because of obscure or ambiguous instructions issued

centrally.

2.2 The delegation groupings apply to Foundation Trusts but Foundation Trusts do

not have a delegation limit.

2.3 Notification to Parliament

2.3.1 For serious Losses, a written statement should be provided to Parliament and

Losses should be reported at the earliest opportunity.

2.3.2 If any general lessons emerge from a Loss or Special Payment, which would

be of interest to other Public bodies then Parliament should be informed.

2.4 Scheme of Delegation

2.4.1 The Trust’s scheme of delegation applies to all losses.

2.4.2 The Board will set the limits for losses written off and Special Payments

authorised by officers. Power to write off Losses and make Special Payments

should normally be exercised by two or more nominated senior officers, acting

jointly and within the delegated limits set by the Board.

2.4.3 Consequently, before a Loss is written off or a Special Payment is made,

authorisation by appropriate officers must have been given. The Trust’s

Scheme of Delegation refers to the document containing the levels of

authorisation required for each type of Loss and Special Payment as

stipulated by the Trust Board. This document is attached at Appendix A for

reference.


3 Losses

3.1 It should be noted that ‘Losses’ only applies to Losses of money or property

belonging to the Trust.

3.2 Type A

Losses of Cash (see Annex 4.10, A.4.10.10 to A.4.10.14 of the

guidance);

Bookkeeping losses;

Exchange rate fluctuations;

Losses of pay, allowances and superannuation benefits;

Losses arising from overpayments;

Losses arising from failure to make adequate charges.

3.3 Type B

Losses of accountable stores (see Annex 4.10, A.4.10.15 to

A.4.10.19 of the Guidance);

Proven or suspected fraud, theft, arson or sabotage, or any

other deliberate act (including repairable damage caused

maliciously to buildings including furniture and fittings and

equipment, stores, etc., even where a legal claim is not possible;

Losses arising from other causes;

Fruitless Payments and Constructive Losses (see Annex 4.10,

A4.10.20 to A4.10.23). A Fruitless Payment is a payment for

which liability ought not have been incurred, or where the

demand for the goods and services in question could have been

cancelled in time to avoid liability. A Constructive Loss is similar

to a Fruitless Payment but where the procurement action itself

has caused the loss. These losses include abandoned Capital

Schemes, cost of rectifying faults and forfeitures under contracts

or payments for wrongly booked travel or accommodation;

Claims waived or abandoned (see Annex A.4.10.24 to

A.4.10.27);

Bad debts.


3.4 In the event of a loss occurring, recommended action should take place:

Reporting the loss and action taken to the appropriate bodies;

Immediately end the loss and attempting to recover it other

than where fraud is suspected;

Finding out the cause and taking appropriate corrective action;

Correcting any weakness in controls or supervision;

Establishing responsibility insofar as it involves inadequate

supervision, negligence or misconduct, and taking appropriate

disciplinary action;

Ensuring that any general lessons are picked up and applied in

future, and if appropriate referred to the Treasury or Parliament

for wider dissemination;

If it is not fully recovered at once, recording the loss and all

stages of subsequent action;

Seeking approval, regardless of value, if the case is novel,

contentious or repercussive;

Reporting the loss to the Board or Audit Committee.

3.5 Comprehensive back up must be maintained for each individual loss and a

summary provided to the Assistant Financial Accountant. The summary must include:

The amount involved and the reasons why the loss arose;

The background of the case, giving full reason why a

payment is necessary;

If fraud was involved;

If the value of the loss is reduced by insurance;

The steps taken to recover the loss, if appropriate;

Identify any failings in the actions of employees or if there

was a breakdown in procedures;

Any subsequent actions to improve system weaknesses.


4 Special Payments 4.1 Special Payments are those which fall outside the normal day-to-day business

of the Trust or those for which exceptionally, and with the approval of the

Treasury, no delegated authority exists.

4.2 The Trust should only authorise Special Payments after careful appraisal of

the facts and when satisfied that the best course of action has been identified.

It is good practice to consider routinely whether particular cases reveal

concerns about the soundness of the control systems; and whether they have

been respected as expected. It is also important to take any necessary steps

to put failings right.

4.3 It is important to consult the Treasury about any cases, irrespective of

delegations, which :

Involve important questions of principle;

Raise doubts about the effectiveness of existing systems;

Contain lessons which might be of wider interest;

Might create a precedent for other departments; or

Arise because of obscure or ambiguous instructions issued

centrally.

4.4 Special Payments fall into one of five main categories as per box A.4.13A of

the guidance:

Extra-contractual payments;

Extra-statutory and Extra-regulatory Payments;

Compensation Payments;

Special Severance Payments (see Annex A4.13.9 to

A4.13.13);

Ex-gratia Payments.

4.5 Comprehensive back up must be maintained for each individual loss and a

summary provided to the Assistant Financial Accountant. The summary must include :

The amount involved and the reasons why the loss arose;

The background of the case, giving full reason why a

payment is necessary;


If fraud was involved;

If the value of the loss is reduced by insurance;

The steps taken to recover the loss, if appropriate;

Identify any failings in the actions of employees or if there was a breakdown in procedures;

Any subsequent actions to improve system weaknesses.

4.6 The only exceptions to this are personal injury cases in which case the

guidance on the NHS Litigation Authority (NHSLA) website (www.nhsla.com)

should be followed.

5 Fraud Reports

5.1 Cases of fraud and corruption should be dealt with in accordance with the

relevant SofS Directions and using the reporting system as specified in the

NHS Counter Fraud and Corruption manual. The NHS Counter Fraud and

Security Management Service (CFSMS) and the Director of Finance should

be informed as soon as a case of fraud arises.

5.2 The Trust must ensure that all allegations of fraud and corruption that arise

are reported immediately and directly to the Local Counter Fraud Specialist

(LCFS).

5.3 The LCFS should inform the appropriate CFMS Team of the commencement

and result of all cases of suspected fraud and corruption investigated by the

Trust using the reporting system as specified by the CFSMS.

5.4 The LCFS is to ensure that a full report is provided on each case to the

Director of Finance, the CFSMS, and to the NHS body’s auditors, including

where fraud is present, an assessment of the systems weakness that allowed

the fraud to be perpetrated.

5.5 If the system weakness has possible implications across the NHS the LCFS

should report the problem to CFSMS using the intranet fraud prevention

referral system so that measures can be taken nationally to amend policy or

systems.

5.6 For reporting purposes only, the value of fraud cases must be calculated gross

before any insurance payments and other recoveries.

5.7 Any suspicion of fraud should be reported to the Local Counter Fraud

Specialist or to the NHS Counter Fraud and Security Management Service

Fraud and Corruption Reporting line on 0800 028 40 60.

http://www.nhsla.com/


6 Security Incidents

6.1 All security related incidents of theft or criminal damage must be reported

through the Security Incident Reporting System (SIRS) in accordance with Secretary of State Directions via local incident reporting systems to the NHS Security Management Service (NHS SMS). Responsibility for informing the NHS SMS of security related incidents will fall to the LSMS.

6.2 The Trust must ensure that there are suitable arrangements in place for the

reporting, investigation and management of such security incidents in accordance with national guidance issued by the NHS SMS, including the resources to support the reporting into the Security Incident Reporting System (SIRS).

6.3 The Trust must ensure that all security related incidents are reported to the Local Security Management Specialist (LSMS) and Police (if required) for a full investigation and considered for the appropriate application of sanctions.

6.4 The LSMS must ensure that any investigation undertaken is done in accordance with the NHS Security Management Manual and any Guidance issued by the NHS SMS.

6.5 The LSMS should inform their Area Security Management Specialist of the commencement and outcome of any investigation into a security related incident using the reporting system as specified by the NHS SMS.

6.6 Where security related incidents expose a system weakness which has possible implications across the NHS, the LSMS should report the problem to the NHS Security Management Service through their Area Security Management Specialist so that measures can be taken nationally to amend policy or systems or to alert other NHS bodies.

6.7 Any suspicion of a security breach or knowledge of an unreported security related incident this should be reported to the Local Security Management Specialist or to the NHS Security Management Service.

7 Completion of Return for Annual Accounts

7.1 An analysis must be completed for Annual Accounts purposes.

7.2 See Appendix 2– Section 1 for details.

8 Accounting for Losses and Special Payments – The Register

8.1 The Trust is required to maintain a “Losses and Special Payments Register” in which details of Losses and Special Payments are entered as they are known.


Where the actual value cannot be immediately determined an estimated value should be inserted.

8.2 Registers should be completed on an accruals basis but excluding provision

for future losses

8.3 Cases of £1,000 and over should be highlighted in the register when reported

to the Audit Committee

8.4 The category type should be clearly identified

8.5 All entries on the Register should be net of NHS Litigation Authority payments

e.g. in the Property Expenses Scheme (PES) or Liability to Third Parties

(LTPS).

8.6 The Assistant Financial Accountant maintains the Losses Register. The

Register is updated on a monthly basis, based on the information provided

from feeder systems and other sources. Information is provided routinely to

the Assistant Financial Accountant for areas where losses are potentially

material or frequent including the following:

Ex-gratia Claims;

Employee Litigation Claims;

Drugs Losses;

Write-off of Receivables;

Cash Losses.

8.7 For other areas where losses occur less frequently, the Financial Accountant

will contact relevant officers to obtain information where this has not been

received including:

Drugs Losses – monthly basis from Ascribe;

Ex-gratia Claims – as and when basis from the Incidents and

Claims Administrator;

Employee Litigation Claims – monthly basis from the

Incidents and Claims Administrator;

Cash Losses – as and when basis from the Patients Finance

and Cashiers Manager / Chief Cashier;

Write-off of Receivables – as and when basis from

Processing Team Leader;


Write-off of Overpayments – as and when basis from Payroll

/ Financial Accountancy Officer;

Fruitless Payments – as and when basis from Processing

Teams.

9 Approval and Monitoring

9.1 The Board is responsible for writing off all Losses and approving all Special

Payments. As previously stated, the Board may delegate the power to write

off Losses and make Special Payments to appropriate officers (two or more

Directors / officers acting jointly) within the delegated limits set by the Board.

9.2 All Losses and Special Payments must be reported (with appropriate

analysis) to the Audit Committee on a six monthly basis unless the Audit Committee dictates otherwise. The Audit Committee will subsequently highlight to the Board that the review has taken place and any items it deems necessary to bring to their attention.

9.3 The Head of Accounting and Processing will produce a six monthly report

which includes the number and value of cases, itemising cases in excess of

£1,000 and a report to show trend data to prior periods for comparative

purposes.

9.4 If an item is of such magnitude or importance, the Director of Finance or

Chief Executive may bring the details directly to the Board’s attention, for

information and / or approval.

10 Additional Relevant Policies

This Practice Guidance Note was preceded by NTW(F)26-01

Losses and Special Payments;

Practice Guidance Note SFI-PGN-14-02 Ex-gratia Payments;

Foundation Trust Annual Reporting Manual – Monitor

Guidance.

11 Northumberland, Tyne and Wear NHS Foundation Trust SFI-PGN-14-01 –Losses and Special Payments V01 – Issue 2 - Issued July 2017 Part of NTW(O)51-Standard Financial Instructions Policy

NORTHUMBERLAND, TYNE AND WEAR NHS FOUNDATION TRUST

Appendix 1

Authorisation Requirements and Limits for Losses and Special Payments

The Board may delegate authority for the write off of losses and/or approval of special payments, and has decided upon the following:

£30,000 or more – Board approval (no delegation to officers/directors).

£5,000 but below £30,000 – delegation to the Chief Executive and Director of Finance acting jointly.

Other amounts – see below:

< £1,000 £1,000 < x < £5,000

Director of Finance +

Losses – where there is a choice of writing off or pursuing further:

Cash eg Salary overpayments Two of DoF/DDoF/HoAP/HoFs (*see below) One of DDoF/HoAP/HoFs (*see below) Patients Monies Errors etc Bad Debts Two of DoF/DDoF/HoAP/HoFs (*see below) One of DDoF/HoAP/HoFs (*see below)

Losses – where the loss has already occurred:

Cash eg shortages (floats, tills Two of DoF/DDoF/HoAP/HoFs (*see below) One of DDoF/HoAP/HoFs (*see below) etc), theft, fraud etc Thefts (non-cash) Two of DoF/DDoF/HoAP/HoFs (*see below) One of DDoF/HoAP/HoFs (*see below) Fruitless Payments(incl. courses) Two of DoF/DDoF/HoAP/HoFs (*see below) One of DDoF/HoAP/HoFs (*see below) Abandoned Works Director – Estates and Facilities Director – Estates and Facilities Rent of Property Director – Estates and Facilities Director – Estates and Facilities Leased Cars Director – Estates and Facilities Director – Estates and Facilities Laundry Director – Estates and Facilities Director – Estates and Facilities Condemned Bedding/Linen Director – Estates and Facilities Director – Estates and Facilities Losses in Store/Goods Not Received Director – Estates and Facilities Director – Estates and Facilities Damage to Buildings Director – Estates and Facilities Director – Estates and Facilities

Losses – Stock:


Drugs Chief Pharmacist Chief Pharmacist Catering Director – Estates and Facilities Director – Estates and Facilities Other stock One of DoF/DDoF/HoAP/HoFs (*see below) One of DoF/DDoF/HoAP/HoFs (*see below)

< £1,000 £1,000 < x < £5,000

Special Payments:

Director of Finance +

Extra Contractual Payments Director – Estates and Facilities Director – Estates and Facilities Ex-Gratia Payments Incidents and Claims Officer + Incidents and Claims Manager +

Incidents and Claims Manager + Any Executive Director (including relevant Group Relevant Budget Holder Director)

In the case of ex-gratia payments, any Executive Director or relevant Group Director if DOF is not available.

Special Payments – where there the loss has already occurred via a legal case:

< £20,000 > £20,000

Employer’s Liability Payments Head of Safety and Patient Experience N/A due to excess on legal cases Public Liability Payments Head of Safety and Patient Experience N/A due to excess on legal cases Personal Injury Payments Head of Safety and Patient Experience N/A due to excess on legal cases Clinical Negligence No loss – costs met by NHSLA No loss – costs met by NHSLA ----------------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------

* DoF = Director of Finance

DDoF = Deputy Director of Finance HoAP = Head of Accounting and Processing HoF = Heads of Finance


Appendix 2

SECTION 1

EXTRACT FROM NHS FOUNDATION TRUSTS – ANNUAL

REPORTING MANUAL

Losses and Special Payments

6.9 A note disclosing information on Losses and Special Payments should be included i the accounts. This note should disclose:

• The total number and value of Losses and Special Payment cases;

• The number and value of clinical negligence, fraud, personal

injury, compensation under legal obligation and Fruitless Payment cases where the net payment for the individual case exceeds £100,000;

• A statement that these amounts are reported on an accruals basis but excluding provisions for future losses; and

• Any other explanation considered necessary.

6.10 Guidance on the definitions of Losses and Special Payments can be found in Annex 4.10 and 4.13 of HM Treasury’s ‘Managing Public Money’, which can be found on the HMT website here. This Guidance will apply to NHS Foundation Trusts in full and is detailed next within this Practice Guidance Note.











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