APPENDIX 3
TERMS OF REFERENCE OF REVIEW OF FINANCIAL
MANAGEMENT AND ACCOUNTING REGIME
AUDIT COMMISSION
REPORT TO
THE SECRETARY
OF STATE
FOR HEALTH
ON THE
FINANCIAL MANAGEMENT
AND ACCOUNTANCY
REGIME IN
THE NHS
Terms of Reference
Purpose
The Secretary of State has requested that the
Audit Commission undertake a review of the NHS financial management
and accountancy regime. The review has been commissioned as a
result of the current financial position of the NHS as a whole
and in particular the number of NHS bodies with deficits. The
objectives of the review are to consider and comment on the current
regime and recommend changes that:
— enable and encourage the NHS and
individual bodies within it to operate on a sound and sustainable
financial footing;
— support the identification of financial
problems and facilitate recovery;
— promote clear and transparent accountability;
and
— support individual organisations
to develop the necessary financial management capacity and capability
to operate effectively.
Scope of Work
The remit of the review will include how these
regimes work within Strategic Health Authorities, Primary Care
Trusts and NHS Trusts. It is intended that the report will specifically
cover:
— the current NHS financial regime,
including how the resource accounting and budgeting regime is
applied to NHS bodies;
— the financial reporting regime (as
set out in the NHS Manuals for Accounts) and its transparency;
— the accountability framework;
— the financial management capacity
and capability of NHS organisations, including the quality of
reporting to Boards and the information available to them; and
— the role and work of internal audit.
The review will build on previous work undertaken
by the Audit Commission and other bodies but will also involve
additional research and analysis.
Constraints
The report and the recommendations made within
it will recognise that the Department of Health and NHS bodies
are required to operate within the overall accounting framework
set by HM Treasury.
The overall level of NHS funding, the formula
for allocating funds to Primary Care Trusts, or the development
of a "failure regime" for individual NHS Trusts will
not fall within the remit of the review.
The report will not consider the financial framework
for NHS Foundation Trusts, other than from the perspective of
preparing NHS Trusts for gaining Foundation Trust status or how
lessons from that framework might be applied elsewhere in the
NHS.
Governance Arrangements
The research and development of the report will
be undertaken by the Commission with the assistance of external
consultants, where appropriate. In doing so, the Commission will
be advised by its NHS Financial Management Advisory Group (which
includes representation from the Department, the NAO, Monitor,
the Healthcare Commission and NHS bodies). The Commission will
invite a representative from HM Treasury to join the Group and
assist with the report's development.
Reporting Arrangements
The Commission will provide a report to the
Secretary of State. The report will make a series of practical
recommendations to the Secretary of State on how the regime could
be improved. The report will be published.
Timescale
It is intended that a report will be submitted
to the Secretary of State before the Summer recess (25 July 2006).
Where necessary it will identify where further work needs to be
done.
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