5. ACTIVITY, PERFORMANCE AND
EFFICIENCY (continued)
5.10.3 What steps is the Department taking
to improve the ability of NHS bodies to make accurate forecasts
of their year-end financial position? What action is being taken
to break the typical cycle identified by the Audit Commission
of NHS bodies giving little credence to financial information
early in the financial year, only to enter into corrective action
after finding themselves in danger of overspending later in the
year? What was the impact of the publication of mid-year financial
position forecasts in 2005-06? (Q92)
ANSWER
1. Further to the response given in 2005,
we are continuing to work with SHAs to adopt a more comprehensive
approach to monitoring. As part of this process, we are working
with SHAs to finalise a monthly performance metrics report that
will focus on both activity and financial data. The key indicators
in this report will be used as a central element of the challenge
function at monthly face-to-face performance management meetings,
enable early identification of trends and allow robust conclusions
to be drawn. It is intended that SHAs will be able to adopt the
same reporting tool to better collate data and manage performance
across their organisations.
2. In addition, we now require more data
from all NHS bodies on a monthly basis, and have improved the
level of performance analysis of this data. We are also more active
in challenging SHAs about the quality of the data.
3. To make the monthly monitoring forms
simpler for the NHS to compete they have now been changed to resemble
the accounts forms where possible.
4. We have also issued more comprehensive
guidance to the NHS, both at the start of the year and where issues
of data quality are identified. For example, we sought reasons
for the significant change in the financial position between 2004-05
month 12 forecasts and final audited accounts and subsequently
issued guidance on the issues identified to avoid a re-occurrence
of the problems.
5. In February 2006 the department set up
a National Programme Office (NPO) for turnaround for those organisations
with significant deficits. The role of the NPO is to provide co-ordination,
review, monitoring and scrutiny of all turnaround projects. This
additional scrutiny of the most financially challenged organisations
further adds to the accuracy of the forecasts provided.
6. The department has taken steps to bring
performance and financial management closer together to help ensure
that financial and non-financial data received from the NHS is
consistent and to enable challenge where it is not. These steps
include the appointment of the NHS Financial Controller, who is
responsible for liaising more closely with SHAs and the department
performance colleagues.
7. In a further step towards this aim, the
department has agreed the publication of a set of productivity
metrics—covering clinical productivity, finance, workforce,
prescribing and procurement—to effectively encourage benchmarking
of performance. This should improve the quality of the data provided
by the NHS in its financial forecasts, and support the identification
and take up of best practice.
8. The publication of the mid-year financial
position in 2005-06 provided a more accurate forecast of the provisional
outturn position for the year then has traditionally been provided
at the mid-year stage in recent years.
9. With the aim of improved transparency
and a continuation in the improvement in the accuracy of financial
forecast the department has committed to publish the quarterly
financial position in 2006-07. The first of these quarterly reports
was published on 11 August.
10. The problems with in-year forecasting
identified by the Audit Commission is partly due to over-pessimistic
forecasting by NHS bodies. The measures set out above aim to make
the forecasting more reliable.
5.10.4 Is there evidence of correlation
between the 2005-06 financial position of Primary Care Trusts
and (a) 2005-06 per cent distance from target revenue allocation
and (b) 2005-06 revenue allocation per unweighted head of population?
Could these data be shown in graphical form? (Q93)
ANSWER
1. Provisional analysis of the 2005-06 forecast
outturn position has shown that there is not one single simple
cause for deficits. There is no single cause of financial problems.
Our analysis shows very little correlation between the size of
deficits and any of the factors relating to funding—including
allocations per head, and distance from target.
2. The PCT economy[1]
position is shown as requested in Figure 93a and Figure
93b. The graphs show there is no significant relationship
between the factors. Figure 93c shows the NHS financial
position by SHA area.
3. These analysis was included in the NHS
Financial Performance Report 2005-06 published 7 June 2006, and
the Chief Economic advisor has been commissioned to do a more
comprehensive analysis.
1 Primary care trust economy looks at the combined
financial position of PCTs and the NHS trusts from whom they commission
activity. This is done by mapping the financial position of NHS
trusts to each of their commissioner PCTs in proportion to their
costed activity with each commissioner. The data used was 2004-05
hospital episode statistics costed and using the tariff. These
figures do not include SHA surpluses as it is not possible to
map these to PCTs or NHS trusts. Back
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