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NHS Improvement says it wants to get real on trust sector finances, but its commitment to credible financial planning will continue to be questioned while its regional finance director for London remains in post.
A wide ranging report by Grant Thornton has identified multiple failures of financial governance at Barking, Havering and Redbridge University Hospitals Trust, where Jeff Buggle was finance director and acting chief executive for most of the relevant period.
There is a pretty well established routine in the NHS when an organisation reveals a sudden and unexpected collapse. Typically, the finance director is shown the door, often alongside other directors.
Had Mr Buggle remained at the trust when a surprise cash shortfall emerged in October 2017 (he left in July that year) that would surely have been his fate.
But the fact he now regulates the finances of every NHS provider in the capital (some of which have the biggest deficits in the sector) makes his position even more untenable.
To be an effective regulator you need to have the confidence and respect of those you are overseeing, and the report’s findings make that difficult.
The Barking failures included a lack of transparency in the accounts; imprudent accounting adjustments; unrealistic income assumptions; weak cash management; underplaying of risks; the omission of key cash indicators in board reports; and a lack of robust financial planning. These helped the board believe it was in a relatively healthy position coming into 2017-18, and encouraged it to sign up to a surplus “control total” with no planned cash support.
What they seemingly didn’t realise was that trust had been staying afloat by routinely delaying payments to suppliers since 2015.
Eventually suppliers got fed up with not being paid and clinical divisions began raising multiple concerns over late payments with senior finance staff from August 2016 onwards. In some cases suppliers stopped delivering crucial goods including, in January 2017, equipment necessary for caesarean sections.
These issues should have been escalated to board level, added to the corporate risk register, and supported a bid for cash support from the Department of Health and Social Care.
But the problems were not adequately escalated for another nine months, until October 2017, by which time Mr Buggle had moved to NHSI.
Some suppliers had gone a year without being paid, with many more waiting over six months.
In this context, some of those imprudent accounting adjustments are jaw dropping, such as a blanket assumption that non-purchase order invoices that were overdue for more than 360 days would not be paid (with a resulting improvement to the reported accounting position).
There have been lots of big “reveals” of huge unplanned deficits since the control total system was imposed on trust sector finances, and the Barking collapse is right up there with the most dramatic.
The trust has now reported a deficit of £49m for 2017-18, against the planned surplus of £1.6m (only £12m of the shortfall relates to missed sustainability payments).
It is important to acknowledge that the governance failures were not limited to the trust’s finance department, and that Grant Thornton found no evidence of any “deliberate decision” by senior finance officials to withhold information.
But regardless of intentions, there were multiple basic failures that were primarily the responsibility of the finance department, and which happened largely on Mr Buggle’s watch.
NHSI has recently pledged to get tough on the revolving door for underperforming NHS managers, and there’s a glaring mismatch between the Barking failures and the regulator’s expressed desire to rebuild confidence in trust sector finances.
Mr Buggle should resign and allow NHSI to get on with it.
HSJ sent the attached list of questions to NHSI, but the regulator said it could not address them while a broader review of the trust’s financial governance is still ongoing. NHSI has commissioned this from Deloitte and said it intends to publish the findings in full.
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