FINANCE: The acute trust made more of its savings non-recurrently than any other trust and ended the year in deficit, an HSJ survey shows.
East Cheshire Trust, which has a turnover of £170m, made £4.3m of its £6.5m savings in 2010-11 on a non-recurrent basis, the highest proportion of any English acute trust.
The trust’s papers from March said: “The month 11 (February) reported position includes non-recurrent adjustments. These include reductions in corporate provisions and accruals relating to staff leave and benefits.”
It negotiated a £5.5m extra payment from Central and Eastern Cheshire Primary Care Trust, above an agreed earlier contract cap.
But papers from its May board said a deficit had been carried forward from 2010-11 and it would need a Department of Health bailout this year, when it was due to run out of money.
The March papaers said the trust had “further supported its CIP delivery through the implementation of several corporate schemes. These include asset valuation review, car parking charge increases and changes to catering arrangements”.
The organisation, which consists of a district general hospital and two community hospitals, hoped to save £750,000 with the asset valuation review.
By January the trust had made 81 per cent of its CIP programme and said: “The shortfall is being supplemented through overall lower expenditure levels on budgets as we progress towards the end of the financial year.”
The trust has a 9 per cent CIPs target this year, up from the 8 per cent it reported to HSJ earlier this year. This amounts to £15m or £1.2m per month.
The most recent figures the trust has produced, for April, show it £416,000 behind plan and mostly using non-recurrent savings.
Documents from the May board paper said: “If the trust was to continue the level of performance in April throughout the year it would return a deficit of roughly £5m. This reflects the under performance on corporate CIPs to date. The trust continues to forecast an annual surplus of £250,000 at this early stage of the year.”
But another finance document reported it was only likely to make 60 per cent of its CIP target, saying “Using probability analysis the most likely case is that schemes will slip to the extent that the Trust will deliver only £9.2m [of identified savings]. To mitigate this risk the trust needs to maintain tight control over expenditure in order to maintain its surplus trajectory. This will include difficult decisions on holding vacancies and delaying developments in order to cover the slippage on CIP schemes.
“Monitor’s expectation of aspirant foundation trusts is that they should maintain a surplus trajectory for a smooth transition through application.”
A turnaround director working with the trust recommended ECT should: “reduce back office functions” by 20 per cent, hold a medical staffing review and “Work with other providers to reduce duplication”.
But the finance team reported that liquidity would trip the trust up before the end of the year.
Their report to the May board said: “The trust has a working capital liquidity deficit of c£4m that is impacting on its ability to pay creditors within the 30-day requirement. If the Trust delivers all CIPs it will still have a cash shortfall of c£4m by the end of the year.
“The most significant timing risk is in September, when PDC dividend and loan payments are due, the trust has a £6m shortfall, at this stage.”
The finance team said to cover the risk the hospital should consider applying to the DH, via NHS North West for a £5-6m loan.
An appendix showed ECT hoped to save £278,000 closing an observation ward and £3.3m integrating with Cheshire East Communtiy Health, formerly part of the PCT.
It also intends to save half a million each on nursing staffing and medical costs and save £279,000 on estates staffing.
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Board papers, May and March + HSJ survey