• King’s College Hospital Foundation Trust sells £10m of equipment to wholly-owned company
  • Company paid for this with loan from the FT itself
  • Income then added to 2017-18 accounts
  • Trust’s relationship with subsidiary company has been criticised by auditors

A prominent foundation trust recorded nearly £10m in income by selling scanning equipment to a company it owns, which in turn had borrowed the money from the NHS parent organisation, HSJ can reveal.

King’s Facilities Management paid £9.9m for the equipment with a loan made to it by King’s College Hospital FT, a trust spokesman confirmed after an enquiry from HSJ.

The income was recorded for the financial year 2017-18, and NHS Improvement had placed the trust in financial special measures in December 2017. It ended that financial year with a deficit of £132m, against a planned deficit of £38m. The exact impact of these transactions on the revenue outturn is not known.

King’s has agreed a “revolving loan facility” with KFM of £30m. This is due to be repaid in full in March 2027 and interest is paid at the Bank of England base rate plus 2 per cent.

The most recent KFM annual report said: “The loan funds stock and medical equipment transfers.” This includes for services like endoscopy, radiology, cardiac catheter labs, dialysis and intensive care.

KFM came in for criticism by the consultants hired to investigate how the trust had ended the year with such a large deficit.

The PricewaterhouseCooper report, completed in February 2018 but not released until November, recommended “improved cooperation” between the trust and KFM while “maintaining [an] arm’s-length relationship”.

The PwC report called for “better financial scrutiny requiring a redefining of the financial model which is then laid out in a contract” and noted the “financial control environment was weak with a need to stabilise KFM management and put robust processes and controls in place”.

In November, the trust said it had appointed a new chief executive and finance director to the company, with an independent chair, plus a “new contract and financial model agreed by the trust enabling enhanced scrutiny”.

KFM was set up in July 2016 and, until recently, had several former King’s FT directors on its board. Roughly 60 staff were transferred from the trust to KFM at the time.

KFM charges the trust £97m a year for the services it provides. In 2017-18, £1.5m of this was for the use of equipment the trust had sold to it, a spokesman said.

KFM’s most recent accounts, for the year ending March 2018, said all of its contracts were with the trust and these were due to expire in 2021.

The Linkedin page of Simon Taylor, who stepped down as finance director for the trust in August 2015, notes that he was director of commercial development for the trust from August 2015 until September 2018. KFM’s annual accounts list him as a non-executive director.

The two substantive trust finance directors who followed him at the FT, and have since left, were also non-exec directors at KFM, and resigned in November 2017 and April 2018.

KFM’s accounts for 2017-18 show it spent £13.2m on services from non-NHS bodies, up from £3.3m the previous year. The report said directors’ remuneration for 2018, including “payments to third parties in respect of directors’ services”, was £389,000, up from £274,000 the previous year.

King’s College Hospital FT’s planned deficit for 2018-19 is £146m.