The Department of Health could face problems with the auditing of its 2011-12 accounts unless potentially “significant” mismatches between the accounting of foundation trusts and commissioners are resolved.

A letter from the DH and Monitor to primary care trusts and providers says an investigation of organisations’ finances in January found “significant differences” between the amount FTs expected as income from primary care trusts; and the amount those commissioners estimated they owed.

The problem has been discovered because, under new accounting legislation and Treasury rules, the DH must include foundation trust spending in its accounts for the first time.

The letter tells commissioners and providers they must agree on sums. It indicates that otherwise organisations could find their end-of-year financial position is worse than expected.

It also risks the embarrassment of the DH’s own accounts failing assurance by auditors. The letter warns: “The level of differences at month 9 are such that without resolution, the impact on both local and national accounts could be significant, either through subsequent restatement of post draft accounts, that could result in movements in reported financial performance, or at national level, as regards audit assurance of the DH consolidated account.”

The letter says: “The additional information that is reported under the [new accounting rules], has highlighted intra NHS balances to a degree not seen before.”

It sets out guidance for organisations to solve the problem. This suggests the large differences have come about for several reasons. They include the use of “deferred income”, or attempts to account in 2012-13 for work carried out in 2011-12. The DH and Monitor letter says this should not be done.

The other reasons indicated include “unvalidated/estimated activity”, or work that has not been agreed between commissioner and provider; disagreement about whether “partially completed spells” should be accounted for; and disagreement about payment for work outside of contract agreements.

One hospital trust finance director told HSJ the process of checking and reconciling accounts was likely to involve significant work for both commissioners and providers. The source predicted it was unlikely to mean significant shifts in organisations’ financial position, and said the review process was unnecessarily extensive. He said the DH and Monitor were “using a sledgehammer to crack a nut”.

A Department of Health spokesman said: “We would expect there to be differences between the accounts of NHS organisations part way through the financial year when this exercise was undertaken. This was an interim exercise and organisations will not have finalised their balances.

“Supplementary guidance has been issued to ensure that there are not significant differences at the year-end, and it brings together already issued accounting guidance and clarifies some issues for NHS organisations.”