• Former chief executive and chief financial officer of University Hospitals of Leicester referred to the CQC
  • NAO cites “unprecedented” failure of trust to present true and fair accounts
  • Finances were presented as “to achieve a certain outcome rather than to represent accurately the economic reality”

The former chief executive and chief financial officer of a major acute trust have been referred to the Care Quality Commission under the ‘fit and proper person’ process, after an ‘unprecedented’ failure to provide true and fair accounts.

The referral emerged as a report by the National Audit Office said ex-leaders at University Hospitals Leicester Trust had adjusted its finances “to achieve a certain outcome rather than to represent accurately the economic reality”.

Last year, HSJ revealed how a review instigated by a new finance chief had discovered a £46m hole in the trust’s financial accounts for 2018-19.

Had the £46m been recognised correctly in that year, the trust would have reported an underlying deficit of £101m, rather than the £55m deficit it did report.

Former chief executive John Adler went on sick leave in March last year, before his retirement was announced in the summer. Paul Traynor, UHL’s previous chief financial officer, left the trust in October 2019 and is now finance CFO at the Open University. HSJ has attempted to reach Mr Adler and Mr Traynor for comment this evening.

The trust has previously said their departures were not connected to the accounting adjustment or subsequent investigations.

NHS England said in a statement this afternoon: “The former chief executive and former chief financial officer of University Hospitals Leicester have both been referred to the CQC under the fit and proper person process, and in the case of the ex-CFO to the accounting professional body too.”

A wider investigation into the failures commissioned by NHS England is ongoing.

But in a report to Parliament yesterday about the general finances of the health service, the NAO’s comptroller and auditor general, Gareth Davies, included a section specifically about UHL.

He said: “The auditor… noted that adjustments appear to have been made in the 2018-19 financial statements at the request of UHL’s management to achieve a certain outcome rather than to represent accurately the economic reality of transactions into which UHL entered.”

An unusually high level of “manual intervention in the accounting records” had been discovered, he said, along with “significant technical accounting issues” in the trust’s 2019-20 records.

These included non or inaccurate recognition of expenditure and payables; disagreement over the classification of a significant lease agreement; material errors in the valuation of the property estate; and inappropriate recognition of income.

Mr Davies added: “The position at UHL is, to my knowledge, unprecedented. An NHS trust has failed to comply with the secretary of state’s direction to prepare true and fair accounts and to maintain appropriate accounting records.

“Moreover, the restatement of the 2018-19 financial statements reflects both financial control failures and a series of actions taken by UHL in the preparation of those accounts that do not reflect the actual substance of the financial transactions entered into by the trust.

He added that “no pressures imposed by a financial control framework explain or justify the type of conduct identified at UHL”. The report is included in the Department of Health and Social Care’s annual accounts for 2019-20.

Rebecca Brown, the trust’s acting chief executive, said: “In the midst of all the other challenges we face this is clearly unwelcome but the board’s decision not to adopt the accounts because we cannot state that they are true and fair is absolutely the right thing to do.

“This is a painful but necessary process and I am grateful to our external auditors and the new senior finance team for the many hundreds of hours’ work that they have already put into creating a set of accounts that we can stand by. There is still more work to do but I’m confident that we will get to an agreed position in the not too distant future.”

Siva Anandaciva, chief analyst at the King’s Trust, told HSJ: “I don’t think this is the end of the story because you’ve got a regulatory framework that’s set up to detect these sorts of things…There have to be further enquiries about how this happened.”