Quarter of NHS trusts 'have weaknesses in securing financial resilience'

An Audit Commission report, published today, on the 2010-11 accounts of all NHS trusts and primary care trusts shows that 24 per cent of trusts and 12 per cent of PCTs were given “qualified” value-for-money conclusions by their auditors.

Such qualifications mean the auditor has concluded the organisation does not have all proper arrangements for securing financial resilience, or efficient and effective use of resources.

The commission also published a table listing trusts with any one of five key indicators of actual or potential financial weakness. Barking, Havering and Redbridge Hospitals University Trust fared the worst, being the only trust to have weaknesses identified in four of the five areas.

Andy McKeon, the commission’s managing director for health, said the VFM qualifications were a warning to trusts to “do better and get their acts together” as the NHS enters a period of huge financial challenge. The service will need to make savings of £5bn – or 5 per cent of its budget – for each of the next four years.

According to the report, PCTs reported savings of £1.9bn in 2010-11, and NHS trusts reported savings of £1.2bn. Combined with the savings foundation trusts reported to their regulator, Monitor, the commission concludes that the service made efficiency savings of £4.3bn in the last financial year, assuming no double counting between organisations.

However, auditors’ analysis of 97 PCTs and 54 NHS trusts found that, at those organisations, “2010-11 plans have been more ambitious but less realistic than 2009-10 plans”.

Overall, those organisations failed to make 19 per cent of their planned savings. They delivered 23 per cent of the savings they did make through one-off – or “non-recurrent” – measures, like temporary vacancy freezes, that will mean they need to make additional savings this year. If those proportions are reflected across the NHS, the service delivered recurrent savings of just £3.3bn, the report concludes.

“2011-12 will be a more financially challenging year than 2010-11,” it warns. “Organisations that have up to now managed their finances well will find financial pressure increasing as the need to deliver high-quality services, without the funding growth of the recent past, begins to have an impact.”

The report includes a table of 53 non-FTs whose 2010-11 account show signs of current financial difficulties, or potential weaknesses that could result in future financial problems.

They are given a black mark if they failed to break even last year; received additional funding for “strategic change and financial support”; received public development capital investment as a result of financial difficulty; received a working capital loan to prop up their cash position; or received a qualified VFM conclusion from their auditors.

“The table shows two things,” said Mr McKeon. “It shows those trusts who currently have some financial difficulty, and also those trusts where auditors are concerned about either their arrangements for securing financial resilience or for securing value for money.”

Only one organisation – Barking, Havering and Redbridge Hospitals University Trust – had black marks against four of those five categories. It recorded a deficit last year despite receiving additional funding and PDC investment, and had its VFM conclusion qualified. Four more had three black marks, including South London Healthcare Trust, whose audit had not been completed at the time the report was compiled, and its auditor had not yet given a VFM conclusion.

Overall, the non-FT sector recorded a surplus of £1.5bn last year. Nine organisations failed to break even, and sixteen received additional income totalling £90m for strategic change or financial support. Of the latter group, 12 would have been in deficit without those extra funds.  

Mr McKeon added: “It’s impressive that the NHS overall performed so well financially last year, even if some organisations struggled. But there is no room for complacency. Tighter funding, and the need to continue to improve services and implement reforms will make the next three years much tougher.”