• Stock adjustments improved trust’s reported position
  • Non-elective care and CIP shortfalls led to operational deficit
  • CIPs now being rephased

A leading acute trust met its financial control total for the second month of the year after a “technical fix” to its stock levels.

The accounting adjustment by Frimley Health Foundation Trust – in which higher volumes of stock have been recognised on the balance sheet – improved the trust’s reported financial performance by £4.5m.

It is unusual for trusts to recognise large stock increases mid year.

The move, which the trust has described in its July board papers as a “last course option” and a “technical fix”, was discussed with auditors beforehand.

The board papers said: “In order to balance to the issued control total for M02 £4.5m of stock has been recognised on the balance sheet. This technical fix was a last course option but has been used at this very early stage to cover the year to date overspend.”

It means the trust met its financial control total for the second month of the year, whereas its operational performance was £4.2m worse than plan, with a £1.9m deficit.

Trusts are rewarded with incentive payments from the “provider sustainability fund” if they stay on track with their financial targets.

One example of a stock adjustment improving a provider’s performance was at Barking Havering and Redbridge University Hospitals Trust, where an independent review recently found there had been a “significant breakdown in financial governance”.

The Grant Thornton review referred to a stock adjustment which improved the trust’s reported financial performance £8.4m in 2016-17. It suggested the adjustment process was not unreasonable, but expressed “scepticism” about the size of the resulting stock levels.

There is no suggestion that Frimley Health’s adjustment is unreasonable, or does not reflect the trust’s actual stock levels.

In a statement, the trust said: “We are aware that we have some ground to make up to achieve our financial plan. We have had higher than expected non-elective activity during the first two months of the year, but we are committed to delivering our cost improvements and getting back on track over the next few months.”

Previous board papers show that the trust had asked for a capital to revenue transfer in the last financial year to avoid a year end position which was £4.7m adverse to plan. Instead, NHS Improvement adjusted the trust’s control total by £6m, allowing it to benefit from “sustainability and transformation funds” of £27.2m.