Published: 08/12/2005 Volume 115 No. 5985 Page 8
Finance experts are examining whether changes should be made to the current NHS accounting system to prevent a type of 'double counting' which can leave trusts forecasting huge deficits.
The Healthcare Financial Management Association is in talks with the Department of Health about whether changes should be made to the resource allocation and budgeting system (RAB) which was introduced four years ago.
Meanwhile the Audit Commission and National Audit Office are reviewing how the system is working, following concerns from some trusts' external auditors of about the effects of the system.
The problem arises because the DoH reduces the local health economy's allocation by the level of deficit run up in any year. In most cases, the strategic health authority then recovers the money by cutting the trust's income.
However, the RAB system requires that the underlying deficit still sits on the balance sheet - and will only be eliminated if the organisations can swiftly cut costs or increase income. Trusts often find that difficult to do within the year - and so the deficit starts to build up.
In some cases SHAs have opted not to pass on the cut in income, which has prevented the deficits accumulating so rapidly.
HFMA chief executive Mark Knight said: 'We are having an ongoing discussion with the department about the peculiarities which exist with this.
'The HFMA is concerned about this but recognises that we are part of the public service system, ' he added.
A spokesperson for the Audit Commission commented: 'The commission is aware of the concerns expressed by some NHS bodies about how RAB has been implemented in the NHS.
'We are currently looking into the operation of RAB within the NHS and we will be examining this in a report due to be published jointly with the National Audit Office early in 2006.' However, it is thought unlikely the government will want to change a system which is used throughout the public sector.
The effects of RAB have been seen in some of the public interest reports issued in the last few months by the Audit Commission. The report on the Royal West Sussex trust in Chichester showed that a current deficit of£20m could become one of more than£140m by 2007-08 if action was not taken and the effects of RAB were also mentioned in reports on Trafford Healthcare trust and Royal Wolverhampton Hospitals trust.