Foundation trusts were handed up to £300m in advance payments by primary care trusts towards the end of the last financial year, HSJ has been told. The prepayments were made as some primary care trusts struggled to keep 2007-08 surpluses below 'control totals' set by the Department of Health.
Foundation trust regulator Monitor's chief operating officer Stephen Hay said the prepayments made at the end of March 2008 were unusually large. He estimated they were "in the region of£275m-£300m".
Accounting rules say NHS organisations should account for the costs of goods and services in the year they are received. It is not clear what proportion of the prepayments were accounted for as 2007-08 expenditure by PCTs, but Mr Hay said the practice was peculiar as it meant foundations earned interest at the expense of the PCTs.
Cash up front
Mr Hay said: "There did seem to be quite a lot of cash being prepaid at the end of March. The level of interest will depend on how long that money has been left with them.
"If I was a finance director of a PCT, I'm not sure I would make that level of prepayment... You wouldn't find many people in the private sector managing their cash like that."
Unlike NHS trusts and PCTs, foundations have no limit on the surpluses they generate and do not need to ensure their reported income and expenditure for a year reconciles with that of the rest of the health economy.
If the prepaid cash had been retained by PCTs, the total NHS surplus for 2007-08 could have been boosted by up to 18 per cent to£2bn. Instead the prepayments contributed to the growing foundation trust cash surplus which stood at£2.5bn at the end of June 2008.
But PCT Network director David Stout defended PCTs. "Businesses don't operate under Treasury rules and control totals," he said. "PCTs might want to make prepayments because they have to balance their books in an annual cycle rather than a longer period."
The network has asked the DH to let high-performing PCTs carry surpluses for three to five years.
"It would avoid the temptation to pay people up front or spend money really quickly on things that aren't a priority," Mr Stout said.