ASSESSMENT Five-part measure will judge trusts on more than whether they break even

Published: 01/09/2005, Volume II5, No. 5971 Page 8

Finance directors have welcomed the decision by the Healthcare Commission to adopt what they describe as a more comprehensive approach to examining the work of their departments.

A method of scoring non-foundation trusts for financial management devised by the Audit Commission will replace the old standard in the starratings which only judged them on whether or not they broke even. It will make up the 'use of resources' section of the Healthcare Commission's assessment framework for 2005-06.

A new auditors' local evaluation assessment (ALE) will give trusts a score of one (weak) to four (strong) in five areas: financial reporting, financial management, financial standing, internal control and value for money.

The Audit Commission will then calculate an overall score. It has just completed a consultation on how this should be calculated. It has not yet decided whether any of the areas will receive a greater weighting, although financial standing appears to be considered the most important.

Healthcare Commission head of methods for use of resources David Bawden added: 'We are still working on what kind of weighting the use of resources section [which includes the Audit Commission's finance ratings] will be given in the final [overall] ratings.

'There is a provisional ruling that a 'weak' performance on use of resources means that a trust will not be able to become 'excellent' overall.

'What it enables us to do is have a much richer assessment of financial performance. What it means is that we can get something into the annual rating, but without adding any extra burden on the NHS.' But he added: '[I am not too sure] whether the NHS is really aware that this is happening because we are getting very few questions about this at the moment. The Audit Commission has consulted widely on what it is proposing without any real adverse comments.' East Devon primary care trust deputy finance director Mark Neville-Smith described the previous standards as a 'blunt tool'.

He said: 'In the past...trusts might have done things that wouldn't have been for the benefit of patients or for the way services ought to be carried out, in an effort to break even.' Southampton University Hospitals trust finance director Ben Lloyd said ALE 'is a lot more rounded'.

He added: 'Under the old star-ratings system a one-off benefit might enable you to break even whereas the underlying deficit might be awful.' But David Bawden warned trusts that breaking even was still of vital importance. 'If trusts do not achieve financial balance on the proposals for which the Audit Commission is scoring, then they would be weak in the use of resources.' Worcestershire Acute Hospitals trust finance director David Moon agreed that the new system was more comprehensive. 'You could have the best systems in the world and still have financial standing problems. If That is bad management then I have no problem with that, but if it is an historic lack of funding I think It is a different matter.' Foundation trusts will be subjected to a similar assessment via Monitor's financial risk rating.