Foundation trust regulator Monitor this afternoon moved to install a new chairman of Bolton FT after a major hole was uncovered in the finances of the troubled hospital trust.
In a letter to the trust’s current chairman Cliff Morris – the Labour leader of Bolton Council – Monitor ordered the foundation trust to appoint interim chairman David Wakefield to take over from next Tuesday (7 August).
The regulator had already placed Bolton FT in significant breach of its terms of authorisation in April, in response to repeated failures to meet national waiting targets and related governance failures.
But since that time Monitor has also become aware of the scale of financial problems facing the trust.
Bolton saw a “significant decline in financial performance” at the end of 2011-12, recording a full-year deficit of £1.9m against a planned surplus of £1.6m, the letter stated.
Even just weeks before the end of the financial year Bolton’s board was unaware its financial plans were at risk, telling Monitor on 16 March that it would deliver its planned surplus.
Monitor directed the trust to appoint external advisors to review its financial governance and financial position. The advisors, from consultancy PricewaterhouseCoopers, reported that the levels of recurrent savings achieved by both the trust’s 2010-11 and 2011-12 savings programmes had been “misreported”.
Discovery of the savings shortfall and cost overruns had led to “the trust carrying forward a significantly worse underlying deficit than previously identified”.
On 16 July Bolton submitted a revised three-year financial plan to Monitor based on the PwC review, which indicated that the trust “will deliver significant deficits in each of the next three years”.
The letter stated: “PwC has indicated that the deterioration in financial performance… was masked by material unsubstantiated accounting adjustments.
“These adjustments were able to be processed undetected as a consequence of significant financial governance and control weaknesses.”
The advisors had found “cultural and competency issues” in Bolton’s finance team, it continued, and “there was misreporting of the 2011-12 forecast outturn to the director of finance”.
The level of cash available to the trust had also undergone “a rapid deterioration” since the end of March, it added. “The trust is currently experiencing significant net cash outflows, and consequently the trust’s liquidity position is forecast to come under significant pressure in [the third quarter of] 2012, in spite of a cash advance from the [strategic health authority].”
Monitor has also directed the trust to appoint external advisors to help it develop a financial recovery plan, and an interim turnaround director.
Bolton FT issued a statement accepting that there had been “failings in performance in relation to its financial position”.
The unexpected deficit presented “a very challenging savings target for the current financial year, and potentially for the following few years”, it added. Its priority was “to stabilise its financial position without compromising patient care”.
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