Review of Finance Action Plan

Joint Finance Group /Resource Work stream Meeting

10th December 2014

Author: - Sponsoring Director:-

Graham StewartKaty Lewis

Deputy Director of FinanceDirector of Finance

Recommendation:

The Joint Finance Group is asked to note the content of this updated action plan review and agree appropriate leads and timeframes for the highlighted actions and consider whether additional finance resource is required to complete the tasks identified.

Revised Finance Action Plan

Summary List of Key Actions:

  • Financial Governance
  • Financial Assurance
  • Audit
  • Financial Management/Reporting
  • Financial Planning
  • VAT
  • Capital
  • Accounting Standards

Review of progress to-date

A series of meetings and workshops have taken place reviewing the guidance drafted by the Integrated Resource Advisory Group (IRAG) and how best work streams suggested therein could be formulated into an action plan.

The vast majority of the work streams undertaken to date have related to demonstrating due diligence around the budgets for integration and the associated level of activity related to these baselines.

A review of 2013/14 out-turn initially identified the proposed resources available from both Council and Health Board functions deemed to be within the scope of integration.

An initial review of 2014/15 baseline budgets within the scope of integration, alongside the associated level of activity undertaken within these areas, but as yet, this work stream remains outstanding with nothing shared between members.

The Joint Finance Group has now been tasked with revisiting the finance action plan with a view to re-prioritising the key action points and agreeing leads and timeframes to each action point.

This document proposes the next steps that the Joint Finance Group should consider in the next meeting and agree how best to proceed with the actions identified below.

Next Steps

The following section breaks the current action plan down into the key areas for progressing the Resource work stream to the next level, focussing on the actions that need to be in place before April 2015 initially, followed by those that will continue to be progressed after April 2015.

Pre April 2015

Financial Governance

  • Identification and agreement of risk share proposals to be managed through reserves and how this would be actioned through the financial management process.
  • Key lead – Susan McMeckan (HB), Angela Paterson (LA)
  • Timeframe – End February 2015
  • Identification and assessment of key financial risks affecting changes in capacity and the degree to which these risks are borne by either party. (Based upon forecast 2014-15 out-turn).
  • Key lead – Graham Stewart (HB), Sean Barrett (LA)
  • Timeframe – End February 2015

Financial Assurance

  • Establishment of financial governance systems for delegated resources, reviewing the scheme of delegation and producing a new scheme of delegation to encompass both health and social care integration arrangements.
  • This is dependent upon the production of the Integration Scheme, currently being progressed.
  • Key lead – Susan McMeckan (HB), Angela Paterson (LA)
  • Timeframe – Joint Finance Group to advise
  • Development of financial regulation and review of Standing Financial Instructions (SFIs)/Standing Orders (SOs) to incorporate changes resulting from financial integration arrangements. This will include developing day-to-day operating financial procedures in accordance with existing SFIs/SOs.
  • Key lead – Susan McMeckan (HB), Angela Paterson (LA)
  • Timeframe – Joint Finance Group to advise

Financial Management/Reporting

  • Agreement for how the integrated budget is to be compiled and shared along with the relevant planned levels of activity requires further refinement. At the moment work has been progressed within both partner organisations. This has involved looking retrospectively at 2013-14 out-turn as well as building 2014-15 recurring budget baselines alongside planned activity levels.
  • A discussion is required at the next Joint Finance Group so as to clarify the approach going forwards in compiling the relevant information necessary to include within budget baselines and understanding the “gap analysis” of issues still to be resolved.
  • This will necessitate agreeing the functions and services to be included within shared budget resources of the Integrated Joint Board going forwards.
  • Key lead – Joint Finance Group
  • Timeframe – December 10th
  • Follow-up leads – Graham Stewart (HB), Sean Barrett (LA)
  • End February 2015
  • Budget-setting Review for 2015/16. A review is required to agree a budget setting timetable for the delivery of 2015/16. Identification of the impact of different approaches to financial management (e.g. accruals and prepayment adjustments) will need to be assessed and understood so as to feed in to Financial Reporting Work streams and Variance analysis.
  • In addition, a review of the in-year reporting procedures for both organisations is required so as to assess and identify areas of inconsistency.
  • Key lead – Graham Stewart (HB), Sean Barrett (LA)
  • Timeframe – End March 2015
  • Consideration of whether overheads at this time need to be allocated to services and functions as defined as integrated budgets. If not agreement on how overheads are to be treated in future and what work streams are required to agree the methodology for budget setting.
  • Key lead – Joint Finance Group
  • Timeframe – December 10th
  • Linked to the identification of financial risk and risk share proposals within ‘Financial Governance’, agreement of the process for managing in-year financial performance of the integrated budget. This may well require further clarification from the Strategic plan/Integration Scheme, but a clear level of understanding is require to agree the processes involved when reporting financial performance.
  • Key lead – Joint Finance Group
  • Timeframe – December 10th
  • A review of the existing Management Accounts practices within both partner organisations, identifying best practice and areas of differing practices that could impact upon the compilation of financial management reports as well as the transparency and robustness of regular in-year reporting (e.g. timely and appropriate information and forecasting capability).
  • Key lead – Graham Stewart/Helen Brown (HB), Sean Barrett (LA)
  • Timeframe – Mid February 2015
  • Building upon this, a review of the chart of accounts/hierarchy of general ledger systems would be crucial in ensuring appropriate financial reporting is deliverable before live shadow reporting is commenced. This may mean agreeing a mapping model of cost centre and account codes so as to enable preparation of budget statements for locality managers.
  • Key lead – Graham Stewart/Helen Brown (HB), Sean Barrett (LA)
  • Timeframe – End March 2015
  • Agreement on the monthly reporting timetables across both partner organisations so as to ensure regular reporting of financial information and a joint reporting timetable for the future.
  • In addition an agreement on the format and content of the budget statements issued is required to ensure joined up reporting is feasible.
  • Key lead – Graham Stewart/Helen (HB), Sean Barrett (LA)
  • Timeframe – End March 2015
  • Arrangements and appropriate authorisation protocols for virements of budgets within the integrated resource will need to be specified within the scheme of delegation so as to enable a virement process to be established.
  • Key lead – Joint Finance Group
  • Timeframe – December 10th

Financial Planning

  • The majority of the guidance reflected within IRAG document necessitates the integration plan to have been completed. It is assumed that the requirements of financial planning will build on the definitions and content contained within the integration plan.
  • The guidance requests that a protocol is agreed so as to enable information to be shared between both organisations as well as how the information is to be accessed by/provided to the Joint Board.
  • Key lead – Joint Finance Group
  • Timeframe – December 10th
  • Agreement of delegated functions as specified within the Integration plan. From a financial planning perspective it is right and proper to scope out the budgets that will be included within integration and what will not. Resolutions to questions such as, “what services will be hosted in specific localities?”; “what will be considered for inclusion for the future?” and “how efficiency savings and targets are to redressed?” should all be agreed prior to the preparation of joint financial information.
  • Key lead – Joint Finance Group
  • Timeframe – December 10th
  • Key lead – JIB(re confirmation of delegated functions)
  • Agreement on dispute resolution whilst contained within Financial Assurance in the review of SFIs, will need to be formally documented and agreed within the integration scheme.
  • Key lead – Joint Finance Group
  • Timeframe – December 10th
  • Key lead – JIB(re specification of integration scheme)
  • Similarly to the above, a process for agreeing the treatment of under/over spends is required in helping to provide input into forming the Strategic plan for approval at JIB.
  • Other areas that will provide input into the Strategic plan will include;
  • Agreed process for setting initial allocations;
  • Agreed process for agreeing subsequent allocations;
  • Agreed process for revisiting allocations in-year (in extremes); and
  • Input into drafting and agreeing the Integration plan.
  • Key lead – Joint Finance Group ???
  • Timeframe – December 10th

Post April 2015

Financial Governance

  • Annual Accounts timetables to be reviewed to identify difference between partner organisations.
  • Key lead – Susan McMeckan (HB), Angela Paterson (LA)
  • Timeframe – Summer 2015
  • Accounting treatment of non-current assets, owned or otherwise to deliver services. This may require a Capital review by each organisation to determine the ownership of assets and associated liabilities.
  • Key lead – Susan McMeckan (HB), Angela Paterson (LA)
  • Timeframe – Summer 2015
  • Appropriate provision for insurance according to the risk management strategy. Both organisation’s position on insurance currently and going forward will need clarification.
  • Key lead – Susan McMeckan (HB), Angela Paterson (LA)
  • Timeframe – Autumn 2015

Audit

  • Review of audit plans in each organisation, identify areas of overlap and what a joint plan would look like going forward.
  • Key lead – Susan McMeckan (HB), Angela Paterson (LA)
  • Timeframe –Summer 2015
  • Jointly appoint external auditors for Integration Board.
  • Key lead – IJB ??
  • Timeframe – Winter 2015
  • Investigate the requirement of a joint audit committee for JIB.
  • Key lead – IJB ??
  • Timeframe – Winter 2015

Financial Management/Reporting

  • Review of both organisations Local Delivery Plans (LDPs) to include a medium term financial plan (3 years).
  • Key lead – Katy Lewis (HB), Paul Garrett (LA)
  • Timeframe – Winter 2015
  • Linked to ‘Financial Planning’ section above, a review of the scope of budgets to be included within integration and what will be considered in the future.
  • Key lead – IJB
  • Timeframe – Summer 2015
  • A review of the methods for monitoring and analysing variances with a joint approach for Integrated services agreed.
  • Key lead – Joint Finance Group
  • Timeframe – Summer 2015
  • Functionality defined HB hospital wide budgets should be disaggregated across partnership populations using patient hospital activity valued on a unit cost basis. A methodology for defining the best way of doing this is required through developing a costing methodology for allocation of resource.
  • Key lead – Graham Stewart (HB), Angela Paterson (LA)
  • Timeframe – Autumn 2015
  • As the Joint Board will produce its own statutory set of accounts, Reporting requirements will be specified in regulation. However an interim consolidation process will be required to be created to ensure year end closure of accounts.
  • Key lead – Susan McMeckan (HB), Angela Paterson (LA)
  • Timeframe – Autumn 2015
  • Timetable for preparing the financial statement should meet audit and publication timetables.Proposed timetables to be drafted and agreed between both orgainsations.
  • Key lead – Susan McMeckan (HB), Angela Paterson (LA)
  • Timeframe – Autumn 2015
  • Revised arrangements to develop HB (SFR) and LA (LFR3) are being developed – currently awaiting guidance from Scottish Government.
  • TBC

VAT

  • Review of VAT status within HB and LA regarding the following;
  • VAT reclaims
  • VAT treatment of delegated services
  • VAT on capital
  • Key lead – Susan McMeckan (HB), Angela Paterson (LA)
  • Timeframe – Summer 2015

Capital

  • Confirmation of use of non-current assets within integrated scheme.
  • Ensure best use of existing resources and develop appropriate capital programmes and asset management.
  • Process agreed for assessing HB and LA capital plans jointly (capital plans will remain with HB/LA for the moment).
  • Payments from LA to HB to cover revenue costs of assets may be included in integrated budgets – pros and cons to be considered.
  • Key lead – Susan McMeckan (HB), Angela Paterson (LA)
  • Timeframe – Summer 2015

Accounting Standards – to note

  • Accounting Standards as adapted for the public sector will apply to the joint board.
  • LA and HB to continue to use existing guidance in preparation of their financial statements.
  • IRFS 11 and IFRS 12 (Joint arrangements and Disclosure of interests in other entities) are planned to be adopted in their application form for public sector in 2014-15. This will affect the detail of the disclosure within the accounts.

Summary

The Joint Finance Group is requested to review this document and agree the key leads and relevant timeframes for completion of the identified tasks contained within the action plan.

In certain areas highlighted above, further discussion and reflection is required by the Joint Finance Group as a whole, to identify the appropriate courses of actions in achieving the proposed finance action plan.

In certain areas professional advice and collaboration with other Health Boards and Local Authorities may be required to ensure work streams are progressed sufficiently.

The Joint Finance Group is also asked to consider the current level of resource available to progress these work streams and determine whether additional finance support is required to ensure tasks and actions are completed within expected timeframes.