FINANCE REPORT TO THE BOARD
8 MONTHSENDED 30 NOVEMBER 2016
Contents
PGESummary financial position / 3
Overview of segmental performance / 4
Overall expenditure trends / 5-8
Key assumptions and risks / 9
Balance sheet / 10-12
Capital expenditure / 13-14
Appendices
Appendix 1 Detailed segmental performance / 15-21
Summary financial position
The overall reported surplus for the first eight months of the 2016/17 financial year is £26k and we continue to forecast a year end break even position. The position for each segment of the organisation is as follows:
Core Services / ITS Programme / Trading / Managed Services / Total£'000 / £'000 / £'000 / £'000 / £'000
Income / 39,571 / 10,504 / 31,534 / 14,401 / 96,010
Payroll / 28,980 / 1,192 / - / 989 / 31,161
Non Pay / 10,565 / 9,312 / 31,534 / 13,412 / 64,823
Total Expenditure / 39,545 / 10,504 / 31,534 / 14,401 / 95,984
Surplus/(Deficit) / 26 / - / - / - / 26
Mth 8 2015/16 / 124
The organisation had budgeted for a surplus of £114k for this point in the financial year so results are slightly down on this due to the continued front loading of some elements of non-recurrent expenditure approved by SMT.
We continue to produce a rolling year end forecast and this supports a break even position for the organisation.
Segmental performance
The performance of each of the organisation’s segments is detailed in Appendix 1. In summary the main trends are as follows:
Core Services
Core services are reporting a small surplus position, slightly below the budgeted level for this point in the year. Vacancy levels in some of the larger staffing areas including FPS, PALS and ITS continue to lead to an under spend in pay, which is off-set by an over-spend in non-pay due to other non-recurrent expenditure.
ITS programme
The ITS revenue programme spend to date is £10.5m of a planned £15m for the year - this covers over 90 individual projects / schemes, and the profile of expenditure for these schemes is monitored through a project management tool. The majority of this spend relates to ongoing revenue commitments which can be forecast with a degree of certainty.
Trading
For the first 8 months trading income and expenditure is over £31m – this is continuing to grow above budgeted levels but all expenditure is matched with income.
Managed services
These services, consisting of student nurse bursaries, healthy start programme, SUMDE payments for medical and dental training, HSC wide management trainee programme, the HSC interpreting service and sundry recharges to other bodies where BSO is the employer of convenience, are all fully funded through either RRL allocations or straight recharges to HSC customers. A break even position is therefore assumed for these services – we are currently assuming approx. £14m full year of RRL in respect of these services. Latest projections would indicate the Healthy Start scheme is on track to underspend this year, and DOH have been informed.
Overall expenditure trends
Pay expenditure
Approximately 52% of BSO’s annual expenditureis on pay costs. Total pay expenditure for the first 8months of the year was £31.2m, against a budget of £33.3m. A detailed analysis of variances against budget is presented in Appendix 1.The pay slippage has remained at previous month’s levels, and is averaging approx. £270k per month, equivalent to approx. 130 posts. The largest number of vacancies are within PALS, ITS and FPS.
The largest areas in terms of pay expenditure are shown below – together they represent over 80% of the pay bill.The graph illustrates that expenditure continues in a stable trend, with no unexpected spikes.
Non pay expenditure (excluding cost of goods sold)
Excluding cost of goods sold through PALS (which is directly recharged to HSC customers), non pay expenditure within BSO for the period to 30 November 2016, was £33.3m compared to a budget of £32.2m.A detailed analysis of variance against budget is contained in Appendix 1.In some areas such as managed services, ITS and SBRI, the non-pay over or under spend is directly matched by a under or over receipt in income. Within other directorates approved non-recurrent expenditure is driving the overspend. The net position is an overall negative variance of over £1m, which is balanced by the large positive pay variance.
The two areas showing most fluctuations this month are ITS programme spend which has dipped slightly compared to month 7, and bursaries which has been impacted by new student nursing intakes.
Income (excluding income from goods sold through PALS)Income within BSO for the first 8 months of the year totalled £64.4m, against a budget of £65.7m – a shortfall of £1.3m (same as month 6 and 7), This is due largely to an under-receipt against budgeted ITS programme income and SBRI project income, matched by a under-spend in non-pay in these areas (see above).A detailed analysis of variance against budget is presented in Appendix 1.The top nine areas for income generation account for over 80% of the total income, and the monthly trendis shown below.
Trading Account
BSO trading for the eight months to end of November 2016 was £31.5m, with income and expenditure fully matched as can be seen below.
Assumptions and risks
The BSO assumes that all services which are provided on behalf of the Department of Health will be fully funded. To this end we are currently assuming match funding in the area of nursing bursaries, healthy start, SUMDE and a number of smaller areas. In total we are assuming income in the region of £18m, which would be normal for this time of the year.
The key risks to our ability to deliver a year end break even position were outlined in our 2016/17 budget paper. The current status of these is as follows:
Key risk / Current statusThe imposition of further savings targets during 2016/17 / BSO have now been asked to scenario plan around a range of RRL reductions for 2017/18.
The final agreement of HSC bodies to management fee charges. / Management fees are being invoiced and received, with minimal queries.
Any further resource requirements to resolve emerging issues within the shared services charges. / BSO continues to work to stabilise staffing in shared services centre, with permanent appointments in both payroll and recruitment being made. Some non-recurrent support has been put in place for particularly payroll and recruitment.
Increasing pressure on the BSO’s customers leading to an inability to accept SLA charges. / SLA meetings have now been completed for 2016/17 to agree basis and amount of charges. Likely to continue as a risk into 2017/18.
Inability to deliver current savings requirements due to demand led pressures / Savings are being delivered out according to plan.
Potential impact to BSO of any DOH decision regarding the further expansion of shared services. / BSO have been asked to carry out further scoping work with regard to ITS, and also the occupational health service .No financial impact is likely in 2016/17.
Balance sheet position at 30th November 2016
30-Nov-16£000's / £000's / £000's
Non Current Assets / Cost / Deprec.
Land Cost / 2,730 / 0
Buildings Cost / 9,447 / (1,116)
Assets Under Construction / 5,210 / 0
Plant and Machinery / 231 / (155)
Transport Equipment / 1,408 / (797)
Information Technology / 46,630 / (30,309)
Furniture and Fittings / 1,730 / (515)
67,386 / (32,892) / 34,494
Intangible Software / 9,273 / (4,735)
Intangible Software Licenses / 79,798 / (34,566)
89,071 / (39,301) / 49,770
84,264
Current Assets
Inventories / 3,531
Trade & other receivables / 22,937
Prepayments and accrued income / 1,023
Commercial Banks and cash in hand / 0
27,491
TOTAL ASSETS / 111,755
Current Liabilities
Other taxation and social security / 0
Bank overdraft / 3,806
Trade revenue & capital payables / 23,803
Accruals and deferred income / 5,862
33,471
NON CURRENT ASSETS LESS NET CURRENT ASSETS/LIABILITIES / 78,284
Non Current Liabilities
Other Payables, accruals and deferred income / 0
Provisions
Prov Former Dir / 72
Prov Other Staff / 290
Prov Other / 107
469
ASSETS LESS LIABILITIES / 77,815
TAXPAYERS' EQUITY
Revaluation reserve / 4,745
General reserve B/fwd / 79,862
Grant In Aid less RRL / 2,220
Non cash - Depreciation etc / (9,038)
Non cash - Provisions arising / 0
Surplus in Period / 26
(6,792)
77,815
Inventories
The stock balance at 30 November 2016 was £3.5m (31 October 2016: £3.6m).
Trade & other receivables
The balance of trade receivables and prepayments at 30 November 2016 was £23.9m (31 October 2016: £18.9m). This balance is comprised of trade debt including inter-HSC, balances owed by client NDPBs and VAT.
Bank & cash / overdraft
The reconciled bank overdraft position of £3.8m includes BSO No 1 and No 2 accounts and the Central accounts which are managed by BSO. Also included is a petty cash balance of £1k.
Trade & other payables
The balance of trade and other payables 30 November 2016 was £29.7m (31 October 2016: £24.5m). The balance also includes an amount owed to DoH (£6.9m in October 2016).
The balance with DoH represents cash drawn from DOH to fund BSO’s working capital requirements and movements relate in particular to FPS expenditure and the respective cash drawn. This balance can fluctuate significantly from month to month.
Capital Position as at 30 November 2016
BSO receives capital funding from a number of sources, and for a range of different purposes – the current status of these is as follows:
CRL approved budget / Cumulative spend – Mth 8£’000 / £’000
ITS programme (Note 1) / 8,000 / 7,719
General capital (Note 2) / 1,000 / 17
Upgrade independent contractor / 50 / 50
BSTP / 264 / 139
Pension Reform / 247 / 65
MAGIC (Note 3) / 162 / 67
9,723 / 8,057
Note 1 ITS programme
ITS planned capital spend is expected to be £9.66m of which approval has been received to date for £8m. The largest element of this expenditure relates to the new data centres (approx.£7.5m). ITS programme capital spend is regularly monitored through programme review meetings with HSCB.
Note 2 General capital
BSO bid for just over £1.1m of general capital and general IT funds and have now received confirmation of funding of £1m, to include £290k received 9th December relating to enhancements to BSO IT infrastructure and desirable bids for trucks (PALS) being approved. One other desirable bid remains unapproved for replacement trucks for PALS. There has been £16k expenditure this month on the approved items and a number of procurement processes in relation to the other capital approvals have been completed.
Note 3Mobile Assistance for Groups and Individuals within the Community – Stroke (MAGIC).
BSO received approval for the business case for Mobile Assistance for Groups and Individuals within the Community – Stroke (MAGIC) in 2015/16 for £647k over a 5 year period, of which £162k relates to the second year of funding in 2016/17. Expenditure on the project is £67k as at 30 November 2016.
Appendix 1 Detailed Divisional performance
Table1 / Summary of budgeted and actual outturn
2 / Analysis of core services
3 / Analysis of operations directorate
4 / Analysis of customer care and performance directorate
5 / Analysis of other areas
6 / Analysis of managed services
TABLE 1 SUMMARY OF BUDGETED AND ACTUAL OUTTURN
TABLE 2 ANALYSIS OF CORE SERVICES
TABLE 3 ANALYSIS OF OPERATIONS DIRECTORATE
TABLE 4 ANALYSIS OF CUSTOMER CARE AND PERFORMANCE DIRECTORATE
TABLE 5 ANALYSIS OF OTHER AREAS
TABLE 6 ANALYSIS OF MANAGED SERVICES
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