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Audit Commission - NHS trusts and PCTs in good financial shape to face economic squeeze ahead

Financial performance across the NHS was mostly encouraging over the last financial year and health service bodies are in good shape to face the leaner years to come.

A new report from the Audit Commission - Auditors' Local Evaluation and Use of Resources: Summary Results for NHS Trusts and Primary Care Trusts 2009/10 - shows that an overall surplus of £1.5 billion was recorded by NHS trusts, primary care trusts (PCTs) and strategic health authorities. (The report does not cover NHS foundation trusts - see notes.)

Problems persist at a small percentage of NHS bodies: out of 260 bodies assessed, six trusts and four PCTs failed to achieve financial balance in 2009/10. No organisation had its accounts qualified on grounds of truth and fairness and there was no difference overall between draft and final accounts.

Local auditors and the Audit Commission began scoring NHS trust and PCT ability to manage their money in 2005/06. The national picture is one of sustained improvement over the last five years. Headline results in the last financial year show:

  • 94 per cent of NHS trusts met or exceeded minimum standards, compared to 63 per cent in 2005/06;
  • 74 per cent of NHS trusts were assessed as performing well or performing strongly, compared to 16 per cent in 2005/06;
  • 75 per cent of PCTs were performing above minimum requirements in managing their finances (it was 53 per cent in 2008/09, when a new tougher assessment was introduced); and

the number of NHS trusts scoring the lowest overall score is only seven, compared to 86 in 2005/06, while there are 11 top scorers compared with only two in 2005/06. Many top scorers during that period have also gone on to be foundation trusts which are outside the Commission's audit regime and are no longer counted in the figures.

Andy McKeon, Managing Director, Health, at the Audit Commission, said:

‘The NHS is mostly in good shape to face the certain tough times ahead. Strong financial management and resilience will be more important than ever considering the smaller increases in funding after this year, the changes set out in the White Paper and the intention to make £15-£20 billion in efficiency savings by 2014.

‘Improving services with less money and during a period of change will be a tough challenge, but the auditors' assessments show clear signs of sustained improvement in financial management in most NHS trusts and PCTs. And it's a real achievement that there was no difference overall between draft and final accounts.'

The use of resources assessment for PCTs, which is more demanding than the evaluation for NHS trusts, shows that six PCTs recorded the lowest overall score available in 2009/10, while only one PCT got the top score. Overall, however, PCTs have significantly improved their approach to managing their finances. Three quarters of PCTs were managing their finances well in 2009/10.

Notes for editors

  • The ALE assessments from the Audit Commission began in 2005/06 for both NHS trusts and PCTs. A new, tougher, ‘Use of Resources' assessment was introduced for PCTs in 2008/09. ALE and Use of Resources scores used to feed the former Healthcare Commission's, and latterly the Care Quality Commission's (CQC) annual health check. CQC is in discussion with the Department of Health around the future of this kind of ‘periodic assessment' of the NHS. The 2009/10 ALE and Use of Resources assessments are the last from the Audit Commission.
  • The Commission's auditors will now focus on the financial resilience of PCTs and NHS trusts, including their ability to achieve cost improvements. Auditors will still need to reach a conclusion on whether NHS trusts and PCTs have proper arrangements for achieving economy, efficiency and effectiveness in their use of resources. Auditors will also continue to address governance issues.
  • The ALE has five themes: financial reporting; financial management; financial standing; internal control; and value for money.
  • Use of resources has three themes: managing finances; governing the business; and managing resources.
  • The NHS, excluding foundation trusts, recorded a total revenue surplus of £1.5 billion for 2009/10, compared with £1.74 billion in 2008/09. This surplus represents about 2 per cent of the total NHS resources.
  • At the year-end, cash balances held by NHS trusts totalled £735 million (£837 million in 2008/09) and PCTs' cash balances totalled £18 million (£17 million last year).
  • Ten NHS bodies failed to achieve financial balance in 2009/10. They were:

Barking, Havering & Redbridge University Hospitals NHS Trust
South London Healthcare NHS Trust
Enfield PCT
North West London Hospitals NHS Trust
Peterborough PCT
Portsmouth Hospitals NHS Trust
Surrey PCT
Sutton and Merton PCT
Trafford Healthcare NHS Trust
West Middlesex University NHS Trust

For further information please contact:
Mark Nicholson
Media Relations Manager, Audit Commission
Millbank Tower, London SW1P 4HQ

Direct line 0844 798 2135  /  0207 166 2135
24hr Press line 0844 798 2128  Mobile 07813 038132 

E-mail m-nicholson@audit-commission.gov.uk

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