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Wales Audit Office - Some positive progress but auditor general unable to give a clean bill of health to four health board accounts for fourth year running

Four of the seven health boards in Wales once again failed to meet their financial duty to break-even over a three-year period, according to their 2019-20 accounts published last week. 

Across NHS Wales, the total in-year deficit fell from £96 million in 2018-19 to £89 million. The three-year cumulative over-spend across the NHS reduced from £411 million to £352 million.

These figures are all set out in a new data tool [opens in new window] that the Auditor General has published..

The Welsh Government increased its revenue spending on health by £650 million for 2019-20. Once inflation is factored in, that translated to a 6.8% increase in real terms. However, this extra funding included several one-off allocations for specific services, rather than a general increase for the day-to-day running of the NHS.  

These allocations include £170 million to cover additional pension costs, £95 million for pay awards and £52 million to support improved performance, particularly for elective waiting times.  The Welsh Government also allocated an extra £192 million to help integrate health and social care and wider transformation of services, some of which will be shared with local government and other partners. The Welsh Government expects this investment to result in longer-term improvements to the cost-effectiveness of health and care services.

Although it started in February, the immediate effects of the COVID-19 pandemic on NHS Wales finances were limited.  Overall, NHS bodies’ expenditure during the final quarter of 2019-20 remained largely in line with their pre-COVID forecasts.  However, we expect the significant additional COVID-19 related spending to have a major impact in the 2020-21 financial year.   

Three of the bodies that failed to meet their financial duty to break even over three years – Hywel Dda University Health Board (UHB), Betsi Cadwaladr UHB and Swansea Bay UHB (formerly known as Abertawe Bro Morgannwg UHB) – also failed to meet their legal duty to have an approved three-year plan. As a result, the Auditor General has had to qualify his audit opinion on the accounts of all three bodies.

Cardiff and Vale UHB has made positive progress. It broke-even on its annual budget for the first time since 2015-16. It also now has an approved three-year plan to 2021-22. Nevertheless, the fact that its budgets still do not balance, as required, over the three-year period to 31 March 2020 means that the Auditor General has had to qualify his audit opinion on the 2019-20 accounts. 

The three other health boards, three NHS trusts and one special health authority all met their duties to break-even and have had approved plans in place. 

Hywel Dda UHB and Betsi Cadwaladr UHB largely sustained their financial position compared to last year, recording similar in-year deficits but failing to meet the reduced deficit ‘control totals’ set for them by the Welsh Government. However, the finances of Swansea Bay UHB deteriorated. Having set out to break-even, the health board recorded an in-year deficit of £16.3 million. 

Auditor General, Adrian Crompton said: Whilst any improvement in the overall financial health of NHS Wales is to be welcomed, I am concerned that several health boards continue to record annual deficits, despite some significant increases in their funding. 

Looking ahead, NHS Wales clearly faces a huge challenge in trying to improve its financial performance whilst also grappling with the exceptional impacts of the Covid-19 pandemic.  I will be closely monitoring its progress throughout 2020-21 and publishing updates as appropriate.

Notes to Editors:

  • In his audit reports on NHS Wales bodies, the Auditor General drew attention to the impact of the December 2019 Ministerial Direction [opens in new window] on the funding of pension tax liabilities for NHS clinicians, for which all of the relevant NHS bodies have disclosed contingent liabilities.
  • The Auditor General was required to limit the scope of his audit opinion on the accounts of Cardiff and Vale UHB as, due to lockdown restrictions, he was unable to obtain audit evidence regarding the valuation of the UHB’s stocks at 31 March 2020.
  • In his audit report on Cardiff and Vale UHB, the Auditor General also drew attention to a material uncertainty regarding the valuation of newly-constructed fixed assets brought into service during 2019-20.  In line with Covid-19 related specific guidance issued by their professional institute, the UHB’s valuer had caveated their professional opinion on certain land and buildings assets that, due to lockdown restrictions, they had been unable to inspect as at the 31 March 2020 date of their valuation report and for which no suitable market comparators existed. 
  • The Auditor General is the independent statutory external auditor of the devolved Welsh public sector. He is responsible for the annual audit of the majority of the public money spent in Wales, including the £15 billion of funds that are voted on annually by the Welsh Parliament. Elements of this funding are passed by the Welsh Government to the NHS in Wales (over £7 billion) and to local government (over £4 billion).
  • The audit independence of the Auditor General is of paramount importance. He is appointed by the Queen, and his audit work is not subject to direction or control by the Welsh Parliament or government.
  • The Wales Audit Office (WAO) is a corporate body consisting of a nine member statutory Board which employs staff and provides other resources to the Auditor General, who is also the Board’s Chief Executive and Accounting Officer. The Board monitors and advises the Auditor General, regarding the exercise of his functions.
  • Audit Wales is the umbrella name for the Auditor General for Wales and the Wales Audit Office. Audit Wales is a registered trademark, but it is not a legal entity in itself.
Original article link: https://www.audit.wales/news/some-positive-progress-auditor-general-unable-give-clean-bill-health-four-health-board-accounts

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