Paper BSO 80/2017

FINANCE REPORT TO THE BOARD

PERIOD ENDED 30th September 2017

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Paper BSO 80/2017

Contents

PGE

Summary financial position 3

Overview of segmental performance 4

Overall expenditure trends 5-8

Key assumptions and risks 9-10

Balance sheet 12-13

Capital expenditure 14-15

Appendices

Appendix 1 Detailed segmental performance 16-22

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Summary financial position

The reported surplus for the first half of the financial year is £46k and we are continuing to forecast a break-even position.

The Month 6 position for each segment of the organisation is as follows:

Core Services

ITS Programme Trading Managed Services Total

£'000 £'000 £'000 £'000 £'000Income 30,701 7,563 22,798 11,228 72,290Payroll 22,800 915 - 711 24,426Non Pay 7,826 6,648 22,798 10,546 47,818Total Expenditure 30,626 7,563 22,798 11,257 72,244Surplus/(Deficit) 75 - - (29) 46

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Segmental performance

The performance of each of the organisation’s segments is detailed in Appendix 1. Emerging issues and expenditure trends are summarised below:

Core Services

Core services are showing an overall pay surplus, due to ongoing vacancies within PALS and FPS in particular – this is balanced out with the planned non-recurrent non-pay expenditure which will fall in the latter half of the financial year.

ITS programme

The ITS revenue programme spend for the first six months is £7.6m and full funding for this is assumed. The revenue programme budget for the year is approximately £16m, and monthly review meetings of programme expenditure (both capital and revenue) continue.

Trading

Trading income and expenditure is around £23m for the first half of the financial year.

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. Full funding is currently assumed against all these with the exception of regional trainees where we are aware funding will be insufficient to cover costs, and we are recognising a small deficit.

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Overall expenditure trends

Pay expenditure (Core services)

Approximately 75% of BSO’s core services annual expenditure is on pay costs. Total pay expenditure for core services for the first six months was £22.8m, against a budget of £23.9m, an underspend of £1.1m, reflecting continuing vacancy levels across some of the larger payroll areas such as ITS, PALS and FPS. A detailed analysis of variances against budget is presented in Appendix 1. The level of vacancies within core services had dropped to about 8% this month, with staff numbers in PALS and ITS increasing in month. The graph below shows the variance against budget for each of the largest payroll areas within core services – it can be seen that PALS has the highest level of underspend with shared services and legal services continuing to show a slight overspend.

PROCUREMENT & LO

GISTICS SERV

SHARED SERVICES

FAMILY PRACTITIO

NER SERVICE

TECHNOLOGY SERVICES

LEGAL DIRECTORATE

HSC LC &

HSC CEC

FINANCE DIRECTORATE

0.00 1,000,000.00 2,000,000.00 3,000,000.00 4,000,000.00 5,000,000.00 6,000,000.00

Analysis of budget vs actual core pay spend by area for six months to end of September 2017

Budget £ Actual £

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Non pay expenditure (core services)

Expenditure for the first half of the year on non-pay within core services was £7.8m, against a budget of £6.8m, an over-spend of £1m – similar levels to prior months. The largest area of overspend is within ‘ other’ – which reflects provision for future non-recurrent expenditure across a range of areas including PALS, shared services and ITS. As this expenditure is incurred it will be reflected in the appropriate directorate. A detailed analysis of expenditure compared to budget is provided in Appendix 1.The graph below shows variance against budget within the largest service areas. In line with last month, the overspends are within corporate services due to higher than budgeted reactive maintenance costs and within pensions services with a further month of increased GAD costs.

PROCUREMENT & LOGISTICS SERV

SHARED SERVICES HR & CORPORATE SERVICES

TECHNOLOGY SERVICES

PENSIONS FAMILY PRACTITIONER SERVICE

0.00

500,000.00

1,000,000.00

1,500,000.00

2,000,000.00

2,500,000.00

Analysis of budget vs actual core non pay expenditure by service area for the five months to end of September 2017

Budget £ Actual £

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Income (core services)

Core services income within BSO for the first six months of the year is £30.7m, compared to a budget of £30.8m, an under - receipt of just over £100k. A detailed analysis of service area variances against budget is given in Appendix 1.The budget vs actual income position for the largest areas of income generation is shown below:

TECHNOLOGY SERVICES PROCUREMENT & LOGISTICS SERV

FAMILY PRACTITIONER SERVICE

LEGAL DIRECTORATE SHARED SERVICES0.00

1,000,000.00

2,000,000.00

3,000,000.00

4,000,000.00

5,000,000.00

6,000,000.00

7,000,000.00

Core services actual income v's budget for 6 months to end of September 2017

Budget £ Actual £

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Non core services

Expenditure in relation to non-core services (including trading), for the first six months was approx. £41.7m, and funding has been assumed against nearly all of this (see below). With the exception of the Healthy Start programme, these services are funded non-recurrently.

As these services are provided by BSO on behalf of either DoH, HSCB or in the case of trading transactions, HSC customers, there is less risk to BSO in relation to this spend. The key emphasis for BSO is to ensure that we work closely with the organisations we provide these services for, and that any anticipated shortfalls or surpluses in indicative funding are highlighted as soon as possible.

The graph below shows the anticipated income and expenditure for the largest spend areas within these services. We are reporting a small deficit in respect of funding for management trainee scheme.

Trading ITS programme Bursaries Interpreting services Healthy start SUMDE0.00

5,000,000.00

10,000,000.00

15,000,000.00

20,000,000.00

25,000,000.00

Managed services - income and expenditure to end of September 2017

Month 6 Income £ Month 6 Expenditure £

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Assumptions and risks

The BSO assumes that all services which are provided on behalf of the Department of Health will be fully funded. We continue to report on a monthly basis to DoH on all assumed income. The key risks to our ability to deliver a year end break even position were outlined in our 2017/18 financial strategy. The current status of these is set out below.

Key risk Current statusUncertainty around the financial allocation for 2017/18, both those directly made to BSO, and the impact of reductions in allocations to BSO’s customers.

BSO have now been given an indicative RRL allocation and have agreed SLA figures for almost all customers. Our detailed month 4 forecast reflects a break-even position.

The regional financial position for the sector remains extremely challenging.

The continued limited internal audit assurance in respect of payroll shared services could lead to difficulties in securing payment for this service, and this could destabilise BSO’s overall financial position.

SLA meetings with nearly all customers have been completed and this issue remains high on the agenda. There are no current indications that any HSC body plans to withhold payment for any services.18 of the 19 SLAs have been signed and returned.

Inability to recurrently deliver RRL savings, particularly if a full year impact of these is notified to us in the latter part of the financial year.

BSO were notified in July 2017 of a 6.4%, or £254,000 reduction in our RRL allocation. Savings plans have been approved by both BSO Board and DoH.

Ability to fill current vacancies. BSO has over the last 2-3 years experienced levels of vacancies that have resulted in non-recurrent pay surpluses, that have had to be managed.

Our recently completed month 4 detailed forecast includes options for addressing pay surpluses, by planned investment in key areas such as shared services.

Securing confirmation of the levels of assumed income, particularly given current budgetary uncertainty.

All assumed income is included in monthly monitoring returns sent to DoH.

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Continued lack of funding for inescapable pressures. For the last number of years BSO has not received funding for pay and non-pay inflationary uplifts for RRL funded services. This has resulted in an additional savings target for the organisation, as these pressures cannot be avoided. For 2017/18 this also includes an inescapable apprenticeship levy.

The indicative RRL for 2017/18 does not include any pay and price uplift, and this continues to put pressure on RRL-funded services such as HSC Pensions Service. Our financial plan for 2017/18 did not assume receipt of a pay and price uplift from DoH.

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Balance sheet position at 30th September 2017

£000's £000's £000's

Non Current Assets Cost Deprec.Land Cost 2,865 0Buildings Cost 9,484 (1,400)Assets Under Construction 0 0Plant and Machinery 268 (179)Transport Equipment 1,423 (822)Information Technology 54,638 (36,184)Furniture and Fittings 1,951 (620)

70,629 (39,205) 31,424

Intangible Software 86,057 (42,087)Intangible Software Licenses 6,724 (5,594)Intangible Assets Under Construction 1,845 0

94,626 (47,681) 46,945

78,369Current AssetsInventories 3,964Trade & other receivables 18,854Prepayments and accrued income 1,068Commercial Banks and cash in hand 7,835

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31,721

TOTAL ASSETS 110,090

Current LiabilitiesOther taxation and social security (67)Bank overdraft 0Trade revenue & capital payables 8,103Accruals and deferred income 12,203

20,239

NON CURRENT ASSETS LESS NET CURRENT ASSETS/LIABILITIES 89,851

Non Current LiabilitiesOther Payables, accruals and deferred income 0

ProvisionsProv Former Dir 76Prov Other Staff 420Prov Other 154

650

ASSETS LESS LIABILITIES 89,201

TAXPAYERS' EQUITYRevaluation reserve 8,143General reserve B/fwd 77,037

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Grant In Aid less RRL 11,948Non cash - Depreciation etc (7,975)Non cash - Provisions arising 0Surplus in Period 48

4,02189,201

Inventories

The stock balance at 30 September 2017 was £4.0m (31 August 2017 £4.0m).

Trade & other receivables

The balance of trade receivables and prepayments at 30 September 2017 was £19.9m (31 August 2017 £20.4m). This balance is comprised of trade debt including inter-HSC, balances owed by client NDPBs and VAT.

Bank & cash / overdraft

The reconciled bank position of £7.8m 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 September 2017 was £20.3m (31 August 2017 was £11.9m).

Capital

General capital allocation

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The BSO had submitted both a list of IT capital bids and general capital bids to the HSCB and DoH respectively. The total bids submitted were £1,309k of which £525k related to HSCB IT capital bids and £784k related to DoH general capital bids. The DoH bids had been categorised as essential and desirable, with totals £745k and £39k respectively.

BSO subsequently submitted a revised list of DoH general capital bids for essential and desirable, £783k and £23k respectively totalling £806k. This change arose due two additional bids and removal of two bids due to bids withdrawn. Additional bids were for replacement of standard pallet racking at Boucher and upgrade tannoy system for Boucher. Bids withdrawn were VCON replacement and Vehicle Routeing Software & Hardware. The total bids submitted were £1,331k.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 6

£’000 £’000ITS programme (7.2) 1,000 344Cyber Security (7.3) 950 0General capital (7.4) 480 0BSTP(7.5) 209 7MAGIC (7.6) 162 56

2,801 407

ITS Programme

ITS planned capital spend is expected to be £3.05m of which BSO has received confirmed CRL of £1m. Expenditure on ITS programme was £344k as at 30 September 2017.

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Cyber Security

Cyber Security Programme Emergency Funding received confirmed CRL of £950k. There has been no spend on Cyber Security as at 30 September 2017 but £500k spend has been incurred in early October.

General capital

BSO bid for just over £1.3m of general capital of which £185k has been received at end of September 2017. There has been no spend on General Capital as at 30 September 2017.

BSTP

BSO received CRL confirmation of £209k in June 2017 in relation to BSTP under ITS General Capital which is managed by HSCB. Expenditure on BSTP was £7k at 30 September 2017.

Mobile Assistance for Groups and Individuals within the Community – Stroke (MAGIC).

BSO received approval for the business case for MAGIC in 2015/16 for £647k over a 5 year period, of which £162k relates to the third year of funding in 2017/18. Expenditure on the project is £56k as at 30 September 2017.

Appendix 1 Detailed Divisional performance

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Table1 Summary of budgeted and actual outturn2 Analysis of core services3 Analysis of operations directorate4 Analysis of customer care and performance directorate5 Analysis of other areas6 Analysis of managed services

TABLE 1 SUMMARY OF BUDGETED AND ACTUAL OUTTURN

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Bud Act Var Bud Act Var Bud Act Var Bud Act Var Bud Act VarTABLE 1 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000

IN MONTH

Income 5,151 5,118 (33) 635 635 0 3,337 3,337 0 1,965 1,965 0 11,088 11,055 (33)Pay 3,995 3,854 141 151 151 0 0 0 0 101 101 0 4,247 4,106 141 Non -pay 1,148 1,249 (101) 484 484 0 3,337 3,337 0 1,870 1,870 0 6,839 6,940 (101)Total 5,143 5,103 40 635 635 0 3,337 3,337 0 1,971 1,971 0 11,086 11,046 40 Surplus /(Deficit) 8 15 7 0 0 0 0 0 0 (6) (6) 0 2 9 7

YEAR TO DATE

Income 30,782 30,701 (81) 7,563 7,563 0 22,798 22,798 0 11,228 11,228 0 72,371 72,290 (81)Pay 23,883 22,800 1,083 915 915 0 0 0 0 711 711 0 25,509 24,426 1,083 Non-pay 6,883 7,826 (943) 6,648 6,648 0 22,798 22,798 0 10,546 10,546 0 46,875 47,818 (943)Total 30,766 30,626 140 7,563 7,563 0 22,798 22,798 0 11,257 11,257 0 72,384 72,244 140

Surplus /(Deficit) 16 75 59 0 0 0 0 0 0 (29) (29) 0 (13) 46 59

MANAGED SERVICES TOTAL BSOCORE SERVICES ITS PROGRAMME TRADING

TABLE 2 ANALYSIS OF CORE SERVICES

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TABLE 2Bud Act Var Bud Act Var Bud Act Var Bud Act Var

£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000

IN MONTH

Income 1,882 1,870 (12) 740 742 2 2,529 2,506 (23) 5,151 5,118 (33)Pay 1,464 1,347 117 636 637 (1) 1,895 1,870 25 3,995 3,854 141 Non -pay 438 492 (54) 119 106 13 591 651 (60) 1,148 1,249 (101)Total 1,902 1,839 63 755 743 12 2,486 2,521 (35) 5,143 5,103 40 Surplus /(Deficit) (20) 31 51 (15) (1) 14 43 (15) (58) 8 15 7

YEAR TO DATE

Income 11,281 11,284 3 4,420 4,422 2 15,081 14,995 (86) 30,782 30,701 (81)Pay 8,762 8,129 633 3,805 3,647 158 11,316 11,024 292 23,883 22,800 1,083 Non-pay 2,625 2,784 (159) 713 508 205 3,545 4,534 (989) 6,883 7,826 (943)Total 11,387 10,913 474 4,518 4,155 363 14,861 15,558 (697) 30,766 30,626 140 Surplus /(Deficit) (106) 371 477 (98) 267 365 220 (563) (783) 16 75 59

OPERATIONS CUSTOMER CARE&PERF OTHER DIRS TOTAL

TABLE 3 ANALYSIS OF OPERATIONS DIRECTORATE

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Bud Act Var Bud Act Var Bud Act Var Bud Act Var Bud Act Var Bud Act Var Bud Act VarTABLE 3 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000

IN MONTH

Income 1,060 1,130 70 147 65 (82) 119 119 0 493 493 0 63 63 0 0 0 0 1,882 1,870 (12)Pay 900 837 63 109 104 5 104 95 9 341 301 40 0 0 0 10 10 0 1,464 1,347 117 Non -pay 184 168 16 55 107 (52) 12 10 2 123 135 (12) 63 63 0 1 9 (8) 438 492 (54)Total 1,084 1,005 79 164 211 (47) 116 105 11 464 436 28 63 63 0 11 19 (8) 1,902 1,839 63 Surplus /(Deficit) (24) 125 149 (17) (146) (129) 3 14 11 29 57 28 0 0 0 (11) (19) (8) (20) 31 51

YEAR TO DATE

Income 6,357 6,441 84 870 788 (82) 717 717 0 2,959 2,960 1 375 375 0 3 3 0 11,281 11,284 3 Pay 5,395 5,028 367 643 585 58 621 598 23 2,042 1,858 184 0 0 0 61 60 1 8,762 8,129 633 Non-pay 1,103 1,087 16 332 468 (136) 72 70 2 736 772 (36) 376 376 0 6 11 (5) 2,625 2,784 (159)Total 6,498 6,115 383 975 1,053 (78) 693 668 25 2,778 2,630 148 376 376 0 67 71 (4) 11,387 10,913 474

Surplus /(Deficit) (141) 326 467 (105) (265) (160) 24 49 25 181 330 149 (1) (1) 0 (64) (68) (4) (106) 371 477

FPS SBRI Ops Dir TOTALPALS Pensions CFPS

TABLE 4 ANALYSIS OF CUSTOMER CARE AND PERFORMANCE DIRECTORATE

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Bud Act Var Bud Act Var Bud Act Var Bud Act Var Bud Act Var Bud Act VarTABLE 4 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000

IN MONTH

Income 1 1 0 8 8 0 15 15 0 19 18 (1) 697 700 3 740 742 2 Pay 9 9 0 14 15 (1) 13 13 0 18 10 8 582 590 (8) 636 637 (1)Non -pay 0 0 0 1 2 (1) 3 2 1 1 0 1 114 102 12 119 106 13 Total 9 9 0 15 17 (2) 16 15 1 19 10 9 696 692 4 755 743 12 Surplus /(Deficit) (8) (8) 0 (7) (9) (2) (1) 0 1 0 8 8 1 8 7 (15) (1) 14

YEAR TO DATE

Income 3 10 7 49 49 0 91 91 0 112 111 (1) 4,165 4,161 (4) 4,420 4,422 2 Pay 56 56 0 82 82 0 80 72 8 111 72 39 3,476 3,365 111 3,805 3,647 158 Non-pay 1 1 0 3 4 (1) 17 9 8 3 3 0 689 491 198 713 508 205 Total 57 57 0 85 86 (1) 97 81 16 114 75 39 4,165 3,856 309 4,518 4,155 363

Surplus /(Deficit) (54) (47) 7 (36) (37) (1) (6) 10 16 (2) 36 38 0 305 305 (98) 267 365

TOTALCCP DIR SERV IMPROV ORECNI EQUALITY ITS

TABLE 5 ANALYSIS OF OTHER AREAS

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Bud Act Var Bud Act Var Bud Act Var Bud Act Var Bud Act Var Bud Act Var Bud Act Var Bud Act Var Bud Act Var Bud Act Var Bud Act VarTABLE 5 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000

IN MONTH

Income 418 428 10 215 215 0 112 113 1 120 120 0 34 34 0 1,056 1,007 (49) 209 170 (39) 288 282 (6) 21 21 0 56 116 60 2,529 2,506 (23)Pay 371 378 (7) 102 94 8 106 101 5 121 117 4 38 36 2 720 743 (23) 155 139 16 252 239 13 13 11 2 17 12 5 1,895 1,870 25 Non -pay 41 50 (9) 112 119 (7) 9 11 (2) 5 2 3 2 2 0 336 264 72 54 20 34 43 31 12 4 0 4 (15) 152 (167) 591 651 (60)Total 412 428 (16) 214 213 1 115 112 3 126 119 7 40 38 2 1,056 1,007 49 209 159 50 295 270 25 17 11 6 2 164 (162) 2,486 2,521 (35)

Surplus / (Deficit) 6 0 (6) 1 2 1 (3) 1 4 (6) 1 7 (6) (4) 2 0 0 0 0 11 11 (7) 12 19 4 10 6 54 (48) (102) 43 (15) (58)

YEAR TO DATE

Income 2,506 2,557 51 1,288 1,288 0 671 677 6 721 721 0 202 170 (32) 6,249 6,247 (2) 1,254 1,066 (188) 1,729 1,748 19 123 123 0 338 398 60 15,081 14,995 (86)Pay 2,223 2,259 (36) 609 546 63 633 588 45 727 659 68 230 196 34 4,232 4,320 (88) 929 843 86 1,508 1,424 84 123 112 11 102 77 25 11,316 11,024 292 Non-pay 245 269 (24) 670 720 (50) 54 48 6 30 19 11 11 12 (1) 2,017 1,927 90 322 294 28 259 220 39 24 0 24 (87) 1,025 (1,112) 3,545 4,534 (989)Total 2,468 2,528 (60) 1,279 1,266 13 687 636 51 757 678 79 241 208 33 6,249 6,247 2 1,251 1,137 114 1,767 1,644 123 147 112 35 15 1,102 (1,087) 14,861 15,558 (697)

Surplus / (Deficit) 38 29 (9) 9 22 13 (16) 41 57 (36) 43 79 (39) (38) 1 0 0 0 3 (71) (74) (38) 104 142 (24) 11 35 323 (704) (1,027) 220 (563) (783)

LEGAL HRCS FINANCE OTHER TOTALBSTPINTERNAL AUDIT CEO SHARED SERVICES HSC-LC HSC-CEC

NB: The deficit within ‘ other’ area of £704k year to date reflects the provision for expenditure on a number of key pressure areas identified by the senior management team.

TABLE 6 ANALYSIS OF MANAGED SERVICES

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Bud Act Var Bud Act Var Bud Act Var Bud Act Var Bud Act Var Bud Act Var Bud Act Vartable 6 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000

IN MONTH

Income 1,277 1,277 0 225 225 0 26 26 0 86 86 0 293 293 0 58 58 0 1,965 1,965 0 Pay 0 0 0 0 0 0 0 0 0 81 81 0 11 11 0 9 9 0 101 101 0 Non -pay 1,277 1,277 0 225 225 0 26 26 0 10 10 0 283 283 0 49 49 0 1,870 1,870 0 Total 1,277 1,277 0 225 225 0 26 26 0 91 91 0 294 294 0 58 58 0 1,971 1,971 0 Surplus / (Deficit) 0 0 0 0 0 0 0 0 0 (5) (5) 0 (1) (1) 0 0 0 0 (6) (6) 0

YEAR TO DATE

Income 6,126 6,126 0 1,508 1,508 0 725 725 0 545 545 0 1,979 1,979 0 345 345 0 11,228 11,228 0 Pay 0 0 0 0 0 0 0 0 0 550 550 0 85 85 0 76 76 0 711 711 0 Non-pay 6,126 6,126 0 1,508 1,508 0 725 725 0 24 24 0 1,894 1,894 0 269 269 0 10,546 10,546 0 Total 6,126 6,126 0 1,508 1,508 0 725 725 0 574 574 0 1,979 1,979 0 345 345 0 11,257 11,257 0

Surplus / (Deficit) 0 0 0 0 0 0 0 0 0 (29) (29) 0 0 0 0 0 0 0 (29) (29) 0

RRL TRAINEES HSC INTERPRETING RECHARGES TOTALBURSARIES HEALTHY START SUMDE

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