CCG Annual Report and Accounts - Grant Thornton UK LLP

Introductory Guide – CCG

Annual Report and Accounts - First EditionIntroductory Guide

Healthcare Financial Management Association (HFMA)Albert House 111 Victoria Street Bristol BS1 6AXT 0117 929 4789 F 0117 929 4844 E [email protected]

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ISBN 978-1-904624-85-1

Healthcare Financial Management Association (HFMA) is a registered charity in England and Wales, no 1114463 and Scotland, no SCO41994. HFMA is also a limited company registered in England and Wales, no 5787972. Company no: 5787972. Registered Office: Albert House, 111 Victoria Street, Bristol, BS1 6AX

CCG Annual Report and Accounts

Introductory Guide

First Edition

Published by the Healthcare Financial Management Association (HFMA), Albert House, 111 Victoria Street, Bristol BS1 6AX

Tel: (44) 0117 929 4789 Fax: (44) 0117 929 4844 E-mail: [email protected]

This guide was produced under the guidance and direction of the HFMA’s Accounting and Standards Committee. The editor was Debbie Paterson with Mick Waite and Diane Vaight from Grant Thornton.

Cover design was undertaken by Mike Wyatt, setting by Academic + Technical Typesetting and printing by ESP Colour Ltd.

The NHS is always changing and developing – this edition reflects the structures and processes in place in March 2014. We are keen to obtain feedback on ways in which the content, style and layout can be improved to better meet the needs of its users. Please forward your comments to [email protected] or to the address above.

While every care has been taken in the preparation of this publication, the publishers and authors cannot in any circumstances accept responsibility for errors or omissions, and are not responsible for any loss occasioned to any person or organisation acting or refraining from action as a result of any material within it.

© Healthcare Financial Management Association 2014. All rights reserved.

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Enquiries about reproduction outside of these terms should be sent to the publishers at [email protected] or posted to the above address.

ISBN 978-1-904624-85-1

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Introductory Guide – CCG Annual Reportand Accounts

Contents

Foreword Page 2

Acknowledgements

1. Introduction Page 5

2. Annual Report Page 7

3. Governance Statement Page 17

4. Statement of Accountable Officer’s Responsibilities Page 19

5. Independent Auditor’s Report Page 21

6. The Financial Statements Page 27

7. Statement of Comprehensive Net Expenditure Page 29

8. Statement of Financial Position Page 35

9. Statement of Changes in Taxpayers’ Equity Page 43

10. Statement of Cash Flows Page 47

11. Notes to the Accounts Page 53

Appendices

Appendix 1: Questions for Members of the Governing Body to Consider Page 67

Appendix 2: Glossary of Terms and Abbreviations Page 73

Appendix 3: References and Further Reading Page 77

Index of tables

Table 1: Contents of the strategic and members’ reports Page 8

Table 2: Remuneration table Page 12

Table 3: Pension benefits Page 14

Table 4: Pay multiple disclosures Page 15

Table 5: Contents of the governance statement Page 17

Table 6: Contents of the independent auditor’s report Page 21

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Foreword

Understanding an annual report and accounts can be difficult, even for those with financial

knowledge or training. This guide aims to make the task of reading and understanding a clinical

commissioning group’s (CCG’s) annual report and accounts easier.

Members of the council of members and governing body also need to understand the annual

accounts if they are to fully appreciate the financial health of their organisation and the financial

impact of the decisions they are making. This guide is intended to provide support to governing

bodies to allow them to carry out their stewardship role effectively. It is intended to help members of

the governing bodies of CCGs carry out their responsibilities when approving and adopting the

annual report and accounts.

To discharge these responsibilities effectively, members of the governing body need to be able to ask

pertinent questions and challenge the finance team and auditors where necessary. This guide

provides the reader with plain English explanations of the various elements of the CCG’s annual report

and accounts. It also suggests questions that members of the governing body may want to ask their

colleagues or the external auditors of the CCG as part of the approval process.

We commend this guide to you.

David Bacon

Chair of the HFMA Accounting and

Standards Committee

Jon Roberts

Partner, Grant Thornton

2

Introductory Guide – CCG Annual Report and Accounts

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Acknowledgements

We are grateful to all members of the HFMA Accounting and Standards Committee who give their

time free of charge, often in addition to long hours routinely worked by most senior members of NHS

finance. The members of the HFMA Accounting and Standards Committee are:

Najma Ali

David Bacon

Jill Boggan

Matt Dale

Abdul Janmohamed

John Evans

Stephen Fell

Colin Forsyth

Andrew Gladwell

Ian Hanley

Jonathan Lumb

Alistair Morgan

Sarah Morgan

Kate Mathers

Keith Morton

Ian Ratcliffe

Samantha Simpson

Pam Tate

Annette Watkinson

We also gratefully acknowledge the support of the Audit Commission. This publication is based on

the earlier joint HFMA and Audit Commission guide to primary care trust accounts for non-executives.

Editorial work on this guide was undertaken by Diane Vaight, technical manager, Grant Thornton,

Mick Waite, director, Grant Thornton and Debbie Paterson, technical editor, HFMA.

Grant Thornton

Grant Thornton are the leading firm in the NHS audit market. Our national NHS practice clients

comprise 79 clinical commissioning groups (37% of the total), 49 NHS trusts (52%), and 20 NHS

foundation trusts (12%).

Our national team of experienced NHS specialists, including those who have held senior positions

within the sector, provides the growing range of assurance, tax and advisory services that our clients

require. Through proactive, client-focused relationships, our teams deliver solutions in a distinctive

and personal way, not pre-packaged products and services.

Our approach combines a deep knowledge of the NHS, supported by an understanding of wider

public sector issues, drawn from working with associated delivery bodies, relevant central government

departments and with commercial organisations working in the sector.

We take an active role in influencing and interpreting policy developments affecting the NHS and

responding to government consultation documents and their agencies. We regularly produce sector

related thought leadership reports, typically based on national studies, and client briefings on key

issues. We also run seminars and events to share our thinking on health and, more importantly,

understand the challenges and issues facing our clients.

The Healthcare Financial Management Association

The Healthcare Financial Management Association (HFMA) is the UK representative body for finance

professionals working in the NHS and the wider healthcare sector. Our aim is to support the NHS

finance function, to promote good practice in financial management and to improve the general

understanding of NHS finance issues.

Our work is informed by a number of committees and special interest groups made up of healthcare

finance practitioners. We publish numerous guides and briefings aimed at finance professionals,

non-executive directors and non-finance staff. We also provide training and development

opportunities – including a suite of web based learning modules – across all of these groups.

3

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Chapter 1: Introduction

The statutory framework for the annual report and accounts

CCGs have a statutory duty1 to produce an annual report and accounts. The annual report and

accounts is the key way in which CCGs demonstrate their effective stewardship of public money and

discharge their accountability to tax payers.

The annual report and accounts is a single document which should present the story of the CCG’s

activities during the previous financial year ending 31 March. The form and content of the annual report

and accounts is directed by NHS England. They must meet the requirements of the Department of

Health’s (the Department) manual for accounts2 (MfA), in practice, this is achieved by following NHS

England’s annual reporting guidance (ARG3). The CCG’s annual report and accounts must contain:

. An annual report

. A statement of the accountable officer’s responsibilities

. A governance statement

. Four primary financial statements

. Notes to the accounts

. A report and opinion from an independent auditor.

It is the responsibility of the CCG’s accountable officer to prepare the annual report and accounts.

Usually, the governing body approves the annual report and accounts for submission to NHS England

and wider publication, but this may vary depending on the CCG’s constitution. In approving the

annual report and accounts, the members of the governing body confirm that they are satisfied they

present the CCG’s year in an appropriate, comprehensive, balanced and coherent way.

Before 30 September each CCG must present its annual report and accounts to stakeholders,

including members of the public, at an annual general meeting.

How to use this guide

The purpose of this guide is to assist members of the CCG and its governing body through the

process of reviewing and approving the annual report and accounts. It explains what each part of the

annual report and accounts means and what it must include. It also includes suggested questions

that members of the governing body may want to ask themselves as they review the annual report

and accounts. The questions are included throughout the document and also as an appendix. They

are not meant to be used as a checklist but to help members of the governing body ensure they

understand the key features of their CCG’s accounts and can approve them with confidence. A

glossary at the end of the guide provides an explanation for those words and phrases which may be

unfamiliar to those new to accounts or the NHS.

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1Paragraph 17 of Schedule 2 of the Health and Social Care Act 2012 (‘the 2012 Act’).2www.info.doh.gov.uk/doh/finman.nsf/4db79df91d978b6c00256728004f9d6b/

af01c57de5465a5480257b7c0054c281?OpenDocument3www.england.nhs.uk/resources/resources-for-ccgs/

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Chapter 2: Annual Report

CCGs have a statutory requirement to prepare an annual report1 which sets out how they have

discharged their duties in the previous financial year. NHS England has directed2 that CCGs must

comply with its ARG when preparing their annual reports.

Whilst the ARG prescribes the contents of the annual report, it is for each CCG to decide how best to

present that information in order to tell the story of their year. It is important to remember that the

annual report and accounts are published as one document so the two must be consistent in the

story that they tell.

The annual report consists of several sub-reports:

. Member practices’ introduction

. The strategic report

. The members’ report

. The remuneration report.

Member practices’ introduction

This is an independent report produced collectively by the GP practices which make up the

membership of the CCG. In practice, this report will be prepared by the council of members. The

content of the report is for the GP practices to decide themselves but the ARG suggests that it should

include:

. Reflections on the CCG’s progress and performance in relation to the health priorities of the local

community as set out in the CCG’s strategy and business plan. Consideration of the impact the council of members and governing body have had in key areas. A statement which sets out how the annual evaluation of effectiveness of the council of

members and/or governing body was conducted and how any recommendations are being

taken forward.

Strategic report and members’ report

The contents of these reports are based on the requirements of sections 414A, C and D and section

416 of the Companies Act 2006 tailored to be relevant to CCGs.

The strategic report should stand alone but can include summarised information cross referenced to

other parts of the annual report. The ARG sets out the required content for the strategic report and

the members’ report.3

7

1Section 14Z15 of the National Health Service Act 2006 (‘the 2006 Act’) as inserted by section 25 of the 2012 Act.2www.england.nhs.uk/wp-content/uploads/2013/03/b-directions-ccgs.pdf3These sections of the Companies Act were revised from 30 September 2013 and require the preparation of a strategic

report and a directors’ report.

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Table 1: Contents of the strategic and members’ reportsEach CCG must decide how best to present the following information

Required contents Comments

Strategic report

A description of the principal activities of the CCGduring the year as well as a brief history of the CCGand its statutory background.

This section will include the fact that CCGs came intobeing on 1 April 2013 as a result the Health andSocial Care Act 2012. It will also include a descriptionof the governance arrangements and the CCG’sconstitution as well as any conditions associated withthe CGG’s authorisation by NHS England.

The section will also include details of the CCG’sfunctions, the services it commissions and thepopulation it serves.

A review of the CCG’s business and description ofthe principal risks and uncertainties it faces.

The strategic report informs the reader how the CCGhas performed during the year by considering:. The CCG’s objectives and strategies. The risks and uncertainties facing the CCG. Where there is doubt about the CCG’s financial

position the reasons for concluding that the CCGis a going concern

. Key policies affecting employees, social,community and human rights issues

. Information about essential working relationshipswith other entities.

Overall, the strategic report must a balanced andcomprehensive analysis of the development andperformance of the CCG during the year and at theyear-end using key financial and non-financialperformance indicators.

The strategic report must be consistent with thegovernance statement, and report issues andproblems as well as good news.

It must also include a statement that the annualreport and accounts have been prepared inaccordance with a direction issued by the NHSCommissioning Board under the NHS Act 2006.

An explanation of how the CCG has:. Fulfilled its functions with a view to securing

continuous improvement in the quality ofhealthcare services

. Exercised its functions with regard to the need toreduce healthcare inequalities in relation toaccess and outcomes

. Made arrangements to consult with patients orprovide them with information in relation to theplanning of and developments in commissioning.

These are requirements of the NHS and Social CareAct 2006 4 and may be included within the strategicreport or as a standalone section.

A review of the extent to which the CCG hascontributed to the delivery of any joint health andwellbeing strategy to which it is a signatory.

When preparing this part of the annual report, theCCG should consult with the appropriate Health andWellbeing Board (HWB).

It must also include a statement that the annualreport and accounts have been prepared inaccordance with a direction issued by the NHSCommissioning Board under the NHS Act 2006.

4Section 14Z15(2) of the 2006 Act


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9


The timetable for the preparation and approval ofthe annual report and accounts therefore needs toinclude adequate time for a request to and responsefrom the HWB.

A section on statutory compliance including aself-certification about continued delivery ofstatutory duties.5

This is a requirement of the CCG Assuranceframework and will cover how the CCG has promotedor supported:. The NHS Constitution. NHS England. The involvement of patients, their carers and

representatives. Patient choice. Innovation, research, education and training. Wide consultation. Emergency planning. The relevant HWB and its preparation of Joint

Strategic Needs Assessments. Safeguarding and the welfare of children.

A sustainability report. CCGs are required to include a sustainability report intheir annual reports. The report’s contents are basedon a return6 made to the Sustainable DevelopmentUnit which is part of NHS England. The report coversthe CCG’s sustainability policies and performanceagainst its plans to reduce carbon emissions andbecome more sustainable.

An equality and diversity report. As public sector bodies, CCGs are required to complywith the Equality Act 2010.7 This Act and its associatedregulations require public bodies to publish relevant,proportionate information demonstrating theircompliance with the equality duty.

This should also include a breakdown of people ofeach sex in the following groups:. the council of members and the governing body. other senior managers. other employees.

Members’ report

A list of GP practices that make up the membershipof the CCG and the composition of the council ofmembers.

The names, job titles, committee membership,periods in post and short biographies of:. All members of the CCG’s governing body. Members of committees and sub-committees

who are not on the governing body. Managers who are classed as senior managers in

the remuneration report.8

The list of GP practices should be the same as in theCCG’s constitution.

The list of names must include everyone who hasbeen a member of the governing body or a sub-committee at any time during the current andprevious financial year up to the date that the annualreport and accounts are signed.

The ARG requires short biographies of each. It is foreach CCG to decide whether to include photographs.

This information could be included in theremuneration report rather than the strategic report.

5Page 17 of the Assurance framework issued by NHS England – www.england.nhs.uk/ourwork/d-com/assurance/6The NHS sustainability reporting framework 2013/14 available from www.sduhealth.org.uk/documents/SDMP/2_Reporting_guide%20to_sus_rep_in_ARs.pdf

7www.gov.uk/equality-act-2010-guidance8Occasionally, at the discretion of the accountable officer, managers who are not members of the governing body areincluded in the remuneration report where they have such a significant management role that they can influence theoperations of the CCG and its financial position.

Annual Report

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Interests and conflicts as declared in the CCG’sregister of interests.

Where members of the CCG hold companydirectorships or other interests which may conflictwith their management responsibilities at the CCG,these must be disclosed. CCGs can disclose this inthe members’ report or in the remuneration reportcross referenced to the members’ report.

The CCG may wish to include reference to how theregister of interests may be accessed.

Principles for remedy. The Parliamentary and Health Service Ombudsman9

published six principles that represent best practicewhen dealing with mistakes made by public bodies.The annual report should refer to these principles andstate to what extent they have been adopted by theCCG as part of its complaints handling procedures.

Pension liabilities. A cross reference to the part of the accounts whichdescribes the accounting treatment for pensionliabilities.

Sickness absence data for staff. This is a requirement of HM Treasury. It is included inthe annual accounts so it can be cross referenced tothe members’ report.

Data loss incidents. Any incidents where the CCG has lost orinappropriately disclosed patients’ personal dataneed to be disclosed.

Any data losses should also be referred to in thegovernance statement.

Charges for information. A statement that the CCG has complied with HMTreasury’s guidance on levying charges for theprovision of information.

A statement that, as far as the members of thegoverning body are aware, there is no relevant auditinformation of which the CCG’s auditors are notaware.

This is supported by a statement from each memberof the governing body that they have taken allnecessary steps to be aware of any relevant auditinformation and to establish that the auditor is awareof that information.

In practice, this means that members of the governingbody should have had a dialogue with the auditorsabout the information they would expect to see andhave considered whether there is anything they thinkthey should bring to the attention of the auditor.

The name of the external auditor and details ofpayments made to them. Details of the CCG’s policyon using external auditors for non-audit work andensuring the auditor’s independence.

These payments will be disclosed in the annualaccounts so can be referenced in the members’report.

Employee matters. A statement about the action taken by the CCG toprovide information to and consult with employees.Also, a statement on the CCG’s policy on disabledemployees.

Emergency preparedness Prescribed self certification that the CCG has anincident response plan in place which is reviewedand improved on a regular basis.

9www.ombudsman.org.uk/improving-public-service/ombudsmansprinciples/principles-for-remedy


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Remuneration report

The remuneration report is a disclosure of payments made by the CCG to all10 members of its governing

body and council of members. The report covers everyone who has been a member of the governing

body or council of members during the financial year and the prior year, even if not for the full period.

It is often the part of the annual report and accounts subjected to most public scrutiny.

There are two parts to the remuneration report. The first, remuneration committee report and the

remuneration policy, is not subject to audit, although the auditor does read it to assess its consistency

with other knowledge gained from the audit. The second, the remuneration tables, is audited by the

external auditor and reported on in the auditor’s report.

Remuneration committee and remuneration policy report

This part of the remuneration report is concerned with how decisions are made in relation to the

amount that members of the governing body are paid. This is the part of the remuneration report

that is read by the auditor but not covered by their audit report.

It must give details on who has made those decisions including the names of the members of the

remuneration committee11 and details on anyone else who has provided guidance on how much to

pay members of the membership body or governing body. Details of the numbers of meetings held

must be provided along with attendance at those meetings.

It must also include details of the policy on payments to the governing body and members of the

council of members including details of:

. Performance related pay

. Expenses and allowances

. Contractual termination arrangements payments

. How employee remuneration is considered.

It must also disclose significant awards to former members of the governing body or council of

members.

Remuneration tables

This part of the remuneration report consists of a series of tables and includes details of payments

made to individuals.12 As with all of the examples in this publication, only the current year is shown.

When the CCG has been operating for more than a year, prior period comparatives will be required.

This part of the remuneration report is subject to audit and must also be consistent with any other

disclosures around remuneration made elsewhere in the annual report and accounts.

11

10Occasionally, at the discretion of the accountable officer, managers who are not members of the council of

members or the governing body are included in the remuneration report where they have such a significant

management role that they can influence the operations of the CCG and its financial position.11The membership of the remuneration committee may be included in the members’ report so can simply be cross

referenced here or vice versa. The chair of the committee must be identified.12These individuals can be employees (either on the governing body or senior managers), members of the council of

members or members of the governing body.

Annual Report

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Table 2: Remuneration tableThe white rows give guidance on the contents of this table

Name and title Total salary and

fees13

(bands of £5,000)

Performance

related bonus

payments

(bands of £5,000)

Taxable benefits

(rounded to the

nearest £00)

Pension related

benefits

(£000)

Total

(bands of £5,000)

The remuneration

report shows

payments made to

named individuals.

Salary is the amount

paid to the

individual for their

role on the CCG’s

governing body.

Salary includes

other additions to

remuneration, for

example, London

weighting and

overtime payments.

Bonus payments are

any payments

which are subject to

performance

conditions.

The report will

include two

columns for

performance related

payments - one for

those relating to

the financial year

and the other

relating to bonuses

earned over a

longer term.

Taxable benefits are

any benefits not

paid in cash, for

example, a lease

car, gym

membership or

assistance with

moving costs.

Members of the

council of members

are only likely to

have an entry in

this column.

This is calculated

using a method set

out in the

Companies Act.

It is only relevant tothose receiving

pension

contributions from

the CCG.

The table must

include a total

column showing

the total of all of

the columns.

The exact payment is not included in this

report. Instead, the disclosure is made in

bands of £5,000.

The estimated value

of non-cash benefits

is disclosed. The

disclosure is in

hundreds of pounds

rather than

thousands.

Sara A, Chair and

Clinical Leader

20–25 20–25

Robin B, Chief

Officer

105–110 0–5 20 125–130

James C, Chief

Finance Officer

(from 1 April to

7 September)

40–45 15 55–60

Tobias X, Chief

Finance Officer

(from 8 September)

45–50 15 60–65

Where a member has not been in post for the full year then their dates in post should be given so that it is clear what period the

payment covers. If an existing member of staff is promoted to the governing body part way through the year then the table includes

payments made only since they became a member of the governing body.

Albert D, lay

member with

responsibility for

finance and

governance

10–15 10–15

Marie E, lay

member with

responsibility for

public and patient

involvement

5–10 5–10

Dr Steve F, clinical

member (secondary

care)

5–10 5–10

Fiona G, clinical

member (nurse)

5–10 5–10

13Where the individual is paid by the CCG for services in addition to their role on the council of members or

governing body then this should be shown separately. This is more common for NHS providers where the medical

director has a clinical role as well as their board position.


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Where a severance payment has been made to a member of the governing body, this is disclosed

separately either as a note following the table or as an additional column.

Where members of the CCG’s governing body are not employed directly by the CCG but via a third party

(for example a limited company, a GP partnership or an agency) any fees paid to that third party must be

disclosed as well as the amount paid for the services of the member of the governing body.

Some members of the CCG’s governing body may work for more than one CCG, for example, a chief

finance officer may hold that role for two CCGs. In this case, the amount paid by the CCG is included in the

table but the total amount that they are paid for both roles should be disclosed elsewhere in the report.

For the non-lay members of the governing body, there is an additional table covering pensions. These

disclosures are sometimes known as the Greenbury disclosures and the numbers are provided by the

NHS Business Services Authority. This table should include any member of the governing body for

whom the CCG pays pension contributions to the NHS pension scheme or stakeholder pension

scheme. It will therefore exclude lay members of the governing body if payments made to them are

not pensionable. It may also exclude other members of the governing body where they are not

directly employed by the CCG. Where this is the case, narrative disclosure should be added to the

report to make the payment arrangements clear. Where disclosures are made in this table, it will be

the total amounts of the NHS pension for that individual rather than just the element which relates to

their work for the CCG. This is because the NHS pension scheme is one scheme so it cannot be

apportioned between employers and also because this is the disclosure required by HM Treasury

which follows the requirements of the Companies Act.

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Annual Report

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Off payroll engagements

Most people working for the CCG will be paid via the payroll with tax and national insurance

contributions deducted ‘at source’ by the CCG as the employer. Occasionally, the CCG may engage

people through a contract for services where the individuals are responsible for their own tax

14

Table 3: Pension benefitsThe white rows give guidance on the contents of this table

Name and

title

Real increase

in pension at

age 60

(bands of

£2,500)

£000

Real increase

in pension

lump sum at

aged 60

(bands of

£2,500)

£000

Total accrued

pension at

age 60 at

31 March 20xx

(bands of

£5,000)

£000

Lump sum at

age 60 related

to accrued

pension at

31 March 20xx

(bands of

£5,000)

£000

Cash

Equivalent

Transfer Value

at 1 April

20xx and

31 March 20xx

(actual

amount)

£000

Real increase

in Cash

Equivalent

Transfer Value

(actual

amount)

£000

Employer’s

contribution

to partnership

pension

(actual

amount)

£00

The real

increase is the

movement in

the expected

value of the

employee’s

pension when

they are 60

years old

excluding the

effect of

inflation.

The real

increase is the

movement in

the expected

value of the

employee’s

lump sum

when they are

60 years old

excluding the

effect of

inflation.

This is the

total expected

value of the

accrued

pension at age

60 as

calculated by

the NHS

pension

scheme.

This is the

expected

value of the

pension lump

sum at age 60

as calculated

by the NHS

pension

scheme.

There will be

no lump sum

for members

of the 2008

section of the

NHS pension

scheme14 or

members who

are over 60.

This is two

columns and

is the amount

that would be

transferred

from the NHS

pension

scheme to

secure

benefits in

another

pension

scheme at the

start and end

of the financial

year.

The value is

provided by

the NHS

pension

scheme

administrators.

This is the

movement in

the cash

equivalent

transfer value

from one year

end to the

next excluding

the effect of

inflation.

The

movement

can go up and

down

depending on

the

movements in

the factors

used by the

actuary and

any

movements in

inflation.

This is the

amount paid

by the CCG

into a pension

scheme other

than the NHS

pension

scheme.

The disclosure

is in hundreds

rather than

thousands of

£s.

Robin B, Chief

Officer

James C, Chief

Finance

Officer (from

1 April to

7 September)

Tobias X, Chief

Finance

Officer (from

8 September)

Many CCG employees will have been employed in the NHS prior to 1 April 2013 and be continuing members of the NHS pension scheme.

Therefore, even in 2013/14 these disclosures will show the movement in pension values over the year based on previous contributions to the

NHS pension scheme.

14Currently, there are two sections in the NHS pension scheme – the 1995 section and the 2008 section. Eligibility

requirements and benefits are different in each part of the scheme. The 1995 scheme was closed to new members

on 1 April 2008. There are further changes proposed to the NHS pension scheme from 1 April 2015.


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arrangements. CCGs are required to report the number of any off payroll engagements which are for

more than £220 a day and last longer than six months. The CCG must also report the arrangements

which have been made to gain assurance that appropriate tax has been paid in relation to these

contracts. For new off payroll engagements, additional reporting is required about whether those

contracts include a clause allowing the CCG to check the tax arrangements and the CCG’s assurance

arrangements. If the contract does not allow the CCG to check the tax, the CCG must disclose the

reasons why. There are additional disclosures required for members of the governing body or senior

managers with significant financial responsibility who are paid via an off payroll contract.

Pay multiple disclosures

The pay multiple disclosure15 is also known as the ‘Hutton’ or ‘fair pay’ disclosure. In 2010, as a

response to public perception that the pay and reward packages of public sector executives were too

high, the Prime Minister commissioned Will Hutton to provide recommendations on how to introduce

a pay multiple to ensure that no public sector manager earned more than twenty times the lowest

paid person in their organisation. However, rather than set a hard cap on the pay of executives, the

key recommendation was for public sector bodies to demonstrate their accountability for the

relationship between the pay of their executives and the wider workforce by disclosing the ratio

between the remuneration of the highest paid employee on the governing body and the median

salary of their staff.

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15HFMA’s Practical guide – pay multiple disclosures www.hfma.org.uk/publications-and-guidance/16It may not be the total column from the remuneration table as the pension related benefits will be excluded from

this calculation.

Table 4: Pay multiple disclosuresThis note includes both numerical and narrative information

Content £ Comment

Band of highest paidmembers’ totalremuneration (£’000)

110–115 This is the band in the remuneration report which the amount paid tothe highest paid member of the governing body falls into.

The amount paid is calculated on a full time equivalent, annualised basisfor those members in post at the end of the financial year. Where all ofthe members of the governing body have been in post full time for afull year this should be clear from the table of salaries.16 However, wheremembers of the governing body have changed mid-year or work parttime, then the salary of the members in post on 31 March must be usedto calculate the amount that they would have been paid had they beenin post for a full year and worked full time.

The mid-point of this band is used in the ratio calculation.

Median salary (£) 21,358 To calculate the median salary, the full time equivalent, annualised salary(including overtime and bonuses) of all CCG staff in post at 31 March iscalculated. The salaries are then arranged in value order. The median isthe salary of the employee mid-point in the list.

Ratio 5.3 This is the mid-point of the highest paid member’s salary band dividedby the median salary. In this case:

£112,500/£21,358

Narrative explanationof movement

The note must include a clear and meaningful description of the differencein the ratio for the current year compared with the previous year.

Annual Report

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Suggested questions about the annual report

Does the annual report give a balanced view of the operations of the CCG over the year?

If you are a member of the CCG governing body and hold company directorships or have other

interests which may conflict with your responsibilities to the CCG, are they disclosed?

Are you satisfied that your salary has been appropriately disclosed?

Has the remuneration report been already considered by the remuneration committee? What was

the outcome?

Has the pay multiple been explained? Has any movement in the multiple been explained?

Are you aware of any relevant audit information which has not been made available to the auditors?


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Chapter 3: Governance Statement

The governance statement reflects the arrangements the CCG has put in place to manage and

mitigate the risks that it faced throughout the financial year. The governance statement should give

the reader a clear sense of the risks which faced the CCG and the controls in place to manage them. It

is reviewed by the audit committee and the governing body before being signed by the accountable

officer.

The headings for the governance statement’s content are prescribed by NHS England and certain

specified items must be covered to allow them to prepare a summary statement for all CCGs.

However, the governance statement should be individual to the CCG and include only those issues

which will be of key interest to the CCG’s own stakeholders.

Whilst the governance statement is prepared by the CCG at the end of the year, it should be built up

from processes designed, run and tested throughout the year. In a CCG’s early years, the governance

statement is therefore expected to describe the journey from a new organisation with immature

controls to one in a more mature and stable position. There should be no surprises for members of

the governing body as all the issues described should have been discussed at governing body or one

of its committees meetings during the year.

The governance statement should be consistent with the rest of the annual report.

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1For example, the Financial Reporting Council’s Corporate Governance Code https://frc.org.uk/Our-Work/Codes-

Standards/Corporate-governance/UK-Corporate-Governance-Code.aspx

Table 5: Contents of the governance statementThe governance statement should be individual to the CCG and its operations in the financial year

Required headings Comments

Scope of responsibilities. This section describes the responsibilities of the accountable officer and thegoverning body to maintain a sound system of internal control that supportsthe achievement of the CCG’s policies, aims and objectives, whilstsafeguarding public funds.

Compliance with corporategovernance good practice.1

A statement that the governing body is satisfied that their corporategovernance arrangements are in line with good practice.

The governance frameworkof the CCG.

This section provides information about the CCG’s committee structure,attendance and the work covered.

Highlights from each committee, particularly the audit committee areincluded. It should include the key actions taken by each committee.

It also includes a review of the governing body’s performance, including aself-assessment of its effectiveness. It should include a statement that theCCG has checked its arrangements to discharge its statutory functions, thatthey are legally compliant and do not include any irregularities.

The risk managementframework.

A description of how risk and control mechanisms work, the key elements ofrisk management and the arrangements in place for the CCG to assure itselfthat these arrangements are in place. The ways in which risk management isembedded into the way that the CCG works should be described.

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Required headings Comments

There are also prescribed statements in relation to information governance,the NHS pension scheme, compliance with equality, diversity and humanrights legislation and sustainability.

Internal control framework. A statement which says that the system of internal control is intended tomanage risk rather than eliminate it. This statement should also indicate howlong the system has been in place.

Risk assessment. The CCG’s risk profile, how it assesses and manages risk.

A description of the CCG’s major risks and how they are being or will bemanaged. This will include consideration of the risks to compliance with theterms of the CCG’s licence.

Review of economy,efficiency and effectivenessin the use of resources.

A description of the key processes applied to ensure that resources are usedwith economy, efficiency and effectiveness.

This section will need to be consistent with the auditor’s conclusion on useof resources.

Review of the effectivenessof risk management andinternal control.

This is a key section of the report which describes how the risks that the CCGfaces are assessed and managed.

It should include:

. How the governing body lead the risk management process and howstaff are trained to manage risk

. A description of the process for maintaining and reviewing the system ofinternal control

. An assessment of the effectiveness of these arrangements

. Reference to work by internal audit including the head of internal audit’sopinion in full and a list of audit reports which have concluded no orlimited assurance

. A description of the impact of any risks that have crystallised.

In the early years of the CCG’s existence, this section may describe risks andcontrols which have been mitigated or changed throughout the year. Thissection, as well as the rest of the governance report, reflects the whole of thefinancial year and not just the position at the end of that year.

Conclusion An overall conclusion which refers to significant control issues, if any, whichhave been identified in the governance statement.

Suggested questions about the governance statement

Does the governance statement include all of the elements required by the ARG?

Is the content of the governance statement consistent with your knowledge of the operations of

the CCG over the year?

Is the governance statement consistent with statements made and reports the audit committee has

received from auditors, or other sources of assurance?

Do you have evidence that the systems and procedures underpinning the disclosures set out in the

governance statement are robust?

Are any significant control issues or gaps in control or assurance recorded consistent with reports

received?

In particular, does the governance statement include:

. All significant risks that you were aware of during the year?

. The actions the CCG is taking, or plans to take, to address the identified risks?

. The head of internal audit’s opinion and disclosure of limited or no assurance internal audit reports?

. A conclusion which specifically refers to significant control issues identified in the statement?


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Chapter 4: Statement of Accountable Officer’sResponsibilities

The CCG is required by statute to have an accountable officer. The accountable officer is responsible1

for ensuring that the CCG exercises its functions in a way which provides good value for money and

complies with its obligations to:

. Ensure that the regularity and propriety of expenditure is discharged – this means that money

should only be spent on things which the CCG has the power to spend money on. Keep proper accounting records. Prepare its annual accounts in accordance with the directions of NHS England. Safeguard the CCG’s assets.

The accountable officer must sign a statement which says that to the best of his/her abilities they

have discharged these responsibilities. This responsibility cannot be delegated to any other member

of the governing body.

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1The responsibilities of the accountable officer are set out in paragraph 12 of Schedule 1A to the National Health

Service Act 2006 and are expanded in NHS England’s publication Clinical commissioning group governing body

members: Role outlines, attributes and skills (www.england.nhs.uk/wp-content/uploads/2012/09/ccg-members-

roles.pdf) as well as the accountable officer’s appointment letter.

Suggested questions about the statement of accountable officer’s responsibilities

Based on your knowledge of the CCG and its operations, are you satisfied that the accountable

officer has discharged all of his/her responsibilities in the year?

If there have been issues concerning efficiency, effectiveness and economy which are reported in

the governance statement or the auditors’ report, are they reflected in this statement?

If any of the CCG’s functions have not been discharged in the year, is that fact reflected in the

statement?

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Chapter 5: Independent Auditor’s Report

The CCG’s accounts must be audited by an independent external auditor who is currently appointed

by the Audit Commission. Following their work, the auditor signs a formal report which the CCG must

include in its annual report and accounts.

The exact wording of the report is for each auditor to decide but it will contain the following sections:

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Table 6: Contents of the independent auditor’s reportThe exact format is for the individual auditor to decide

Example independent auditor’s report Comments

Independent auditor’s report to the members ofNHS [name] CCG

This is the heading of the report which is addressedto the members of the CCG as they areresponsible for the governance arrangements ofthe CCG.

We have audited the financial statements of NHS[name] CCG for the year ended 31 March [year]which comprise the statement of comprehensive netexpenditure, the statement of financial position, thestatement of cash flows, the statement of changes intaxpayers’ equity and the related notes.

The financial reporting framework that has beenapplied in their preparation is applicable law and theaccounting policies directed by NHS England withthe consent of HM Treasury as relevant to theNational Health Service in England.

We have also audited the information in theremuneration report that is subject to audit.

The audit report will state exactly which parts of theaccounts and remuneration report have been subjectto audit.

The audit report makes it clear which financialreporting framework has been used – NHS Englandrequires that CCGs are compliant with internationalfinancial reporting standards (IFRS).

This report is made solely to the members of NHS[name] CCG in accordance with Part II of the AuditCommission Act 1998. Our audit work has beenundertaken so that we might state to the membersof the CCG those matters we are required to state tothem in an auditor’s report and for no otherpurpose. To the fullest extent permitted by law, wedo not accept or assume responsibility to anyoneother than the members of the CCG for our auditwork, for this report or for the opinions we haveformed.

This paragraph is sometimes referred to as theBannerman paragraph. It is inserted to reinforce thefact that, although other parties might read it, thisreport is for the members only. Each audit firm willhave their own version of this paragraph.

Respective responsibilities of CCG and auditor inrelation to the accounts

As explained more fully in the statement ofaccountable officer’s responsibilities set out onpage [x], the accountable officer is responsible forthe preparation of the financial statements and forbeing satisfied that they give a true and fair view.Our responsibility is to audit and express an opinionon the financial statements in accordance withapplicable law and International Standards onAuditing (UK and Ireland). Those standards require usto comply with the Auditing Practices Board’s EthicalStandards for Auditors.

This section makes it clear that the CCG (in particular,the accountable officer) is responsible for preparingthe accounts and the auditor’s responsibility is forauditing them.

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Scope of the audit of the financial statements

An audit involves obtaining evidence about theamounts and disclosures in the financial statementssufficient to give reasonable assurance that thefinancial statements are free from materialmisstatement, whether caused by fraud or error. Thisincludes an assessment of:

. Whether the accounting policies are appropriateto the CCG’s circumstances and have beenconsistently applied and adequately disclosed

. The reasonableness of significant accountingestimates made by the governing body and

. The overall presentation of the financialstatements.

This section sets out in high level terms what anaudit is.

Opinion on financial statements

In our opinion the financial statements:

. Give a true and fair view of the state of the CCG’saffairs as at 31 March [year] and of its expenditureand income for the year then ended and

. Have been prepared properly in accordance withthe accounting policies directed by NHS Englandwith the consent of HM Treasury as relevant tothe National Health Service in England.

This is the auditor’s opinion on the accounts.

The wording shown here is for an unqualifiedopinion.

It is unusual for NHS accounts to be qualified whichwould mean that the auditor is unable to say thatthe accounts give a true and fair view or have beenproperly prepared. Auditors need to give advancedwarning to the Audit Commission and NHS England ifa qualification is likely.

[A description of those specific assessed risks ofmaterial misstatement that were identified by theauditor and which had the greatest effect on the auditstrategy; the allocation of resources in the audit; anddirecting the efforts of the engagement team.]

[An explanation of how the auditor applied the conceptof materiality in planning and performing the audit.Such explanation shall specify the threshold used bythe auditor as being materiality for the financialstatements as a whole.]

[An overview of the scope of the audit, including anexplanation of how the scope addressed the assessedrisks of material misstatement and was influenced bythe auditor’s application of materiality.]

In 2013/14, this section of the audit report will not berequired. However, this is likely to change in thefuture to reflect current commercial practice. Whenthe change is adopted, the auditor will have toinclude information on how they have undertakenand focused their audit.

Opinion on regularity prescribed by the Code ofAudit Practice 2010 for local NHS bodies

In our opinion, in all material respects theexpenditure and income have been applied to thepurposes intended by parliament and the financialtransactions conform to the authorities which governthem.

This section is known as the regularity opinion.

The wording shown here is for an unqualifiedregularity opinion.

Auditors will qualify this part of their report if theCCG overspends against its financial targets.

Auditors will also qualify this part of their report ifthey identify any expenditure on items that the CCGdoes not have the legal power to incur.

If the regularity report is qualified the governancestatement and the accountable officer’s statementshould refer to the qualification issue.


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Opinion on other matters prescribed by the Codeof Audit Practice 2010 for local NHS bodies

In our opinion:

. The part of the remuneration report subject toaudit has been properly prepared in accordancewith the accounting policies directed by NHSEngland with the consent of HM Treasury asrelevant to the National Health Service inEngland; and

. The information given in the strategic report andthe members’ report for the financial year forwhich the financial statements are prepared isconsistent with the financial statements.

The remuneration report should identify whichelements have been subject to audit.

The auditor must compare the messages given bythe strategic report and members’ report with thosegiven by the accounts and report on whether theyare consistent.

Matters on which we are required to report byexception

We have nothing to report in respect of thefollowing matters where the Code of Audit Practice2010 for local NHS bodies requires us to report toyou if:

. In our opinion, information in the annual reportis:. Materially inconsistent with the information in

the audited financial statements or. Apparently materially incorrect based on, or

materially inconsistent with, our knowledge ofthe CCG acquired in the course of performingour audit or

. Is otherwise misleading.. In our opinion, the governance statement does

not reflect compliance with NHS England’srequirements

. Any referrals to the Secretary of State have beenmade under section 19 of the Audit CommissionAct 1998

. Any matters have been reported in the publicinterest under the Audit Commission Act 1998 inthe course of, or at the end of the audit.

In particular, we are required to consider whether wehave identified any inconsistencies between ourknowledge acquired during the audit and thedirectors’ statement that they consider the annualreport is fair, balanced and understandable andwhether the annual report appropriately disclosesthose matters that we communicated to the auditcommittee which we consider should have beendisclosed.

There are certain things which the auditor is requiredto report on when they find a problem. This exampleuses the wording where there is nothing for theauditor to report.

The auditor will amend this section of their reportaccordingly where there is something they need toreport on. For example, the governance statementdoes not refer to a serious data loss or a referral hasbeen made to the Secretary of State.

There are two reports which auditors might make asa result of their duties set out in the AuditCommission Act 1998.

The first is a referral to the Secretary of State. Theauditor must make such a report if they identify atransaction which they consider is not legal and willcause the CCG to suffer a loss. For example if theCCG has made, or is about to make, a severancepayment in excess of the amount to which theemployee is entitled in law or contract.

The second is a report in the public interest. This isrequired where the auditor identifies a matter of suchseriousness that they consider it necessary to bring itto the attention of the public. The CCG must give aformal public response to any such report.

In 2013/14, the final paragraph (shown in italics) isnot required. However, in the future, the auditor willalso report if they consider that the annual report isnot fair, balanced or understandable.

Independent Auditor’s Report

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Letter of representation

Before the auditor signs their report, they will ask the governing body to review and discuss a letter

of representation that will be signed, on its behalf, by the chair of the governing body. This is a

formal letter to the auditors from the governing body covering matters the auditors want

confirmation on, for example:

. Areas where the governing body or management2 has had to make a judgment

. That the representations made by management on the CCG’s behalf are accurate and reasonable

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Conclusion on the CCG’s arrangements for securingeconomy, efficiency and effectiveness in the use ofresources

We are required under Section 5 of the AuditCommission Act 1998 to satisfy ourselves that theCCG has made proper arrangements for securingeconomy, efficiency and effectiveness in its use ofresources. The Code of Audit Practice issued by theAudit Commission requires us to report any mattersthat prevent us being satisfied that the audited bodyhas put in place such arrangements.

We have undertaken our audit in accordance withthe Code of Audit Practice 2010 for local NHS bodies,having regard to the guidance issued by the AuditCommission on [date].1 We have considered theresults of the following:

. Our review of the governance statement

. The work of other relevant regulatory bodies orinspectorates, to the extent that the results ofthis work impact on our responsibilities

. Our locally determined risk-based work on [insertdescription as appropriate].

As a result, we have concluded that there are nomatters to report.

Auditors are required to follow a programme of workset out by the Audit Commission when consideringwhether a CCG has proper arrangements in place forsecuring economy, efficiency and effectiveness –usually referred to as value for money

The focus of the work is usually twofold:

. Does the organisation have proper arrangementsin place for securing financial resilience

. Does the organisation have proper arrangementsin place for challenging how it secures economy,efficiency and effectiveness.

However, recognising that CCGs are new, developingorganisations, the Audit Commission has givenauditors more flexibility in this area in 2013/14.

This is an example of an unqualified value for moneyconclusion. Where the auditor has identified issuesthen they will qualify this part of their report andgive their reasons.

The governance statement and the accountableofficer’s statement should reflect the qualificationissue.

Certificate

We certify that we have completed the audit of theaccounts of NHS [name] CCG in accordance with therequirements of the Audit Commission Act 1998 andthe Code of Audit Practice 2010 for local NHS bodiesissued by the Audit Commission.

This certificate officially closes the audit and finalisesthe CCG’s annual report and accounts for that year.

[name] for and on behalf of [audit firm] AppointedAuditor

Chartered Accountants

[address]

[date]

The auditor will sign the report in his or her name onbehalf of the audit firm that they work for.

1The guidance for 2013/14 is available on www.audit-commission.gov.uk/technicaldirectory/vfm1314/ and the date it

was issued for the relevant financial year will be inserted in the audit report.2In this context, management is likely to be a senior employee in the CCG or a group of senior employees who are

able to make decisions which have an operational or financial impact. This may be restricted to the governing body

but could include employees who report directly to members of the governing body.


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. That the governing body agrees that errors identified by the auditors should be adjusted in the

accounts or left unadjusted.

Members of the governing body may wish to discuss or investigate elements of the letter with

management prior to signing it.

Report to those charged with governance

Prior to signing their audit report on the CCG’s accounts, the auditor will issue a report to those

charged with governance which sets out the findings from their audit. This is sometimes referred to as

the ‘ISA 260’ report as it is a requirement under International Standard on Auditing (UK & Ireland) 260.

The purpose of this report is to ensure that the governing body is aware of and has considered any

issues arising from the audit before approving and adopting the annual report and accounts.

Sometimes, the auditor will require a formal response from the governing body. For example, where

there are errors in the accounts that have not been rectified by management, the auditor will ask the

governing body to confirm they agree with management’s decision not to make an amendment and

give their reasons. This response will usually form part of the letter of representation.

Consistency reports

The accountable officer and chief finance officer of the CCG are required to sign a statement

confirming the information provided by the CCG for consolidation into NHS England’s accounts is

consistent with the audited accounts. Auditors are also required to give NHS England and the

National Audit Office (NAO) a similar statement. If there are inconsistencies between the information

for consolidation and the audited accounts, the auditor must report these to NHS England.

25

Suggested questions about the auditor’s report

If any part of the auditors’ report is qualified, do you understand why?

After 2013/14, is the section of the audit report on risk and materiality consistent with your

understanding of the auditor’s plan?

Have you considered any unadjusted errors brought to your attention by the auditor and are you

satisfied with management’s explanation for not amending the accounts?

Does the letter of representation reflect your views and understanding of the annual report and

accounts and the judgements made in preparing them?

Independent Auditor’s Report

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Chapter 6: The Financial Statements

The accounts (or financial statements) consist of four primary statements

. A statement of comprehensive net expenditure

. A statement of financial position

. A statement of changes in taxpayer’s equity

. A statement of cash flows.

These are accompanied by notes to the accounts which provide further information on the financial

activities of the CCG.

The accounts must include comparative figures for the prior year to show how the CCG’s financial

position has changed year on year.

It is best practice, for clarity, that CCGs should not include any headings or notes for which no

amount is recorded in either the current or the prior year.

Detailed guidance on the form and content of the accounts is included in the ARG prepared by NHS

England.

If the CCG controls another body within the resource accounting boundary, including a NHS charity, it

must prepare consolidated financial statements. This means the prime statements and key notes must

not only provide information on the CCG itself but also on the CCG and its subsidiary combined. We

have not included consolidated accounts in this guide.

In addition to their accounts, CCGs must provide the same information (with further analysis in places)

to NHS England in a standard format for consolidation. The accountable officer and chief finance

officer must provide assurance to NHS England that this information is consistent with the audited

accounts.

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Chapter 7: Statement of Comprehensive NetExpenditure

Accounting standards require the preparation of a statement of comprehensive income. However, as

CCGs are funded by an allocation from parliament, the MfA requires them to prepare a statement of

comprehensive net expenditure (SOCNE) instead.

The SOCNE shows the amount spent by the CCG in the year less any income it has received from the

provision of goods or services to other organisations.1 The SOCNE does not include the CCG’s main

source of funding which is its resource allocation from NHS England (referred to as parliamentary

funding in the accounts). Parliamentary funding is not treated as income but is added to the general

fund in the statement of changes in taxpayers’ equity.

The SOCNE is prepared on an ‘accruals basis’ which means that expenditure is recognised in the

accounts in the financial year that goods or services are received. This may not be the same year that

cash is paid for those goods or services. Likewise, income is recognised in the year that goods or

services are delivered rather than the year in which cash is received in payment for those goods or

services.

The SOCNE does not tell you how well the CCG has performed against its financial targets, this

information is given in the notes to the accounts. Box A on p 32 discusses the relevant notes.

29

1In accounting terms, the difference between expenditure and income is called net.

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30

Statement of Comprehensive Net Expenditure for year ended 31 March 20xx

Current year Prior year

Note £’000 £’000

(Other operating revenue) 54

Gross employee benefits 54

Other operating expenses 55

Net operating costs before financing

(Investment revenue) 58

Other (gains) and losses 59

Finance costs 59

Net operating costs before transfers byabsorption

Net (gain)/loss on transfers by absorption 59

Retained net operating costs for thefinancial year

Other comprehensive net expenditure

Impairments and (reversals) 38 Box B

Net (gain)/loss on revaluation of property,plant & equipment

Net (gain)/loss on revaluation of intangibles

Net (gain)/loss on revaluation of financialassets

60

Movements in other reserves

Net (gain)/loss on available for sale financialassets

60

Net (gain)/loss on assets held for sale 61

Net actuarial (gain)/loss on pensionschemes

Share of (profit)/loss of associates and jointventures

Reclassification adjustments

On disposal of available for sale financialassets

60

Total comprehensive net expenditure forthe financial year


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Explanation

Normally a note number but in this guide we have used page numbers.The notes column directs you to specific notes where you can see more detail about figures in the primary statements.

Any income other than the CCG’s resource allocation (parliamentary funding). As this is a statement of net expenditure,income is shown as a negative number (in brackets) and expenditure as a positive number. It is important that signs used inthe accounts is consistent and clear. It may be that income is shown as positive and expenditure as negative (in brackets).

Employee benefits include all payments made to the people employed by the CCG including the non-lay members of thegoverning body and any staff on temporary contracts.

This row might also be called ‘other costs’. The majority of the amount shown here will be the amounts paid to providerbodies for the provision of healthcare.The costs of running and maintaining the CCG’s offices will also be shown here. This will include amounts paid to laymembers. The note to the accounts will provide a more detailed breakdown of these expenses.

This is the total of the amounts above.

This line is for the return on cash invested by the CCG. CCGs will not usually make any investments so there is unlikely to bean entry here.

This usually relates to any gain or loss on the disposal of a non-current asset (see the statement of financial position onpage 36). CCGs will not usually be disposing of non-current assets so there is unlikely to be an entry here.

This row includes the interest cost on any finance leases the CCG has entered into (see box B, p 38) and the interest costs onany borrowings. CCGs should not usually have large finance leases or be entering into borrowing arrangements. Thereforeyou would not normally expect to see significant amounts in this row.

This is the total of the amounts above. As it is the difference between expenditure and income, it is the net cost.

This row is used only where the CCG is involved in a merger or other transfer of functions from another public sector body.However, it will not be used for the transfer of functions on the dissolution of primary care trusts (PCTs) on 1 April 2013.A gain indicates the CCG has either received net assets, or disposed of net liabilities on the transfer of functions.A loss indicates the CCG has either received net liabilities or disposed of net assets on the transfer of functions.As this is a statement of net expenditure a gain is shown as negative (in brackets) and a loss as positive.

This is the total of the amounts above.

Other comprehensive net income includes other movements in the CCG’s financial position that are not permitted by IFRS tobe included in the net operating costs for the year.

A CCG should not hold significant values of property plant and equipment (see box B, p 38) and nor should it have asignificant number of staff in non NHS pension schemes. Therefore you should not expect to see any significant amounts inthese rows.

31

Statement of Comprehensive Net Expenditure

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32

BOX A

FINANCIAL PERFORMANCE

Statutory financial duties

The CCG has statutory financial duties set out in sections 223H, I and J of the 2006 Act (as amended).

The CCG’s performance against these financial targets is disclosed in the notes to the accounts.

Expenditure not to exceed income

In this case income includes all parliamentary funding.

Capital resource use and, if specified, capital resource use on specified matter(s), does

not exceed amount specified in Directions

CCGs have to keep their capital expenditure (expenditure on property, plant and equipment) within

a limit set each year by NHS England.

Revenue resource use and, if specified, revenue resource on specific matters does not

exceed the amount specified in Directions

CCGs have to keep their net operating costs for the year within a limit set each year by NHS England.

Revenue administration resource use (running costs) does not exceed the amount

specified in the Directions

HM Treasury requires that all income and expenditure is classified as either administration or

programme. Programme is any income or expenditure on the direct provision of healthcare or

healthcare related services. Administration is any income or expenditure which is not for the direct

provision of healthcare or healthcare related services.

CCGs are not allowed to spend more than a set amount per head of population on administration

each year. In 2013/14 this is £25 but this will be reduced to £24.73 in 2014/15 and £22.07 in 2015/16.

Non statutory financial duty – better payment practice code

CCGs have a further non statutory financial performance target based on the better payment

practice code (BPPC).

The BPPC requires CCGs to aim to pay all undisputed invoices by the latest of:

. their due date

. 30 days of receipt of goods

. 30 days of receipt of the valid invoice.

The CCG is deemed to have complied with the code if it has paid at least 95% of valid invoices by

the target date.

The note shows how the CCG performed against the BPPC target for both NHS and non NHS

suppliers (they are separately reported) and by value and number of invoices.

The CCG must also disclose any finance costs and compensation it has paid as a result of the late

payment of commercial debts.


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33

Suggested questions about the statement of comprehensive net expenditure

Do the figures appear reasonable based on financial reports to the governing body throughout the

year? In particular, does the CCG’s performance against its financial targets agree with your

expectations?

Other than in the first year of operation, do you understand the reasons for any significant

differences from the comparative figures for the prior year? Where there is no significant movement

year on year, are you satisfied that this is what is expected?

If the CCG has been involved in a transfer of functions in the year, is there a reported net gain or

loss on transfers by absorption? Is this as anticipated?

There are rows in the SOCNE which CCGs would not normally be expected to use. If these are

included in the CCG’s SOCNE and are not showing as zero or a small number, do you understand

why the CCG’s activities differ from the norm?

If the CCG has exceeded the resources (revenue, capital and administration) specified in directions

by NHS England do you understand why? Are you satisfied with the plans in place to ensure the

CCG meets these targets in the following period? Do you understand the consequences of

exceeding these targets?

If the CCG has failed to pay at least 95% of NHS or non NHS invoices within the target period do

you understand why? (For example, is it because of a weakness in the CCG’s systems or does it

indicate difficulties with the CCG’s cash flow? Is it due to the payment arrangements with the

commissioning support unit (CSU) or shared services?) Are you satisfied with the plans the CCG has

in place to ensure its invoices are paid as they fall due in the following period?

Statement of Comprehensive Net Expenditure

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Chapter 8: Statement of Financial Position

The statement of financial position (SOFP) provides a snapshot of the CCG’s financial position at a

specific date – the end of the financial year.

The SOFP is made up of two parts which must always equal each other: the top part (total assets

employed) which shows the CCG’s assets and liabilities (what the CCG owns and is owed), and the

bottom part (total taxpayers’ equity) which shows how the CCG has been financed.

35

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36

Statement of Financial Position as at 31 March 20xx

Note Prior year end£’000

Current year end£’000

Non-current assets:

Property, plant and equipment Box B

Intangible assets 59

Investment property 60

Trade and other receivables 60

Other financial assets 60

Total non-current assets

Current assets:

Inventories 60

Trade and other receivables 60

Other financial assets 60

Other current assets 60

Cash and cash equivalents 60

Non-current assets held for sale 61

Total current assets

Total assets

Current liabilities

Trade and other payables 61

Other financial liabilities 61

Other liabilities 62

Borrowings 62

Provisions 40 Box C

Total current liabilities

Non-current assets plus/(less) net currentassets/(liabilities)

Non-current liabilities

Trade and other payables 58

Other financial liabilities 58

Other liabilities 58

Borrowings 59

Provisions 59

Total non-current liabilities

Total Assets Employed


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Explanation

Normally a note number but in this guide we have used page numbers.The comparative figures in the statement of financial position must equal the closing balances shown in the previous year’saccounts. In 2013/14, as this is the first year of the CCG’s operation this column will not be required.Assets are shown as positive numbers and liabilities as negative numbers (in brackets).

Non-current assets are assets the CCG expects to hold or use for more than a year.

See box B.

Intangible assets are non-monetary assets that do not have physical substance and which cost at least £5,000. An example ofan intangible asset is a software licence which is valid for, and will be in use for more than one year.

Property held to earn rentals or for capital appreciation. CCGs should not usually have investment property.

Amounts owed to the CCG for goods or services provided in the year but for which payment is not due for over a year. CCGsshould not usually have non-current trade and other receivables.

Other financial assets include balances in relation to non NHS pension schemes.

Current assets are assets the CCG expects to sell, use up, or otherwise realise in carrying out its operations in the comingyear.

Inventory is also called stock. These are things which are consumed in the delivery of a service. For provider bodies thisincludes items such as drugs and bandages. CCGs should not usually hold inventory balances because commissioningservices will not involve the consumption of such items.

Amounts owed to the CCG for goods or services provided in the year but for which the CCG has not yet received payment.

Other financial assets include investments and balances in relation to non NHS pension schemes. CCGs should not usuallyhave significant other financial assets.

Other assets held in the short term that do not fit into any other category. CCGs should not usually hold other current assets.

Includes all cash and deposits that can be quickly and easily converted into known amounts of cash.

Includes non-current assets, usually a property or piece of equipment that the CCG is actively seeking to sell within the year.CCGs should not usually hold non-current assets held for sale.

Current liabilities are financial obligations the CCG expects to discharge in the coming year.

Amounts owed by the CCG for goods or services it has received but not yet paid for.

Other financial liabilities are any debt the CCG is due to settle in cash but which do not fit under any of the other headings.CCGs should not usually hold other financial liabilities.

Other short term liabilities that do not fit into any other category. CCGs should not usually hold other current liabilities.

This includes amounts owed under finance leases. See box B.

See box C.

This is the sum of non-current assets, current assets and current liabilities. It will be positive if there are more assets thanliabilities or negative if there are more liabilities than assets.

Financial obligations the CCG is not due to discharge within a year.

Amounts owed by the CCG for goods or services it has received but not yet paid for and is not due to pay within the year.

Other long term liabilities that do not fit into any other category. CCGs should not usually hold other liabilities.

This includes amounts owed under finance leases. See box B.

See box C.

This is the total of all of the amounts above and equals total taxpayers’ equity below.

37

Statement of Financial Position

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38

Statement of Financial Position as at 31 March 20xx

Note Prior year end£’000

Current year end£’000

FINANCED BY TAXPAYERS’ EQUITY

General fund

Revaluation reserve

Other reserves

Charitable reserves

Total Taxpayers’ Equity

BOX B

Property plant and equipment

Property

Unlike most commercial entities, NHS trusts and foundation trusts, CCGs are unlikely to own any

property (land and buildings). This is because, when PCTs transferred their commissioning functions

to CCGs, their property was generally transferred to:

. NHS trusts and foundation trusts or

. NHS Property Services Ltd1 or

. Community Health Partnerships Ltd.2

CCGS are entitled to the use of some property, usually, under lease agreements.

Lease agreements are split into two categories: finance leases and operating leases. Under an

operating lease the CCG is renting the asset whereas through a finance lease it is effectively buying

it but spreading the cost over time.

All expenditure on operating leases is accounted for in the SOCNE. Where assets are leased under a

finance lease however, the CCG as lessee recognises a non-current asset and an equivalent liability

as part of ‘borrowings’ on its SOFP. The costs reflected in the SOCNE for a finance lease are interest

and a depreciation charge calculated to spread the cost of the asset over the lease term – as if the

CCG owned the asset outright.

1NHS Property Services Ltd is wholly owned by the Secretary of State for Health.2Community Health Partnerships Ltd is wholly owned by the Secretary of State for Health.


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Explanation

Normally a note number but in this guide we have used page numbers.The comparative figures in the statement of financial position must equal the closing balances shown in the previous year’saccounts. In 2013/14, as this is the first year of the CCG’s operation this column will not be required.Assets are shown as positive numbers and liabilities as negative numbers (in brackets).

How the CCG has been financed. See box D.

The general fund represents the government’s original stake in the CCG plus the difference between the CCG’s annualparliamentary allocation and its expenditure.

A measure of the net increase in value of the CCG’s property, plant and equipment over its original cost.Where the CCG acquires property, plant and equipment from another NHS body on the transfer of functions, it has torecreate the revaluation reserve that existed in relation to those assets in the transferring body. To do this it must make anappropriate transfer from the general fund into the revaluation reserve.

Other reserves arise from specific one off events and their creation requires agreement from NHS England and theDepartment. It is unlikely for a CCG to have an ‘other reserve’.

If the CCG has consolidated a NHS charity the charity’s reserves are disclosed here.

This is the total of the amounts above and equals total assets employed as above.

39

It is sometimes difficult to determine whether a lease is an operating lease or a finance lease but

usually, the more exclusive the use of an asset over its useful life the CCG is entitled to, the more

likely it is to be a finance lease.

Assets financed under local improvement finance trust (LIFT) or public finance initiative (PFI)

schemes may be seen as particular types of finance lease between an NHS body and a commercial

entity. CCGs should not be directly party to such schemes as they are the responsibility of

Community Health Partnerships Ltd.

Plant and equipment

CCGs may own or lease non property assets such as plant and machinery, furniture fittings and

equipment including IT equipment. These assets are initially recorded on the SOFP at cost and then

reduced by annual depreciation which is charged to the SOCNE. The depreciation is calculated to

spread the cost of the asset over its useful life.

Non property assets should be valued on the SOFP at fair value. This is an estimate of what it

would cost to buy an asset in similar condition at the date of the SOFP. However, where such

assets are short lived and the cost does not fluctuate significantly over their life, it may be

appropriate to value them at a depreciated historic cost. This is the amount which they were

purchased for written down over their useful economic life.

The accounts need to disclose for each class of asset the:

. Cost or valuation

. Accumulated depreciation

. Method of financing

. Minimum and maximum economic lives.

Similar disclosures are required for intangible non-current assets.


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40

BOX C

Provisions and contingencies

A CCG needs to make provisions for amounts it is probable (more likely than not) it will have to

pay in the future where the reason for the liability has already occurred but the timing or amount

needed to settle it are as yet uncertain. On creation of a provision as a liability on the SOFP a

charge is made to the SOCNE. Any future increase in the estimate of the likely amount payable, or

in the amount actually paid, is charged as a further expense in the SOCNE. If the actual amount

paid is less than the provision the CCG will release the excess back to the SOCNE as a reduction in

expenditure in that year.

In the rare event that it is not possible to place a financial valuation on the outcome the CCG does

not make a provision but discloses the details in the accounts as a contingent liability.

Contingencies

Where an event has happened before the year end that may give rise to a future liability, but it is

deemed that a payment is possible rather than probable (more likely than not that the CCG will

not have to make a payment), the CCG does not make a provision. It is, however, required to

disclose the details in the accounts as a contingent liability. This disclosure should include

estimated values. In the rare event that the CCG cannot make a reasonable estimate of the likely

value it should disclose the reasons for this in the note.

An event before the year end that gives rise to the possibility of income in the future is a

contingent asset. The CCG should not recognise a contingent asset in its accounts unless the

receipt is virtually certain. If the receipt is probable, the CCG should disclose the details in a note to

the accounts.

BOX D

Taxpayers’ equity

CCGs may have inherited net liabilities from their predecessor PCT or, if they spend more than their

parliamentary allocation, may need to reflect net liabilities at the date of the SOFP.

Where a CCG has net liabilities, rather than reflecting the government’s investment in the CCG, the

taxpayer’s equity reflects an amount that would be required to ensure all the CCG’s liabilities are met.

If a commercial body had net liabilities it could indicate that it is unlikely to continue as a going

concern.3 For a CCG, as long as there is evidence that its operations will continue to be performed

either by itself or another public sector body, it should always prepare its accounts as if it is a

going concern. The ARG says that unless the CCG is about to apply or has applied to NHS England

for dissolution then the accounts should be prepared on a going concern basis. However, the

governing body should include in the CCG’s accounts a note on any material financial uncertainties

that may mean the CCG cannot continue in its current form.

3See Grant Thornton guidance on going concern on www.grant-thornton.co.uk


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41

Suggested questions about the statement of financial position


year? Use the notes to find out more information on balances that look unusual.

Do you understand the reasons for any significant differences from the comparative figures for the

prior year? Where there is no significant movement year on year, are you satisfied that this is what

is expected?

If there are balances which a CCG would not normally be expected to have, do you understand

why this CCG is different?

If receivables have increased significantly, are you satisfied that the CCG’s credit control systems are

operating effectively?

If payables have increased significantly, is the CCG having difficulties paying its payables? (Refer

also its performance against the Better Payments Practice Code above.)

Where provisions are significant, has the CCG factored future payment into its cash flow forecasts?

If the CCG does not have any significant provisions, are you satisfied that it has adequately

considered any potential liabilities?

If an ‘other reserve’ has been created are you aware that the CCG has had approval for this from

the NHS England and the Department?

Has the governing body considered whether the CCG is likely to continue in its current form for at

least 12 months from the date of the SOFP and where there are material uncertainties have they

been adequately disclosed in the accounts?


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Chapter 9: Statement of Changes in Taxpayers’Equity

The statement of changes in taxpayers’ equity (SOCITE) shows the movement on the general fund and

reserves in the year. The amounts shown in this statement are also reflected in the SOCNE in the

other operating expenses section. The CCG’s parliamentary funding for the year is shown at the

bottom of this statement.

43

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44

Statement of Changes in Taxpayers’ Equity

General

fund

£’000

Revaluation

reserve

£’000

Other

reserves

£’000

Charitable

reserves

£’000

Total

£’000

Balance at 1 April 20xx

Transfer of assets and liabilities from closed

NHS bodies 1 April 2013

Transfer between reserves in respect of

assets transferred from closed NHS bodies

1 April 2013

Prior period adjustment

Restated balance at 1 April 20xx

Changes in taxpayers’ equity in year

Net operating cost for the financial year

Surplus/(loss) on charitable funds

Share of profit/(loss) of associates and joint

ventures

Net gain/(loss) on revaluation of:

Property, plant, equipment

Intangible assets

Financial assets

Assets held for sale

Impairments and reversals

Movements in other reserves

Transfers between reserves

Release of reserves to SOCNE

Reclassification adjustment on disposal of

available for sale financial assets

Transfers by absorption to/(from) other

bodies

Transfer between reserves in respect of

assets transferred under absorption

Reserves eliminated on dissolution

Net actuarial gain/(loss) on non-NHS

pension schemes

Net recognised expenditure for the

financial year

Net parliamentary funding/grant-in-aid

Balance at 31 March 20xx


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Explanation

This figure must equal the closing balance from the previous year. In 2013/14, for CCGs this will be zero.

This figure is the difference between assets and liabilities transferred from PCTs on 1 April 2013.

In 2013/14, this statement will reflect the assets and liabilities transferred from PCTs on 1 April 2013. All assets except

inventories (stock) and non-current assets (property, plant and equipment) and all liabilities except those closely related to

transferred non-current assets will transfer to NHS England so there are unlikely to be large balances included in these lines.

After 2013/14, this row in the statement will not be used as the accounting treatment for the transfer of functions will be

different.

Where revalued non-current assets have transferred the CCG needs to recreate the revaluation reserve as it was in the PCT.

If there is a change in accounting policy in the year or a correction is needed in relation to material error in a prior year’s set

of accounts, the impact is recognised retrospectively through reserves rather than through the SOCNE.

This figure comes from the SOCNE. As this is a cost it will be a negative number shown in brackets.

Where charitable funds are consolidated into a CCG’s accounts there will be an entry here.

CCGs are unlikely to enter into these arrangements.

These figures come from total comprehensive net expenditure section of the SOCNE.

This row should always total zero.

This row shows transfers that are required on disposal of financial assets where earlier revaluation gains have been taken to

reserves. As CCGs do not usually hold financial assets it would be unusual for a figure to appear here.

CCGs should not usually hold significant non-current assets held for sale so it would be unusual for a figure to appear here.

Net assets or liabilities transferring from another public sector body other than on 1 April 2013 are accounted for as income

or expenditure in the SOCNE. This line will be used for any transfers after that date.

Where revalued assets have transferred the CCG needs to recreate the revaluation reserve as it was in the transferring body.

This line will only be used if the CCG ceases to exist.

This row is only relevant to non NHS pension schemes where, for instance, staff have transferred from a local authority and

continue to be members of the local government superannuation scheme. Where staff are members of a private pension

scheme there are no entries here.

This is a sub-total of the amounts above.

This is the funding the CCG receives from NHS England for both revenue and capital purposes.

This row should agree with the taxpayers’ equity in the SOFP.

45

Statement of Changes in Taxpayers’ Equity

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46

Suggested questions about the statement of changes in taxpayers’ equity

If there is a prior period adjustment, has the reason for it been explained clearly to you and

disclosed in the accounts?

If there are any significant movements between reserves have these been clearly explained?

If there are significant balances where this is likely to be unusual, do you understand why this is the

case?


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Chapter 10: Statement of Cash Flows

The statement of cash flows (SOCF) summarises the actual cash flowing into and out of the CCG

during the year. It differs from the SOCNE which includes expenditure which the CCG has incurred but

not paid for and income which is due but has not yet been received.

It takes as its starting point the net operating costs from the SOCNE and then lists the adjustments

needed to bring this back to the cash paid out or received in the year. Some amounts are shown in

this statement but not in the SOCNE. For example, the cash paid for a new piece of equipment is

shown here but the in the SOCNE the cost is spread over the life of the asset by including a

depreciation charge each year.

47

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48

Statement of cash flows for year ended 31 March 20xx

Note Current year£’000

Prior year£’000

Cash flows from operating activities

(Net operating costs for the financial year)

Depreciation and amortisation

Impairments/(impairment reversals)

(Other gains)/other losses on foreign exchange

(Donated assets received credited to revenue but non-cash)

(Government granted assets received credited to revenue but non-cash)

Release of PFI deferred credit

(Interest paid)

(Increase)/decrease in inventories

(Increase)/decrease in trade and other receivables

(Increase)/decrease in other current assets

Increase/(decrease) in trade and other payables

Increase/(decrease) in other current liabilities

(Provisions utilised)

Increase/(decrease) in provisions

Net cash inflow/(outflow) from operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

Interest received

(Payments) for property, plant and equipment

(Payments) for intangible assets

(Payments) for investments with the Department

(Payments) for other financial assets

(Payments) for financial assets (LIFT)

Proceeds of disposal of assets held for sale (PPE)

Proceeds of disposal of assets held for sale (intangible)

Proceeds from disposal of investment with the Department

Proceeds from disposal of other financial assets (LIFT)

(Loans made in respect of LIFT)

Loans repaid in respect of LIFT

Rental revenue

Net cash inflow/(outflow) from investing activities

NET CASH INFLOW/(OUTFLOW) BEFORE FINANCING

CASH FLOWS FROM FINANCING ACTIVITIES

Net parliamentary funding received

Loans received

(Loans repaid)

(Capital element of payments in respect of finance leases, PFI and LIFT)


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Explanation

Operating activities are the principal activities of the CCG. It does not include parliamentary funding.

This figure comes from the SOCNE, in this example outflows of cash are shown as negative (in brackets) and inflows aspositive. Signs should be consistent throughout the statement.The rest of this section of the SOCF strips out the non-cash elements of this statement and adds in the cash effect ofmovements in balances to get to the net movement in cash in relation to operating activities.

These rows represent expenditure recognised in the SOCNE but for which no cash has been received or paid in the year.

Interest paid is shown in the SOCNE but below the net operating cost total.

Changes between the opening and closing balances in current assets and liabilities are not accounted for in the SOCNE inthe year but mean there has been either an inflow or outflow of cash in the year. Therefore they need to be taken account ofhere.

As the settlement of a provision involves a cash payment but it is not recognised in the SOCNE in the year it needs to betaken account of here.

This represents expenditure recognised in the SOCNE but for which no cash has been paid in the year.

Investing activities are the acquisition and disposal of non-current assets and other investments not included in cashequivalents.

Interest received is shown in the SOCNE. This will be the cash received rather than the amount due in the year.

These are amounts of cash paid or received for assets and liabilities which are shown in the SOFP.

Financing activities consist of parliamentary and any other grant funding or loans. They also include payments in respect offinance leases other than the interest.

This is the cash received from NHS England to allow the CCG to operate.

This is the cash received in the form of a loan.

This is the cash paid to repay a loan.

This is the amount paid for a finance lease excluding the interest element.

49

Statement of Cash Flows

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50

Statement of cash flows for year ended 31 March 20xx

Note Current year£’000

Prior year£’000

Cash flows from operating activities

Capital grants and other capital receipts received/(repaid)

Net cash inflow/(outflow) from financing activities

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS

Cash and cash equivalents at 1 April 20xx

Effect of exchange rate changes in the balance of cash held in foreigncurrencies

Cash and cash equivalents at 31 March 20xx

Suggested questions about the statement of cash flows

Does the CCG’s end of year cash flow position correspond with that reported during the financial

year?

Do the figures appear reasonable based on other entries in the accounts? (For example if there has

been a significant rise in payables is this evident in the cash flows from operating activities?)

Are there any items that are not clearly explained which may indicate that they have been included

only to ensure the net increase/decrease in cash and cash equivalents agrees with the movement in

the SOFP?


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Explanation

Operating activities are the principal activities of the CCG. It does not include parliamentary funding.

These are any cash amounts received to assist with the purchase of an asset.

This entry is the difference between the cash and cash equivalent balances on 1 April and 31 March.

Includes all cash and deposits that can be quickly and easily converted into known amounts of cash. This should agree to theprior year figure in the SOFP.

This should not be a significant amount for CCGs as they will operate only in £s sterling.

This should agree to the current year figure in the SOFP.

51

Statement of Cash Flows

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Chapter 11: Notes to the Accounts

The notes to the accounts provide additional details on the entries in the primary statements.

Accounting policies

This note sets out the accounting rules the CCG has followed when preparing its accounts.

The accounting policies are dictated by International Financial Reporting Standards (IFRS) and

HM Treasury’s financial reporting manual (FReM) and are replicated in the ARG.

One of the key policies is that income and expenditure is recognised on an accruals basis, meaning it

is recorded in the period that services are provided rather than when cash is received or paid out.

The accounting policies also dictate when purchases should be recorded as capital expenditure and

how assets should be valued and depreciated.

CCGs have only very limited scope to amend these policies, although they can expand the

descriptions of the policies where it is appropriate. Where an appropriate accounting policy does not

appear to exist, CCGs should seek guidance from NHS England. CCGs should also exclude any of the

standard policies included in the ARG that are not relevant to their activities, for example if the CCG

has no property it should not include a policy on the valuation of property. The audit committee must

approve the CCG’s accounting policies annually as well as consider any changes that may be needed

to the way that the policies are applied.

There also needs to be disclosure of the likely impact on the accounts of applying accounting

standards that have been issued but not yet adopted. This disclosure is usually found in the

accounting policies note.

Critical judgements and estimation uncertainty

The accounts need to disclose those judgements which management made when preparing the

accounts that have the most significant effect on the amounts recognised in the accounts. The

statements also need to disclose the key assumptions management made when preparing the

accounts and any associated uncertainty in key figures. These are likely to be decisions discussed by

the governing body or audit committee.

These disclosures may be made in the accounting policies note under the heading ‘critical accounting

judgements and key sources of estimation uncertainty’ or spread through the statements as part of

other notes on the relevant values.

53

Suggested questions about the accounting policies

Are you aware of any departures from the accounting policies set by NHS England? If so has the

CCG received approval from NHS England?

If there have been any changes in applicable accounting policies this year, are you clear about the

impact on the CCG’s accounts? Have they been considered by the audit committee?

Do the accounts set out clearly the critical judgements you are aware that management has made

when preparing them?

Do the accounts set out clearly the key assumptions you are aware that management has made

when preparing them and also any associated uncertainty in significant figures?

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Other operating revenue

This note analyses all income other than the CCG’s main resource allocation. As CCGs are mainly

commissioning (spending) organisations they are unlikely to have generated much, if any,

operating revenue.

The accounts are prepared in accordance with the overarching principle that income and expenditure

are recorded gross and are not netted off. It would not simply show the difference between the

amount paid and the amount reimbursed. The only exception would be where a transaction is of a

non-trading nature whereby the CCG is deemed to be acting solely as an agent and does not gain

any economic benefit from the transaction.

The CCG also needs to disclose how much of its other operating revenue derives from the sale of

goods and how much from the supply of services.

Employee benefits

This note gives details about the cost and number of the CCG’s employees by staff group. The staff

groups used are defined by the Department and are the same for all NHS bodies.

The note splits the information between the cost of staff with a permanent contract of employment

and ‘others’. ‘Others’ include agency staff and staff seconded into the CCG. Where the CCG seconds

staff to another body, it must disclose any income it recovers from the other body in relation to the

secondment and the overall net (expenditure less income) employee benefits incurred by the CCG.

The note also includes the cost of exit packages, both compulsory and voluntary, agreed (not

necessarily paid) in the year.

Pension contributions form part of the employee benefit note. The NHS pension scheme is a defined

benefit scheme which means that the benefits on retirement are not linked to the contributions made

into the scheme. Accounting for a defined benefit scheme is complex and the accounts show the

assets and liabilities of that scheme. However, because of the nature of the NHS pension scheme, NHS

bodies cannot identify their share of the underlying assets or liabilities of the scheme. Therefore, the

CCG accounts for it as if it were a defined contribution scheme. This means the CCG accounts for its

contributions into the scheme in the year it makes them. The CCG also has to make a number of

disclosures about the funding and valuation of the NHS pension scheme. These are usually provided

by the Department.

Details of staff sickness absence and retirements during the year for reasons of ill-health should also

be shown here.

54

Suggested questions about employee benefits

Do you understand the reasons for any significant movements in employee benefits and/or staff?

Does the change in staff numbers or mix make sense in relation to any changes in overall

employee benefits? Do the changes fit with your knowledge of the CCG during the year?

Do the disclosures for termination benefits, sickness absence and ill-health retirements make sense

in relation to your knowledge of activity in these areas during the year?


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Operating expenses

This note analyses the CCG’s expenditure on goods and services in the year. As with revenue, the

overarching principle is that revenue income and expenditure are recorded gross and are not

netted off.

The table below shows the analysis required by the ARG. Most of the expenditure on commissioning

healthcare services will be shown as services from foundation trusts, NHS trusts and other NHS bodies.

It is for CCGs to decide whether to provide more information on the types of healthcare purchased.

55

Notes to the Accounts

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56

Operating expenses

Current year£’000

Prior year£’000

Gross Employee benefits

Employee benefits excluding governing body members

Executive governing body members

Total gross employee benefits

Other costs

Services from other CCGs and NHS England

Services from foundation trusts

Services from NHS trusts

Services from other NHS bodies

Purchase of healthcare from non NHS bodies

Chair and lay governing body members and members of the council of members

Supplies and services – clinical

Supplies and services – general

Consultancy services

Establishment

Transport

Premises

Impairments and reversals of receivables

Inventories write down

Depreciation

Amortisation

Impairments and reversals of:. Property, plant and equipment. Intangible assets. Financial assets. Non-current assets held for sale. Investment properties

Audit fees

Other auditor’s remuneration

Internal audit services

General dental services and personal dental services

Prescribing costs

General ophthalmic services

General medical services


Black plate (57,1)

Explanation

These two rows analyse total employee costs between those paid to employees who are on the governing body and thosewho are not.The executive governing body costs plus the cost of lay members will be the same as the amount shown in theremuneration report.

This must equal the total in the employee benefits note.

These lines should be used for main commissioning costs and other expenses where the services received do not fit underany of the other headings.

Services commissioned from Scottish, Welsh and Irish health bodies as well as from private or voluntary sector healthcareproviders.

The amount paid to members of the council of members and of the governing body who do not have an executive role inthe CCG. This plus the cost of executive members of the governing body will be the same as the amount shown in theremuneration report.

This is expenditure on goods and services for clinical use.

Includes the cost of cleaning and catering for example cleaning materials.

The cost of management consultancy where the consultant is not providing a service which would normally be undertakenby a trust staff member for example, specialist tax advice.

Administrative costs for example, printing, postage, telephone, and advertising.

Includes vehicle insurance, fuel and oil, maintenance and hire of transport.

Includes utility costs, furniture and other property-related revenue expenditure such as rates, rent and insurance.

The cost of debts written off during the year because they are not expected to be paid and the increase or decrease in theprovision for debts which are unlikely to be paid in the future. Only non-NHS debts can be treated in this way. It would beunusual for a CCG to have a value here.

The reduction in value of any items of inventory (stock) which are no longer worth the amount recorded in the accounts. Itwould be unusual for a CCG to have a value here.

An accounting charge which reflects the fact that capital assets are consumed over their useful lives. For instance, ITequipment might be depreciated over five years on a straight line basis. This would mean that one-fifth of the cost of theequipment would be charged as depreciation every year for the five year life of the asset.Amortisation is the equivalent to depreciation for intangible assets, such as software. This is not a cash transaction.

Impairments included within expenses are those that relate to:. A consumption of economic value or. A fall in price, where there is no balance in the revaluation reserve that it can be offset against.

The amount paid to the external auditor for undertaking the audit work required by the Audit Commission’s Code of AuditPractice.

Any amounts paid to the external auditor for work which is not required by the Code of Audit Practice.

Any amounts paid to the external auditor for internal audit services.

Any amounts paid as a result of commissioning primary care services.

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Black plate (58,1)

Income generation

If the CCG undertakes income generation activities costing over £1m or are otherwise material with

the aim of making a surplus it must include the details in its accounts. It is unlikely that a CCG would

undertake such activities as it is a way of using excess capacity to good effect and is mainly

something that healthcare providers do.

Investment revenue

The source and nature of any rental income, interest or other investment income is disclosed in this

note.

Other gains and losses

The note analyses other gains and losses and includes those resulting from the disposal of property,

plant and equipment and other assets.

58

Operating expenses – continued

Current year£’000

Prior year£’000

Other professional fees (excluding audit)

Grants to other public bodies

Clinical negligence

Research and development (excluding staff costs)

Education and training

Change in discount rate

Other expenditure

Total operating costs

Suggested questions about operating expenses

Does the analysis of expenditure appear reasonable to you based on your understanding of the

CCG’s operations?


differences from the comparative figures for the prior year? Do you also understand the reasons for

a lack of significant movement year on year?

Do you know the main elements of ‘other’ expenditure?

Does the CCG operate from premises owned by NHS Property Services Ltd? Is the related

expenditure shown under ‘premises’?

Does expenditure on significant contracts for example, the contract held with the commissioning

support unit look reasonable and is it consistent with what you know?


Black plate (59,1)

Explanation

Any fees paid to professionals other than auditors and management consultants.

Any grant paid to a local authority or other public body.

Any contribution to the NHS litigation authority (NHSLA)’s clinical negligence scheme. As CCGs do not treat patients directly,it would be unusual for a CCG to have a value here. However, there may be an additional line for payments to the NHSEngland risk sharing scheme for legacy continuing care provisions (see box C).

Costs relating to research and development. It would be unusual for a CCG to have a value here.

Costs relating to education and training of staff.

Provisions which are not expected to be paid out within a year are discounted to reflect the time value of money. Thediscount rate is set by Treasury each year and can go up or down. The effect of changes in the discount rate is shown here.

All other costs which do not fit into any of the classifications above. If this number is particularly large, the CCG shouldanalyse it further.

This is the amount shown in the SOCNE for operating costs and is the total of all of the above.

Finance costs

Finance costs are analysed by type. This includes interest relating to finance leases and the late

payment of commercial debt.

Net gain/(loss) on transfer by absorption

This note provides a full description of the transfer of functions to (or from) the CCG (other than those

which occurred on 1 April 2013) that gave rise to a net gain or loss.

Operating leases

The operating lease note gives details of the value of operating lease payments charged to the

SOCNE in the year and also the minimum future payments the CCG is contracted to pay. The note

includes contingent rents. These are any element of the lease payment that is not fixed but is based

on something that changes other than with the passage of time, for example future price indices or

future market rates of interest.

Any sub-lease payments received by the CCG must also be disclosed in this note.

Property, plant and equipment

See box B above.

Intangible non-current assets

This note analyses the movements in intangible non-current assets. It has similar contents to the note

on property, plant and equipment – see box B above.

Investment property

This note provides details on any property that the CCG holds to earn rentals and/or for capital

appreciation rather than for use. It is unlikely that a CCG would own any investment property.

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Black plate (60,1)

Inventories

This note sets out any stock the CCG holds and the value of stock charged to expenditure in the year

including any amounts written off. The levels of stock held by a CCG are likely to be very small.

Trade and other receivables

This note analyses the amounts due to the CCG by the type of body that owes the money and

between amounts due within a year and over a year. At key points in the financial year (usually at the

end of December and end of March) the Department requires all NHS bodies to undertake an exercise

to agree the amounts due to and from individual NHS bodies. This is to allow the Department to

prepare the consolidated NHS accounts. This exercise is known as ‘agreement of balances’. The

accounts will not include any reference to this exercise but it provides evidence that the amounts

shown in the accounts are robust.

The note also identifies any provision for potential bad debts described as ‘provision for impairment

of receivables’. This is the amount that management consider will not be paid. Provisions are not

made against any receivables from NHS bodies; if they are not going to be paid then a credit note is

issued. The CCG must show the age of receivables that are past their due date but which it still

expects to receive.

Other financial assets

If the CCG has any other financial assets, this note explains the movement in them, including

additions, disposals and revaluations over the year. As CCGs have limited powers to make

investments, it is unlikely that any CCGs will include this note in their accounts.

Other current assets

These are current assets that do not fit into any other category in the SOFP.

Cash and cash equivalents

Cash includes cash in hand (petty cash) and cash at the bank. Cash equivalents are any other deposits

that can be converted to cash straight away without penalty.

The note analyses the CCG’s cash and cash equivalents between amounts held in commercial banks,

amounts held by the Government Banking Service and other current investments.

The figure must exclude any cash held on behalf of patients and other bodies under pooled budget

arrangements.

60

Suggested questions about trade and other receivables

Does the analysis of trade and other receivables appear reasonable to you?


differences from the comparative figures for the prior year?

Did the agreement of balances exercise identify any significant differences between what the CCG

is reporting and the equivalent figures reported by the counterparty? If so, are you satisfied with

what is being done to reconcile them? Are you satisfied that the CCG’s recording process is robust?


Black plate (61,1)

Non-current assets held for sale

This note discloses the movement in any non-current assets that the CCG intends to dispose of within

a year and is actively marketing for sale. It is unlikely that a CCG would have any such assets.

Analysis of impairments and reversals

This note explains the reasons for any material impairments that occurred during the year. An

impairment is a reduction in the valuation of any non-current assets owned by the CCG.

Trade and other payables

This note analyses the amounts payable by the CCG by the type of body that it owes and between

amounts due within a year and over a year. As with receivables, at key points in the financial year

(usually at the end of December and end of March) the Department requires all NHS bodies to

undertake an exercise to agree the amounts due to and from individual NHS bodies. This is to allow

the Department to prepare the consolidated NHS accounts. This exercise is known as ‘agreement of

balances’. The accounts will not include any reference to this exercise but it provides evidence that

the amounts shown in the accounts are robust.

The note also includes details of amounts received by the CCG in advance of providing the relevant

goods or services. This excludes parliamentary funding.

Deferred revenue

If the CCG has received income for a specific activity that is to be delivered in the following year, that

income is deferred. This note shows the movement in deferred revenue over the year. The closing

balance on this note will agree to the balance shown in the trade and other payables note above.

Other financial liabilities

If the CCG has any other financial liabilities, this note analyses them by type. It is unlikely that a CCG

would have any such liabilities.

Other liabilities

If the CCG has any other liabilities which do not fall into any of the categories above, this note

provides further analysis and details of them. It is unlikely that a CCG would have any such

liabilities.

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Suggested questions about trade and other payables

Does the analysis of trade and other payables appear reasonable to you?


differences from the comparative figures for the prior year?

Did the agreement of balances exercise identify any significant differences between what the

CCG is reporting and the equivalent figures reported by the counterparty? If so, are you satisfied

with what is being done to reconcile them? Are you satisfied that the CCG’s recording process is

robust?


Black plate (62,1)

Borrowings

If the CCG has any borrowings, including bank overdrafts and finance lease liabilities, this note

analyses them by type. It also discloses the amount of the principle that needs to be paid within

specific time frames. Other than finance leases, CCGs have limited powers to borrow so any entries in

this note would be unusual.

Private finance initiative (PFI), local improvement finance trust (LIFT) and other service

concession arrangements

Most PCT PFI, LIFT and other service concession arrangements transferred to Community Health

Partnerships Ltd. However, if the CCG is a party to such an arrangement, this note provides details of

the arrangements including payments made and future commitments.

Finance lease obligations

This note provides details of any finance leases to which the CCG is party including amounts payable

or receivable in the future.

Provisions

See box C.

Contingencies

See box C.

Commitments

This note provides details of expenditure that the CCG is committed by contract to make but has not

yet incurred as the contract has not been fulfilled.

Financial instruments

A financial instrument is a contract that will be settled by the transfer of cash. The most likely financial

assets that a CCG may have are trade and other receivables, the most likely financial liabilities are

trade and other payables.

The note discloses the value of financial instruments the CCG has and the currency, interest rate,

credit and liquidity risks associated with them. If the fair value of the financial instrument differs from

the value included in the accounts, this note will also disclose the fair value and how it has been

obtained. This is unlikely to be the case for CCGs.

Operating segments

This note shows the way that financial information is reported to the governing body. If the CCG

reports the financial position of different parts of the organisation separately for management

purposes, then this note reconciles what is reported to management with the amount shown in the

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Black plate (63,1)

SOCNE. Only parts of the CCG which incur at least 10% of the CCG’s expenditure or use at least 10%

of its assets are disclosed in this note.

The note is intended to allow readers of the accounts to understand how management view the

organisation. As CCGs do not operate over a wide geographic area and have a relatively narrow

function (commissioning healthcare), it is unlikely that they will report on a segmental basis.

Pooled budgets

Pooled budget arrangements are joint arrangements between health and social services. A pooled

budget is not an entity in its own right but is a working arrangement between NHS bodies and local

authorities. A pooled budget is hosted by one of the member bodies. Accounts of the pooled budget

will be prepared but as it is not an entity, each member must account for only its share of the

transactions and balances of a pooled budget. This note summarises the CCG’s transactions with the

pooled budget and may also include memorandum accounts produced by the host body for the pool

as a whole.

From 1 April 2015, transactions relating to the Better Care Fund will be covered by this note as they

will be operated through pooled budgets.

Intra-government and other balances

This note analyses the CCG’s receivables and payables across intra-governmental bodies including

central government agencies such as HM Revenue and Customs, local authorities, NHS trusts and

foundation trusts.

Related party transactions

This note provides details of any significant transactions that the governing body or other key CCG

members and managers (or their relations or any bodies that they may control) have undertaken with

the CCG and any outstanding balances with them. Whether a transaction is significant must be

considered from the point of view of both parties to the transaction. See box E below.

This note also lists the NHS organisations and other governmental bodies that the CCG has transacted

with during the year but it need not give the value of the relevant transactions and balances.

If members of the CCG’s governing body are trustees of a charity that transacts with the CCG, details

of those transactions and any outstanding balances are also included in this note.

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BOX E

Related party transactions

There is a general assumption that transactions between entities occur on an ‘arm’s length’ basis. In

other words, each party to the transaction is operating independently, will seek to maximise the

benefit it gets from the transaction and neither party is in a position to influence the other’s

decision.


Black plate (64,1)

Losses and special payments

This note discloses payments that parliament would not have envisaged healthcare funds being spent

on when it originally provided the funds. Examples may include fraudulent payments, personal injury

payments and legal compensation. Such payments must be reported to and approved by either the

chief officer or the governing body, depending on the size of the payment.

Third party assets

Assets belonging to third parties, such as money held on behalf of patients, or other bodies under a

pooled budget arrangement are not recognised in the accounts since the CCG has no beneficial

interest in them. They are disclosed in this note.

Financial performance targets

See box A above.

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IFRS requires that the CCG’s accounts contain disclosures to draw attention to the possibility that

its results and financial position may have been affected by the existence of related parties. All

transactions, balances and commitments between related parties must be disclosed whether or not

the relationship has influenced the outcome of the transaction. Disclosure in this note does not

imply that the transaction has been impacted by collusion in any way.

A related party is someone (or a close member of the family of someone) who:

. Has control or joint control of the CCG

. Has significant influence over the CCG or is a member of the key management personnel of

the CCG or of NHS England or the Department of Health.

For example, if the husband or wife of a member of the governing body owns and runs a care

home with which the CCG has a contract, any transactions and balances between the CCG and the

care home must be disclosed in the related party note.

Another example would be where one of the lay members is also a trustee of a charity which

supports the elderly in the community. Any transactions between the CCG and the charity must be

disclosed in this note.

When preparing this note, the register of interests should be reviewed to identify any possible

relationships but enquiries may be made of members of the governing body to identify

relationships which may exist through family members.

Also, other public sector bodies and associates or joint ventures of the CCG are related parties to

the CCG.

Suggested question about losses and special payments

Does the number and value of losses and special payments agree with your expectations based on

reports through the year?


Black plate (65,1)

Analysis of charitable reserves

If the CCG has consolidated a charity, this note analyses the charity’s reserves between unrestricted,

restricted and endowment funds.

Events after the reporting period

Before signing the accounts, the CCG must consider whether any events of significant interest to the

users of the accounts have occurred since the year end.

If the event provides information about a situation that existed at the year end, for example, a

valuation after the year end to assess the fall in value of a building as a result of damage incurred

before the year end, the accounts are adjusted to incorporate the new information.

If however, the actual event for example the damage, occurred after the year end, the accounts are

not adjusted but the information is disclosed in this note.

65

Suggested question about events after the reporting period

Is the information in this note consistent with your understanding of key events since the year end?


Black plate (66,1)

Black plate (67,1)

Appendix 1: Questions for Members of theGoverning Body to Consider

Suggested questions about the annual report

Does the annual report give a balanced view of the operations of the CCG over the year?

If you are a member of the CCG governing body and hold company directorships or have other

interests which may conflict with your responsibilities to the CCG, are they disclosed?

Are you satisfied that your salary has been appropriately disclosed?

Has the remuneration report been already considered by the remuneration committee? What was the

outcome?

Has the pay multiple been explained? Has any movement in the multiple been explained?

Are you aware of any relevant audit information which has not been made available to the auditors?

Suggested questions about the governance statement

Does the governance statement include all of the elements required by the ARG?

Is the content of the governance statement consistent with your knowledge of the operations of the

CCG over the year?

Is the governance statement consistent with statements made and reports that the audit committee

has received from auditors, or other sources of assurance?

Do you have evidence that the systems and procedures underpinning the disclosures set out in the

governance statement are robust?

Are any significant control issues or gaps in control or assurance recorded consistent with reports

received?

In particular, does the governance statement include:

. All significant risks that you were aware of during the year?

. The actions the CCG is taking, or plans to take, to address the identified risks?

. The head of internal audit’s opinion and disclosure of limited or no assurance internal audit reports?

. A conclusion which specifically refers to significant control issues identified in the statement?

Suggested questions about the statement of accountable officer’s responsibilities

Based on your knowledge of the CCG and its operations, are you satisfied that the accountable officer

has discharged all of his/her responsibilities in the year?

If there have been issues concerning efficiency, effectiveness and economy that are reported in the

governance statement or the auditors’ report, are they reflected in this statement as well?

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Black plate (68,1)

If any of the CCG’s functions have not been discharged in the year, is that fact reflected in the

statement?

Suggested questions about the auditor’s report

If any part of the auditors’ report is qualified, do you understand why?

After 2013/14, is the section of the audit report on risk and materiality consistent with your

understanding of the auditor’s plan?

Have you considered any unadjusted errors brought to your attention by the auditor and are you

satisfied with management’s explanation for not amending the accounts?

Does the letter of representation reflect your views and understanding of the annual report and

accounts and the judgements made in preparing them?

Suggested questions about the statement of comprehensive net expenditure


year? In particular, does the CCG’s performance against its financial targets agree with your

expectations?

Other than in the first year of operation, do you understand the reasons for any significant differences

from the comparative figures for the prior year? Where there is no significant movement year on year,

are you satisfied that this is what is expected?

If the CCG has been involved in a transfer of functions in the year, is there a reported net gain or loss

on transfers by absorption? Is this as anticipated?

There are rows in the SOCNE which CCGs would not normally be expected to use. If these are

included in the CCG’s SOCNE and are not showing as zero or a small number, do you understand why

the CCG’s activities differ from the norm?

If the CCG has exceeded the resources (revenue, capital and administration) specified in directions by

NHS England do you understand why? Are you satisfied with the plans in place to ensure the CCG

meets these targets in the following period? Do you understand the consequences of exceeding these

targets?

If the CCG has failed to pay at least 95% of NHS or non NHS invoices within the target period do you

understand why? (For example, is it because of a weakness in the CCG’s systems or does it indicate

difficulties with the CCG’s cash flow? Is it due to the payment arrangements with the commissioning

support unit (CSU) or shared services?) Are you satisfied with the plans the CCG has in place to ensure

its invoices are paid as they fall due in the following period?

Suggested questions about the statement of financial position


year? Use the notes to find out more information on balances that look unusual.

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Black plate (69,1)

Do you understand the reasons for any significant differences from the comparative figures for the

prior year? Where there is no significant movement year on year, are you satisfied that this is what is

expected?

If there are balances which a CCG would not normally be expected to have, do you understand why

this CCG is different?

If receivables have increased significantly, are you satisfied that the CCG’s credit control systems are

operating effectively?

If payables have increased significantly, is the CCG having difficulties paying its payables? (Refer also

its performance against the Better Payments Practice Code above.)

Where provisions are significant, has the CCG factored future payment into its cash flow

forecasts?

If the CCG does not have any significant provisions, are you satisfied that it has adequately considered

any potential liabilities?

If an ‘other reserve’ has been created are you aware that the CCG has had approval for this from the

NHS England and the Department?

Has the governing body considered whether the CCG is likely to continue in its current form for at

least 12 months from the date of the SOFP and where there are material uncertainties have they been

adequately disclosed in the accounts?

Suggested questions about the statement of changes in taxpayers’ equity

If there is a prior period adjustment, has the reason for it been explained clearly to you and disclosed

in the accounts?

If there are any significant movements between reserves have these been clearly explained?

If there are significant balances where this is likely to be unusual, do you understand why this is the

case?

Suggested questions about the statement of cash flows

Does the CCG’s end of year cash flow position correspond with that reported during the financial

year?

Do the figures appear reasonable based on other entries in the accounts? (For example if there has

been a significant rise in payables is this evident in the cash flows from operating activities?)

Are there any items that are not clearly explained which may indicate that they have been included

only to ensure the net increase/decrease in cash and cash equivalents agrees with the movement in

the SOFP?

69

Questions for Members of the Governing Body to Consider

Black plate (70,1)

Suggested questions about the accounting policies

Are you aware of any departures from the accounting policies set by NHS England? If so has the CCG

received approval from NHS England?

If there have been any changes in applicable accounting policies this year, are you clear about the

impact on the CCG’s accounts? Have they been considered by the audit committee?

Do the accounts set out clearly the critical judgements you are aware that management has made

when preparing them?

Do the accounts set out clearly the key assumptions you are aware that management has made when

preparing them and also any associated uncertainty in significant figures?

Suggested questions about employee benefits

Do you understand the reasons for any significant movements in employee benefits and/or staff?

Does the change in staff numbers or mix make sense in relation to any changes in overall employee

benefits? Do the changes fit with your knowledge of the CCG during the year?

Do the disclosures for termination benefits, sickness absence and ill-health retirements make sense in

relation to your knowledge of activity in these areas during the year?

Suggested questions about operating expenses

Does the analysis of expenditure appear reasonable to you based on your understanding of the CCG’s

operations?


from the comparative figures for the prior year? Do you also understand the reasons for a lack of

significant movement year on year?

Do you know the main elements of ‘other’ expenditure?

Does the CCG operate from premises owned by NHS Property Services Ltd? Is the related expenditure

shown under ‘premises’?

Does expenditure on significant contracts for example, the contract held with the commissioning

support unit look reasonable and is it consistent with what you know?

Suggested questions about trade and other receivables

Does the analysis of trade and other receivables appear reasonable to you?


from the comparative figures for the prior year?

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Black plate (71,1)

Did the agreement of balances exercise identify any significant differences between what the CCG is

reporting and the equivalent figures reported by the counterparty? If so, are you satisfied with what is

being done to reconcile them? Are you satisfied that the CCG’s recording process is robust?

Suggested questions about trade and other payables

Does the analysis of trade and other payables appear reasonable to you?


from the comparative figures for the prior year?

Did the agreement of balances exercise identify any significant differences between what the CCG is

reporting and the equivalent figures reported by the counterparty? If so, are you satisfied with what is

being done to reconcile them? Are you satisfied that the CCG’s recording process is robust?

Suggested question about losses and special payments

Does the number and value of losses and special payments agree with your expectations based on

reports through the year?

Suggested question about events after the reporting period

Is the information in this note consistent with your understanding of key events since the year end?

71

Questions for Members of the Governing Body to Consider

Black plate (72,1)

Black plate (73,1)

Appendix 2: Glossary of Terms and Abbreviations

2006 Act The National Health Service Act 2006 is the legislation which sets out

the current form of the NHS.

2012 Act The Health and Social Care Act 2012 amended the 2006 Act to remove

references to PCTs and SHAs and insert the statutory basis for NHS

England and CCGs.

Accountable officer The chief officer of the CCG is accountable to the governing body and

NHS England. The role of the CCG’s accountable officer is set out in

paragraph 12 of Schedule 2 of the 2012 Act. The accountable officer can

be a clinician or a non-clinician and will always be a member of the

governing body. At a high level, the role of the accountable officer is to

be responsible for ensuring that:. The CCG fulfils its duties to exercise its functions effectively, efficiently

and economically. The regularity and propriety of expenditure is discharged at all times.

Proper arrangements are put in place to assure the members (through

the governing body) of the CCG’s on-going capability and capacity to

meet its duties.

Accounts directions In some places, the various Acts of Parliament which establish NHS

bodies will say that the Secretary for State for Health or NHS England

can ‘direct’ CCGs to do certain things, for example, follow their guidance

when preparing their annual report and accounts. Therefore directions

have statutory force and have to be followed and cannot be ignored.

Approval of the The CCG’s constitution will set out exactly who is responsible for

annual report and approving the annual report and accounts in the scheme of delegation.

accounts It is assumed in this document that it will be the governing body but

some CCGs may require the annual report and accounts to be approved

by the council of members of the CCG.

Audit Commission This is the body which appoints auditors to CCGs. The current audit

contract runs to 2017, after which the Audit Commission will cease to

exist and CCGs will appoint their own auditors.

Consolidated accounts Accounts including the financial results of several entities which are

under common control. The CCG’s accounts will be consolidated into

NHS England’s accounts which will, in turn, be consolidated into the

Department’s accounts.

Council of members/ All GP practices in the geographical area covered by the CCG are

members council members of the CCG. Depending on the constitution of the CCG,

representatives of each practice may belong to a council of members.

The governing body oversees the operations of the CCG but reports to

the council of members.

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Black plate (74,1)

Disclosed This means a transaction or balance which is explained or included in a

set of accounts.

External auditors The auditor appointed to give independent opinion on CCG’s financial

statements and arrangements for securing value for money. Appointed

by the Audit Commission until April 2017.

Fair value A rational and unbiased estimate of the potential market price of a

good, service, or asset.

Governing body The governing body or board is the CCG’s pre-eminent group that takes

corporate responsibility for the strategies and actions of the

organisation and is accountable to the public and parliament. It sets the

strategy and objectives for the CCG, monitors their achievement, and

looks for potential problems and risks that might prevent them being

achieved.

Health and Wellbeing The Health and Social Care Act 2012 introduced Health and Wellbeing

Board Boards (HWBs) to every upper tier local authority. Established as forums

‘where key leaders from the health and care system work together to

improve the health and wellbeing of their local population and reduce

health inequalities’, their role is to join up commissioning across the

NHS, social care, public health and other services that are directly

related to health and wellbeing in the local area.

Internal control Internal control is the system of managing risks to an organisation. It is

the system of checks and balances which gives management assurance

that the organisation can achieve its objectives effectively and efficiently

in compliance with financial reporting and legal requirements.

International financial Accounting standards issued by the International Accounting

reporting standards (IFRS) Standards Board which all public sector bodies in the UK are required to

follow.

Joint health and wellbeing Joint health and wellbeing strategies (JHWSs) set out the health and

strategy social care issues requiring greatest attention by key commissioners

(CCGs, local authorities and NHS England) and how they will work

together to deliver the agreed priorities.

National Audit Office (NAO) The organisation which audits the consolidated accounts prepared by

NHS England and the Department.

NHS England/NHS The organisation established by the 2012 Act which has responsibility

Commissioning Board for improving health outcomes for the people of England.

It also prepares a consolidated CCG and NHS England annual report and

accounts which is why it provides guidance to CCGs on their individual

annual report and accounts.

NHS England is the operating name of the NHS Commissioning Board;

its legal name remains the NHS Commissioning Board.

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Resource accounting Bodies for which the Department is accountable. These bodies are all

boundary consolidated into the Department’s accounts and the Department

retains responsibility for their spending.

Vote funded Funding received by direct parliamentary allocation.

ARG CCG Annual Reporting Guidance

CCG Clinical Commissioning Group

DH Department of Health/the Department

FReM Financial Reporting Manual

FRC Financial Reporting Council

HFMA Healthcare Financial Management Association

IAS International Accounting Standard

IFRS International Financial Reporting Standards

ISA (UK&I) International Standards on Auditing (UK & Ireland)

LIFT Local improvement finance trust

MfA The manual for accounts issued by the Department which has to be followed by NHS

trusts and CCGs to allow the Department to prepare their consolidated accounts

PCT Primary Care Trust

PFI Public Finance Initiative

SFS Summary Financial Statements

SOCF Statement of Cash Flows

SOCITE Statement of Changes in Taxpayers’ Equity

SOCNE Statement of Comprehensive Net Expenditure

SOFP Statement of Financial Position

75

Glossary of Terms and Abbreviations

Black plate (76,1)

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Appendix 3: References and Further Reading

The HFMA:

www.hfma.org.uk

Grant Thornton:

www.grant-thornton.co.uk

The Department of Health:

www.dh.gov.uk

The MfA and associated guidance is found on the ‘finman’ website:

www.info.doh.gov.uk/doh/finman.nsf

NHS England:

www.england.nhs.uk

The CCG ARG:

http://www.england.nhs.uk/publications/

HM Treasury:

www.gov.uk/government/organisations/hm-treasury

HM Treasury FReM:

www.gov.uk/government/collections/government-financial-reporting-manual-frem

The Audit Commission:

www.audit-commission.gov.uk

The NAO:

www.nao.org.uk/

The NAO’s fact sheet on governance statements good practice:

www.nao.org.uk/report/fact-sheet-governance-statements-good-practice-observations-from-our-audits-3/

77

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Published by the Healthcare Financial Management Association (HFMA), Albert House, 111 Victoria Street, Bristol BS1 6AX

Tel: (44) 0117 929 4789 Fax: (44) 0117 929 4844 E-mail: [email protected]

This guide was produced under the guidance and direction of the HFMA’s Accounting and Standards Committee. The editor was Debbie Paterson with Mick Waite and Diane Vaight from Grant Thornton.

Cover design was undertaken by Mike Wyatt, setting by Academic + Technical Typesetting and printing by ESP Colour Ltd.

The NHS is always changing and developing – this edition reflects the structures and processes in place in March 2014. We are keen to obtain feedback on ways in which the content, style and layout can be improved to better meet the needs of its users. Please forward your comments to [email protected] or to the address above.

While every care has been taken in the preparation of this publication, the publishers and authors cannot in any circumstances accept responsibility for errors or omissions, and are not responsible for any loss occasioned to any person or organisation acting or refraining from action as a result of any material within it.

© Healthcare Financial Management Association 2014. All rights reserved.

The copyright of this material and any related press material featuring on the website is owned by Healthcare Financial Management Association (HFMA)

No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopy, recording or otherwise without the permission of the publishers.

Enquiries about reproduction outside of these terms should be sent to the publishers at [email protected] or posted to the above address.

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