LOCAL DELIVERY PLANS 2009-10 to 2011-12

ANNEX 4

FINANCIAL PLANNING GUIDANCE

November 2008

Scottish Government Health Department - Health Finance Division

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LOCAL DELIVERY PLANS 2009-10 to 2011-12FINANCIAL PLANNING GUIDANCE

CONTENTS

Foreword Pg 1

Summarised Operating Cost Statement Pg 3

Recurring & Non-Recurring Revenue Projection Pg 6

Efficiency Savings Pg 9

Infrastructure Investment Programme Pg 10

Risks and Assumptions Pg 11

Appendix 1: Recurring and Non-Recurring Definitions Pg 12

FOREWORD

Introduction

Financial planning is an integral part of the Local Delivery Plan (LDP) submission. In line with the previous round of LDPs, all NHS Boards are asked to complete specific financial templates setting out planned performance against key financial targets.

The detailed information included in the templates will be used to assess each Board’s financial projections, including risks/assumptions, to ensure achievement of financial targets. (Monthly performance assessment of the agreed financial plan/trajectory will continue to be based on the SGHD Monthly Monitoring Returns).

This document provides guidance on completion of the LDP financial templates, in a bid to ensure consistency and to facilitate meaningful comparisons across NHS Scotland.

Workforce narrative is required again this year to ensure that the workforce implications of key HEAT targets are fully taken into account in Boards’ LDPs. However, it is recognised that HEAT targets and LDPs do not represent the complete range of NHS Board services which rely on the right workforce mix for successful delivery. Therefore a brief summary of the main workforce issues facing Boards based around the following 3 headlines is included in the annex of the LDP:

information on significant changes in skill mix and the plans to take this forward

existing and planned new service areas with particular workforce pressures and possible solutions; and

other significant workforce issues that the Scottish Government should be aware of that may require a national focus

As part of wider workforce planning, workforce plans are required to be completed and published by Boards by 30 April 2009 although, as for last year, they do not require to be formally submitted to the Scottish Government. However, as for last year, a workforce projections template requires to be completed and submitted by 30 April 2009. Separate guidance will be issued in relation to workforce plans, the projections template and additional narrative required to capture wider headline information on the workforce.

Key changes relating to the 2009-10 LDP planning cycle

There are no material changes to the financial targets and associated supporting measures under the HEAT1 system. These continue to be in line with existing financial targets.

1 HEAT represents the ministerial priorities/objectives of Health; Efficiency, Access and Treatment. For 2008-09 there are 30 key targets associated with these priorities, which form the basis of the LDP.

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Each NHS Board is expected to meet 4 financial targets under HEAT Efficiency and Governance section. These are effectively three annual budget limits which must not be exceeded:-

1. Revenue Resource Limit – a resource budget for ongoing operations;2. Capital Resource Limit - a resource budget for net capital investment3. Cash Requirement – a financing requirement to fund the cash consequences

of ongoing operations and net capital investment.4. NHS Boards to meet their cash efficiency target.

We continue to expect a three year financial planning cycle in line with the planning timeframe attached to LDPs. (However it is recognised that five year financial plans will continue to be required from those Boards who are in financial recovery and/or, have major service redesign/capital investment programmes coming on stream).

Timetable for submission

Completed LDPs, including financial templates, supporting narrative and associated Board papers, should be submitted to the SG Health Finance by 18th February 2009. It is anticipated that all LDPs will be signed off and approved by 31st March 2009 – resulting in a formal “delivery agreement” between the SG Health Finance and each NHS Board in respect of key targets.

Contacts

For queries relating to completion of the financial plan templates, please contact:-

Michael Sullivan 0131 244 2032 Michael.Sullivan@Scotland.gsi.gov.uk

Alan Morrison 0131 244 3591 Alan.Morrison@Scotland.gsi.gov.uk Lin Ferguson 0131 244 1816 Lin.Ferguson@Scotland.gsi.gov.uk

Wendy Groome-Vine 0131 244 2620 Wendy.Groome-Vine@Scotland.gsi.gov.uk

Robert Peterson 0131 244 3569 Robert.Peterson@Scotland.gsi.gov.uk

For general queries on the LDP process and overall approach, please contact:-

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Robert Williams 0131 244 6918 Robert.Williams@Scotland.gsi.gov.ukSUMMARISED OPERATING COST STATEMENT

Introduction

The Operating Cost Statement provides a high level summary of the projected outturn against the Revenue Resource Limit for the three year period ending 2011-12. (Additional columns covering the period to 2013-14 are provided for those Boards who will complete a 5 year financial plan).

This template is based on a summarised format of the Operating Cost Statement per the Annual Accounts, which reflects each NHS Board’s primary role as a commissioner of health care services.

Boards should input data for 2008-09 only. Data for financial years 2009-10 to 2013-14 is populated automatically from template 2.

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Completion of summarised Operating Cost Statement template

Summarised Operating Cost StatementLine Description Details1.01 & 1.02/Clinical Service

This line should include all expenditure on clinical services – this will reflect both Hospital and Community Healthcare (HCH) and Family Health Service (FHS) expenditure.

As such, this line will include the costs of healthcare services provided direct from local facilities (including laboratory services, research and development, undergraduate medical facilities and other training costs).

It will also reflect the various service level agreements entered into with other organisations for the provision of healthcare services, such as other NHS Boards, voluntary bodies and the private sector (including those outwith Scotland).

The costs associated with the treatment of patients who are resident outwith Scotland should also be included, in line with Non-Contract Activity (formerly OATs) arrangements.

In terms of FHS – all expenditure incurred in respect of Primary Medical Services, Pharmaceutical Services, General Dental Services and General Ophthalmic Services should be disclosed in this line (including unified and non-discretionary expenditure).

Further details are included in the Annual Accounts manual (notes 4 and 5).

This year the template requires the split of Clinical service costs between Pay Costs (line 1.01) and Non-Pay Costs line 1.02). You are required to confirm that workforce projections, due to be submitted in April 2009, align to agreed financial plans. It is essential to test the affordability of the Workforce Plans against the Pay Costs identified within.

Summarised Operating Cost StatementLine No/Description Details1.03 & 1.04/Non-Clinical Service Costs

This line should include all expenditure on non-clinical services. This will reflect all costs associated with the planning and commissioning of healthcare services.

This will include the costs of administration of the Board and its committees (including board members remuneration and corporate management costs), statutory reporting (e.g. annual accounts), strategic planning and policy etc.

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Summarised Operating Cost StatementLine No/Description Details

It should also reflect the costs associated with occupational health, compensation payments, pension enhancement and redundancy payments, patients travel etc. It will also include any expenditure relating to unified budget monies paid to general dental practitioners to facilitate vocational training of dental registrars.

Further details are contained in the Annual Accounts manual (notes 6 and 7).

This year the template requires the split of Non-Clinical service costs between Pay Costs (line 1.03) and Non-Pay Costs (line 1.04). You are required to confirm that workforce projections, due to be submitted in April 2009, align to agreed financial plans. It is essential to test the affordability of the Workforce Plans against the Pay Costs identified within.

1.05/Total expenditure This line represents the sum of clinical and non-clinical costs. The addition is calculated automatically – no entry is required.

1.06/Operating Income This line should include all operating income receivable. This will reflect income in respect of HCH services (e.g. patient care income generated from

other NHS Boards, private patient income, Road Traffic Act income)

FHS services (e.g. income received either by the Board; or on the Boards behalf via NSS; or retained by contractors; in respect of patients contributions towards general prescriptions, general dental, general ophthalmic or general medical services).

Other operating income (e.g. administration and other non-clinical services income)

See note 9, of the Annual Accounts manual for further details. 1.07/Net Operating Costs

This line represents total expenditure less operating income. The subtraction is calculated automatically – no entry is required.

1.08/FHS non-discretionary

As the FHS Non-Discretionary allocation does not form part of the Revenue Resource Limit, it is required to be deducted from Net Operating Costs separately.

1.09/Net Resource Outturn

This line represents Net Operating Costs less the FHS Non-Discretionary allocation. The subtraction is calculated automatically – no entry is required.

1.10/Revenue Resource Limit

The Revenue Resource Limit should be disclosed on this line. This represents the annual expenditure limit which each NHS Board should operate within.

1.11/Savings/(Excess) against Revenue Resource Limit

This line represents the Revenue Resource Limit less Net Resource Outturn. The subtraction is calculated automatically – no entry is required.

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RECURRING & NON-RECURRING REVENUE PROJECTION

Introduction

Template two provides a breakdown of the overall financial position on a recurring and non-recurring basis over the three year period to 2011-12. Additional columns covering the period to 2013-14 are provided for those Boards who will complete a 5 year financial plan. (Definitions of recurring and non-recurring funding and expenditure are available at appendix 1).

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Completion of the recurring and non-recurring revenue projection template

Summarised Operating Cost StatementLine No/Description Details2.01 & 2.02/Clinical Service Costs

This line should include all expenditure on clinical services – this will reflect both Hospital and Community Healthcare (HCH) and Family Health Service (FHS) expenditure.

As such, this line will include the costs of healthcare services provided direct from local facilities (including laboratory services, research and development, undergraduate medical facilities and other training costs).

It will also reflect the various service level agreements entered into with other organisations for the provision of healthcare services, such as other NHS Boards, voluntary bodies and the private sector (including those outwith Scotland).

The costs associated with the treatment of patients who are resident outwith Scotland should also be included, in line with Non-Contract Activity (formerly OATs) arrangements.

In terms of FHS – all expenditure incurred in respect of Primary Medical Services, Pharmaceutical Services, General Dental Services and General Ophthalmic Services should be disclosed in this line (including unified and non-discretionary expenditure).

Further details are included in the Annual Accounts manual (notes 4 and 5). This year the template requires the split of Clinical service costs between Pay Costs and Non-Pay Costs. You are required to confirm that workforce projections, due to be submitted April 2009, align to agreed financial plans. It is essential to test the affordability of the Workforce Plans against the Pay Costs identified within.

2.03 & 2.04/Non-Clinical Service Costs

This line should include all expenditure on non-clinical services. This will reflect all costs associated with the planning and commissioning of healthcare services.

This will include the costs of administration of the Board and its committees (including board members remuneration and corporate management costs), statutory reporting (e.g. annual accounts), strategic planning and policy etcThis year the template requires the split of Clinical service costs between Pay Costs and Non-Pay Costs. You are required to confirm that workforce projections, due to be submitted April 2009, align to agreed financial plans. It is

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essential to test the affordability of the Workforce Plans against the Pay Costs identified within.

Summarised Operating Cost StatementLine No/Description Details2.03 & 2.04/Non-Clinical Service Costs (continued)

It should also reflect the costs associated with occupational health, compensation payments, pension enhancement and redundancy payments, patients travel etc. It will also include any expenditure relating to unified budget monies paid to general dental practitioners to facilitate vocational training of dental registrars. Further details are contained in the Annual Accounts manual (notes 6 and 7).

2.05/Total expenditure This line represents the sum of clinical and non-clinical costs. The addition is calculated automatically – no entry is required.

2.06/Operating Income This line should include all operating income receivable. This will reflect income in respect of HCH services (e.g. patient care income generated from

other NHS Boards, private patient income, Road Traffic Act income)

FHS services (e.g. income received either by the Board; or on the Boards behalf via NSS; or retained by contractors; in respect of patients contributions towards general prescriptions, general dental, general ophthalmic or general medical services).

Other operating income (e.g. administration and other non-clinical services income)

See note 9, of the Annual Accounts manual for further details. 2.07/Net Operating Costs

This line represents total expenditure less operating income. The subtraction is calculated automatically – no entry is required.

2.08/FHS non-discretionary

As the FHS Non-Discretionary allocation does not form part of the Revenue Resource Limit, it is required to be deducted from Net Operating Costs separately.

2.09/Net Resource Outturn

This line represents Net Operating Costs less the FHS Non-Discretionary allocation. The subtraction is calculated automatically – no entry is required.

2.10/Revenue Resource Limit

The Revenue Resource Limit represents the annual expenditure limit which each NHS Board should operate within.

2.11/Base allocation Include the allocation as advised per the initial allocation letter.

2.12-2.50/Anticipated allocations

List all other allocations expected to be issued in year. Lines 2.12 to 2.16 represent allocations applicable to all/most Boards. There is now an additional form named ‘Further Allocations’ for those Boards which require additional lines.

2.52/Savings/(Excess) This line represents the Revenue Resource Limit less Net

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against Revenue Resource Limit

Resource Outturn. The subtraction is calculated automatically – no entry is required.

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EFFICIENCY SAVINGS

Introduction

This template records the total planned savings which will support ongoing service provision, new developments, and the overall financial position.

Note that the template also separately identifies all savings schemes (both local and national) which contribute to the Efficient Government programme in 2009-10.

Detailed line by line guidance is provided below.

Completion of Efficiency Savings template

Efficiency savingsLine No/Description Details3.01-3.49/Saving scheme details

A description of each individual savings scheme should be provided, distinguishing between its recurring and non-recurring elements. There is now an additional form named ‘Further Savings’ for those Boards which require additional lines.

Eff. Gov. An “E” should be chosen in this column to indicate whether each scheme contributes to the Local 2% Efficient Government programme. An “N” should be chosen to identify those schemes which contribute to the National Efficient Government savings target.

Risk rating A risk rating of high (H), medium (M) or low (L) should be chosen for each scheme illustrating the likelihood of successful achievement of the target. A scheme marked as high risk suggests that scheme may not fully deliver.

3.50/Total Planned Savings

This line represents the total planned savings. The addition is calculated automatically – no entry is required.

3.51/Contribution to EG target

This line represents the total savings which form part of the local Efficient Government target for 2009-10 only. The addition is calculated automatically – no entry is required.

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INFRASTRUCTURE INVESTMENT PROGRAMME

Introduction

This template provides a high level summary of the projected outturn against the Capital Resource Limit for the five year period ending 2013-14. (Note that data should be provided for all 5 years).

Completion of Infrastructure Investment Programme template

Infrastructure investment programmeLine No/Description DetailsNew Developments – a) Property b) Equipmentc) IM&Td) Capital Grants

List all capital expenditure on new developments, distinguishing between new property, equipment and IM&T projects. In addition, any expenditure on new projects which are classed as capital grants should also be reported.

Rolling Programmes – a) Propertyb) Equipmentc) IM&Td) Intangible Assetse) Donated Assets

Include total expenditure on ongoing projects/prior year developments. Total expenditure should be categorised between property, equipment and IM&T. Total forecast expenditure on intangible assets and donated assets (for both new developments and rolling programmes) should also be disclosed here.

Total Expenditure This line represents the sum of all capital expenditure. The addition is calculated automatically – no entry is required.

Capital Income Include the Net Book Value of all fixed assets which are expected to be sold/disposed off during the financial year

Net Capital Expenditure This line represents total expenditure less capital income. The subtraction is calculated automatically – no entry is required.

SEHD Formula Allocation

Include the “in year” SEHD capital allocation. This will exclude any agreed advances/banked funds and the brought forward saving/excess against the prior year CRL as these items are reported in the lines below.

Prior Year Saving/(Excess) b/f

Include the prior year saving/(excess) reported against the CRL. Note that this information only requires to be input to the 2008-09 column. Figures for 2009-10 to 2011-12 are automatically populated.

Net Advances/Banked Funds

Include capital advances and/or banked funds as agreed with the Private Finance and Capital Unit.

Donated Assets Include capital resource cover required for Donated Assets.

Capital Resource Limit This represents the annual capital expenditure limit which each NHS Board should operate within. This line is automatically calculated – no entry is required.

Saving/(Excess) against CRL

This line represents the Capital Resource Limit less Net Capital Expenditure. The subtraction is calculated

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automatically – no entry is required.

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RISKS AND ASSUMPTIONS

Introduction

This template is designed to capture the key assumptions applied throughout the financial planning process, and the key risk areas which may influence the achievement of financial targets.

Detailed line by line guidance is provided below.

Completion of Financial Planning Assumptions and Risk Assessment

Financial Planning AssumptionsLine No/Description Details5.01/Resource Include the percentage uplift applied to resources. For

2009-10 and 2010-11, this should be in line with the levels notified in the allocation letter.

5.02/Pay Include the percentage uplift applied to pay. This should reflect general pay inflation and agenda for change.

5.03/Prices Include the percentage uplift applied to prices/supplies. 5.04/GP prescribing Include the percentage uplift applied to GP prescribing.5.05/Hospital Drugs Include the percentage uplift applied to hospital drugs.5.06/Other FHS uplift Include the percentage uplift applied to other Family

Health Service budgets.

Financial Planning AssumptionsLine No/Description Details5.07/Capital Charges Include the amount of capital charges expected to be

incurred during the financial planning period. 5.08/Impairments Include amounts assumed regarding the impact of any

impairment resulting from the loss of economic value to fixed assets.

5.09/Accelerated Depreciation

Include amounts assumed in respect of accelerated depreciation.

Risk AssessmentLine No/Description DetailsKey Assumptions/Risks Enter details of the key risk areas within the financial plan.Risk rating/Impact Provide a risk rating of high, medium or low for each

identified risk area, together with an assessment of the impact on the financial plan should the risk materialise. Where possible, the risk should be quantified.

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APPENDIX 1

DEFINITIONS OF RECURRING AND NON-RECURRING RESOURCES AND EXPENDITURE

In order to avoid inconsistencies in NHS Board’s interpretation or classification of recurring and non-recurring resources and expenditure, specific definitions are outlined below.

RecurringResourcesResources allocated to NHS Boards on an ongoing basis for the provision of health services.ExpenditureResources spent by NHS Boards on an ongoing basis to provide health services.SavingsSavings which require to be made from the cost base each year. Recurring savings include the redesign of a service which then requires fewer staff, the introduction of a regional rather than local service, or reduction in capital charges from the closure of a building.

Non-recurring ResourcesResources allocated to NHS boards on a one off basis for the provision of health services. Typically, this refers to resources received for one year only. However, it will also include resources received for ring-fenced initiatives with a specific life span, i.e. a single project lasting more than one year. Non-recurring resources therefore include funding for ring-fenced projects (such as drug and alcohol prevention), and profits on disposal of fixed assets. Such items do not address underlying deficits.ExpenditureResources spent by NHS Boards on one off items of expenditure.SavingsSavings which are made on a one-off basis. Non-recurring savings include deferring expenditure on a specific project or putting a temporary freeze on recruitment.

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