The Comptroller and Auditor General, Sir John Bourn, today reported to Parliament the results of his examination of the 17 Summarised Accounts* which cover the financial activities of the National Health Service in England, with an annual budget of some £36 billion.
Sir John’s opinion on each of the summarised accounts is unqualified. His report however draws attention to several departures from generally accepted accounting practice. In particular the NHS Executive, with Treasury agreement, did not apply two Financial Reporting Standards for 1998-99.
Sir John’s report comments on:
The overall financial performance of health authorities and NHS Trusts in 1998-99:
- 48 of the 100 health authorities reported a deficit for the 1998-99 year, the same number as for 1997-98. The health authorities in aggregate reported a surplus of £18 million but Sir John also notes that by the end of the second quarter of 1999-2000 the forecast in-year position was a deficit of £80 million;
- 98 of the 402 Trusts reported a deficit for the 1998-99 year, compared with 149 of the 425 Trusts in 1997-98. In aggregate NHS Trusts reported a net deficit for the year of £36 million. Sir John however notes that by the end of the second quarter of 1999-2000 the forecast in-year deficit for NHS Trusts had risen to £117 million; and
- Sir John notes the financial performance reported by NHS Trusts in 1998-99 would have been adversely affected had the Treasury not allowed departure from generally accepted accounting practices. For example, had Financial Reporting Standard 11, been implemented in 1998-99 an additional £366 million would have been charged to the income and expenditure account for losses due to impairment of fixed assets. And, had NHS Trusts adjusted for the downward revaluation of land and buildings around £750 million would have been charged against the income and expenditure account. The NHS Executive have informed me that they have taken actions for 1999-2000 to protect NHS Trusts’ finances from an adverse impact from this loss, which has arisen primarily through accounting adjustments rather than any real financial loss.
Progress in countering fraud in the NHS
- Sir John welcomes the range of initiatives introduced by the Directorate of Counter-Fraud Services to tackle fraud in the NHS, including the appointment of a trained specialist in each NHS organisation, and the setting up of regional and national teams;
- Sir John supports the important work of the Directorate of Counter-Fraud Services to measure the actual levels of fraud within the NHS. The Directorate’s target date for completing eight separate measurement exercises across the NHS was March 2000. However, due to the complexity of the task, they have yet to fully complete any of the eight measurement exercises planned. The Directorate now plan to complete some of the exercises by May 2000, but aim to report on the overall level of fraud in the NHS early in 2001;
- from April 1999 the NHS Executive have implemented checks at the point when drugs are dispensed, which require documentary evidence to be produced to support the grounds for exemption. Furthermore, the act of fraudulently evading prescription charges has been made a criminal offence. The Directorate of Counter-Fraud Services have therefore measured the annual loss to the taxpayer of evading prescription charges, in non age-related cases, before and after this date and found that the loss has fallen from £137million (+/-£15 million) in November 1998 to £92 million (+/-£12 million) in July 1999; and
- Sir John found the methodology used for the measurement of prescription charge evasion was sound. However, he noted that receipt of benefits without proper entitlement could lead to erroneous exemption from prescription charges. He has therefore suggested that the Directorate of Counter-Fraud Services should work closely with the Benefits Agency to minimise the drain on NHS resources due to fraud and error in the social security benefits system and undertake further work to develop suitable methodologies for measuring fraud in other areas.
The costs to the NHS of clinical negligence** and developments in improving the quality of clinical care
- Sir John notes that reported liability for clinical negligence continues to increase within the NHS, with total potential liabilities of £2.4 billion disclosed in the accounts at 31 March 1999, an increase of £0.6 billion from the previous year, due partly to improvements in reporting and disclosures in the accounts. However, the value of incidents incurred but not reported, which are excluded from this £2.4 billion, may now be below the previous estimate of £1 billion; and
- Sir John welcomes the continuing work within the NHS to improve the system for handling claims, and enhancing the standards of health care to minimise the risk of negligence happening in the first place. These measures include the introduction of protocols following the reforms to the civil justice system, the duty of quality of care on NHS bodies established in the Health Act 1999, the National Institute for Clinical Excellence*** and the Commission for Health Improvement **** becoming fully operational, the continued assessment of NHS Trusts against the clinical risk standards and the further development of those standards for new controls assurance statements.
Developments in accounting and internal control
- In the light of the difficulties experienced in implementing Financial Reporting Standards, Sir John welcomes the NHS Executive’s proposal that, subject to operational assurances, future NHS accounting should be overseen by the Financial Reporting Advisory Board;
- Sir John notes that more NHS Trusts and health authorities met all of the minimum internal financial control standards in 1998-99 than in 1997-98, and welcomes these improvements together with the further developments to provide wider assurance on risk management and organisational controls in 1999-2000; and
- Sir John notes that NHS bodies reported very few incidents relating to the year 2000 date change and that the NHS Executive considered that none of the incidents affected patient services or safety.