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Head of the National Audit Office Sir John Bourn has published a report following his examination of each of the twenty three summarised accounts for the NHS in England. Today’s report draws attention to a number of issues, including the NHS’s overall financial performance, developments in accounting and internal control, fraud, and clinical negligence liabilities.

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Each summarised account is prepared by the Secretary of State for Health based on the audited financial statements of each underlying health organisation. Sir John has given an unqualified opinion on twenty two of the summarised accounts. However, he qualified his opinion on the summarised account of the NHS Appointments Commission as he was unable to verify that all the expenditure properly chargeable to the Commission’s accounts had been included.

Overall financial performance of health authorities, Primary Care Trusts and NHS Trusts in 2001-2002

In 2001-2002, the NHS overall is reporting a £71 million revenue underspend. This is in the context of overall health care commissioned of £43.3 billion. In 2001-2002, all health authorities and Primary Care Trusts achieved their statutory financial duties to remain within revenue resource and cash limits. All but four health authorities achieved their capital resource limit duty. No NHS Trust failed its statutory duty to break-even taking one year with another in 2001-2002.

The Department of Health assessed 46 out of the 318 NHS Trusts (14.5 per cent) as managing significant financial problems by the end of 2001-2002. The Department considers that modernisation of service delivery and changed management structures, together with the significant increases in the overall resources made available to the NHS, will support the process of financial recovery.

Developments in accounting and internal control

Sir John noted the significant restructuring of the NHS, with the abolition of health authorities and the creation of strategic health authorities and more primary care trusts. The final summarised account for health authorities has been prepared for 2001-2002 and will, from 2002-2003, be replaced by one covering the strategic health authorities.

NHS organisations were required to prepare statements on internal control for the first time in 2001-2002. Although they made progress in implementing Treasury’s requirements during 2001-2002, the Department recognises that achieving the successful implementation and embedding of effective risk management arrangements across all key NHS activities is challenging and requires extensive effort by each of the underlying organisations during 2002-2003 to meet Treasury requirements by the target of April 2003.

Following Treasury guidance and best practice in the private sector, the Department has sought to increase the level of disclosure of senior staff salaries and pensions within the accounts of each of the underlying bodies. Sir John noted that a significant number of senior staff in these bodies, including some 50 Chief Executives, have claimed rights under the Data Protection Act to withhold consent to disclose such information in their 2001-02 accounts. Sir Nigel Crisp, Chief Executive of the NHS, is due to write to all NHS employers to strongly encourage all senior managers to voluntarily agree to disclose their remuneration in accounts to be published in September 2003.

Progress in countering fraud in the NHS

The Department has made progress in tackling fraud and developing an anti-fraud culture within the NHS. However, the Department has yet to establish estimates for all areas of NHS expenditure – although estimates totalling £118 million have been calculated for most areas within Family Health Services Expenditure, the Department’s original priority. There is therefore a need for the Department to complete fraud measurement exercises across all expenditure. In areas where a second measurement exercise has been completed, the results indicate success in reducing fraudulent activity over time, and there has been significant progress against the original targets set by the Department for reducing fraud within key areas.

Clinical negligence

The amount of money paid out during 2001-2002 to settle clinical negligence claims amounted to £446 million (£31 million more than the amount paid out in 2000-2001). This increase is partly caused by shortening average times taken to settle claims, from 5.5 years in 1999-2000 to 3.89 years in 2001-02 for the “closed” existing liabilities scheme. Claims for the current scheme (the clinical negligence scheme for trusts) are settled on average within 1.27 years.

Regarding the NHS’s total long term liability for clinical negligence, this continued to increase. At the end of March 2002, the total amount which the NHS expects to pay out over a number of years to settle currently known or anticipated claims for clinical negligence stood at £5.25 billion. This total takes into account the likelihood of settlement of the claims, as determined by actuaries. (The total liability has increased by £850 million over the previous year when it was estimated at £4.4 billion.). A key cause of this increase was changed assumptions made by actuaries when calculating the estimates.

The total of £5.25 billion is not the amount paid out in a single year but, rather, the amount which the NHS currently expects it will have to pay out over a number of years.

The Department of Health is preparing a report which will describe its proposals to reform the systems for handling clinical negligence claims.

"The National Health Service continues to be subject to significant restructuring to be better able to deliver the government’s "NHS Plan" and to use its resources more effectively. Against this background of change, I urge the Department of Health to make every effort to ensure that risk-management arrangements are fully in place and these are operating effectively across the NHS as soon as possible.

"I commend the progress made by the Department in tackling fraud so far and developing an anti-fraud culture within the NHS. However, there is a need for the Department to complete fraud measurement exercises across all areas of NHS expenditure I encourage the Department to take steps as soon as possible to measure the full extent of the fraud being committed and to set new targets to demonstrate the success of their efforts in countering fraud."

Commenting on his report, Sir John


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