patient safety · by the trust’s income assessment, and the greater part of the variance against...

NLG(14)478

DATE 25 November 2014

REPORT FOR Trust Board of Directors – Public

REPORT FROM Marcus Hassall, Director of Finance

CONTACT OFFICER Marcus Hassall, Director of Finance

SUBJECT Current Trading Position, October 2014

BACKGROUND DOCUMENT (IF ANY) -

REPORT PREVIOUSLY CONSIDERED BY & DATE(S) Resources Committee, 20 November 2014

EXECUTIVE COMMENT (INCLUDING KEY ISSUES OF NOTE OR, WHERE RELEVANT, CONCERN AND / OR NED CHALLENGE THAT THE BOARD NEED TO BE MADE AWARE OF)

The report sets out the Trust’s trading position to the end of October. The Trust deficit for this period is £15.54m, which is £11.46mil higher than that planned. The full year forecast position shows a marginal improvement, to a deficit of £15.11m.

This position remains on the lower boundary of an overall Continuity of Services Rating of 3 under Monitor’s Framework.

The contracting and income position are still the most significant factors in the Trust’s distressed financial position. The Trust has taken a very prudent approach to income recognition until contractual settlements have been agreed.

Risks are also increased in respect of expenditure – though CIP delivery and liquidity mitigation actions should offset the impact of these pressures.

HAVE THE STAFF SIDE BEEN CONSULTED ON THE PROPOSALS?

N/A

HAVE THE RELEVANT SERVICE USERS/CARERS BEEN CONSULTED ON THE PROPOSALS?

N/A

ARE THERE ANY FINANCIAL CONSEQUENCES ARISING FROM THE RECOMMENDATIONS?

Contained within the report

IF YES, HAVE THESE BEEN AGREED WITH THE RELEVANT BUDGET HOLDER AND DIRECTOR OF FINANCE, AND HAVE ANY FUNDING ISSUES BEEN RESOLVED?

-

ARE THERE ANY LEGAL IMPLICATIONS ARISING FROM THIS PAPER THAT THE BOARD NEED TO BE MADE AWARE OF?

-

WHERE RELEVANT, HAS PROPER CONSIDERATION BEEN GIVEN TO THE NHS CONSTITUTION IN ANY DECISIONS OR ACTIONS PROPOSED?

-

WHERE RELEVANT, HAS PROPER CONSIDERATION BEEN GIVEN TO SUSTAINABILITY IMPLICATIONS QUALITY & FINANCIAL) & CLIMATE CHANGE?

-

THE PROPOSAL OR ARRANGEMENTS OUTLINED IN THIS PAPER SUPPORT THE ACHIEVEMENT OF THE TRUST OBJECTIVE(S) AND COMPLIANCE WITH THE REGULATORY STANDARDS LISTED

-

ACTION REQUIRED BY THE BOARD The Committee is asked to: 1. Review financial performance; and 2. Consider any further action required

Report to the Resources Committee

Financial Performance Update 2014/15 For the Year to 31st October 2014

This report covers the Trust’s financial performance for the financial year 2014/15. The variances and trends outlined in this report are based upon the detailed financial plans contained within the current forward plan submissions made to Monitor.

The financial report contains the following sections:

1) Financial Headlines2) Risk Rating Analysis3) Income and Expenditure Account4) Contract Trading Position5) Pay Trends Analysis6) Savings Programme Update7) Balance Sheet Summary8) Cashflow and Cash Balance Analysis9) Investment Programme Update10) Budgetary Variance Analysis11) Forecast Outturn Updated Position12) Key Risk Summary

This report is supplemented by separate more detailed periodic reports covering developments in the Healthy Lives Healthy Futures strategic review process, delivery of the Trust Savings Programme, updates on the Capital Investment Programme, and progress on the Trust’s Financial Governance Review.

SECTION ONE: Financial Headlines

Trading Surplus/ (Deficit) (£15.54)mil Cash Balance £18.68mil Continuity of Service Rating 3

The Trust reports a trading deficit of £15.54mil for the period to 31st October 2014. This compares to a planned deficit of £4.08m and represents an in-month increase in deficit of £3.01m. This remains an unsustainable position. The Trust currently runs a deficit level that will rapidly bring about external intervention if uncorrected. The Trust has, through its “Sustainability Programme”, set out the corrective actions it intends to take.

The Trust does not expect to meet the target deficit position of £5.94m. The current forecast, set out in section 11, is for an I&E deficit (excluding revaluation or other exceptional items) of £15.11m, a marginal improvement on last month. The variances from plan driving this position are in part related to expenditure control and savings plan slippage, but of greater scale are issues linked to activity and income. The range of potential outcomes on income remains wide, with significant incomplete contracting work with CCGs.

Contracting negotiations have made further progress in October and November, but for the year to date accounts as at the end of October the absence of sufficiently robust agreements with the two South Humber CCGs necessitated an extremely prudent line on income declaration. The income accounted for in the year to date is based on a floor level which would be secured in the absence of any agreement on outstanding issues with these two CCGs. This position is below the Trust’s current worst case assessment, and will under all foreseeable scenarios improve significantly through the remainder of the year. This explains the forecast position for the full year showing an improvement on the year to date position.

The Trust has, after closing down the October position, made significant further progress with North Lincolnshire CCG, agreeing a contractual arrangement which should, subject to normal due process, avoid the need for arbitration, and secure a settlement for the Trust marginally better than the previous mid-range forecast. This settlement is not reflected in any way in the year to date position, but is factored into the revised forecasts. Work is still needed to secure the more ambitious gain share and transformation support agreement with North East Lincolnshire CCG – the major remaining issue for 2014/15 contracting. Significant risks in terms of securing plan income remain.

Activity levels remain high, with a significant spike in October. This has had a major impact on direct clinical costs in month. Activity control remains a key objective for the remainder of the year and into 2015/16 through community-wide joint action - more activity is bad for Trust finances.

CIP slippage and expenditure pressures related to medical staffing and activity remain high risk areas. The Trust has made significant progress in establishing its delivery infrastructure to support improved control processes, with external support from PwC assisting the newly constituted internal Improvement Team. This element of the Sustainability Programme must be able to deliver rapid improvement in key spend control areas if the existing problems of slippage are not to derail the Trusts underlying financial recovery plan. Speed is critical – improvements need to reach the Trust’s bottom line as soon as possible.

The Trust held cash balances of £18.68mil at the end of the October. This is a £5.63mil in-month increase in cash, with the overall balance now £1.87m below plan. The in-month improvement reflects some success on income and debtor balances, but is primarily a result of a further loan drawdown. The underlying cash position, excluding loans held, is £2.16m.

This cash balance remains a clear indicator of the Trust’s perilous position. External finance support through PDC will be required from early 2015/16, unless clear and rapid improvements are made across both contracting and savings delivery. _________________________________________________________________________________ Finance Directorate, November 2014 Page 2 of 16

SECTION TWO: Continuity of Services Risk Rating Trust performance against the Continuity of Services measurement framework is below:

NLAG 4 3 2 1

Capital Service Cover Rating (406%) 250% 175% 125% <125% Liquidity Rating +3.9 -2.0 -7.0 -12.0 <-12.0 Weighted Average 2.5

The Trust continues, for the present time, to operate within the acceptable parameters of the Risk Assessment Framework. However, margins continue to reduce over time. There is little to add to previous reports, which have set out the dynamics of the two indicators. It is however necessary to reiterate that the underlying deficit position, and the resulting erosion of cash balances, will eventually move the rating to 2, the normal threshold for Monitor regulatory action. This reflects the unsustainable nature of the current financial position.

_________________________________________________________________________________ Finance Directorate, November 2014 Page 3 of 16

SECTION THREE: Income & Expenditure Account YTD Actual Variance from

Plan £mil £mil Income 188.33 (6.67)

Expenditure – Pay (137.96) (2.68)

Expenditure – Non Pay (59.74) (2.38)

EBITDA (9.36) (11.73) Post EBITDA Items (6.19) 0.27 Trading Surplus/(Deficit) (15.54) (11.46) Exceptional Items 0.00 0.00 I&E Surplus/(Deficit) (15.54) (11.46)

The Trust reports a deficit of £15.54m for the period to 31st October, which is £11.46m higher than that planned for this period – this position also represents an in-month deterioration of £3.01m. Income remains the most significant variance. The level of plan deficit was itself driven by the Trust’s income assessment, and the greater part of the variance against plan is income driven also. Efforts to secure more appropriate contract settlements are still ongoing, but lasting change to the wider system of resource allocation locally will be necessary to deliver the scale of change needed. Income levels at Month 7 continue to be set prudently. They do not reflect the full forecast income position currently projected by the Trust, but only income secured by the Trust as at the end of October. The Trust dare not account for income before it is backed by agreements with CCGs, and is clearly due for invoicing. Improvement is therefore likely in the latter part of the year, as the Trust strategy on income delivers secured gains. The income position also needs to be linked with the activity position – which is also driving up expenditure levels, particularly on non pay. Additionally, an element of the income has been secured only with commitments to incur additional costs on service investment. In terms of variation from plan, this has the effect of understating income shortfalls, and increasing expenditure excesses. The key factor for non pay variances remains increased activity levels. Clinical non pay costs, directly driven by patient workload, account for the majority of variance to date, and saw a severe deterioration in October. Agency staffing remains a key pressure on expenditure. The spend on bank and agency nursing staff increased in October, and further action is certainly required to deliver the gains that are known to be deliverable. Appropriate control improvements are in the process of implementation – this task must be seen through. A significant improvement in control and spend is factored into the forward forecast, on the basis that the required improvements will be delivered by management teams on the ground. The medical staffing position also poses a huge threat. High vacancy levels must be tackled, but this will take time. Improvements on the effectiveness of job plans and productivity will likewise be vital but will not have a huge impact immediately. Further action is needed to improve rota setting and deployment management by rota coordinators and their line managers – these actions can deliver rapid spending improvements. Savings plan delivery issues across many projects remain apparent – Delivering available cost improvements effectively is still a fundamental test that the Trust must meet. The Sustainability Programme is building the infrastructure to support this – but time is short.


SECTION FOUR: Contract Trading Position Income: Despite further progress with North Lincolnshire CCG, the Trust has yet to fully firm up its income position, and faces a wide range of potential income values for the year. This makes all planning difficult, and reflects the wider system instability facing providers attempting to maintain safe and effective delivery. With North Lincolnshire CCG, arbitration now appears to have been averted. The CCG have agreed an income package for 2014/15 that meets the Trust’s forecast assessment, if not complete agreement on all points. The settlement brings together bot the baseline discussions and an approach on in year activity growth – incentivising joint work to control activity increases. The certainty is welcome, but it is obviously disappointing that the process took so long. Agreement has been reached with North East Lincolnshire CCG on a contract baseline, but as yet no agreement is possible on gain share arrangements for activity reductions. It is vital that the health community act together to reduce demand, and some form of gain share arrangement in year was central to Trust plans. The Trust’s income plan (and wider community objectives) rely upon agreement on this issue, converting NEL CCG’s acceptance of principle into joint agreement and action. Lincolnshire and East Riding CCGs already had contract agreements in place, but it is worrying that system issues have delayed the paperwork being available to sign off – delaying cash payments to the Trust. The meeting with Monitor and the Area team on 22nd October clearly set out the need for collective action, and brought out clearly the scale of the future challenge – as described in the “Single Version of the Truth” document provided to support the next stage of Healthy Lives Healthy Futures. The community Finance leaders have now agreed to work on crafting principles to support a more appropriate resource allocation system to support transformation, to replace a pure Payment by Results model. Activity: In the absence of full agreed contractual baselines the following table focuses solely on the levels of activity as compared to the equivalent position last financial year. 2013/14

Activity 2014/15 Actual

Variance against last

year

% variance against last

year Non Elective Spells Elective & Daycase Spells Unbundled Activities Outpatient Attendances Critical Care Days A&E Attendances Diagnostics (£’000) Excluded Drugs & Devices (£’000)

27,546 32,975 9,151

226,373 11,047 82,241 19,342 9,630

28,044 35,520 9,284

226,652 11,030 87,493 21,123 11,196

498 2,545

133 279 (17)

5,252 1,781 1,566

1.8 7.7

1.5 0.1

(0.2) 6.4 9.2 16.3

Activity remains increased overall, but the level of variation saw some significant further acceleration in October. Activity kept high pressure on the whole unscheduled care system through the month, making A&E performance difficult. At the same time, elective work to maintain strong RTT times was ongoing. Transformation plans to streamline pathways and provision, drawn up by the providers as part of Healthy Lives Healthy Futures, are taking shape but all speed is necessary. Activity eats up cash that the local health economy does not have, but planning work has demonstrated (but not fully modelled out) the possible gains to be achieved in demand control.


SECTION FIVE: Pay Trends Medical Staffing Spend - Pay: The two months of reduction in September and October do little to move spend levels down to a sustainable level as set out in plan:

Vacancies drive the spend excess, but recruitment activities will take time to improve matters, as will improved liaison with the Deanery over future training grade supply. Project work in both these areas needs to be accelerated. Similarly, work on team job planning and also capacity and demand analysis is vital - but moving slower than needed. Control of rotas and locum spend is also a proven issue – this can deliver immediate savings, and requires targeted and sustained action, quickly. Nursing Spend – Pay: A further slight reduction in nursing spend was also evident in October – a positive sign, but with much more needed and deliverable:

Though spend is on plan, in broad terms, investigations have highlighted significant gains that could be made quickly without any adverse impact on care, through improved staff deployment. The “boot camp” and review process identified significant weaknesses in approval processes, and inadequate oversight by many (but not all) roster mangers and matrons. October and November plan analysis identified significant wastage - a major quality issue, given the restricted nursing resources available. Agency Nursing – Pay: The monthly bank and agency nurse spend saw an increase in October, wiping out the September reduction. This is clearly not in line with the mitigation plan, backing up the evidence of poor roster controls. The decision to introduce further central control and oversight from 10th November, and the rollout processes which involved detailed review, ward by ward, of nursing spend have been clearly vindicated, but now we must see this turned into results in terms of significantly reduced spend.


The improvement plan is being more thoroughly project managed now that the Trust Improvement team are in post, supported by PwC through the start-up phase. It should also be noted that though the Trust has a net over-establishment of HCAs, agency spend on this staff group still exceeded £50k in month. This again demonstrates roster control issues which must be corrected.


WTE Trend: The contracted WTE position showed a slight increase again in October. The changes were primarily clinical, with a slight improvement in doctor vacancy levels and significant gains on registered nurses. The Trust should consider reviewing control systems to ensure that they match the differing requirements for different staff groups. The over-establishment now seen at HCA grade in nursing highlights the need for different controls to be established. Period wte March 2012 5,075 March 2013 5,094 March 2014 5,221 April 2014 5,202 September 2014 5,279 October 2014 5,287


SECTION SIX: Savings Programme Delivery The Trust savings programme of £13.25m is naturally weighted towards the tail end of the year. Delivery to date is £4.62m against a year to date target of £6.85m, with forecast of £9.84m (74%) forecast for the full year:

Scheme Total Plan

£000's

YTD Plan

£000's

YTD Delivery £000's

YTD Variance

£000's

Forecast Delivery £000's

Variance £000's Risk

Service Devt/Income Generation 1,176 612 426 (186) 923 (253) R Medical Staffing Costs 2,373 1,166 572 (594) 1,212 (1,161) R Other Clinical Staff Costs 1,997 1,043 655 (387) 1,606 (391) R Non Clinical Staff Costs 1,547 752 763 11 1,520 (27) G Drug Costs 471 213 162 (52) 437 (34) A Clinical Non Pay Costs 1,397 682 521 (161) 1,122 (275) R Non Clinical Non Pay Costs: 1,362 675 441 (234) 876 (486) R Terms & Conditions 680 397 0 (397) 113 (567) R Technical 2,248 1,311 1,081 (231) 2,030 (218) A Total 13,250 6,852 4,621 (2,230) 9,838 (3,412) R Delivery rates against the programme continue to deteriorate. The issues of forward projection of savings delivery, relating to weaknesses in project management systems in some programme areas, mean that the formal Trust forecast for slippage on schemes os greater than the £3.41m set out in the scheme by scheme projections above – the corporate forecast has further risk adjusted this figure, and includes £4.05m. This extra risk adjustment is a precursor to work started but not yet completed by PwC – risk assessing each scheme as part of the embedding of the expenditure control elements of the Sustainability Programme. This is due to be completed by the end of November, but is not available at time of writing to build in to forecasts. The issues of savings delivery have been very clearly identified as linked to delivery support inadequacies through the Financial Governance Review process. The response to this, an Improvement Team supported by external project support in key priority areas, has been up and running (though not yet fully staffed) from late October, with PwC assistance on set up and planning work. This team must be able to rapidly inject momentum into key projects which have stalled, and deal with the most pressing issues identified through the review process. The Executive Team must ensure that this team is very quickly effective, driving forward projects, and delivering on the commitments made in the Trust’s Sustainability Programme.


SECTION SEVEN: Balance Sheet Summary

Last Month This Month Variance From Plan

£mil £mil £mil Total Fixed Assets 135.41 135.81 (5.43) Stocks & WIP 2.64 2.69 0.24 Debtors 20.11 19.59 6.73 Prepayments 4.57 4.82 (0.02) Cash 13.05 18.68 (1.87) Total Current Assets 40.37 45.78 5.08 Creditors : Revenue 20.01 20.92 4.27 Creditors : Capital 1.17 1.40 (0.45) Accruals 11.56 12.23 2.93 Deferred Income 0.71 0.83 (0.48) Finance Lease Obligations 0.05 0.05 (0.03) Provisions 3.80 4.00 (0.56) Total Current Liabilities 37.30 39.45 5.70 Net Current Assets/(Liabilities) 3.08 6.33 (0.62) Debtors Due > 1 Year 0.02 0.02 0.00 Creditors Due > 1 Year 0.03 0.03 (0.21) Finance Lease Obligations > 1 Year 0.19 0.19 (0.07) Loans > 1 Year 10.78 17.44 3.44 Provisions - Non Current 5.07 5.07 (0.48) TOTAL ASSETS/(LIABILITIES) 122.43 119.42 (8.73) TOTAL CAPITAL & RESERVES 122.43 119.42 (8.73)

High levels of NHS debtors remain the most significant variation of the Trust balance sheet – these have had a direct impact on the cash balance, which is not sustainable. Some improvement has been secured in September and October, and agreement with North Lincolnshire CCG should see further improvement – but not until the December drawdown. The Trust has optimised loan drawdown profiles, put in place a range of measures to maximise creditor levels and support cash, and has also slowed the capital programme to build additional headroom. These are all one off measures – the ongoing I&E imbalance will continue to degrade the Trust balance sheet until corrected.


SECTION EIGHT: Cashflow and Cash Balance Analysis

The Trust held cash balances of £18.68mil at the end of October 2014, though it should be noted that the headline cash balance includes loans received but not yet spent to the value of £16.52m. The above graph highlights the actual and expected future cash profile for each element of the Trust’s overall liquidity. The cash balance remains below plan, with the income and debtor issues highlighted above the dominant cause, offset by creditor management and capital slippage:

This Month Year To Date YTD Variance from Plan

£mil £mil £mil Opening Balances 13.05 26.50 0.00 Income Levels 27.19 188.30 (6.42) Shift In Debtors, Accruals, Prepayments 0.65 (9.33) (7.21) Total Income Impact 27.84 178.97 (13.63) Expenditure Levels (29.23) (197.69) (5.06) Contingency Support 0.00 0.00 0.00 Shift in Creditors, Accruals, Provisions 1.12 2.52 5.68 Total Expenditure Impact (28.11) (195.18) 0.62 Capital Programme (0.97) (3.17) 8.68 Shift In Capital Creditors 0.24 (0.10) (0.45) Total Capital Impact (0.74) (3.27) 8.23 Other 6.64 11.65 2.91 Closing Balances 18.68 18.68 (1.87)

The Trust cash balance remains held primarily in the Government Banking Service account – low interest rates, but optimal for reducing PDC dividend payments: Bank Balances by Organisation: Bank £mil Access NatWest 0.41 Instant Access CitiBank (Government Banking Service) 18.26 Instant Access Bank of Scotland 0.00 Instant Access Other/Cash in Hand/Postage 0.01 Instant Access Total Bank Balances 18.68


SECTION NINE: Investment Programme Update:

Current Full Year

Plan

YTD Plan YTD Actual

YTD Variance

£mil £mil £mil £mil Major Schemes Major Equipment Replacement 0.20 0.00 0.00 0.00 DPoW Reconfiguration Programme 2.82 1.61 0.80 (0.81) SGH &GDH Reconfiguration Programme 0.68 0.68 0.29 (0.39) Community Equipment Facility 1.15 0.96 0.07 (0.89) DPOW Estates Rationalisation 0.15 0.05 0.00 (0.05) Residences Development 4.80 2.60 0.00 (2.60) Energy Collaborative 4.43 2.58 0.00 (2.59) Planning and Feasibility Fees 0.10 0.06 0.03 (0.03) Facilities Maintenance Programme 1.50 0.69 0.49 (0.20) IM&T Programme 2.46 1.44 0.81 (0.63) Equipment Renewal Programme 2.23 1.18 0.68 (0.50) Discretionary Capital 0.00 0.00 0.01 0.01 Capital Programme Total 20.52 11.85 3.17 (8.68)

The cash position shown in section 8 should still be viewed in the context of the significant cash benefit derived from significant slowing of the capital programme, but at the same time some gains have been made in terms of scheme tenders coming in below planned spend levels. These variances will be tightly controlled, and will not be available for automatic redeployment to other capital schemes. For the end of the year, a gain of £3.0m is assumed to be sustained from programme changes, which should be topped up by further gains, where delivered, from scheme efficiencies. The residential redevelopment plan may also see slippage beyond year end, given the delays in funding being secured from the FTFF and resulting delays in the re-purchase of assets. The capital programme remains a key enabling element of the transformation plan, however. It should not be considered an easy source of liquidity mitigation – reductions have consequences, often in terms of I&E gains, also in terms of ensuring service safety and sustainability. Opportunities to support liquidity through reduced in year capital spend will be taken, but only where they do not compromise other strategic objectives – at least, while the Trust retains autonomy of decision making.


SECTION TEN: Budgetary Variance Analysis

Variance

(£000s) Clinical Income (6,649) Education Income (70) Other Central Income (14) Sub Total – Income (6,733) Trust Management 2 Medical Director's Office 48 Governance (49) Finance (60) Organisational Development & Workforce (40) Chief Nurses Office (47) Strategy & Planning (211) Facilities Management & Support Services (588) Sub Total - Corporate Directorates (945) Operations (6,297) Pathlinks (8) Sub Total – Clinical Directorates (6,305)

Corporate & Capital Charges 2,524 Sub Total - Other Prime Budgets 2,524 TOTAL (11,459)

The budgetary position reflects the wider year to date I&E variances, but the net variance across expenditure is smaller once the amounts still held centrally are taken into account. Corporate and support Directorates remain under pressure, but in the majority of cases continue to predict nil or small variances by the end of the year. Facilities have a larger issue (and are the largest corporate Directorate by some margin), with known slippage issues on a number of high value savings schemes. Ultimate delivery on these schemes is however still robustly forecast - the complexity of some CIP schemes has driven slippage, but full year effect of delivery is still on track. Operations budgets continue to reflect the extent of pressure on clinical staffing costs, from activity and external labour market pressures, and from non pay costs linked to activity – particularly bad in October, with major spikes in both drugs and clinical consumables spending. CIP delivery slippage is also most pronounced in front line areas, and more needs to be done to accelerate the key project areas – medical staffing controls, agency nursing reduction, and recruitment. Some small element of mitigation remains available from central budgets, arising from slippage on planned investments, but recurrently all flexibilities are fully committed.


SECTION ELEVEN: Outturn Forecast The Trust forecast for I&E has been updated to reflect the latest position – the agreement reached with North Lincolnshire CCG, the month 7 activity and spend position, and the review work in month on CIP delivery (though this work is still incomplete). The headline forecast is for a deficit of £15.11m – an improvement of £0.41m:

1) An improved assessment of Income risks (£0.66m favourable change) 2) Reassessment of CIP and Expenditure risk (£0.25m adverse change)

The range of potential outcomes remains wide, though the last month has, as might be expected, narrowed off the range slightly. Income uncertainty remains the biggest volatility factor, with a large amount still to do to secure the right outcome for the Trust – though the last month has been positive. A significantly more favourable outcome remains achievable, but income also holds significant downside risks. The expenditure position is more tightly mapped to a narrow outturn forecast range, but still shows disappointing performance against plan – more must be done to correct the current position to avoid further shift towards downside:

Best Case Position

Proposed Month 07 Forecast

Worst Case Position

Change In Month In Forecast

Income/Activity Variance (6.02) (10.02) (13.72) 0.66 Expenditure/CIP Variance (3.13) (4.57) (6.23) (0.25) Governance/Infrastructure (0.52) (0.52) (0.52) 0.00 Total (9.67) (15.11) (20.47) 0.41 Best Case Shift Worst Case

Shift

Income/Activity Variance 4.00 (3.70) Expenditure/CIP Variance 1.44 (1.66) Governance/Infrastructure 0.00 0.00 Total 5.44 (5.36)

The cash position forecast has been mapped forward into 2015/16. For month 7, this now includes an initial assessment of variation form plan in 2015/16, again based on a 3 scenario model. This highlights potential liquidity risk from early in 2015/16 in the worst case scenario, and also that when a risk assessed view of 2015/16 is added in risks to liquidity remain unless the Trust can move towards best case performance:


Note also that this position includes loans held and committed but not spent – a support to liquidity until late in 2015/16.

SECTION TWELVE: Key Risk Analysis The October position, with a further material in month deterioration, highlighted the dangerous position facing the Trust. The position is still presented with exceptional prudence in respect of income, with some progress in month with North Lincolnshire CCG coming slightly too late to affect the end of October position. Though this will deliver an improvement, equivalent gains need to be made with North East Lincolnshire CCG, on the more challenging “gain share” agreement, to deliver plan on forecast. Though some gains beyond the forecast level are possible – but will be exceptionally challenging to negotiate. Building on the work with North Lincolnshire CCG, agreeing the next steps with North East Lincolnshire CCG now becomes the most pressing objective – important for 2014/15, but even more so for 2015/16 contracting. Income shortfalls remain the core issue behind the underlying deficit position – a factor evident form the system wide issues facing providers. There are rare examples of acute providers achieving balance in year, usually attributable to close collaboration with their local commissioners. This work locally is now moving forward, but pace is important. In the longer term, however, the Single Version of the Truth work has mirrored national projections in the 5 Year Forward View – the challenge of nil real terms growth cannot be met by local efficiency and transformation programmes. The funding straitjacket will not hold without fundamental reductions to access or quality – neither of which are currently on the table. Though the Trust has taken action already to start to correct and mitigate savings programme slippage, this is not yet delivering gains on the bottom line – and key areas of control remain behind the point they should have reached. An accelerated work programme in key priority areas must be delivered by the Trust management team. The Healthy Lives Healthy Futures programme is now just starting to assimilate the provider improvement work, giving the programme the start of a proper direction of travel – this work has significant promise – delivering real clinical integration. This work must be supported by a fundamentally different resource allocation system. It is encouraging that CCG finance leaders have agreed to work towards a different way of business – encouraged by the suggestions in the 5 Year Forward View. Marcus Hassall Director of Finance November 2014


APPENDIX 1 Creditor and debtor day analysis

Ratio July August September October Debtor days 26 29 28 28 Creditor days 42 42 40 42 APPENDIX 2 Facilities Branch Variances

Facilities Management & Soft Services YTD Variance £000s

Facilities Management (84) Facilities Services (137) Soft Services (368) Total (588)

APPENDIX 3 Operations Branch Variances

Operations YTD Variance £000s

Operations Central (159) Operations Directorate 18 Surgery & Critical Care (1,902) Medicine (3,081) Women & Childrens Services (169) Therapy & Community Services (292) Diagnostics (712) Total (6,297)

APPENDIX 4 Pathlinks Branch Variances

Pathlinks YTD Variance £000s

Pathlinks (8) Total (8)


patient safety · by the trust’s income assessment, and the greater part of the variance against...

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