1 AGENDA ITEM NO 13 CLUSTER BOARD Date 14 July 2011 REPORT OF:Director of Finance DATE OF PAPER:28 June 2011 SUBJECT:Finance Report for the two months ended 31 May 2011 IN CASE OF QUERY, PLEASE CONTACT Mrs Claire Yarwood PURPOSE OF PAPER: This paper provides an update to the Cluster Board on the financial position for Greater Manchester for the first two months of

2 Contents 1. Key Financial Performance Dashboard 2. Summary Financial Position 3. Risks 4. Cost Improvement Programme Performance 5.PCT Performance Exception Report 6. Capital Investment Programme 7. Recommendations

3 1 Key Financial Performance Dashboard ReviewCommentary Year to Date Rating Year End Rating Revenue The current revenue position after two months is a cumulative surplus of £2,167k, which is slightly behind the planned year to date surplus of £2,604k. PCTs are forecasting achievement of the planned surplus of £14,717k for although this is based on limited information from providers at this early stage in the financial year, and dependent on the achievement of significant levels of QIPP savings. CapitalTo date there has been minimal spend of £382k against a total net capital resource limit of £14,716k. Cash PCTs are largely drawing down cash in accordance with their plans, with the exception of NHS Bury (1.3% ahead of plan) and NHS Trafford (0.56% ahead of plan). No PCTs are currently indicating a requirement for cash in excess of their allocation. Provider Breakeven NHS Stockport and NHS Bolton are the only PCTs with provider arms. NHS Stockport has reported a year to date surplus of £122k due to lower than planned pay costs and NHS Bolton is reporting a break even position. Both PCTs are forecasting that their provider arms will break even in Both PCTs are planning to transfer their provider services to Acute Trusts during 2011/12

4 2Summary Financial Position Surplus / (Deficit) YTD Resource Limit ; Opening in-year allocationBudgetActualVariance Forecast Surplus £ 000's NHS Ashton Leigh and Wigan573, (116) 2,726 NHS Bolton488, (17) 1,000 NHS Bury316,15250(5) 250 NHS Heywood Middleton and Rochdale396, ,000 NHS Manchester1,032, ,000 NHS Oldham422, (335) 2,015 NHS Salford476, ,260 NHS Stockport482, NHS Tameside and Glossop429, ,000 NHS Trafford379, (165) 1,799 Total Greater Manchester4,997,1552,6042,167(437)14,717

5 3 Risks

6 There are a number of financial risks that are included in the PCTs’ forecast financial position however the magnitude and certainty of these risks is variable. The table on the previous page lists the major risks and the potential best and worst cases. Currently the most likely positions are included in the forecast outturns and are mitigated by contingencies, under spends on developments and strategic initiatives. Each PCT has assessed the risks applicable to their financial position and commissioned services. Whilst some risks are specific to particular PCTs, the risks relating to secondary care contracts, QIPP delivery and prescribing spend are common to most PCTs. This format of presenting financial risks is new to some PCTs, and therefore the information contained within this schedule at month two should be treated with caution. However, this will continue to be developed with Organisations.

7 4 Cost Improvement Programme (CIP) Performance Resource Limit ; Opening in-year allocationCIP Plan CIP Plan as % of Resource LimitCIP Forecast £ 000's NHS Ashton Leigh and Wigan573,07312, ,700 NHS Bolton488,6919, ,944 NHS Bury316,15226, ,903 NHS Heywood Middleton and Rochdale396,76210, ,938 NHS Manchester1,032,50920, ,238 NHS Oldham422, NHS Salford476,0522, ,379 NHS Stockport482,4758, ,180 NHS Tameside and Glossop429,94010, ,200 NHS Trafford379,32215, ,300 Total Greater Manchester4,997,155115, ,782

8 4 Cost Improvement Programme (CIP) Performance NHS Bury has the highest CIP target as a percentage of revenue resource limit, at £26.9m. Of this amount, £21.7m or 81% of the schemes are rated as high risk at month two, but this is a slight improvement over the plan position. However, achievement of CIP at month two is only £1.4m, which is £2.6m behind plan, but further analysis will be undertaken over the course of the next two months to evidence the savings. NHS Manchester set an initial CIP target of £20.2m and then added a further 50% to allow for slippage on schemes, optimism bias, and to provide a potential contingency for any deterioration in the underlying financial position. Detailed plans have been drawn up by consortia leads and other budget holders to address £23m of the revised £30m target and are currently working on proposals to achieve the balance. However significant savings are anticipated from service agreements, with over 50% of the original target covered by block contract arrangements and therefore these have been achieved. The highest risk areas are in schemes to save costs in relation to secure mental health and running costs. NHS Stockport is reporting achievement of £6.8m of the £8.2m CIP savings at month two, and £4.6m of this relates to a 2% reduction in elective and unscheduled care contracts. If these contracts over perform later in the year, the PCT will report this as a cost pressure rather than an underachievement of CIP. NHS Bolton are currently forecasting an under achievement against their CIP plans of £3.4m, of which £2m is related to prescribing schemes and based on holding spend to levels, and £1.4m is for demand management schemes. However this is expected to improve as the programme takes effect but will be closely monitored.

9 5 PCT Performance Exception Report PCTs are currently forecasting achievement of the planned surpluses totalling £14,717k. This is the surplus control total agreed with the Strategic Health Authority. Therefore achieving the planned 2% recurrent headroom target. The year to date position is a surplus achieved of £2,167k against a budgeted position of £2,604k, with the majority of the underachievement contributed by NHS Ashton Leigh and Wigan, NHS Oldham and NHS Trafford. However, as expected at this stage of the financial year, many of the sources of information used to generate forecasts are not available, most notably prescribing, collaborative commissioning and other provider activity monitoring reports. Most PCTs have incorporated month one activity from their main provider into their forecasts. NHS Bury has a number of financial recovery schemes in place, and those related to secondary care, prescribing and continuing care in particular have had a slower impact than anticipated. NHS Bury is forecasting achievement of the target surplus on the basis that in year savings on financial recovery schemes will be made to mitigate any recurrent shortfall. To date, there have also been non recurrent savings in other areas and work will be undertaken to secure these savings recurrently. NHS Manchester has identified forecast overspends of £6.3m, mainly within prescribing (£2m), mental health non secure contracts (£2m) and specialist/collaboratively commissioned services (£1m). There are ongoing negotiations between NHS Manchester and Manchester City Council regarding the settlement of mental health non secure over performance for , the mental health pool contribution and pooling resources for Currently all PCTs are assuming that the full amount of the 2% non recurrent top slice will be returned in and be available for planned non recurrent expenditure.

10 5 PCT Performance Exception Report NHS Oldham are in the process of developing dashboards to provide evidence – based reporting on CIP achievements including financial benefits realised, and therefore whilst “banked” savings at month two are low, it is anticipated these are understated. The financial position is being closely monitored by Cluster and Locality Director of Finance.

11 6Capital Investment Programme PCT CAPITAL PROGRAMME PlanForecast Expenditure Disposals /Grants /IFRIC-12 Charge against CRLExpenditure Disposals /Grants /IFRIC-12 Charge against CRL NHS Ashton Leigh and Wigan2,068(1,633)4352,068(1,633)435 NHS Bolton16,130(11,925)4,20515,930(11,725)4,205 NHS Bury1,558(592)966 NHS Heywood Middleton and Rochdale925(340)585925(340)585 NHS Manchester3, NHS Oldham15,346(16,942)(1,596)15,981(18,212)(2,231) NHS Salford3,954(831)3,1233,954(831)3,123 NHS Stockport2,092(427)1,6652,092(427)1,665 NHS Tameside and Glossop1,105(340)7651,105(340)765 NHS Trafford1,900(1,050)8501,900(1,050)850 48,796(34,080)14,71648,639(34,558)14,081

12 6Capital Investment Programme Although there has been very little expenditure to date on the capital programmes, all PCTs are forecasting to remain within the net Capital Resource Limit for Approximately £6.3m of capital expenditure is dependent on the disposal of assets, all to non NHS bodies, and PCTs have programmed capital schemes to commence only when disposals are certain. However, there is a risk that if disposals are delayed until later in the year, that there will be insufficient time to complete planned schemes and there may be capital resource limit under spends which cannot be carried forward to IT schemes total £4.4m and work is currently being undertaken to review the nature of planned expenditure and determine whether efficiencies in procurement and/or implementation are possible across the Greater Manchester footprint.

13 7Future Performance Management Information In future reports information will be presented on the following areas of financial performance Performance against main provider contracts Delivery of running cost targets/paybill Non recurrent 2% expenditure plans

14 8Recommendations 8.1 The Cluster Board is asked to note the contents of the report. 8.2The Cluster Board is asked if the information contained within or proposed is sufficient to meet the needs of Board members, given full detailed financial reports will be prepared for Locality Boards. Any comments can be sent directly to Mrs C Yarwood.