Agenda item

Members to receive a presentation report on the UHL Financial Accounts for the financial years 2019-20 and 2020-21 including details of how improvements have been made and to highlight any further anticipated issues.

For background information members can access the full published accounts on the links below:

19/20

(2022) - Thursday 31 March 2022 - All Documents (leicestershospitals.nhs.uk)

20/21

(2022) - Friday 9 September 2022 - All Documents (leicestershospitals.nhs.uk)

Members received a report containing details of the University Hospitals Leicester (UHL) Finances and Accounts for the financial years 2019-20 and 2020-21.

Lorraine Hooper, Chief Financial Officer, UHL, informed members that:

·         The accounts for 2019-20 were finally adopted and published with a disclaimer opinion on 31^st March 2022.

·         The audited accounts for 2020-21 were adopted by the Trust Board on 9^th September 2022 with an adverse opinion. Due to the Queens passing the Board met in private but did subsequently meet in public on 6^th October to ratify that decision.

·         In relation to the 2019-20 accounts, external auditor Grant Thornton had provided an updated audit findings report which included the restated balance sheet, this saw the deficit moving from £76.8m to £122.7m following adjustments agreed during the course of the audit.

·         Grant Thornton recognised the considerable improvement in account process and culture within the finance team at UHL since their original audit findings report but also recognised some errors still to be addressed and work to do on financial statements to address risks to the Trust’s financial sustainability.

·         The 2020-21 draft accounts had been produced in line with the National timetable (June 2021) which was a significant step forward.

·         The financial position in 2021 improved by £29.8m to £46.2m largely as a result of repatriation of expenditure into the previous financial year as a result of the 2019-20 balance sheet restatement.

·         The current financial year (2021-22) accounts were on track and undergoing external audit with KPMG (new external auditor) and it was  anticipated those accounts would be adopted in February 2023 by the Trust Board.

In relation to the issues uncovered around the 2019-20 accounts, members were informed that it was clear standards previously fell short of anything that was an acceptable standard, and since those challenges considerable change and improvement had been made across the whole organisation.

Members were advised that the Trust Board had been set up and in place for 14 months, the Board had a wider experience and a committee Chair who ensured challenge was robust. Governance had been revised across the Trust and financial decision making was much tighter and more robust.

The entire finance department had been restructured and a clear skills requirement for each grade had been put in place together with weighting of staff within the structure and a considerable amount of staff training. Mandatory training had been undertaken by budget holders and there was now in place a regular reporting system. All control processes had also been refreshed, reviewed, and rewritten where necessary.

Members noted that as a consequence of the financial challenges  the Trust was placed in financial special measures and was now in a recovery support programme so there was additional oversight from NHS England and the Trust was making good progress to be able to exit that programme.

The Chair invited members to comment which included the following points:

Members remarked that this was clearly a serious historical issue at the hospital and new people had been brought in to rectify the position, however it was queried whether it was internal or external processes that had led to the discovery of the huge financial issues and whether there was now confidence in all processes and procedures in place to avoid the same thing happening.

Members were astounded at the level and depth of financial incompetence and damage to the hospital and concerned as to whether the financial loss impacted on patient care and members sought absolute assurances that robust processes were in place to avoid a similar situation again.

Members stressed the importance of having confidence that UHL was not just delivering good healthcare but that they could handle the millions of pounds handed to them by government to deliver those services. As a consequence of the massive failure regarding public funds it was queried what happened to the people involved and whether any action against individuals was taken?

Members expressed serious concerns that the financial issues of almost 4 years ago were still being resolved and although it was appreciated the Trust were now making strides against the measures put in place there was a need to ensure that this sort of fundamental error could not happen again.

Members were not satisfied that the report provided the level of detail necessary to fully scrutinise what had happened. Members were keen to know more about the new processes in place as well as what the specific weaknesses and errors of accounting were that led to the failings.

Members enquired about the wider implications for the hospital financially, whether it was operating within its means and whether there would be other impacts e.g., upon the reconfiguration programmes.

Responding to the points raised members were informed that:

·         In terms of whether internal or external process revealed the discrepancies it was the previous Chief Financial Officer (who came into post in 2020) who unearthed the financial issues and set about a process to put things right, he subsequently retired but the steps put in motion were continued by his successor.

·         The  current senior management were confident that processes were improving and that there were clear actions in place but recognised there was a need to do more. The process that the Trust had gone through was appropriate and proper oversight was now in place.

·         As regards the financial mismanagement, there had been full reflection on how financial decisions were made and assurance was given that all decisions now went through a full and proper procedure which included impact and equality assessments.

·         It was asserted that the financial circumstances had not prevented the hospitals from being able to deliver and the reductions in elective surgery backlog was given as an example.

·         In relation to confidence in the current administration, it was noted that the vast majority of the Board and team were new to the organisation over the last 18 months to 2 years and all came with professional skills to deal with the issues identified and were aware of the challenges which they continued to work through.

·         In terms of the hospitals living within means, it was stated that this year UHL was delivering within part of its financial plan and working closely with ICB partners to ensure they maintained that over the financial year.

·         As far as the recovery support programme, it was anticipated there would be sufficient progress to enable the Trust to exit that in Spring 2023 and it tied in closely to the current audit and 2021-22 financial accounts.

Richard Mitchell, Chief Executive Officer UHL apologised on behalf of the organisation and was regretful that this situation had arisen. Richard acknowledged the concerns raised, noting that the update given today had been shared previously in public, and he was optimistic that with the work they were doing they could evidence more increasingly that the Trust was improving. It was confirmed that the Chief Executive Officer, Trust Chair and Chief Financial Officers at the time of the financial issues occurring were all no-longer working in the NHS. As to whether any actions were taken against individuals Members were referred to the Trusts Annual Report which would provide that information and officers agreed to provide the link to that outside this meeting.

As regards to the reconfiguration programme it was stated that this issue bore no relation to the Trust’s ability to access money for that programme and it was already well documented that there had been delays in that programme particularly due to Covid, but it was expected a more accurate update on the reconfiguration programme around quantum of monies UHL Leicester would receive should be available soon.

In relation to patient care, members were informed that like wider NHS partners the Trust were working to financial constraints, but the financial issues uncovered in the accounts had not affected that. Examples of improvements to patient care were given noting that no NHS Trust in the country had reduced their number of patients waiting over 2 years for surgery as UHL had and within the last 6 months  UHL had also stepped into community provision with local partners to deliver services as well as opening a much needed minor injuries department.

The Chair invited any supplementary comments which included the following:

Members suggested that in the interests of transparency and accountability UHL should take an innovative step of having their accounts open for feedback from the public domain and officers agreed to take that away for consideration.

Regarding the auditors adverse opinion for the 2020-21 accounts, Members were advised this was largely in respect of the UHL property plan and capital expenditure and focused on how the Trust could verify its assets and show how assets under construction were accounted for, that was up to March 2021 and considerable work had been done since then so the remainder of outstanding matters were about smaller control issues which were all close to being completed.

Members referred to the report again, reiterating its lack of detail and requested that more information about the work still needed and how that was being done be provided along with data such as KPI’s in an accessible format. Officers took on board the comments about accessibility and were agreeable to sharing a condensed version of data reports that went to the Trust Board if required. Officers agreed to provide members with an abridged version of the improvements required. Members noted that minutes of the Trust Board meetings were all in the public domain and could be accessed through UHL website.

Returning to the points made in relation to reconfiguration proposals, it was noted that since those proposals were put together and the bid submitted the economic situation and increased inflation had become a significant factor, and it would be a challenge to do what was said would be done. Members therefore requested that if UHL found itself having to make modifications to the original plans that impacted on the geographic community that those be brought to committee for discussion as soon as possible.

Members queried the deficit amount from the restated balance sheet and how that would be “paid back”. There followed a brief a discussion around the deficit and how that was made up. The Chief Financial Officer clarified that the deficit would be held as part of the accumulated total carried forward and this would show as part of the cycle from being historically behind with accounts, she went on to explain how during the Covid pandemic the NHS went through a process in which NHS’s debt was rebased, and debts were effectively written off. Officers agreed to provide a written summary of how that was worked out in practical terms for Members.

The Chair drew discussion to a close.

AGREED:

1.    That UHL officers provide the link to the UHLs Annual Report for Members to access outside this meeting,

2.    That in the interests of transparency and accountability UHL should consider having their accounts open for feedback from the public domain and to consider sharing those with this committee for scrutiny feedback,

3.    That a written summary about the deficit and how that was to be worked out in practical terms be provided for Members outside this meeting,

4.    That any potential modifications to the original UHL reconfiguration plans that impacted on the geographic community should be brought to committee for discussion as soon as they arise,

5.    That a further update and full report on  the UHL’s financial recovery, to include an abridged version of the improvements required and the new processes in place to address the specific financial weaknesses and errors of accounting identified in the financial years 2019-20 and 2020-21 be provided to a future meeting in 2023.