Annual Accounts

Annual accounts for the year ending 31 March 2020

Annual accounts for the year ending 31 March	2020
Statement of Comprehensive Income
		2019-20		2018-19
	Note	£000		£000
Operating income from patient care activities	3	187,871		172,737
Other operating income	4	14,532		12,348
Operating expenses	6, 8	(211,980)		(180,256)
Operating surplus/(deficit) from continuing operations		(9,577)		4,829
Finance income	11	101		63
Finance expenses	12	(1,437)		(1,588)
PDC dividends payable		(3,500)		(3,663)
Net finance costs		(4,836)		(5,188)
Other gains / (losses)	13	(120)		1,370
Surplus / (deficit) for the year		(14,533)		1,011
Other comprehensive income
Will not be reclassified to income and expenditure: Impairments	7	(3,393)		(921)
Revaluations	16	7,728		-
Total comprehensive income / (expense) for the period		(10,198)		90
Adjusted financial performance (control total basis): Surplus / (deficit) for the period		(14,533)		1,011
Remove net impairments not scoring to the Departmental expenditure limit		18,683		921
Remove I&E impact of capital grants and donations		88		94
Adjusted financial performance surplus / (deficit)		4,238		2,026

The reported performance of the Trust of £14.5m deficit differs from the financial performance of £4.2m surplus due to allowable technical adjustments.

The notes on pages 58 to 93 form part of these accounts.

Statement of Financial Position		31 March 2020		31 March 2019
Non-current assets	Note	£000		£000
Intangible assets	14	461		854
Property, plant and equipment	15	122,971		135,842
Investment property	17	1,091		-
Receivables	18	403		443
Total non-current assets		124,926		137,139
Current assets
Receivables	18	8,510		8,110
Cash and cash equivalents	19	15,678		12,545
Total current assets		24,188		20,655
Current liabilities
Trade and other payables	20	(17,233)		(18,336)
Borrowings	22	(3,203)		(3,927)
Provisions	24	(1,208)		(588)
Other liabilities	21	(2,576)		(10)
Total current liabilities		(24,220)		(22,861)
Total assets less current liabilities		124,894		134,933
Non-current liabilities
Borrowings	22	(10,941)		(11,837)
Provisions	24	(1,492)		(1,400)
Total non-current liabilities		(12,433)		(13,237)
Total assets employed		112,461		121,696
Financed by
Public dividend capital		116,318		115,355
Revaluation reserve		18,622		13,714
Other reserves		(5,280)		(4,701)
Income and expenditure reserve		(17,199)		(2,672)
Total taxpayers' equity		112,461		121,696

The notes on pages 58 to 93 form part of these accounts.

The financial statements on pages 54 to 93 were approved the board on the 24th June 2020 and signed on its behalf by

Helen Greatorex, Chief Executive Date: 24 June 2020

Statement of Changes in Equity for the year ended 31 March 2020

 

	Public dividend capital	Revaluation reserve	Other reserves	Income and expenditure reserve	Total
	£000	£000	£000	£000	£000
Taxpayers' and others' equity at 1 April 2019 - brought forward	115,355	13,714	(4,701)	(2,672)	121,696
Surplus/(deficit) for the year	-	-	-	(14,533)	(14,533)
Other transfers between reserves	-	(6)	-	6	-
Impairments	-	(3,393)	-	-	(3,393)
Revaluations	-	7,728	-	-	7,728
Public dividend capital received	963	-	-	-	963
Other reserve movements *	-	579	(579)	-	-
Taxpayers' and others' equity at 31 March 2020	116,318	18,622	(5,280)	(17,199)	112,461

Statement of Changes in Equity for the year ended 31 March 2019

 

	Public dividend capital	Revaluation reserve	Other reserves	Income and expenditure reserve	Total
	£000	£000	£000	£000	£000
Taxpayers' and others' equity at 1 April 2018 - brought forward	113,993	14,764	(4,701)	(3,812)	120,244
Prior period adjustment	-	-	-	-	-
Taxpayers' and others' equity at 1 April 2018 - restated	113,993	14,764	(4,701)	(3,812)	120,244
Surplus/(deficit) for the year	-	-	-	1,011	1,011
Other transfers between reserves	-	(129)	-	129	-
Impairments	-	(921)	-	-	(921)
Public dividend capital received	1,362	-	-	-	1,362
Taxpayers' and others' equity at 31 March 2019	115,355	13,714	(4,701)	(2,672)	121,696

* Errors identified following a merger in 2006 are charged to an 'Other reserves'. The Department of Health and Social Care (DHSC) do not alter the initial Public Dividend Capital (PDC) value so this reserve is the means of identifying the over statement. During 2019-20 the Trust identified a property which it has not had formal ownership of since the merger and as such the property has been revalued to zero and the resulting negative revaluation reserve has been transferred to the 'Other reserves'.

Information on reserves

Public dividend capital

Public dividend capital (PDC) is a type of public sector equity finance based on the excess of assets over liabilities at the time of establishment of the predecessor NHS organisation. Additional PDC may also be issued to trusts by the Department of Health and Social Care (DHSC). A charge, reflecting the cost of capital utilised by the Trust, is payable to the DHSC as the Public dividend capital dividend.

Revaluation reserve

Increases in asset values arising from revaluations are recognised in the Revaluation reserve, except where, and to the extent that, they reverse impairments previously recognised in operating expenses, in which case they are recognised in operating income. Subsequent downward movements in asset valuations are charged to the Revaluation reserve to the extent that a previous gain was recognised unless the downward movement represents a clear consumption of economi benefit or a reduction in service potential.

Other reserves

Errors identified following a merger in 2006 are charged to an 'Other reserve'. The DHSC do not alter the initial PDC value so this reserve is the means of identifying the over statement.

Income and expenditure reserve

The balance of this reserve is the accumulated surpluses and deficits of the Trust.

 

Statement of Cash Flows
		2019-20		2018-19
	Note	£000		£000
Cash flows from operating activities
Operating surplus / (deficit)		(9,577)		4,829
Non-cash income and expense:
Depreciation and amortisation	6	5,689		5,742
Net impairments	7	18,683		2,563
(Increase) / decrease in receivables and other assets		(80)		324
Increase in payables and other liabilities		4,341		595
Increase / (decrease) in provisions		677		(314)
Net cash flows from operating activities		19,733		13,739
Cash flows from investing activities
Interest received		101		63
Purchase of intangible assets		2		(222)
Purchase of PPE and investment property		(10,865)		(7,210)
Sales of PPE and investment property		1		6,408
Net cash flows (used in) investing activities		(10,761)		(961)
Cash flows from financing activities
Public dividend capital received		963		1,362
Movement on loans from DHSC		(800)		(800)
Capital element of finance lease rental payments		(162)		(152)
Capital element of PFI, LIFT and other service concession payments		(655)		(681)
Interest on loans		(42)		(51)
Other interest		(5)		-
Interest paid on finance lease liabilities		(81)		(92)
Interest paid on PFI, LIFT and other service concession obligations		(1,277)		(1,419)
PDC dividend (paid) / refunded		(3,780)		(3,484)
Net cash flows (used in) financing activities		(5,839)		(5,317)
Increase in cash and cash equivalents		3,133		7,462
Cash and cash equivalents at 1 April - brought forward		12,545		5,083
Cash and cash equivalents at 31 March	19.1	15,678		12,545

Notes to the Accounts

Note 1 Accounting policies and other information Note 1.1 Basis of preparation

The DHSC has directed that the financial statements of the Trust shall meet the accounting requirements of the DHSC Group Accounting Manual (GAM), which shall be agreed with HM Treasury.

Consequently, the following financial statements have been prepared in accordance with the GAM 2019-20 issued by the DHSC. The accounting policies contained in the GAM follow International Financial Reporting Standards to the extent that they are meaningful and appropriate to the NHS, as determined by HM Treasury, which is advised by the Financial Reporting Advisory Board.

Where the GAM permits a choice of accounting policy, the accounting policy that is judged to be most appropriate to the particular circumstances of the Trust for the purpose of giving a true and fair view has been selected. The particular policies adopted are described below. These have been applied consistently in dealing with items considered material in relation to the accounts.

 

Accounting convention

These accounts have been prepared under the historical cost convention modified to account for the revaluation of property, plant and equipment, intangible assets, inventories and certain financial assets and financial liabilities.

Note 1.2 Going concern

The Trust’s annual report and accounts have been prepared on a going concern basis. Non-trading entities in the public sector are assumed to be going concerns where the continued provision of a service in the future is anticipated, as evidenced by inclusion of financial provision for that service in published documents. In approving the Trust’s financial statements, the board has made an assessment, and has satisfied itself that it is appropriate to prepare the financial statements on the going concern basis.

The Trust has delivered a surplus (after technical adjustments) of £4.2m. Prior to the COVID-19 outbreak the Trust had prepared financial plans and cash flow forecasts for the coming financial year with a forecast break even position. The breakeven position for 2020-21 includes £5.4m of Financial Recovery Fund allocation, as the Trust moves towards long term financial sustainability.

The Trust's opening cash balance of £15.7m and planned cash flow enable the capital programme to be financed without an external borrowing requirement.

The planning timetable has been extended due to COVID-19. This has therefore meant contract negotiations have not concluded by the 31st March 2020. NHS England and NHS Improvement have advised that trusts will be funded through a block contract for the first seven months of the financial year. The 2019-20 contracts terms and conditions remain in place. In addition trusts will be reimbursed for COVID-19 costs. All trusts must have sufficient backup for reimbursement. Once the system returns to business as usual providers will be expected to deliver a breakeven or surplus position and as such the Trust will work with partners in the local health economy and NHS England to finalise contracts covering the remainder of the financial year 2020-21, to give certainty around the income forecasts.

As directed by the DHSC GAM 2019-20, the directors have prepared the financial statements on a going concern basis as they consider that the services currently provided by the Trust will continue to be provided in the foreseeable future.

On 2nd April 2020, the DHSC and NHS England and NHS Improvement announced reforms to the NHS cash regime for the 2020-21 financial year. During 2020-21 the existing DHSC interim revenue loan as at 31st March 2020 will be extinguished and replaced with the issue of PDC to allow the repayment. The affected loans totalling £2.307m are classified as current liabilities within these financial statements. As the repayment of these loans will be funded through the issue of PDC, this does not present a going concern risk for the Trust.

Note 1.3 Critical accounting judgements and key sources of estimation uncertainty

In the application of NHS trust accounting policies, management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from those estimates and the estimates and underlying assumptions are continually reviewed. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Note 1.3.1 Critical judgements in applying accounting policies

Any critical judgements, apart from those involving estimations (see below) that management has made in the process of applying the NHS trust’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements, are annotated where applicable in the notes to these accounts.

The main areas of critical judgement are:

• The assessment of the expectation on the Trust's ability to continue as a going concern, and The valuation under a Modern Equivalent Asset on an Alternative Site basis.
• The valuation of non specialised property assets on an Market Value for Existing Use basis. The valuation of the investment property at fair value.
• The valuation of the Private Finance Initiative assets on a net of VAT basis.

Note 1.3.2 Events after the reporting period (DHSC loans)

On 2nd April 2020, the DHSC and NHS England and NHS Improvement announced reforms to the NHS cash regime for the 2020-21 financial year. During 2020-21 existing DHSC interim revenue and capital loans as at 31 March 2020 will be extinguished and replaced with the issue of PDC to allow the repayment. Given this relates to liabilities that existed at 31 March 2020, DHSC has updated its Group Accounting Manual (GAM) to advise this is considered an adjusting event after the reporting period for providers.

Outstanding interim loans totalling £2.307m as at 31st March 2020 in these financial statements remain classified as current as they will be repayable within 12 months.

Note 1.3.3 Sources of estimation uncertainty

Key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year when arising, will be disclosed within the relevant note. The disclosure will include the nature of the assumption and the carrying amount of the asset/liability at the balance sheet date, sensitivity of the carrying amount to the assumptions, expected resolution of uncertainty and range of possible outcomes within the next financial year. The disclosure will also include an expectation of changes to past assumptions if the uncertainty remains unresolved.

Material areas including estimations with the 2019-20 accounts are as follows:

• Property plant and equipment see Note 1.7 and Note 16, relating to alternative site valuation of non functional land and buildings
• Property plant and equipment Note 16, relating to the material valuation uncertainty declared by the external valuers due to COVID-1.
• Private Finance Initiative (PFI) see Note 1.7.5 and Note 27.

Accruals see Note 1.6 and Note 20. Provisions see Note 1.13 and Note 24.1.

Note 1.4.1 Revenue from contracts with customers

Where income is derived from contracts with customers, it is accounted for under IFRS 15. The GAM expands the definition of a contract to include legislation and regulations which enables an entity to receive cash or another financial asset that is not classified as a tax by the Office of National Statistics (ONS).

Revenue in respect of goods/services provided is recognised when (or as) performance obligations are satisfied by transferring promised goods/services to the customer and is measured at the amount of the transaction price allocated to those performance obligations. At the year end, the Trust accrues income relating to performance obligations satisfied in that year. Where the Trust’s entitlement to consideration for those goods or services is unconditional a contract receivable will be recognised. Where entitlement to consideration is conditional on a further factor other than the passage of time, a contract asset will be recognised. Where consideration received or receivable relates to a performance obligation that is to be satisfied in a future period, the income is deferred and recognised as a contract liability.

Revenue from NHS contracts

The main source of income for the Trust is contracts with commissioners for health care services. A performance obligation relating to delivery of a spell of health care is generally satisfied over time as healthcare is received and consumed simultaneously by the customer as the Trust performs it. The customer in such a contract is the commissioner, but the customer benefits as services are provided to their patient. Even where a contract could be broken down into separate performance obligations, healthcare generally aligns with paragraph 22(b) of the Standard entailing a delivery of a series of goods or services that are substantially the same and have a similar pattern of transfer.

The Trust receives income from commissioners under Commissioning for Quality and Innovation (CQUIN) schemes. The CQUIN payments are not considered distinct performance obligations in their own right; instead they form part of the transaction price for performance obligations under the contract.

Revenue from research contracts

Where research contracts fall under IFRS 15, revenue is recognised as and when performance obligations are satisfied. For some contracts, it is assessed that the revenue project constitutes one performance obligation over the course of the multi-year contract. In these cases it is assessed that the Trust’s interim performance does not create an asset with alternative use for the Trust, and the Trust has an enforceable right to payment for the performance completed to date. It is therefore considered that the performance obligation is satisfied over time, and the Trust recognises revenue each year over the course of the contract.

Revenue from Provider Sustainability Fund and Financial Recovery Fund

The Provider Sustainability Fund (PSF) and the Financial Recovery Fund (FRF) enable NHS providers to earn income linked to the achievement of financial controls and performance targets. Access to both the general and targeted elements of PSF and FRF are unlocked as NHS providers meet their financial control totals. At each quarter, the allocated funding will be released upon achievement of the financial control total. In line with IFRS 15, PSF and FRF should be accounted for as variable consideration.

Note 1.4.2 Revenue grants and other contributions to expenditure

Government grants are grants from government bodies other than income from commissioners or trusts for the provision of services. Where a grant is used to fund revenue expenditure it is taken to the Statement of Comprehensive Income to match that expenditure.

Note 1.4.3 Apprenticeship service income

The value of the benefit received when accessing funds from the Government's apprenticeship service is recognised as income at the point of receipt of the training service. Where these funds are paid directly to an accredited training provider from the Trust's Digital Apprenticeship Service (DAS) account held by the Department for Education, the corresponding notional expense is also recognised at the point of recognition for the benefit.

Note 1.5 Expenditure on employee benefits

Short-term employee benefits, salaries, wages and employment-related payments such as social security costs and the Apprenticeship levy are recognised in the period in which the service is received from employees.

Pension costs

NHS Pension Scheme

Past and present employees are covered by the provisions of the two NHS Pension Schemes. Both schemes are unfunded, defined benefit schemes that cover NHS employers, general practices and other bodies, allowed under the direction of Secretary of State for Health and Social Care in England and Wales. The scheme is not designed in a way that would enable employers to identify their share of the underlying scheme assets and liabilities. Therefore, the scheme is accounted for as though it is a defined contribution scheme: the cost to the Trust is taken as equal to the employer's pension contributions payable to the scheme for the accounting period. The contributions are charged to operating expenses as and when they become due.

Additional pension liabilities arising from early retirements are not funded by the scheme except where the retirement is due to ill-health. The full amount of the liability for the additional costs is charged to the operating expenses at the time the Trust commits itself to the retirement, regardless of the method of payment.

Note 1.6 Expenditure on other goods and services

Expenditure on goods and services is recognised when, and to the extent that they have been received, and is measured at the fair value of those goods and services. Expenditure is recognised in operating expenses except where it results in the creation of a non-current asset such as property, plant and equipment.

Note 1.7 Property, plant and equipment Note 1.7.1 Recognition

Property, plant and equipment is capitalised where:

• it is held for use in delivering services or for administrative purpose
• it is probable that future economic benefits will flow to, or service potential be provided to, the Trust
• it is expected to be used for more than one financial year
• the cost of the item can be measured reliably
• the item has cost of at least £5,000, or
• collectively, a number of items have a cost of at least £5,000 and individually have cost of more than £250, where the assets are functionally interdependent, had broadly simultaneous purchase dates, are anticipated to have similar disposal dates and are under single managerial control; or
• items form part of the initial equipping and setting-up of a new building, ward or unit, irrespective of their individual or collective cost.

   

Where a large asset, for example a building, includes a number of components with significantly different asset lives, eg, plant and equipment, then these components are treated as separate assets and depreciated over their own useful lives.

Note 1.7.2 Measurement Valuation

All Property, plant and equipment assets are measured initially at cost, representing the costs directly attributable to acquiring or constructing the asset and bringing it to the location and condition necessary for it to be capable of operating in the manner intended by management. All assets are measured subsequently at current value.

Land and buildings used for the Trust’s services or for administrative purposes are stated in the Statement of Financial Position at their revalued amounts, being the fair value at the date of revaluation less any impairment.

Revaluations of Property, plant and equipment are performed with sufficient regularity to ensure that carrying amounts are not materially different from those that would be determined at the end of the reporting period. Current values in existing use are determined as follows:

• Land and non-specialised buildings – market value for existing use.
• Specialised buildings – depreciated replacement cost, modern equivalent asset basis.

   

   

HM Treasury has adopted a standard approach to depreciated replacement cost valuations based on modern equivalent assets and, where it would meet the location requirements of the service being provided, an alternative site can be valued. All land and buildings are restated to current value using professional valuations in accordance with IAS 16 every five years and in the intervening third year by a 'desk top' review, or on the completion of a material refurbishment scheme.

The 5 year professional valuations are carried out by local independent valuers. The valuations are carried out in accordance with the Royal Institute of Chartered Surveyors (RICS) Appraisal and Valuation Manual in so far as these terms are consistent with the agreed requirements of the DHSC and HM Treasury. In accordance with the requirements of the DHSC, a full asset valuation took place this year, in March 2020.

Properties in the course of construction for service or administration purposes are carried at cost, less any impairment loss. Cost includes professional fees and, where capitalised in accordance with IAS 23, borrowing costs. Assets are revalued and depreciation commences when they are brought into use.

The carrying value of existing assets at that date will be written off over their useful remaining lives and new fixtures and equipment are carried at depreciated historic cost as this is not considered to be materially different from fair value.

An item of property, plant and equipment which is surplus with no plan to bring it back into use is valued at fair value under IFRS 13, if it does not meet the requirements of IAS 40 or IFRS 5.

Valuation guidance issued by the Royal Institute of Chartered Surveyors states that valuations are performed net of VAT where the VAT is recoverable by the entity, and the replacement option would be via a similar approach that would equally allow VAT recovery. In 2019-20 this basis has been applied to the Trust’s Private Finance Initiative (PFI) scheme at the Greenacres site, where the construction was completed by a special purpose vehicle and the costs had recoverable VAT for the Trust. Although PFI schemes are not a future option in the NHS, it is management's view that, were it to be required to rebuild this asset, it would replace under a similar special purpose vehicle that would enable VAT recovery. The Trust has opted to change in practice following a full review by the Trust’s newly appointed valuer, Montagu Evans, and will be adopting this judgement going forward.

Modern Equivalent Asset on an Alternative Site Basis

In 2017-18 the Trust adopted the alternative site for its land valuations. The valuation assumption within note 15.1, relating to the land values, is to adopt the methodology appropriate for a Modern Equivalent Asset (MEA) on an Alternative Site Basis whereby the Trust would not hold more land than is necessary for the delivery of services. This follows the economic principle of substitution. Without affecting services some land at each of the four sites can be identified as non functional, and therefore excluded from an MEA valuation.

In 2019-20 the Trust additionally adopted the alternative site for a vacant ward also on an Alternative Site Basis whereby the Trust would not hold more building space than is necessary for the delivery of services. This follows the economic principle of substitution. Without affecting services the building can be identified as non functional, and therefore excluded from an MEA valuation.

Subsequent expenditure

Subsequent expenditure relating to an item of property, plant and equipment is recognised as an increase in the carrying amount of the asset when it is probable that additional future economic benefits or service potential deriving from the cost incurred to replace a component of such item will flow to the enterprise and the cost of the item can be determined reliably. Where a component of an asset is replaced, the cost of the replacement is capitalised if it meets the criteria for recognition above. The carrying amount of the part replaced is de-recognised. Other expenditure that does not generate additional future economic benefits or service potential, such as repairs and maintenance, is charged to the Statement of Comprehensive Income in the period in which it is incurred.

Depreciation

Items of property, plant and equipment are depreciated over their remaining useful lives in a manner consistent with the consumption of economic or service delivery benefits. Freehold land is considered to have an infinite life and is not depreciated.

Property, plant and equipment which has been reclassified as ‘held for sale’ cease to be depreciated upon the reclassification. Assets in the course of construction and residual interests in off-Statement of Financial Position PFI contract assets are not depreciated until the asset is brought into use or reverts to the Trust, respectively.

Revaluation gains and losses

Revaluation gains are recognised in the Revaluation reserve, except where, and to the extent that, they reverse a revaluation decrease that has previously been recognised in operating expenses, in which case they are recognised in operating income.

Revaluation losses are charged to the Revaluation reserve to the extent that there is an available balance for the asset concerned, and thereafter are charged to operating expenses.

Gains and losses recognised in the Revaluation reserve are reported in the Statement of Comprehensive Income as an item of ‘other comprehensive income’.

Impairments

In accordance with the GAM, impairments that arise from a clear consumption of economic benefits or of service potential in the asset are charged to operating expenses. A compensating transfer is made from the Revaluation reserve to the Income and expenditure reserve of an amount equal to the lower of (i) the impairment charged to operating expenses; and (ii) the balance in the Revaluation reserve attributable to that asset before the impairment.

An impairment that arises from a clear consumption of economic benefit or of service potential is reversed when, and to the extent that, the circumstances that gave rise to the loss is reversed. Reversals are recognised in operating expenditure to the extent that the asset is restored to the carrying amount it would have had if the impairment had never been recognised. Any remaining reversal is recognised in the Revaluation reserve. Where, at the time of the original impairment, a transfer was made from the Revaluation reserve to the Income and expenditure reserve, an amount is transferred back to the Revaluation reserve when the impairment reversal is recognised.

Other impairments are treated as revaluation losses. Reversals of ‘other impairments’ are treated as revaluation gains.

Note 1.7.3 De-recognition

Assets intended for disposal are reclassified as ‘held for sale’ once all of the following criteria are met:

• the asset is available for immediate sale in its present condition subject only to terms which are usual and customary for such sales;
• the sale must be highly probable ie:
  • management are committed to a plan to sell the asset
  • an active programme has begun to find a buyer and complete the salethe asset is being actively marketed at a reasonable price
  • the sale is expected to be completed within 12 months of the date of classification as ‘held for sale’ and
  • the actions needed to complete the plan indicate it is unlikely that the plan will be abandoned or significant changes made to it.

Following reclassification, the assets are measured at the lower of their existing carrying amount and their ‘fair value less costs to sell’. Depreciation ceases to be charged. Assets are de-recognised when all material sale contract conditions have been met.

Property, plant and equipment which is to be scrapped or demolished does not qualify for recognition as ‘held for sale’ and instead is retained as an operational asset and the asset’s useful life is adjusted. The asset is de- recognised when scrapping or demolition occurs.

Note 1.7.4 Donated and grant funded assets

Donated and grant funded Property, plant and equipment assets are capitalised at their fair value on receipt. The donation/grant is credited to income at the same time, unless the donor has imposed a condition that the future economic benefits embodied in the grant are to be consumed in a manner specified by the donor, in which case, the donation/grant is deferred within liabilities and is carried forward to future financial years to the extent that the condition has not yet been met.

The donated and grant funded assets are subsequently accounted for in the same manner as other items of Property, plant and equipment.

Note 1.7.5 Private Finance Initiative (PFI) and Local Improvement Finance Trust (LIFT) transactions

PFI and LIFT transactions which meet the IFRIC 12 definition of a service concession, as interpreted in HM Treasury’s FReM, are accounted for as ‘on-Statement of Financial Position’ by the Trust. In accordance with IAS 17, the underlying assets are recognised as Property, plant and equipment, together with an equivalent finance lease liability. Subsequently, the assets are accounted for as Property, plant and equipment and/or intangible assets as appropriate.

The annual contract payments are apportioned between the repayment of the liability, a finance cost and the charges for services.

The service charge is recognised in operating expenses and the finance cost is charged to finance costs in the Statement of Comprehensive Income.

The annual unitary payment is separated into the following component parts, using appropriate estimation techniques where necessary:

1. Payment for the fair value of services received;

2. Payment for the PFI asset, including finance costs; and

3. Payment for the replacement of components of the asset during the contract ‘lifecycle replacement’.

Note 1.7.6 Useful lives of property, plant and equipment

Useful lives reflect the total life of an asset and not the remaining life of an asset. The range of useful lives are shown in the table below:

	Min life	Max life
	Years	Years
Land	-
Buildings, excluding dwellings	3	90
Plant & machinery	5	15
Transport equipment	7	10
Information technology	4	5
Furniture & fittings	1	10

Finance-leased assets (including land) are depreciated over the shorter of the useful life or the lease term, unless the trust expects to acquire the asset at the end of the lease term in which case the assets are depreciated in the same manner as owned assets above.

Note 1.8 Intangible assets Note 1.8.1 Recognition

Intangible assets are non-monetary assets without physical substance which are capable of being sold separately from the rest of the Trust’s business or which arise from contractual or other legal rights. They are recognised only where it is probable that future economic benefits will flow to, or service potential be provided to, the Trust and where the cost of the asset can be measured reliably.

Internally generated intangible assets

Internally generated goodwill, brands, mastheads, publishing titles, customer lists and similar items are not capitalised as intangible assets.

Expenditure on research is not capitalised. Expenditure on development is capitalised where it meets the requirements set out in IAS 38, where all of the following can be demonstrated:

• the project is technically feasible to the point of completion and will result in an intangible asset for sale or use
• the Trust intends to complete the asset and sell or use it
• the Trust has the ability to sell or use the asset
• how the intangible asset will generate probable future economic or service delivery benefits, e.g. the presence of a market for it or its output, or where it is to be used for internal use, the usefulness of the asset;
• adequate financial, technical and other resources are available to the Trust to complete the development and sell or use the asset and
• the Trust can measure reliably the expenses attributable to the asset during development.

Software

Software which is integral to the operation of hardware, eg an operating system, is capitalised as part of the relevant item of property, plant and equipment. Software which is not integral to the operation of hardware, eg application software, is capitalised as an intangible asset.

Note 1.8.2 Measurement

Intangible assets are recognised initially at cost, comprising all directly attributable costs needed to create, produce and prepare the asset to the point that it is capable of operating in the manner intended by management.

Subsequently intangible assets are measured at current value in existing use. Where no active market exists, intangible assets are valued at the lower of depreciated replacement cost and the value in use where the asset is income generating. Revaluations gains and losses and impairments are treated in the same manner as for Property, plant and equipment. An intangible asset which is surplus with no plan to bring it back into use is valued at fair value where there are no restrictions on sale at the reporting date and where they do not meet the definitions of investment properties or assets held for sale.

Intangible assets held for sale are measured at the lower of their carrying amount or fair value less costs to sell.

Amortisation

Intangible assets are amortised over their expected useful lives in a manner consistent with the consumption of economic or service delivery benefits.

Note 1.8.3 Useful economic life of intangible assets

Useful lives reflect the total life of an asset and not the remaining life of an asset. The range of useful lives are shown in the table below:

	Min life	Max life
	Years	Years
Information technology	-	5
Licences & trademarks	-	5
Note 1.9 Investment Property

Investment property, which is property held to earn rentals and/or for capital appreciation (including property under construction for such purposes), is stated at its fair value at the balance sheet date. Gains or losses arising from changes in the fair value of investment property are included in profit or loss for the period in which they arise.

Note 1.10 Cash and cash equivalents

Cash is cash in hand and deposits with any financial institution repayable without penalty on notice of not more than 24 hours. Cash equivalents are investments that mature in 3 months or less from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value.

In the Statement of Cash Flows, Cash and cash equivalents are shown net of bank overdrafts that are repayable on demand and that form an integral part of the Trust’s cash management. Cash, bank and overdraft balances are recorded at current values.

Note 1.11 Financial assets and financial liabilities Note 1.11.1 Recognition

Financial assets and financial liabilities arise where the Trust is party to the contractual provisions of a financial instrument, and as a result has a legal right to receive or a legal obligation to pay cash or another financial instrument. The GAM expands the definition of a contract to include legislation and regulations which give rise to arrangements that in all other respects would be a financial instrument and do not give rise to transactions classified as a tax by Office for National Statistics (ONS).

This includes the purchase or sale of non-financial items (such as goods or services), which are entered into in accordance with the Trust’s normal purchase, sale or usage requirements and are recognised when, and to the extent which, performance occurs, ie, when receipt or delivery of the goods or services is made.

Note 1.11.2 Classification and measurement

Financial assets measured at fair value through profit or loss are those that are not otherwise measured at amortised cost or fair value through other comprehensive income. This includes derivatives and financial assets acquired principally for the purpose of selling in the short term.

Financial assets and financial liabilities at amortised cost

Financial assets and financial liabilities at amortised cost are those held with the objective of collecting contractual cash flows and where cash flows are solely payments of principal and interest. This includes cash equivalents, contract and other receivables, trade and other payables, rights and obligations under lease arrangements and loans receivable and payable.

After initial recognition, these financial assets and financial liabilities are measured at amortised cost using the effective interest method less any impairment (for financial assets). The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial asset or financial liability to the gross carrying amount of a financial asset or to the amortised cost of a financial liability.

Interest revenue or expense is calculated by applying the effective interest rate to the gross carrying amount of a financial asset or amortised cost of a financial liability and recognised in the Statement of Comprehensive Income as financing income or expense. In the case of loans held from the DHSC, the effective interest rate is the nominal rate of interest charged on the loan.

Financial assets and financial liabilities at fair value through income and expenditure

Financial assets measured at fair value through profit or loss are those that are not otherwise measured at amortised cost or fair value through other comprehensive income. This includes derivatives and financial assets acquired principally for the purpose of selling in the short term.

Loans and receivables are non-derivative financial assets with fixed or determinable payments which are not quoted in an active market.

The Trust’s loans and receivables comprise: cash and cash equivalents, NHS receivables, accrued income and 'other

receivables'. Loans and receivables are recognised initially at fair value, net of transactions costs, and are measured subsequently at amortised cost, using the effective interest method. The effective interest rate is the rate that discounts exactly estimated future cash receipts through the expected life of the financial asset or, when appropriate, a shorter period, to the net carrying amount of the financial asset.

Interest on loans and receivables is calculated using the effective interest method and credited to the Statement of Comprehensive Income.

Credit losses are determined and distinguished between different classes of financial asset. This has been calculated based on historical cashflows classified by relevant groups of income categories. The credit losses have been calculated using loss rates based on historical experience adjusted for forward-looking information.

Expected losses are charged to operating expenditure within the Statement of Comprehensive Income and reduce the net carrying value of the financial asset in the Statement of Financial Position.

Note 1.11.3 Derecognition

Financial assets are de-recognised when the contractual rights to receive cash flows from the assets have expired or the Trust has transferred substantially all the risks and rewards of ownership.

Financial liabilities are de-recognised when the obligation is discharged, cancelled or expires.

Expected losses are charged to operating expenditure within the Statement of Comprehensive Income and reduce the net carrying value of the financial asset in the Statement of Financial Position.

Note 1.12 Leases

Leases are classified as Finance leases when substantially all the risks and rewards of ownership are transferred to the lessee. All other leases are classified as Operating leases.

Note 1.12.1 The trust as lessee

Finance leases

Where substantially all risks and rewards of ownership of a leased asset are borne by the Trust, the asset is recorded as 'Property, plant and equipment' and a corresponding liability is recorded. The value at which both are recognised is the lower of the fair value of the asset or the present value of the minimum lease payments, discounted using the interest rate implicit in the lease.

The asset and liability are recognised at the commencement of the lease. Thereafter the asset is accounted for as an item of Property plant and equipment.

The annual rental charge is split between the repayment of the liability and a finance cost so as to achieve a constant rate of Finance over the life of the lease. The annual finance cost is charged to 'Finance Costs' in the Statement of Comprehensive Income. The lease liability is de-recognised when the liability is discharged, cancelled or expires.

Operating leases

Operating lease payments are recognised as an expense on a straight-line basis over the lease term. Lease incentives are recognised initially as a liability and subsequently as a reduction of rentals on a straight-line basis over the lease term.

Contingent rentals are recognised as an expense in the period in which they are incurred.

Leases of land and buildings

Where a lease is for land and buildings, the land component is separated from the building component and the classification for each is assessed separately.

Note 1.12.2 The trust as lessor

Finance leases

Amounts due from lessees under Finance leases are recorded as receivables at the amount of the Trust's net investment in the leases. Finance lease income is allocated to accounting periods to reflect a constant periodic rate of return on the Trust's net investment outstanding in respect of the leases.

Operating leases

Rental income from Operating leases is recognised on a straight-line basis over the term of the lease. Initial direct costs incurred in negotiating and arranging an Operating lease are added to the carrying amount of the leased asset and recognised as an expense on a straight-line basis over the lease term.

Note 1.13 Provisions

The Trust recognises a provision where it has a present legal or constructive obligation of uncertain timing or amount; for which it is probable that there will be a future outflow of cash or other resources; and a reliable estimate can be made of the amount. The amount recognised in the Statement of Financial Position is the best estimate of the resources required to settle the obligation. Where the effect of the time value of money is significant, the estimated risk-adjusted cash flows are discounted using the discount rates published and mandated by HM Treasury.

Clinical negligence costs

NHS Resolution operates a risk pooling scheme under which the trust pays an annual contribution to NHS Resolution, which, in return, settles all clinical negligence claims. Although NHS Resolution is administratively responsible for all clinical negligence cases, the legal liability remains with the Trust. The total value of clinical negligence provisions carried by NHS Resolution on behalf of the Trust is disclosed at note 24.2 but is not recognised in the Trust’s accounts.

Non-clinical risk pooling

The Trust participates in the Property Expenses Scheme and the Liabilities to Third Parties Scheme. Both are risk pooling schemes under which the Trust pays an annual contribution to NHS Resolution and in return receives assistance with the costs of claims arising. The annual membership contributions, and any 'excesses' payable in respect of particular claims are charged to operating expenses when the liability arises.

Note 1.14 Contingencies

Contingent liabilities are defined as:

• possible obligations arising from past events whose existence will be confirmed only by the occurrence of one or more uncertain future events not wholly within the entity’s control; or
• present obligations arising from past events but for which it is not probable that a transfer of economic benefits will arie or for which the amount of the obligation cannot be measured with sufficient reliability.

Note 1.15 Public dividend capital

Public dividend capital (PDC) is a type of public sector equity finance based on the excess of assets over liabilities at the time of establishment of the predecessor NHS organisation. HM Treasury has determined that PDC is not a financial instrument within the meaning of IAS 32.

The Secretary of State can issue new PDC to, and require repayments of PDC from, the Trust. PDC is recorded at the value received.

A charge, reflecting the cost of capital utilised by the Trust, is payable as PDC dividend. The charge is calculated at the rate set by HM Treasury (currently 3.5%) on the average relevant net assets of the Trust during the financial year.

Relevant net assets are calculated as the value of all assets less the value of all liabilities, except for

1. donated and grant funded assets,

2. average daily cash balances held with the Government Banking Services (GBS) and National Loans Fund (NLF) deposits, excluding cash balances held in GBS accounts that relate to a short-term working capital facility, and

3. any PDC dividend balance receivable or payable.

In accordance with the requirements laid down by the DHSC (as the issuer of PDC), the dividend for the year is calculated on the actual average relevant net assets as set out in the 'pre-audit' version of the annual accounts. The dividend calculated is not revised should any adjustment to net assets occur as a result the audit of the annual accounts.

Note 1.16 Value added tax

Most of the activities of the Trust are outside the scope of Value Added Tax (VAT) and, in general, output tax does not apply and input tax on purchases is not recoverable. Irrecoverable VAT is charged to the relevant expenditure category or included in the capitalised purchase cost of fixed assets. Where output tax is charged or input VAT is recoverable, the amounts are stated net of VAT.

Note 1.17 Third party assets

Assets belonging to third parties in which the Trust has no beneficial interest (such as money held on behalf of patients) are not recognised in the accounts. However, they are disclosed in a separate note to the accounts in accordance with the requirements of HM Treasury’s FReM.

Note 1.18 Losses and special payments

Losses and special payments are items that Parliament would not have contemplated when it agreed funds for the health service or passed legislation. By their nature they are items that ideally should not arise. They are therefore subject to special control procedures compared with the generality of payments. They are divided into different categories, which govern the way that individual cases are handled. Losses and special payments are charged to the relevant functional headings in expenditure on an accruals basis.

The losses and special payments note is compiled directly from the losses and compensations register which reports on an accrual basis with the exception of provisions for future losses.

Note 1.19 Early adoption of standards, amendments and interpretations

No new accounting standards or revisions to existing standards have been early adopted in 2019-20.

Note 1.20 Standards, amendments and interpretations in issue but not yet effective or adopted

The DHSC GAM does not require the following standards and interpretations to be applied in 2019-20. These standards are still subject to HM Treasury FReM adoption and the government implementation date for IFRS 16 and IFRS 17 are still subject to HM Treasury consideration.

IFRS 14 Regulatory Deferral Accounts - Applies to first time adopters of IFRS after 1 January 2016. Therefore not applicable to DHSC group bodies.

IFRS 16 Leases

IFRS 16 Leases will replace IAS 17 Leases, IFRIC 4 Determining whether an arrangement contains a lease and other interpretations , and is applicable in the public sector for periods beginning 1 April 2021. The standard provides a single accounting model for lessees, recognising a right of use asset and obligation in the Statement of Financial Position for most leases. Some leases are exempt through application of practical expedients explained below. For those recognised in the Statement of Financial Position the standard also requires the recalculation of lease liabilities in specific circumstances after the commencement of the lease term. For lessors, the distinction between operating and finance leases will remain and the accounting will be largely unchanged.

IFRS 16 changes the definition of a lease compared to IAS 17 and IFRIC 4. The Trust will apply this definition to new leases only and will grandfather its assessments made under the old standards of whether existing contracts contain a lease.

On transition to IFRS 16 on 1 April 2021, the Trust will apply the standard retrospectively with the cumulative effect of initially applying the standard recognised in the income and expenditure reserve at that date. For existing operating leases with a remaining lease term of more than 12 months and an underlying asset value of at least £5,000, a lease liability will be recognised equal to the value of remaining lease payments discounted on transition at the Trust’s incremental borrowing rate. The Trust’s incremental borrowing rate will be a rate defined by HM Treasury. Currently this rate is 1.27% but this may change between now and adoption of the standard. The related right of use asset will be measured equal to the lease liability adjusted for any prepaid or accrued lease payments. For existing peppercorn leases not classified as finance leases, a right of use asset will be measured at current value in existing use or fair value. The difference between the asset value and the calculated lease liability will be recognised in the income and expenditure reserve on transition. No adjustments will be made on 1 April 2021 for existing finance leases.

For leases commencing in 2021-22, the Trust will not recognise a right of use asset or lease liability for short term leases (less than or equal to 12 months) or for leases of low value assets (less than £5,000). Right of use assets will be subsequently measured on a basis consistent with owned assets and depreciated over the length of the lease term.

The Trust had prepared for IFRS16 by engaging all stakeholders in identifying finance leases as per the accounting standard. The schedules had been prepared in anticipation of the transition period as expected for 2020-21 accounts and testing had been undertaken of new systems and processes that would be required for implementation.

HM Treasury revised the implementation date for IFRS 16 in the UK public sector to 1 April 2021 on 19 March 2020. Due to the need to reassess lease calculations, together with uncertainty on expected leasing activity from April 2021 and beyond, a quantification of the expected impact of applying the standard in 2021-22 is currently impracticable. However, the Trust does expect this standard to have a material impact on non-current assets, liabilities and depreciation.

IFRS 17 Insurance Contracts – Application required for accounting periods beginning on or after 1 January 2021, but not yet adopted by the FReM: early adoption is not therefore permitted.

Note 2 Segmental Reporting

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are are different from those of other business segments.

A geographical segment is engaged in providing products or services within a particular economic environment that is subject to risks and returns that are different from those of segments operating in other economic environments. The directors consider that the Trust’s activities constitute a single segment since they are provided wholly in the UK, are subject to similar risks and rewards and all assets are managed as one central pool. The Trust has also a single purpose in the provision of healthcare services.

Note 3 Operating income from patient care activities

All income from patient care activities relates to contract income recognised in line with the accounting policy in note 1.4.1

Note 3.1 Income from patient care activities (by nature)	2019-20	2018-19
	£000	£000
Mental health services Cost and volume contract income	3,068	2,512
Block contract income	178,381	167,119
Clinical partnerships providing mandatory services (including S75 agreements)	678	741
All services
Agenda for Change pay award central funding Additional pension contribution central funding**	5,744		2,365
Total income from activities	187,871		172,737

**The employer contribution rate for NHS pensions increased from 14.3% to 20.6% (excluding administration charge) from 1 April 2019. For 2019/20, NHS providers continued to pay over contributions at the former rate with the additional amount being paid over by NHS England on providers' behalf. The full cost and related funding have been recognised in these accounts.

 

Note 3.2 Income from patient care activities (by source)
	2019-20		2018-19
Income from patient care activities received from:	£000		£000
NHS England	32,059		23,704
Clinical commissioning groups	153,117		144,748
Department of Health and Social Care	119		2,420
Other NHS providers	1,785		917
Local authorities	273		236
Non-NHS: private patients	98		-
Non NHS: other	420		712
Total income from activities	187,871		172,737
Of which:
Related to continuing operations	187,871		172,737

Note 4 Other operating income 2019-20 2018-19

 

	Contract income	Non-contract income	Total		Contract income	Non-contract income	Total
	£000	£000	£000		£000	£000	£000
Research and development	682	-	682		461	-	461
Education and training	3,596	275	3,871		3,385	130	3,515
Non-patient care services to other bodies	2,233		2,233		2,203		2,203
Provider sustainability fund (PSF)	1,456		1,456		4,449		4,449
Financial recovery fund (FRF)	4,516		4,516		-		-
Income in respect of employee benefits accounted on a gross basis	247		247		274		274
Rental revenue from operating leases		1,211	1,211			1,206	1,206
Other income	316	-	316		240	-	240
Total other operating income	13,046	1,486	14,532		11,012	1,336	12,348
Of which:
Related to continuing operations			14,532				12,348

 

Note 5 Additional information on contract revenue (IFRS 15) recognised in the period

2019-20 2018-19 - £000 £000

Revenue recognised in the reporting period that was included in within Annual Report 2019-20 contract liabilities at the previous period end 10 45

Note 6 Operating expenses

 

	2019-20		2018-19
	£000		£000
Purchase of healthcare from NHS and DHSC bodies	2,595		2,240
Purchase of healthcare from non-NHS and non-DHSC bodies	3,430		3,320
Staff and executive directors costs	150,251		138,798
Remuneration of non-executive directors	114		72
Supplies and services - clinical (excluding drugs costs)	2,148		1,891
Supplies and services - general	2,657		2,410
Drug costs (drugs inventory consumed and purchase of non-inventory drugs)	2,976		2,879
Consultancy costs	150		320
Establishment	5,451		3,831
Premises	8,220		8,145
Transport (including patient travel)	1,953		1,335
Depreciation on property, plant and equipment	5,321		5,256
Amortisation on intangible assets	368		486
Net impairments	18,683		2,563
Movement in credit loss allowance: contract receivables / contract assets	(7)		(38)
Increase/(decrease) in other provisions	352		(52)
Change in provisions discount rate(s) Audit fees payable to the external auditor	97		(24)
audit services- statutory audit	52		54
other auditor remuneration (external auditor only)	11		10
Internal audit costs	120		134
Clinical negligence	980		1,009
Legal fees	547		1,335
Insurance	238		246
Research and development	-		2
Education and training	1,516		678
Rentals under operating leases	1,928		1,820
Redundancy	67		66
Charges to operating expenditure for on-SoFP IFRIC 12 schemes (e.g. PFI / LIFT)	1,057		986
Car parking & security	172		165
Hospitality	7		3
Losses, ex gratia & special payments	72		71
Other	454		245
Total	211,980		180,256
Of which: Related to continuing operations	211,980		180,256

The audit fees included within Note 6 above are reported as the gross position, the value excluding VAT for 2019-20 is £43k (2018-19 £45k).

Note 6.1 Other auditor remuneration
	2019-20		2018-19
Other auditor remuneration paid to the external auditor:	£000		£000
2. Audit-related assurance services	11		10
Total	11		10

The other auditor remuneration included above, relates to assurance on the quality accounts and the grant certification on the 'PATH' project. They are reported as the gross position, the value excluding VAT for the quality accounts for 2019-20 is £6k (2018-19 £8k) and for the grant certification on the 'PATH' project for 2019-20 is £3k (2018-19 nil).

Note 6.2 Limitation on auditor's liability   The limitation on auditor's liability for external audit work is £2m (2018-19: £2m).   Note 7 Impairment of assets
	2019-20		2018-19
	£000		£000
Net impairments charged to operating surplus / deficit resulting from:
Abandonment of assets in course of construction	-		1,642
Changes in market price	18,683		921
Total net impairments charged to operating surplus / deficit	18,683		2,563
Impairments charged to the revaluation reserve	3,393		921
Total net impairments	22,076		3,484
Note 8 Employee benefits
	2019-20		2018-19
	Total		Total
	£000		£000
Salaries and wages	100,992		98,138
Social security costs	9,951		9,568
Apprenticeship levy	487		471
Employer's contributions to NHS pensions	18,881		12,756
Pension cost - other	31		16
Termination benefits	67		66
Temporary staff (including agency)	19,955		17,849
Total gross staff costs	150,364		138,864
Recoveries in respect of seconded staff	-		-
Total staff costs	150,364		138,864
Of which Costs capitalised as part of assets	46		-
Note 8.1 Retirements due to ill-health

During 2019-20 there were 2 early retirements from the Trust agreed on the grounds of ill-health (4 in the year ended 31 March 2019). The estimated additional pension liabilities of these ill-health retirements is £188k (£251k in 2018-19).

These estimated costs are calculated on an average basis and will be borne by the NHS Pension Scheme.

Note 9 Pension costs

Past and present employees are covered by the provisions of the two NHS Pension Schemes. Details of the benefits payable and rules of the Schemes can be found on the NHS Pensions website at www.nhsbsa.nhs.uk/pensions. Both are unfunded defined benefit schemes that cover NHS employers, GP practices and other bodies, allowed under the direction of the Secretary of State in England and Wales. They are not designed to be run in a way that would enable NHS bodies to identify their share of the underlying scheme assets and liabilities. Therefore, each scheme is accounted for as if it were a defined contribution scheme: the cost to the NHS body of participating in each scheme is taken as equal to the contributions payable to that scheme for the accounting period.

In order that the defined benefit obligations recognised in the financial statements do not differ materially from those that would be determined at the reporting date by a formal actuarial valuation, the FReM requires that “the period between formal valuations shall be four years, with approximate assessments in intervening years”. An outline of these follows:

1. Accounting valuation

   A valuation of scheme liability is carried out annually by the scheme actuary (currently the Government Actuary’s Department) as at the end of the reporting period. This utilises an actuarial assessment for the previous accounting period in conjunction with updated membership and financial data for the current reporting period, and is accepted as providing suitably robust figures for financial reporting purposes. The valuation of the scheme liability as at 31 March 2020, is based on valuation data as at 31 March 2019, updated to 31 March 2020 with summary global member and accounting data. In undertaking this actuarial assessment, the methodology prescribed in IAS 19, relevant FReM interpretations, and the discount rate prescribed by HM Treasury have also been used.

   The latest assessment of the liabilities of the scheme is contained in the report of the scheme actuary, which forms part of the annual NHS Pension Scheme Accounts. These accounts can be viewed on the NHS Pensions website and are published annually. Copies can also be obtained from The Stationery Office.

2. Full actuarial (funding) valuation

The purpose of this valuation is to assess the level of liability in respect of the benefits due under the schemes (taking into account recent demographic experience), and to recommend contribution rates payable by employees and employers.

The latest actuarial valuation undertaken for the NHS Pension Scheme was completed as at 31 March 2016. The results of this valuation set the employer contribution rate payable from April 2019 to 20.68%, and the Scheme Regulations were amended accordingly.

The 2016 funding valuation was also expected to test the cost of the Scheme relative to the employer cost cap set following the 2012 valuation. Following a judgment from the Court of Appeal in December 2018 Government announced a pause to that part of the valuation process pending conclusion of the continuing legal process.

Note 9.1 Alternative Scheme Pension costs

Employees not eligible for the NHS Pension Scheme are automatically enrolled into the National Employment Savings Trust (NEST). Employees can choose to opt out within one month of enrolment, or if they need to suspend contributing for a while they can do so without opting out.

The NEST Pension Scheme was established by the National Employment Savings Trust Order 2010. The scheme is a registered pension scheme for tax purposes under the Finance Act 2004 and was registered with HM Revenue & Customs on 21 January 2011. The Trustee of the scheme is the NEST Corporation which is a non-departmental public body established by statute, section 75 of the Pensions Act 2008. NEST is run on a not-for-profit basis and collects an annual management charge from its members of 0.3% of the employee's total fund each year. Also a charge of 1.8% is made on contributions made by the employee. At NEST, the employee keeps the same retirement pot and contributes to it even if their circumstances change.

Scheme Provisions

From April 2015 new rules mean the employee has more options for what they can do with their retirement pot. When the employee reaches 55, they will be able to take out as much as they want as cash and will have more choices in how they can get a retirement income.

Details of the benefits available under this scheme can be found on the NEST website - nestpensions.org.uk

Note 10 Operating leases

Note 10.1 Kent and Medway NHS and Social Care Partnership Trust as a lessor

This note discloses income generated in Operating lease agreements where Kent and Medway NHS and Social Care Partnership Trust is the lessor.

The Trust leases properties to a number of stakeholders primarily other NHS bodies and public sector organisations. These leases tend to be on a "full maintenance" basis.

 

	2019-20		2018-19
	£000		£000
Operating lease revenue
Other	1,211		1,206
Total	1,211		1,206
	31 March 2020		31 March 2019
	£000		£000
Future minimum lease receipts due:
not later than one year; later than one year and not later than five years; later than five years.	1,211 - -		1,206 - -
Total	1,211		1,206

Note 10.2 Kent and Medway NHS and Social Care Partnership Trust as a lessee

This note discloses costs and commitments incurred in Operating lease arrangements where Kent and Medway NHS and Social Care Partnership Trust is the lessee.

The majority of the leasing arrangements for the properties currently occupied by Trust services are on a full repairing basis.

A number also require the Trust to reinstate dilapidations on vacation of the premises. Break clauses where they exist are primarily at the 5 and 10 year point. No significant information is available on restrictions with the exception of one site where it is not to be used for any other purpose than healthcare offices or consulting rooms.

 

	2019-20		2018-19
	£000		£000
Operating lease expense
Minimum lease payments	1,928		1,820
Total	1,928		1,820
	31 March 2020		* restated 31 March 2019
	£000		£000
Future minimum lease payments due:
- not later than one year;	1,812		1,834
- later than one year and not later than five years;	2,712		3,000
- later than five years.	3,979		3,365
Total	8,503		8,199

 

Note 11 Finance income Finance income represents interest received on assets and investments in the period.
	2019-20		2018-19
	£000		£000
Interest on bank accounts	101		63
Total finance income	101		63

Note 12.1 Finance expenditure

Finance expenditure represents interest and other charges involved in the borrowing of money or asset financing.

	2019-20		2018-19
	£000		£000
Interest expense:
Loans from the Department of Health and Social Care	39		47
Finance leases	81		92
Interest on late payment of commercial debt	5		-
Main finance costs on PFI and LIFT schemes obligations	721		763
Contingent finance costs on PFI and LIFT scheme obligations	556		656
Total interest expense	1,402		1,558
Unwinding of discount on provisions	35		30
Total finance costs	1,437		1,588
Note 12.2 The late payment of commercial debts (interest) Act 1998 / Public Contract Regulations 2015
2019-20				2018-19
£000				£000
Amounts included within interest payable arising from claims made under this
legislation	5	-
Note 13 Other gains / (losses)
	2019-20		2018-19
	£000		£000
Gains on disposal of assets	4		1,377
Losses on disposal of assets	(124)		(7)
Total gains / (losses) on disposal of assets	(120)		1,370
Total other gains / (losses)	(120)		1,370

 

Note 14 Intangible assets - 2019-20
	Licences &	Internally generated information
	trademarks	technology	Total
	£000	£000	£000
Valuation / gross cost at 1 April 2019 - brought forward	2,205	4,162	6,367
Additions		(2)	(2)
Disposals / derecognition	(839)	(955)	(1,794)
Valuation / gross cost at 31 March 2020	1,366	3,205	4,571
Amortisation at 1 April 2019 - brought forward	1,917	3,596	5,513
Provided during the year	79	289	368
Disposals / derecognition	(838)	(933)	(1,771)
Amortisation at 31 March 2020	1,158	2,952	4,110
Net book value at 31 March 2020	208	253	461
Net book value at 1 April 2019	288	566	854
Note 14.1 Intangible assets - 2018-19
	Licences &	Internally generated information
	trademarks	technology	Total
	£000	£000	£000
Valuation / gross cost at 1 April 2018 - as previously stated	1,956	4,055	6,011
Prior period adjustments	-	-	-
Valuation / gross cost at 1 April 2018 - restated	1,956	4,055	6,011
Additions	191	31	222
Reclassifications	58	76	134
Valuation / gross cost at 31 March 2019	2,205	4,162	6,367
Amortisation at 1 April 2018 - as previously stated	1,738	3,289	5,027
Prior period adjustments	-	-	-
Amortisation at 1 April 2018 - restated	1,738	3,289	5,027
Provided during the year	179	307	486
Amortisation at 31 March 2019	1,917	3,596	5,513
Net book value at 31 March 2019	288	566	854
Net book value at 1 April 2018	218	766	984

 

Note 15.1 Property, plant and equipment - 2019-20	Land	Buildings excluding dwellings	Assets under construction	Plant & machinery	Transport equipment	Information technology	Furniture & fittings	Total
	£000	£000	£000	£000	£000	£000	£000	£000
Valuation/gross cost at 1 April 2019 - brought forward	23,286	117,581	4,211	1,364	196	11,049	1,931	159,618
Additions	-	5,312	1,834	52	-	753	36	7,987
Impairments charged to operating expenses	(3,933)	(14,750)	-	-	-	-	-	(18,683)
Impairments charged to the revaluation reserve	(507)	(2,886)	-	-	-	-	-	(3,393)
Revaluations	945	(7,176)	-	(27)	-	-	(26)	(6,284)
Reclassifications	(327)	3,302	(4,101)	35	-	-	-	(1,091)
Transfers to / from assets held for sale	-	-	-	-	-	-	-	-
Disposals / derecognition	-	(105)	-	-	(20)	-	-	(125)
Valuation/gross cost at 31 March 2020	19,464	101,278	1,944	1,424	176	11,802	1,941	138,029
Accumulated depreciation at 1 April 2019 - brought forward	-	14,626	-	951	186	6,546	1,467	23,776
Provided during the year	-	3,456	-	135	6	1,567	157	5,321
Revaluations	-	(13,959)	-	(27)	-	-	(26)	(14,012)
Disposals / derecognition	-	(7)	-	-	(20)	-	-	(27)
Accumulated depreciation at 31 March 2020	-	4,116	-	1,059	172	8,113	1,598	15,058
Net book value at 31 March 2020	19,464	97,162	1,944	365	4	3,689	343	122,971
Net book value at 1 April 2019	23,286	102,955	4,211	413	10	4,503	464	135,842

 

Note 15.2 Property, plant and equipment - 2018-19	Land	Buildings excluding dwellings	Assets under construction	Plant & machinery	Transport equipment	Information technology	Furniture & fittings	Total
Valuation / gross cost at 1 April 2018 - as previously	£000	£000	£000	£000	£000	£000	£000	£000
stated	24,126	115,596	7,120	1,292	242	10,018	1,795	160,189
Prior period adjustments	-	-	-	-	-	-	-	-
Valuation / gross cost at 1 April 2018 - restated	24,126	115,596	7,120	1,292	242	10,018	1,795	160,189
Transfers by absorption	-	-	-	-	-	-	-	-
Additions	-	3,554	4,163	119	-	1,829	178	9,843
Impairments charged to operating expenses	-	(921)	(1,642)	-	-	-	-	(2,563)
Impairments charged to the revaluation reserve	-	(921)	-	-	-	-	-	(921)
Reclassifications	-	4,466	(5,430)	-	-	830	-	(134)
Disposals / derecognition	(840)	(4,193)	-	(47)	(46)	(1,628)	(42)	(6,796)
Valuation/gross cost at 31 March 2019	23,286	117,581	4,211	1,364	196	11,049	1,931	159,618
Accumulated depreciation at 1 April 2018 - as
previously stated	-	11,265	-	880	223	6,596	1,319	20,283
Prior period adjustments	-	-	-	-	-	-	-	-
Accumulated depreciation at 1 April 2018 - restated	-	11,265	-	880	223	6,596	1,319	20,283
Provided during the year	-	3,361	-	118	9	1,578	190	5,256
Disposals / derecognition	-	-	-	(47)	(46)	(1,628)	(42)	(1,763)
Accumulated depreciation at 31 March 2019	-	14,626	-	951	186	6,546	1,467	23,776
Net book value at 31 March 2019	23,286	102,955	4,211	413	10	4,503	464	135,842
Net book value at 1 April 2018	24,126	104,331	7,120	412	19	3,422	476	139,906

 

Note 15.3 Property, plant and equipment financing - 2019-20

 

	Land	Buildings excluding dwellings	Assets under construction	Plant & machinery	Transport equipment	Information technology	Furniture & fittings	Total
	£000	£000	£000	£000	£000	£000	£000	£000
Net book value at 31 March 2020
Owned - purchased	18,855	71,676	1,944	259	4	3,673	241	96,652
Finance leased	-	777	-	-	-	-	1	778
On-SoFP PFI contracts and other service concession arrangements	-	24,484	-	106	-	16	101	24,707
Owned - donated	609	225	-	-	-	-	-	834
NBV total at 31 March 2020	19,464	97,162	1,944	365	4	3,689	343	122,971

 

Note 15.4 Property, plant and equipment financing - 2018-19

 

	Land	Buildings excluding dwellings	Assets under construction	Plant & machinery	Transport equipment	Information technology	Furniture & fittings	Total
	£000	£000	£000	£000	£000	£000	£000	£000
Net book value at 31 March 2019
Owned - purchased	22,696	75,693	4,211	300	10	4,482	313	107,705
Finance leased	-	907	-	4	-	-	2	913
On-SoFP PFI contracts and other service concession arrangements	-	24,886	-	109	-	21	149	25,165
Owned - donated	590	1,469	-	-	-	-	-	2,059
NBV total at 31 March 2019	23,286	102,955	4,211	413	10	4,503	464	135,842

 

Note 16 Revaluations of property, plant and equipment

Montagu Evans LLP, who is a member of the RICS and is independent of the Trust, undertook a full valuation of the Trust's land and buildings as at 31st March 2020. The last full valuation was undertaken by the previous valuer Boshier & Co, MRICS as at 31st March 2015, with a 'desktop' valuation as at 31st March 2018. The valuations were carried out in accordance with the RICS Appraisal and Valuation Manual in so far as these terms are consistent with the agreed requirements of the DHSC and HM Treasury. The valuations were undertaken in accordance with the Trust's accounting policy (see note 1).

The valuers considered the remaining useful economic lives of the property assets, taking into account work undertaken between valuations, the age and condition of the properties, location factors and changes to the BCIS (all price) tender price index when assessing value attributable to each asset.

In 2019-20 as part of the valuation the Trust adopted the assumption that all separable office space would be valued as non specialised property assets and valued at market value for existing use.

Overall the valuation has contributed to net downward movement of £13.6m of which £18.7m was an impairment to the Statement of Comprehensive Income.

The valuation exercise was carried out in March 2020 with a valuation date of 31st March 2020. In applying the Royal Institute of Chartered Surveyors (RICS) Valuation Global Standards 2020 (‘Red Book’), the valuer has declared a ‘material valuation uncertainty’ in the valuation report. This is on the basis of uncertainties in global markets caused by the outbreak of COVID-19, declared by the World Health Organisation as a “Global Pandemic” on 11 March 2020.

Travel restrictions have been implemented by many countries. Market activity is being impacted in many sectors. As at the valuation date, the valuer considers that they can attach less weight to previous market evidence for comparison purposes, to inform opinions of value. The values in the report have been used to inform the measurement of property assets at valuation in these financial statements. With the valuer having declared this material valuation uncertainty, the valuer has continued to exercise professional judgement in providing the valuation and this remains the best information available to the Trust.

Note 17 Investment Property
	2019-20	2018-19
	£000	£000
Carrying value at 1 April - brought forward	-	-
Reclassifications to/from PPE	1,091	-
Carrying value at 31 March	1,091	-

As part of the of the valuation undertaken as at 31st March 2020, one building held for rental purposes has been reclassified from property, plant and equipment to an Investment Property. This change was instructed by management to reflect the Trust's decision to rent this building to other parties and hold purely for that purpose.

Note 18 Trade receivables and other receivables
	31 March 2020		31 March 2019
	£000		£000
Current
Contract receivables	6,000		6,708
Allowance for impaired contract receivables / assets	(546)		(1,525)
Deposits and advances	-		30
Prepayments (non-PFI)	1,915		1,704
PDC dividend receivable	439		159
VAT receivable	569		919
Other receivables	133		115
Total current receivables	8,510		8,110
Non-current
Contract assets	353		443
Other receivables	50		-
Total non-current receivables	403		443
Of which receivable from NHS and DHSC group bodies:
Current	5,529		6,683
Non-current	50		-

Following the application of IFRS 15 from 1 April 2018, the Trust's entitlements to consideration for work performed under contracts with customers are shown separately as contract receivables and contract assets. This replaces the previous analysis into trade receivables and accrued income. IFRS 15 is applied without restatement therefore the comparative analysis of receivables has not been restated under IFRS 15.

The great majority of trade is with Clinical Commissioning Groups (CCGs) as commissioners for NHS patient care services. As CCGs are funded by Government to buy NHS patient care services, no credit scoring of them is considered necessary.

Note 18.1 Allowances for credit losses

 

Contract receivables and contract assets		Contract receivables and contract assets		All other receivables
£000		£000		£000
Allowances as at 1 April - brought forward 1,525		-		2,611
Impact of implementing IFRS 9 (and IFRS 15) on 1 April 2018			2,611	(2,611)
New allowances arising	699		1,906	-
Changes in existing allowances	-		24	-
Reversals of allowances	(706)		(1,968)	-
Utilisation of allowances (write offs)	(972)		(1,048)	-
Allowances as at 31 Mar 2020	546		1,525	-

Note 18.2 Non-current assets held for sale and assets in disposal groups

NBV of non-current assets for sale and assets in disposal groups at 1 April - restated

2019-20 2018-19 - £000 £000

Assets sold in year (5) NBV of non-current assets for sale and assets in disposal groups at 31 March - -

Note 19 Cash and cash equivalents movements

Note 19.1 Cash and cash equivalents movements

Cash and cash equivalents comprise cash at bank, in hand and cash equivalents. Cash equivalents are readily convertible investments of known value which are subject to an insignificant risk of change in value.

	2019-20		2018-19
	£000		£000
At 1 April	12,545		5,083
Net change in year	3,133		7,462
At 31 March	15,678		12,545
Broken down into:
Cash at commercial banks and in hand	38		94
Cash with the Government Banking Service	15,640		12,451
Total cash and cash equivalents as in SoFP	15,678		12,545
Total cash and cash equivalents as in SoCF	15,678		12,545
Note 19.2 Third party assets held by the Trust

Kent and Medway NHS and Social Care Partnership Trust held cash and cash equivalents which relate to monies held by the Trust on behalf of patients or other parties and in which the Trust has no beneficial interest. This has been excluded from the Cash and cash equivalents figure reported in the accounts.

	31 March 2020		31 March 2019
	£000		£000
Total third party assets	170		185
Note 20 Trade and other payables
	2020		2019
	£000		£000
Current
Trade payables	5,617		4,646
Capital payables	2,184		5,062
Accruals	5,216		4,452
Social security costs	1,356		1,249
Other taxes payable	1,030		998
Other payables	1,830		1,929
Total current trade and other payables	17,233		18,336
Of which payables from NHS and DHSC group bodies: Current	3,061		2,698

 

Note 21 Other liabilities	31 March		31 March
	2020		2019
	£000		£000
Current
Deferred income: contract liabilities	2,576		10
Total other current liabilities	2,576		10
Note 22 Borrowings
	31 March 2020		31 March 2019
	£000		£000
Current
Loans from DHSC	2,307		3,110
Obligations under finance leases	173		162
Obligations under PFI, LIFT or other service concession contracts	723		655
Total current borrowings	3,203		3,927
Non-current
Obligations under finance leases	823		996
Obligations under PFI, LIFT or other service concession contracts	10,118		10,841
Total non-current borrowings	10,941		11,837
Note 22.1 Reconciliation of liabilities arising from financing activities - 2019-20
Loans	PFI and

 

	from DHSC	Finance leases	LIFT schemes	Total
	£000	£000	£000	£000
Carrying value at 1 April 2019	3,110	1,158	11,496	15,764
Cash movements:
Financing cash flows - payments and receipts of principal	(800)	(162)	(655)	(1,617)
Financing cash flows - payments of interest	(42)	(81)	(721)	(844)
Non-cash movements:
Application of effective interest rate	39	81	721	841
Carrying value at 31 March 2020	2,307	996	10,841	14,144

Note 22.2 Reconciliation of liabilities arising from financing activities - 2018-19

	Loans from DHSC	Finance leases	PFI and LIFT schemes	Total
	£000	£000	£000	£000
Carrying value at 1 April 2018	3,900	1,310	12,177	17,387
Cash movements:
Financing cash flows - payments and receipts of principal	(800)	(152)	(681)	(1,633)
Financing cash flows - payments of interest	(51)	(92)	(763)	(906)
Non-cash movements:
Impact of implementing IFRS 9 on 1 April 2018	14	-	-	14
Application of effective interest rate	47	92	763	902
Carrying value at 31 March 2019	3,110	1,158	11,496	15,764

Note 23 Finance leases

Note 23.1 Kent and Medway NHS and Social Care Partnership Trust as a lessee

Obligations under Finance leases where Kent and Medway NHS and Social Care Partnership Trust is the lessee.

There are no contingent rent obligations.

Options for renewal are as per the standard Landlord and Tenant Act 1954 and none have the option to purchase. All properties are restricted for use as healthcare facilities.

	31 March 2020		31 March 2019
	£000		£000
Gross lease liabilities	1,215		1,458
of which liabilities are due:
- not later than one year;	243		243
- later than one year and not later than five years;	972		972
- later than five years.	-		243
Finance charges allocated to future periods	(219)		(300)
Net lease liabilities	996		1,158
of which payable:
- not later than one year;	173		162
- later than one year and not later than five years;	823		769
- later than five years.	-		227

Littlebrook Hospital PFI - Scheme 1

In 2025, after the completion of the 25 years life cycle, the Project Agreement becomes a normal Finance Lease Agreement for the 100 years remaining residual life regulated by IFRS 16 - Leases. An option appraisal is to be undertaken nearer the date of completion, therefore the future commitment relating to this agreement has not been disclosed in Note 23 above.

Note 24.1 Provisions for liabilities and charges analysis

 

	Pensions: early departure costs	Legal claims	Other	Total
	£000	£000	£000	£000
At 1 April 2019	1,521	222	245	1,988
Change in the discount rate	97	-	-	97
Arising during the year	37	416	378	831
Utilised during the year	(124)	(52)	-	(176)
Reversed unused	-	(62)	(13)	(75)
Unwinding of discount	35	-	-	35
At 31 March 2020	1,566	524	610	2,700
Expected timing of cash flows:
- not later than one year;	124	524	560	1,208
- later than one year and not later than five years;	496	-	-	496
- later than five years.	946	-	50	996
Total	1,566	524	610	2,700

Early Departure Costs represent pension liabilities for injury benefits.

Legal Claims reflect LTPS which NHS Resolution provide estimates and employment tribunal claims whose timings are based on current assumptions from the Trust's Legal Department.

Other claims relate to dilapidations provisions and clinicians pension provision.

Note 24.2 Clinical negligence liabilities

At 31st March 2020, £3,498k was included in provisions of NHS Resolution in respect of clinical negligence liabilities of Kent and Medway NHS and Social Care Partnership Trust (31st March 2019: £1,761k).

Note 25 Contingent assets and liabilities
	31 March 2020		31 March 2019
	£000		£000
Value of contingent liabilities
NHS Resolution legal claims	(56)		(77)
Other	(855)		(1,100)
Net value of contingent liabilities	(911)		(1,177)

Contingent liabilities relate to £56k (£77k 2018-19) LTPS notified by NHS Resolution and £0.9m (£1.1m 2018-19) dilapidation costs for future years.

Note 26 Contractual capital commitments

31 March		31 March
2020		2019
£000		£000
Property, plant and equipment 159		1,158
Total	159		1,158

Note 27 On-SoFP PFI, LIFT or other service concession arrangements

The Trust has committed to two PFI Schemes.

Scheme 1 comprises the provision of an acute psychiatric hospital at Bow Arrow Lane, Dartford. Under the agreement, some services are provided to the hospital. Certain rights and obligations are accorded to the Trust under back to back arrangements with the PFI consortium.

Scheme 1 : Littlebrook Hospital   Estimated Capital value of the PFI Scheme at the start of the contract	2019-20 £000s 7,542	2018-19 £000s 7,542
Contract start date:		06/03/2000
Contract end date:		06/06/2025

After the completion of the 25 years life-cycle, the Project Agreement becomes a normal Lease Agreement (Finance Lease) for the remaining 100 year residual life.

Scheme 2 : Replacement of Stone House Hospital

The Trust replaced the old Stone House Hospital in two stages:

Stage 1 was carried out as a variation order under Dartford and Gravesham PFI Project Agreement. It related to the construction of a mental health assessment unit and a renal dialysis unit on the Darent Valley Hospital site. The scheme was completed in April 2005 at a cost of £5.4m. Stage 1 was funded by public capital, rather than private finance, and was capitalised on the Trust's Statement of Financial Position in 2005-06. Dartford and Gravesham NHS Trust recharges the Trust for all facility services and other costs provided under the PFI agreement.

Stage 2 is the PFI scheme 2 and comprises the provision of a mental health continuing care unit, a mental health rehabilitation unit, a learning disabilities forensic unit in phase 1 and an inpatient addiction unit in phase 2. The phase 2 inpatient addiction unit, which was provided as a variation under the Project Agreement, opened on 2nd July 2007.

Hard facilities management services are provided to the units under the project agreement.

Phase 1 Stone House Hospital Estimated capital value of the PFI scheme at the start of the contract	2019-20 £000s 9,440	2018-19 £000s 9,440
Contract start date:		29/09/2006
Contract end date:		02/07/2037
	2019-20	2018-19
Phase 2 Stone House Hospital	£000s	£000s
Estimated capital value of the PFI scheme at the start of the contract	2,787	2,787
Contract start date:		02/07/2007
Contract end date:		02/07/2037

Note 27.1 On-SoFP PFI, LIFT or other service concession arrangement obligations

The following obligations in respect of the PFI, LIFT or other service concession arrangements are recognised in the Statement of Financial Position:

	31 March 2020		31 March 2019
	£000		£000
Gross PFI, LIFT or other service concession liabilities	16,556		17,932
Of which liabilities are due
- not later than one year;	1,404		1,376
- later than one year and not later than five years;	5,947		5,905
- later than five years.	9,205		10,651
Finance charges allocated to future periods	(5,715)		(6,436)
Net PFI, LIFT or other service concession arrangement obligation	10,841		11,496
- not later than one year;	723		655
- later than one year and not later than five years;	3,753		3,490
- later than five years.	6,365		7,351

Note 27.2 Total on-SoFP PFI, LIFT and other service concession arrangement commitments

Total future commitments under these on-SoFP schemes are as follows:

	31 March 2020		31 March 2019
	£000		£000
Total future payments committed in respect of the PFI, LIFT or other service concession arrangements	46,593		49,857
Of which payments are due:
- not later than one year;	3,397		3,395
- later than one year and not later than five years;	13,869		13,543
- later than five years.	29,327		32,919

Note 27.3 Analysis of amounts payable to service concession operator

This note provides an analysis of the unitary payments made to the service concession operator:

	2019-20		2018-19
	£000		£000
Unitary payment payable to service concession operator	2,989		3,086
Consisting of:
- Interest charge	721		763
- Repayment of balance sheet obligation	655		681
- Service element and other charges to operating expenditure	1,057		986
- Contingent rent	556		656
Total amount paid to service concession operator	2,989		3,086

Note 28 Financial instruments

Note 28.1 Financial risk management

Financial reporting standard IFRS 7 requires disclosure of the role that financial instruments have had during the period in creating or changing the risks a body faces in undertaking its activities. Because of the continuing service provider relationship that the Trust has with CCGs and the way those CCGs are financed, the Trust is not exposed to the degree of financial risk faced by business entities. Also financial instruments play a much more limited role in creating or changing risk than would be typical of listed companies, to which the financial reporting standards mainly apply. The Trust has limited powers to borrow or invest surplus funds and financial assets and liabilities are generated by day-to- day operational activities rather than being held to change the risks facing the Trust in undertaking its activities.

The Trust’s treasury management operations are carried out by the Finance department, within parameters defined formally within the Trust’s Standing Financial Instructions and policies agreed by the board of directors. The Trust's treasury activity is subject to review by the Trust’s internal auditors.

Currency risk

The Trust is principally a domestic organisation with the great majority of transactions, assets and liabilities being in the UK and sterling based. The Trust has no overseas operations. The Trust therefore has low exposure to currency rate fluctuations.

Interest rate risk

The Trust borrows from Government for capital expenditure, subject to affordability as confirmed by NHS England and NHS Improvement. The borrowings are for 1 – 25 years, in line with the life of the associated assets, and interest is charged at the National Loans Fund rate, fixed for the life of the loan.

The Trust may also borrow from Government for revenue financing subject to approval by NHS Improvement. Interest rates are confirmed by the DHSC (the lender) at the point borrowing is undertaken.

The Trust therefore has low exposure to interest rate fluctuations.

Credit risk

Because the majority of the Trust’s revenue comes from contracts with other public sector bodies, the Trust has low exposure to credit risk. The maximum exposures as at 31 March 2020 are in receivables from customers, as disclosed in the trade and other receivables note.

Liquidity risk

The Trust’s operating costs are incurred under contracts with CCGs, which are financed from resources voted annually by Parliament. The Trust funds its capital expenditure from funds obtained within its prudential borrowing limit. The Trust is not, therefore, exposed to significant liquidity risks.

Note 28.2 Carrying values of financial assets

 

Held at amortised Carrying values of financial assets as at 31 March 2020 cost		Held at fair value through I&E	Total book value
£000		£000	£000
Trade and other receivables excluding non financial assets 5,587		-	5,587
Cash and cash equivalents 15,678			15,678
Total at 31 March 2020 21,265		-	21,265
Held at amortised		Held at fair value	Total
Carrying values of financial assets as at 31 March 2019 cost		through I&E	book value
£000		£000	£000
Trade and other receivables excluding non financial assets 5,741		-	5,741
Cash and cash equivalents 12,545		-	12,545
Total at 31 March 2019 18,286		-	18,286
Note 28.3 Carrying values of financial liabilities
		Held at amortised	Total
Carrying values of financial liabilities as at 31 March 2020		cost	book value
		£000	£000
Loans from the Department of Health and Social Care		2,307	2,307
Obligations under finance leases		996	996
Obligations under PFI, LIFT and other service concession contracts		10,841	10,841
Trade and other payables excluding non financial liabilities		13,017	13,017
Total at 31 March 2020		27,161	27,161
		Held at amortised	Total
Carrying values of financial liabilities as at 31 March 2019		cost	book value
		£000	£000
Loans from the Department of Health and Social Care		3,110	3,110
Obligations under finance leases		1,158	1,158
Obligations under PFI, LIFT and other service concession contracts		11,496	11,496
Trade and other payables excluding non financial liabilities		14,397	14,397
Total at 31 March 2019		30,161	30,161

 

Note 29 Losses and special payments
	2019-20		2018-19
	Total number of Total value cases of cases		Total number of Total value cases of cases
	Number £000		Number £000
Losses
Cash losses	22 3		24 10
Bad debts and claims abandoned	10 2		19 7
Total losses	32 5		43 17
Special payments
Ex-gratia payments	30 67		22 54
Total special payments	30 67		22 54
Total losses and special payments	62 72		65 71
Compensation payments received	-		-
Note 30 Related parties

The Kent and Medway NHS and Social Care Partnership Trust is a body corporate established by order of the Secretary of State for Health.

During the year none of the Trust board members or members of the key management staff, or parties related to any of them, has undertaken any transactions material to the accounts of Kent and Medway NHS and Social Care Partnership Trust. There has been one transaction where the payment made by the Trust was material to a related party, Dead Ernest Ltd, amounting to £11,156 in respect of board development work. This was a one off engagement and the Trust has no ongoing relationship with this party.

The DHSC is regarded as a related party. During the year the Trust has had a significant number of material transactions with the Department, and with other entities for which the DHSC is regarded as the parent department. These entities, with transactions greater than £1m, are listed below:

Note 30.1 Related Party Income

Health Education England
NHS Ashford Clinical Commissioning Group
NHS Canterbury and Coastal Clinical Commissioning Group
NHS Dartford, Gravesham & Swanley Clinical Commissioning Group NHS Thanet Clinical Commissioning Group
NHS Swale Clinical Commissioning Group NHS West Kent Clinical Commissioning Group
NHS South Kent Coast Clinical Commissioning Group NHS Medway Clinical Commissioning Group
NHS England (including CSUs) Department of Health and Social Care

Note 30.2 Related Party Expenditure

NHS Pensions Scheme

Note 30.3 Events after the reporting date

There are non-adjusting material events after the reporting date and are disclosed in Note 1.3.2.

Note 31 Better Payment Practice code
	2019-20	2019-20		2018-19	2018-19
Non-NHS Payables	Number	£000		Number	£000
Total non-NHS trade invoices paid in the year	13,954	58,531		18,513	53,885
Total non-NHS trade invoices paid within target	13,061	56,282		16,890	52,213
Percentage of non-NHS trade invoices paid within target	93.6%	96.2%		91.2%	96.9%
NHS Payables
Total NHS trade invoices paid in the year	1,308	8,360		1,227	6,317
Total NHS trade invoices paid within target	1,267	8,127		1,167	6,150
Percentage of NHS trade invoices paid within target	96.9%	97.2%		95.1%	97.4%

The Better Payment Practice code requires the NHS body to aim to pay all valid invoices by the due date or within 30 days of receipt of valid invoice, whichever is later.

 

Note 32 External financing limit The Trust is given an External financing limit against which it is permitted to underspend
	2019-20	2018-19
	£000	£000
Cash flow financing	(3,787)	(7,733)
External financing requirement	(3,787)	(7,733)
External financing limit (EFL)	7,619	1,637
Under spend against EFL	11,406	9,370
Note 33 Capital Resource Limit
	2019-20	2018-19
	£000	£000
Gross capital expenditure	7,985	10,065
Less: Disposals	(121)	(5,038)
Charge against Capital Resource Limit	7,864	5,027
Capital Resource Limit	8,298	5,826
Under spend against CRL	434	799
Note 34 Breakeven duty financial performance
	2019-20	2018-19
	£000	£000
Adjusted financial performance surplus (control total basis)	4,238	2,026
Remove impairments scoring to Departmental Expenditure Limit	-	1,642
IFRIC 12 breakeven adjustment	389	295
Breakeven duty financial performance surplus	4,627	3,963

 

Note 35 Breakeven duty rolling assessment
	2010/11	2011/12	2012/13	2013/14	2014/15	2015/16	2016/17	2017/18	2018/19	2019-20
	£000	£000	£000	£000	£000	£000	£000	£000	£000	£000
Breakeven duty in-year financial performance	13	538	1,202	1,607	902	(4,180)	(3,311)	(1,224)	3,963	4,627
Breakeven duty cumulative position	3,913	4,451	5,653	7,260	8,162	3,982	671	(553)	3,410	8,037
Operating income	182,204	178,468	172,902	174,924	178,674	181,334	183,103	181,034	185,085	202,403
Cumulative breakeven position as a
percentage of operating income	2.1%	2.5%	3.3%	4.2%	4.6%	2.2%	0.4%	(0.3%)	1.8%	4.0%