Managing finances

Managing finances

The financial performance for the year has been strong. We exceeded our control total despite continuing pressures both locally and nationally and delivered a surplus for the second year in a row.

We have continued to work closely with our commissioning partners to drive investment in mental health services, aligned to the national long term mental health implementation plan. Financial performance is reported each month to the Trust Board as part of an integrated quality and performance report, as well as a separate finance report, both of which describe the current and forecast financial position.

This section describes how much funding we receive and where it comes from, as well as how we spend our money on providing services. You can also learn about how we pay our bills, our investment in capital projects and learn whether we have met our financial targets for 2019-20.

The accounting policies adopted follow International Financial Reporting Standards (IFRS) 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.

Summary of Financial Performance in 2019-20

At the beginning of the financial year we agreed a control total with NHS Improvement which was signed off by the Trust Board. This was a breakeven position after technical adjustments, including receiving £6m of national support funding. We reported to the January Trust Board and to NHS Improvement in February that we were forecasting to exceed this and deliver a £3m surplus. This was due to unspent contingency and vacancies across a number of our teams. In March we were notified of additional mental health funding being issued to mental health providers nationally, which improved this position to a £4m surplus after technical adjustments.

The table below sets out the final financial performance against plan. This includes an impairment of £18.7m following a revaluation exercise, which is undertaken in full every five years. Further details on this revaluation can be found in the annual accounts. The impact of this impairment is excluded from the control total performance.

Income

KMPT continued to earn the majority of its core business income from the eight local Clinical Commissioning Groups all under block contract. This accounts for 76 per cent of total income. Specialist services were commissioned via NHS England and comprise 13 per cent of total income. In addition to this, the employer contribution rate for NHS pensions increased from 14.3 per cent to 20.6 per cent from 1 April 2019. For 2019-20, the additional amount is paid over by NHS England on providers’ behalf but is reflected in the annual accounts in both income and employee expenses. This is £5.7m in the table to the right.

Further details regarding income are identified on notes 1 and 2 of the accounts.

Expenditure

Operating expenditure in 2019-20 was £212m. KMPT spent £150m on employee expenses during the year. This represented 71 per cent of total operating expenditure. This is consistent with the nature of services we provide and is comparable to other mental health trusts.

Table 2

Non pay was £21m adverse to plan at year end, and £20m higher than last year. This included an impairment of £18.7m in relation to our valuation of buildings and land, and £2m spend above plan on PICU placements outside of the KMPT bed base.

Analysis of operating expenditure is provided in the table below.

Table 3

Further details regarding this expenditure can be found on note 6 of the accounts.

Table 4

Cost improvement programme

KMPT set a £6m cost improvement programme target for 2019-20. We delivered £5.6m of the planned savings with an adverse variance of £0.4m at year end. Of the savings delivered £3.8m (68%) recurrently and £1.8m (32%) on a non-recurrent basis, with a full year effect value of £4.8m.

The full details are shown in the table above.

Capital expenditure

KMPT spent £8m on capital expenditure in 2019-20, which represented an under spend against the Capital Resource Limit of £434k.

The most significant capital expenditure in the year was on the following items:

1. £2m on refurbishing Heather ward

2. £1m on the Willow Suite PICU refurbishment

3. £0.6m on Canterbury site reconfiguration

4. £0.6m on Electronic Prescribing and Medicines Administration system

5. £1.4m on capital maintenance and minor schemes

6. £0.6m on IT devices replacement.

Summary of financial risks

Summaries of the financial risks are outlined within the Annual Governance Statement.

Audit

Our external auditor is Grant Thornton. It conducted work during the year on audit services at a cost of £54k. This work included accounts, governance and performance work.

Provision of information to auditors

As far as KMPT directors are aware, there is no relevant information of which the auditor is not aware and the directors have taken all reasonable steps that might properly be taken as directors to make themselves aware of any material audit information and to establish that the auditor is aware of that information.

Going concern

International Accounting Standard 1 (IAS 1) requires the directors to assess, as part of the preparation of the annual accounts, the Trust’s ability to continue as a going concern.

In accordance with the Department of Health’s Group Accounting Manual, the accounts have been prepared on a going concern basis as the directors do not intend, nor consider that it will be necessary, to apply to the Secretary of State for the dissolution of the Trust without the transfer of the services to another entity, in the foreseeable future.

KMPT’s accounting policy regarding going concern (Note 1.2 to the accounts) contains further detail.

Looking forward to 2020-21

The financial achievements of 2019-20 provide a foundation upon which our objective to achieve financial sustainability can be built. Financial trajectories have been issued as part of the Long Term Plan, which for KMPT is a deficit of £5.4m in 2020-21. This will be matched by £5.4m support funding from NHS England/ Improvement (NHSE/I). This support funding remains non recurrent and will reduce over the next four years. Our focus is therefore on how to continue with productivity and efficiency initiatives and improve our financial performance further to ensure the Trust returns to long term financial sustainability.

The national planning timetable has been extended due to COVID-19 and as a result KMPT have not finalised their final plan. A draft plan was submitted to NHS Improvement earlier in the year and the Trust Board agreed to achieve our control total. Budgets are being prepared on that basis, and there is an expectation in the organisation that focus will continue on using the resources we have to the best effect for our population.

We are planning an extensive capital expenditure programme for the coming financial year, funded both from depreciation and cash reserves. This will include support the delivery of our clinical technology strategy, totalling £5.2m, and commencing a project to build an additional PICU and rehab facility to remove the need for patients to be sent to private facilities.

Our annual accounts for 2019-20 have been examined by our external auditor, Grant Thornton, and their report is set out on page 50.

Helen Greatorex Chief Executive