Financial services supports and advises the organisation (staff and patients) on financial, governance and regulatory aspects - enabling our service users to receive perfect care.
The wider Financial Services function includes the procurement/Purchase to pay team, so for information relating to raising Purchase Orders, receipting, payment of invoices and queries on SBS please refer to those sections within our finance pages.
The primary role of Financial Services concerns the financial running of the Trust as a business, ensuring we meet our statutory obligations, manage cash flow, work within a sound goverance framework and operate as effectively as possible.
- Follow this link to view the Trust annual financial accounts
Further information
Statutory requirements
All NHS bodies have a statutory duty to produce an annual report and accounts150 with the form and content set out in accounts directions. These directions are contained within the Department of Health and Social Care’s (DHSC) group accounting manual (GAM), chapter 2, Annex 3151 and the foundation trust annual reporting manual (FT ARM), chapter 1, annex 1152 .
The accounts directions are made by different organisations depending on the NHS body, but they all require organisations to prepare true and fair accounts and to maintain appropriate accounting records. The production of the annual report and accounts is the principal means by which NHS bodies discharge their accountability responsibilities to taxpayers and users of services, for their stewardship of public money.
The annual report and accounts (ARA) is a single document that is approved and signed by the governing body and includes an external audit opinion. The ARA must be fair, balanced and understandable, and the accountable officer (usually the chief executive), in signing the ARA, takes personal responsibility that this is the case.
All NHS bodies must publish their ARA and then present it at a public meeting. NHS foundation trusts must lay their annual report and accounts before Parliament prior to publication or presentation at a public meeting. It is considered best practice for the public meeting to be held before 30 September following the end of the relevant financial year.
Agreement of balances exercises
Agreement of Balances exercises are undertaken at the end of Month 6, 9 and 12. The purpose of these exercises is that all organisations falling under the control of the Department of Health and Social Care (DHSC) which includes all NHS Trusts, Foundation Trusts, Clinical Commissioning Groups (CCGs) and Integrated Care Boards (ICBs) etc., agree between themselves how much they owe to and are owed by each other at the end of a financial period, along with how much income and expenditure they have had with each other during the financial year.
The DHSC is required to consolidate the accounts of all organisations (departmental group bodies) falling within the Resource Accounting Boundary (RAB), as expanded by the Constitutional Reform and Governance Act 2010 (HM Treasury’s alignment legislation). Under International Financial Reporting Standard 10 (IFRS10), paragraph B86, consolidated statements should “…eliminate in full intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between entities of the group”.
What is the purpose of the internal and external audit?
Internal audits:
An internal audit is designed to assess the key risks facing the business, the effectiveness of the business in managing those risks along with the control processess that management have implemented. Internal auditors often perform a more advisory role by issuing recommendations aimed to support management in improving their systems and controls for the instances where they identify deficiencies in certain business areas.
Their scope of work includes but are not limited to financial and non-financial elements and can even consider the organisations reputation. The scope of their work is defined by management who will pinpoint certain areas for attention in light of the Trust's objectives and risks.
External audits:
The objectives of external auditors are defined by statute. The purpose of an external audit is to provide an objective independent examination and to verify that the financial statements provide a true and fair reflection of where the Trust is financially and have been appropriately prepared in accordance with accounting standards. This not only increases the value and credibility of the financials produced by manaement which in turn increases user confidence, but an independent review also provides greater transparency to stakeholders, hihglighting areas of importance.
External auditors report primarily to the stakeholders of the Trust which could range from the regulatory bodies, Clinical Commissioning Groups (CCGs)/Integrated Care Boareds (ICBs) and the general public.
The main report is in a format required by the Auditing Standards and focuses on whether the financials give a true and fair view and comply with legal and regulatory requirements. External auditors' reports are placed in the public domain via the annual financial statements required to be submitted to Parliament.
Who are the Trust's auditors?
Internal
Internal auditors may be employees of the Trust, or alternatively the Trust may wish to outsource its internal audit services.
External auditors
External auditors are appointed by the Trust and unlike internal auditors they must be able to act independently to ensure an objective approach to the audit process.
Is it a requirement to have an audit?
Internal audits
Although larger organisations see an internal audit as a fundamental way of improving the company's systems and developing specific risk management policies, internal audits are discretionary.
External audits
In the case of external audits and whether or not these are required, this must be assessed on a case by case basis.
Who are the end-users of the audit report?
Internal audits
Internal auditors will report internally to the audit committee or the Trust Board once they have documented their findings and will review the recommendations.
They will provide a tailored report about how the risks and objectives are being managed and focus on any strengths and weaknesses identified. Internal audit reports are not available to the public.
External audits
External auditors report primarily to the stakeholders of the Trust which could range from the regulatory bodies, Clinical Commissioning Groups (CCGs)/Integrated Care Boareds (ICBs) and the general public.
The main report is in a format required by the Auditing Standards and focuses on whether the financials give a true and fair view and comply with legal and regulatory requirements. External auditors' reports are placed in the public domain via the annual financial statements required to be submitted to Parliament.
Who are the Trust's auditors?
Internal
Mersey Internal Audit Agency (MIAA)
As a modern internal audit provider we deliver assurance at all levels to build confidence in a fast paced and ever changing environment.We work in partnership with our clients to truly understand their risks and assurance needs, and support continuous improvement in governance, risk management and internal control.
Our best practice services are underpinned by a highly qualified and experienced team bringing insights from a wide range of organisations. This brings not only a confidence in our services, but also an opportunity to learn from others and share best practice.
Our internal audit services bring:
Assurance – Strong professional standards and delivery to meet your assurance requirements
Insight – Adding value through advice, guidance and best practice
Foresight – Understanding emerging issues, using leading edge technology and working proactively to future proof
External
What is Capital in the NHS?
In the public sector, expenditure is classified as either revenue (spending on day-to-day operations) or capital (spending on assets that will be used for more than a year). Capital spending is incurred when an asset intended for use on a long-term basis is acquired – this is also described as capital investment.
Capital expenditure is an investment, as opposed to revenue, which is considered to be current expenditure.
Capital spending supports services that will be provided over a number of years. Therefore it is often funded through government borrowing, which is repaid over time, meaning the repayments reflect the fact that the asset is used over a similar period of time.
In practice, when managing capital expenditure there are two constraints that each NHS body needs to consider:
The first relates to the organisation itself – is the expenditure affordable and is there cash or other funding available to pay for the new asset?
The second is the CDEL, which is a hard limit on the amount of expenditure that the bodies that make up the DHSC group as a whole can incur in any one year. Even affordable capital expenditure cannot be incurred if it would mean the DHSC breaches the CDEL limit.
Capital v Revenue Expenditure
Capital funding is use to purchase non-current assets that have a life of more than 1 year, non-current assets fall into the following categories: Land, Buildings, Furniture & Fittings, Vehicles, IT Equipment & Other Equipment
The capitalisation threshold for individual assets is £5,000, although assets of lesser value are capitalised if they form part of a group with a group value in excess of £5,000.
Definition of capital asset
For each category the decision as to whether or not the expenditure should be treated as capital is as follows:
Land
The purchase of land is capital expenditure
Buildings
The purchase or construction of a building is capital expenditure. The refurbishment of a ward, department or even room can be treated the same as “new build” provided it meets the criteria for capitalisable subsequent expenditure (see below)
Furniture and fittings
A single item costing more than £5,000 or lower value items purchased as part of a new build or refurbishment is capital expenditure. The purchase of other Furniture and fitting is revenue expenditure.
Vehicles
The purchase of a vehicle is capital expenditure
IT equipment
A single item costing more than £5,000 or lower value items purchased as part of a new build or refurbishment is capital expenditure. The purchase of other IT equipment is revenue expenditure.
Other equipment
A single item costing more than £5,000 is capital expenditure. Smaller value items that are interdependent and collectively cost more than £5,000 may be capital expenditure. The purchase of other equipment is revenue expenditure.
Subsequent expenditure on an asset, such as the refurbishment of a ward, department or room may be either revenue or capital.
It will be revenue expenditure if it returns the asset to a previous standard (i.e. maintenance). This includes replacement carpets and flooring or painting & decorating.
It will be capital expenditure if it enhances the asset above the previous standard or it changes the use of the room or building.
Additional revenue costs
Even if the scheme expenditure is capital there may be revenue costs as well, these include:
- Staff training on new equipment
- Maintenance contracts, service charges or licencing costs for new equipment
Links to documents and guidance:
Managing cash flow
Cash flow is a measurement of the amount of cash that comes into and out of your organisation in a particular period of time.
When you have positive cash flow, you have more cash coming into your business than you have leaving it. When you have negative cash flow, the opposite is true.
A sustained period of negative cash flow can make it increasingly hard to pay your bills and cover other expenses.
This is because your cash flow affects the amount of money available to fund your business’ day-to-day operations, otherwise known as working capital.
Reporting cash flow
The Trust is required to prepare and report on it's cash flow in each monthly monitoring return and also for it's annual accounts. It is also required to prepare a cash forecast for the years ahead in order to demonstrate it's ongoing liquidity, and also to inform business decisions such as if and when to comit to new building schemes etc.
Managing bank accounts
The Trust operates several bank accounts with specific purposes, all of which are provided via the Government Banking Service or a commercial bank.
Government Banking is a shared government function which provides critical banking services across central government and for wider public sector customers.
Separate bank accounts are used for normal Trust business (also known as Exchequer), for Patients Monies where funds are managed on behalf of in-patients and Charitable Funds, to manage donations/grants and other income received, and for approved payments from funds.
Corporate credit cards
On occasions there is a requirement to make urgent payments or payments to suppliers who only accept payment via credit card, for example the Home Office Visa Agency for visa applications. To faciliate these, the Trust Procurement team has corporate credit cards. These cards are used in very limited circumstances, however if you are in a situation where card payment seems to be the only option, please contact the Procurement team who will advise of the process to be followed.
Faster payments
On occasion the Financial Services Team will be required to make Faster Payments to either suppliers or staff, where urgent payment for goods or services is required or for salary advances or re-issued salary payments respectively. Subject to various cut-off times, same day faster payments can be facilitated where necessary.
Loans and repayments
Due to the high value of capital building projects, rather than use available cash reserves to pay for the construction costs on a one-off basis or across say a the 12 month build project, it is far more usual to apply to draw down a cash loan from the Department of Health, which is then repaid via twice yearly instalments of the principal and interest over a period, say 25 years.
In terms of cash mangement we will ensure that the cash received is utilised to pay the contractor's invoices and then we will include in our cash flow forecasts the dates and amounts of repayments over the next 25 years.
Reviewing unallocated cash
As part of the SBS contract, they monitor the Trust's main bank account and allocate payments received to the relevant debtor invoice or will request a cost centre for the income to be coded to if it doesn't relate to an invoice but is expected, for example a Department of Health loan as mentioned above. In the event that a payment has credited the bank account but SBS haven't received a remittance advice, there are no outstanding invoices for the payee and it is not income that was expected, then it is treated as unallocated cash.
These payments will remain on the balance sheet until it has been possible to identify what the payment relates to, which may involve both Financial Services and Financial Management working together, liaising with the payee and with SBS to ensure that previous payments haven't been misallocated. To assist in the this process, there is a BI report that is available.
Other cash and banking services
Bulk cash delivery - The Trust contracts with several cash couriers to order bulk cash deliveries to various cash office sites Trust-wide
Electronic Point of Sale (EPOS) Terminals - Financial Services arrange for debit/credit card terminals at various locations, including staff/visitor catering outlets and Walk in Centres to faciliate the payment for goods and services.
Local banking - Cash and Cheques received are deposited at various cash offices across the Trust, which is then counted, reconciled and prepared for collection by the cash couriers who will then deliver to the bank to be processed and ultimately credit the relevant Trust's bank accounts. Any cheques sent directly to SBS in respect of payment of invoices will be banked by SBS on the Trust's behalf.
Direct debit payments - there are certain instances where Financial Services will set-up direct debit mandates to faciliate the payment for certain services, for example Non-Domestic Rates bills which are paid in ten monthly instalments between April and January each year.
Vending machine income - cash from vending machines at various sites across the Trust's footprint are periodically emptied and banked as above.
Night Safe facility - for any income received outside of the cash office opening hours, there is a night safe where cash can be dropped and held securely until the following working day, where it will be counted and banked as above. This night safe facility may also be used for patients cash and/or valuables if it is deemed appropriate that this should be removed from the ward and deposited at the cash office.
Most NHS Trusts and Foundation Trusts have a charity which is legally separate from the rest of the Trust's activities.These NHS charities vary significantly in size and scale of operations, so most Acute Trusts have quite large Charities, sometimes focussing on specific fund raising for the likes of MRI scanners or Special Baby Units. A small number of specialist Trusts have very large charities, reflecting the level of public interest in their services, such as childrens or cancer Trusts, for example Alder Hey or The Christie respectively.
Historically NHS mental health and community Trusts have tended to be smaller charities in terms of both value and activities.
In the event that one NHS Trust or Foundation Trust is acquired by another Trust, then it is usual that the Charity will also transfer to the aquirer's Charity. Similarly, if the contract to provide services transfers from one NHS Trust to another, then any Charitable Funds specific to those services would normally be transferred to the new provider's Charity.
In the case of the Mersey Care Charity, the funds belonging to the former North West Boroughs Charity transferred to the Mersey Care Charity on 1 June 2021, and likewise funds were transferred from Lancashire Care Trust.
Charity Commission Regulation
All charities, including NHS Charities like the Mersey Care Charity are regulated by the Charity Commission. This means they must be registered with the Charity Commission, submit annual report and accounts each financial year and operate in accordance with the relevant legislation and regulatory requirements.
All charities have Trustees, who are legally responsible for the actions of the Charity, to ensure that funds are utilised in accordance with the Charities objectives and to meet regularly to monitor the day to day management of funds etc. The Mersey Care Charity has Corporate Trustees, who are the Trust Board of the Mersey Care Trust itself.
Charity Commission website for the Mersey Care Charity.
Recent Developments
| NHS Charities Together |
Following the Covid-19 pandemic in March 2020, there was an outpouring of good will across the nation in support of the NHS, characterised by the fund raising efforts of Sir Captain Tom Moore. NHS Charities Together (NHSCT) were tasked with responsibility for coordinating all Covid-19 fund raising on behalf of the NHS, and then to develop grant programmes to distribute donations to all the NHS Charities across the UK, who in turn would support staff and patients of their Trusts.
To date, £150m has been raised by NHSCT throughout the pandemic, thanks to the generous support of the public and corporate partners.
| NHS Charities Together |
The Mersey Care Charity has recently recruited a fund raiser who will develop a stategy to grow the Charity over the next few years. Consequently at this time the Financial Services team are supporting the Charity Team in developing the Charity, identifying roles and responsibilities, and to develop new opportunities for fund raising and new process to submit applications to access funds.
This section will be updated in the coming months once new processes, procedures and further information is available on the Mersey Care Charity.
The Trust's payroll provider is St Helens & Knowsley Hospital NHS Trust
All general employee queries on their pay should be sent in the first instance to payroll at the email below, including expected enhancements not being paid, band/increment changes, deductions etc.:
merseycare
Employees should check their online payslips each month, via the ESR portal. The Annual P60 is also accessible from the portal.
Responsibility for the processing of applications to access the Trust's various salary sacrifice schemes rests with Financial Services. In addion to processing applications, placing and approvoing orders, minimum wage assessments etc. The team also monitor and process invoices received from the scheme providers. With regard to the vehicle scheme, additional charges over and above the agreed rental may arrise due to parking fines, end of contract wear and tear or excess mileage charges etc., so the team will liaise with the employee and payroll to agree the recovery of these additional costs from the employee.
In the the event that an employee leaves the Trust's employment before they have made all contractual payments for their salary sacrifice scheme, the total owed will be deducted from their final salary payment if possible, or if not they will be invoiced for the outstanding balance. To mitigate risk to the Trust, it is important that as soon as an employee formerly resigns, their manager checks if the person has any outstanding salary sacrifice schemes and notifies both Payroll and Financial Services accordingly so the necessary steps can be actioned.
Visit our salary sacrifice page on YourSpace for further information.
Purpose of SoRD
This Scheme of Reservation and Delegation of Powers details administrative practice and procedure and records the delegations and reservations of powers and functions adopted by the Mersey Care NHS Foundation Trust (referred to as the “Trust”). They should be used in conjunction with the Constitution and the Standing Financial Instructions which have been adopted by the Trust. The Trust’s Constitution and the Foundation Trust Code of Governance from Monitor / NHS Improvement requires such a formal document recording the exercise of delegated powers
The Trust is a Public Benefit Corporation following approval by the Independent Regulator of NHS Foundation Trusts (known as Monitor or NHS Improvement) pursuant to the National Health Service Act 2006 (the “2006 Act”). The Trust is governed by the 2006 Act, as amended by the Health and Social Care Act 2012 (or subsequent statute, its Constitution and the NHS Provider Licence granted by Monitor / NHS improvement. The functions of the Trust are conferred by the Regulatory Framework and the Trust is required to comply with the guidance issued by Monitor / NHS Improvement. This Scheme of Reservation and Delegation of Powers and their content and approval are the sole responsibility of the Board of Directors and are not required to be submitted for approval to any group or organisation including Monitor / NHS Improvement or the Council of Governors.
The purpose of this document is to detail how the powers are reserved to the Board of Directors, matters for which it is held accountable to Monitor / NHS Improvement, whilst at the same time delegating to the appropriate level the detailed application of Trust policies and procedures. However, the Board of Directors remains accountable for all of its functions, even those delegated to individual directors or officers and would therefore expect to receive information about the exercise of delegated functions to enable it to maintain a monitoring role.
Sections
1. Schedule of Reservations and Delegations
2. Introduction
3. Reservation of Powers to the Board of Directors
4. Delegation of Powers
5. Scheme of Reservations and Delegations to Officers
5.2 Table A - Delegated Authority
5.3 Table B - Delegated Limits
5.4 Table C - Mental Health Act Scheme of Delegation
An example of the SoRD is shown below, showing the Delegated Limits for requisitioning, ordering and payment of goods and services under the section for Non-Pay Revenue Expenditure.
Purpose of Standing Financial Instructions
These Standing Financial Instructions detail the financial responsibilities, policies and procedures adopted by the Mersey Care NHS Foundation Trust (referred to as the “Trust”). They are designed to ensure that the Trust's financial transactions are carried out in accordance with the law, with Government policy and with other good practice in order to achieve probity, accuracy, economy, efficiency and effectiveness. They should be used in conjunction with the Constitution and the Scheme of Reservation and Delegation and Powers which have been adopted by the Trust.
The Trust is a Public Benefit Corporation following approval by the Independent Regulator of NHS Foundation Trusts (known as Monitor or NHS Improvement) pursuant to the National Health Service Act 2006 (the “2006 Act”). The Trust is governed by the 2006 Act, as amended by the Health and Social Care Act 2012 (or subsequent statute, its Constitution and the NHS Provider Licence granted by Monitor / NHS improvement. The functions of the Trust are conferred by the Regulatory Framework and the Trust is required to comply with the guidance issued by Monitor / NHS Improvement. These Standing Financial Instructions, their content and approval are the sole responsibility of the Board of Directors and are not required to be submitted for approval to any group or organisation including Monitor / NHS Improvement or the Council of Governors.
These Standing Financial Instructions identify the financial responsibilities which apply to everyone working for the Trust and its constituent organisations including trading units. They do not provide detailed procedural advice and should be read in conjunction with the detailed departmental and financial procedure notes. All financial procedures must be approved by the Executive Director of Finance or delegated officers.
Should any difficulties arise regarding the interpretation or application of any of the Standing Financial Instructions then the advice of the Executive Director of Finance must be sought before acting. The user of these Standing Financial Instructions should also be familiar with and comply with the provisions of the Trust’s Constitution.
The failure to comply with these Standing Financial Instructions, the Constitution, the Standing Orders and the Scheme of Reservation and Delegation of Powers could be regarded as a disciplinary matter that may result in dismissal.
Sections
1. Introduction
2. Audit
3. Allocations, Planning, Budgets, Budgetary Control and Monitoring
4. Annual Accounts and Reports
5. Bank Accounts
6. Income, Fees and Charges and Security of Cash, Cheques and other Negotiable Instruments
7. Tendering and Contract Procedure
8. Contracts for the Provision of Services
9. Terms of Service, Allowances and payment of Members of the Board of Directors and Executive Committee and Employees
10. Non-Pay Expenditure
11. External Borrowing and Investments
12. NHS Provider Licence
13. Capital Investment, Private Financing, Fixed Asset Registers and Security
14. Stores and Receipt of Goods
15. Disposals and Condemnations, Losses and Special Payments
16. Information Technology
17. Patients' Money and Property (excluding patients at Ashworth Hospital)
18. Patients' Money and Property (for those patients at Ashworth Hospital)
19. Acceptance of Gifts by Staff and link to the Standards of Business Conduct
20. Retention of Records
21. Risk Management and Insurance
Annex 1. Application to Waiver Competitive Quotation/Tendering Procedure
Training on SFIs
A training presentation on SFIs has been developed which can be provided to departments upon request. An example of this presentation can be found at the link below, and can be tailored for the relevant department as required.
The NHS and VAT
The provision of healthcare by the NHS is a statutory function: it is thus non-business rather than exempt. NHS hospitals are funded centrally by Government for their provision of healthcare as well as for the VAT they incur. They are registered for VAT and as well as recovering input tax in relation to those taxable supplies they make in the course of business, they are permitted under a special provision under section 41 of the VAT Act 1994 to recover the tax incurred on certain services in relation to their non-business statutory provision.
The starting point is that the NHS can’t claim VAT refunds for goods, only services. But there are exceptions to the ‘not-on-goods’ principle. And not on all services count. The specifics have been built up over the years, with ever-evolving layers of HMRC guidance supporting a framework called the COS (Contracted out Services) rules.
HMRC issued a list which currently has 76 headings of Contracted Out Services (COS) which can be reclaimed by NHS Trusts and NHS Foundation Trusts. For all services provided to the Trust which come under these headings, the VAT included in the invoice from the supplier can be reclaimed. As mentioned above, VAT under the COS regulations can only be recovered on services and not on goods.
VAT on income
In deciding on whether VAT needs to be charged on invoices for services we provide, there are a number of considerations. Most importantly is that VAT is NOT charged to other English NHS bodies, however it will be to the likes of Scottish and Welsh NHS bodies, NHS Property, NHS Charities and certain other bodies.
The list below includes the majortity of NHS bodies:
The second consideration is that when we raise invoices to those NHS organisations that are outside English NHS VAT Division and to all other Non-NHS organisations, we need to check if VAT is chargeable depending upon the type of income.
Is VAT recoverable on agency staff?
One of the common questions under the COS rules is whether VAT is recoverable on agency staff. VAT IS recoverable on agency nurses. It IS NOT recoverable on medics and Professions Allied to Medicine agency staff.
For other agency staff such as admin & clerical, professional advisors and management roles, there is a test to determine if VAT is recoverable, as per the following flowchart:
Capital implications for VAT
Heading 35 of the contracted-out-services legislative provisions allows VAT recovery on the “maintenance, non structural repair and cleaning of buildings”.
HMRC have agreed with the Department of Health that construction works costing under £5000 (excluding VAT) may be treated, as repairs and maintenance and the VAT element are refundable under the Contracted-Out provisions.
Recovery of VAT using the ‘banding scheme’
On capital building projects up to a total cost of £15,000,000, NHS bodies are able to use banding in order to quickly determine the VAT recoverability instead of doing a line by line analysis.