WIREDGOV

The third annual Auditors’ Local Evaluation (ALE) report from the Audit Commission, published today (2 October), shows an overall picture of financial improvement for many NHS organisations in 2007/08.

Half of the 302 NHS trusts and primary care trusts (PCTs) assessed in England have performed well or strongly in the way that they have used their resources and only 3 per cent have failed to balance their books.

Good financial management means that trusts and PCTs are better placed to improve services for patients.

Findings from the new evaluation show that:

• Ninety-three per cent of NHS trusts and PCTs met or exceeded minimum standards for their overall use of resources;
• The North West Strategic Health Authority area achieved the highest average score overall across England, while those in the Yorkshire and Humber Strategic Health Authority area scored the lowest on average;
• London’s performance is the most mixed: it has the highest proportion of NHS bodies performing strongly, but it also has the highest proportion failing to meet minimum standards;
• Six NHS trusts and eight PCTs achieved the overall top score for use of resources in 2007/08; and
• Twenty NHS bodies in England have failed to reach minimum financial standards, of which 12 have failed to meet minimum standards overall in their use of resources in each of the past three years’ evaluations.

Michael O’Higgins, Chairman of the Audit Commission, said:

‘The improvements in the way that NHS trusts and PCTs have managed their money in the past year are impressive. Financial management in the health service had been in poor shape, but better use of resources locally has made a difference. Auditors have shown that many NHS bodies are now responding well to financial challenges and this local evaluation is helping to drive improvement.

‘However, pockets of real concern remain. Poor financial management can put services for patients at risk. Patients and the public deserve better from the poor performers, who must learn from the strong performers. And we should be seeing a lot more than only 14 NHS bodies performing strongly in their use of resources.’

Auditors have found many signs of financial improvement in the NHS and the better overall financial performance is especially noteworthy as foundation trusts are not assessed in this evaluation (Note 8). This year only one organisation has failed to meet the minimum standards in any of the five use of resources themes (Note 5) compared with four bodies in the previous year.

An outstanding performance in this year’s report is from Bromley PCT, the first NHS body to score a 4 (performing strongly) in all five themes that make up the overall use of resources score.

A new detailed report, Financial Management in the NHS 2007/08, which also examines the financial environment in which NHS bodies were operating in over the most recent financial year, will be published jointly by the Audit Commission and the National Audit Office in November 2008.

Notes to editors

1. Media interviews about the ALE report are available with the Chairman of the Audit Commission, Michael O’Higgins. (See contact at the bottom of this page.)
2. 2007/08 is the third year in which the Audit Commission has carried out the evaluation. ALE applies to NHS trusts and PCTs in England, but not NHS foundation trusts. The ALE scores are also used by the Healthcare Commission as the Use of Resources part of its Annual Health Check.
3. Scoring explanation: The ALE scores are combined into a single overall score, from 1 to 4. The scores are as follows: 1 Below minimum requirements – inadequate performance; 2 At minimum requirements – adequate performance; 3 Consistently above minimum requirements – performing well; 4 Well above minimum requirements – performing strongly.
4. The ALE process requires auditors to reach scored judgements for five themes: financial reporting; financial management; financial standing; internal control; and value for money.
5. Financial performance is known to have a direct impact on the quality of outcomes for patients, and ALE is an important driver of improved financial performance in the NHS locally. In preparing their evaluations, the answers to five key questions are central to auditors’ judgements on the financial performance of organisations (see page 9 of full report for further explanation):
6. How good are the organisation’s financial accounting and reporting arrangements? How well does the organisation plan and manage its finances? How well does the organisation safeguard its financial standing? How well does the organisation’s internal control environment enable it to manage its significant business risks? How good are the organisation’s arrangements for managing and improving value for money?
7. The 2007/08 report includes examples of notable practice in case studies which show how some NHS bodies are performing well. These are aimed at helping organisations learn from each others successes.
8. There will be new accounting challenges over the next 18 months as NHS bodies have to complete their accounts earlier and convert to International Financial Reporting Standards, but this year’s ALE shows that two-thirds of bodies are well placed to meet both challenges.
9. NHS foundation trusts (FTs) are subject to a different regulatory regime. ALE is not undertaken at FTs due to the different audit arrangements in place for FTs. Instead the Healthcare Commission uses Monitor’s FT’s financial risk rating as the UoR assessment. Both ALE and the financial risk rating are assessments of how well resources are managed and used, but component parts are different.
10. The Audit Commission is an independent watchdog, driving economy, efficiency and effectiveness in local public services to deliver better outcomes for everyone.
11. Our work across local government, health, housing, community safety and fire and rescue services means that we have a unique perspective. We promote value for money for taxpayers, covering £180 billion spent by 11,000 local public bodies.
12. As a force for improvement, we work in partnership to assess local public services and make practical recommendations for promoting a better quality of life for people.
13. Further details about the role of the Audit Commission can be obtained from http://www.audit-commission.gov.uk.

Appendix

Fourteen NHS bodies have achieved the top score of 4 overall in 2007/08:

1. Ashton, Leigh and Wigan Primary Care Trust
2. Bromley Primary Care Trust
3. Camden Primary Care Trust
4. Haringey Teaching Primary Care Trust
5. Kingston Hospital NHS Trust
6. Lambeth Primary Care Trust
7. Norfolk and Norwich University Hospitals NHS Trust (now Norfolk and Norwich Hospitals NHS Foundation Trust)
8. Northamptonshire Healthcare NHS Trust
9. Redbridge Primary Care Trust
10. Royal Free Hampstead NHS Trust
11. Royal Liverpool and Broadgreen University Hospitals NHS Trust
12. Salford Primary Care Trust
13. St Helens and Knowsley Hospitals NHS Trust
14. Stockport Primary Care Trust

Twenty NHS bodies have the lowest overall score of 1 in 2007/08 (12 in bold have failed to meet minimum standards over a three-year period):

1. Brent Teaching Primary Care Trust
2. Enfield Primary Care Trust
3. Barking, Havering and Redbridge Hospitals NHS Trust
4. Bromley Hospitals NHS Trust
5. Buckinghamshire Primary Care Trust
6. East of England Ambulance Service NHS Trust
7. Great Yarmouth and Waveney Primary Care Trust
8. Hinchingbrooke Health Care NHS Trust
9. Hounslow Primary Care Trust
10. Newham University Hospital NHS Trust
11. North West London Hospitals NHS Trust
12. North Yorkshire and York Primary Care Trust
13. Queen Elizabeth Hospital NHS Trust
14. Queen Mary’s Sidcup NHS Trust
15. Royal National Orthopaedic Hospital NHS Trust
16. Trafford Healthcare NHS Trust
17. Scarborough and North East Yorkshire Health Care NHS Trust
18. Whipps Cross University Hospital NHS Trust
19. Winchester and Eastleigh Healthcare NHS Trust
20. Worcestershire Mental Health Partnership NHS Trust

A full list of results can be found in the Auditors’ Local Evaluation (ALE) report.