Financial Performance Report

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Financial Performance Report August 2008

• EXECUTIVE SUMMARY
• At the end of August, the Trust had an actual
  surplus of 1,625k, 457k ahead of plan.
• In month surplus is 369k against a target of
  248k, 121k ahead of plan.
• In-month WTEs 183 below plan.
• Cash balance is 4.3m below plan at 31st August
  but forecast to return to planned levels by the
  year end.
• All operational divisions, including corporate
  services have achieved current period and year to
  date surpluses. Reserves and miscellaneous
  divisions continue to show an adverse position
  due to provisions for data challenges and other
  cost uncertainties.
• Overall admitted patient care activity (based on
  data to 31st July) continues to show some over
  performance which is confirmed as part of the
  monthly forecast outturn reconciliation required
  by the StHA with both Sandwell and HoB PCTs
  forecasting a degree of SLA over performance.
  However, patient related income reflects activity
  against contract targets as adjusted for data
  challenges
• CIP performance remains broadly in line with
  planned levels.

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Financial Performance Report August 2008

• External Perspective
• Both Sandwell and Heart of Birmingham PCTs
  continue to forecast surplus positions with no
  significant changes to previously reported
  performance although both also forecasting SLA
  over performance with the Trust.
• The national pressure on prices is being equally
  felt within the NHS and at SWB Hospitals. Overall
  prices rises as measured by the Health Service
  Cost Index (HSCI) for the past year are 4.54.
  This compares with rises over the previous few
  years averaging only 1-2. Some items have risen
  substantially more than the average including
  foodstuffs (27) and energy (up to 88). This
  will clearly place significant ongoing pressure
  on the Trusts non pay budgets.
• Predictions of potential energy costs continue to
  rise, primarily driven by volatility in the
  forward gas market resulting in large increases
  in tariffs for November onwards. The forward
  costs for winter gas supply have risen to over 1
  per therm in spite of recent falls in the price
  of oil. It is expected that this situation will
  stabilise and that winter monthly tariffs will
  soften nearer to the time of delivery but this
  will remain a very volatile and potentially
  problematic area for the Trust over the remainder
  of the year.

• Performance of Major Commissioners
• Fully coded activity data is available up to
  31st June and this, and its related income, is
  incorporated into the financial position reported
  this month.
• Over performance has continued and improved
  particularly on elective and day case activity
  although much of the financial value of over
  performance continues to be generated by high
  cost drugs and AE activity.
• Performance on both new and follow up out-patient
  attendances has improved in month.
• Although the improved financial position of the
  PCTs will improve relationships, the prospect of
  data challenges remains strong and the Trust has
  taken and will need to continue to take this into
  account when assessing its income position.
• Major variations from SLA activity targets are
  shown in the adjacent table.

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Financial Performance Report August 2008

• Divisional Performance
• Overall performance in month has improved with
  all divisions performing in excess of their break
  even financial targets both for the current
  period and on a year to date basis with
  significant surpluses now being generated in
  Women Childrens, Pathology, Imaging, Surgery A
  and Corporate Services.
• The adverse position reported within Reserves and
  Miscellaneous reflects a prudent position on
  income as well as some provision for uncertain
  expenditure items.
• Although under spending against pay budgets is
  still a significant contributor to the financial
  position of some divisions, there has been some
  over spending in the current period particularly
  for bank and agency staff. Although some of this
  can clearly be identified as non recurrent,
  continuation of these levels of spend will
  require concerted management action to deliver a
  balanced or surplus position at the year end.
• Income and, in particular, SLA income is now the
  major contributor to the good performance of many
  divisions, particularly Surgery A, Surgery B and
  Imaging, and, in some cases, offsets over
  spending against pay and non pay budgets.
• Levels of non pay expenditure continue to reflect
  activity rises and price changes. Consequently,
  pressure on non pay budgets is likely to continue
  to be felt over the remainder of the year
  particularly owing to high rates of inflation
  across the economy.
• Although net actual wte numbers have increased by
  50 in month, overall numbers remain significantly
  lower than planned. However, savings from vacant
  posts are being offset by expenditure on agency
  staff and payments which do not generate wte
  equivalents (e.g. waiting list initiative work).

The tables adjacent and overleaf demonstrate most
divisions are clustered fairly close together
generally with current period and year to date
surpluses. Women Childrens has the largest year
to date surplus primarily driven by ongoing lower
than planned pay expenditure across most pay
groups.
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Financial Performance Report August 2008
The tables below illustrate that income, pay and
interest are all are performing better than plan.
The only area where actual performance is worse
than plan is other non pay. Most of this relates
to Reserves and Miscellaneous where provisions
are being made for uncertain expenditure as well
as challenges to patient related income.

• Capital Expenditure
• Planned and actual capital expenditure by month
  is summarised in the adjacent graph. Year to date
  expenditure by August has risen to 2,892k, an
  increase in month of 917k, mainly related to
  pathology reconfiguration and the City neo natal
  unit.
• in relation to pathology reconfiguration and the
  neo natal unit has been processed by the Capital
  Projects office and this will be manifested in
  September.
• Changes have been approved by SIRG with
  additional schemes for pain management minor
  works 22k, ophthalmology replacement equipment
  150k, bariatric beds 40k and EPAU ultrasound
  75k. In addition, following the approval of
  catering income generation schemes, the residual
  CIP related item has been removed and returned to
  contingencies.

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Financial Performance Report August 2008

• Paybill Workforce
• Overall workforce numbers (wtes) are around 183
  below plan for August, primarily continuing to be
  within administration estates, scientific
  therapeutic and management.
• Paybill (including agency staff) is 179k above
  budgeted levels for the month, the result of a
  combination of increased wte numbers, continuing
  high levels of agency staff and payments not
  generating wte equivalents.
• Excluding the cost of agency staff, the paybill
  would be 365k below budget in month and 1,846k
  year to date.
• Agency spend in month was 452k with the monthly
  average for the year reaching 405k. The biggest
  users of agency staff to date are Surgery A
  (mainly in theatres), Medicine B (primarily
  within AE) and Finance (Internal Audit).
• In terms of divisional performance, the most
  significant contributors to the wte shortfall
  remain as before
• Women Childrens (most pay groups)
• Pathology (scientific staff)
• Finance
• Surgery A (mainly nursing)

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Financial Performance Report August 2008

• Balance Sheet
• The opening balance sheet for the year at 1st
  April reflects the final audited accounts.
• Changes in fixed asset values are largely a
  consequence of the estimated value of indexation
  of existing assets at 1st April 2008 along with
  depreciation charged between April and August.
  New capital expenditure in 2008/2009 remains
  fairly low although significant progress has been
  made on some major schemes including the City neo
  natal redevelopment and pathology
  reconfiguration.
• Cash balances have remained broadly steady in
  month although this now leaves cash balances
  around 4m lower than originally planned. The
  primary cause of this is higher than expected
  payments to creditors. In part this is a
  reflection of increased budgets since the start
  of the year as well as general increases in
  prices. The cash budget will be reassessed over
  the next few weeks in the light of changed income
  and expenditure budgets and actual experience in
  the first five months of the year.
• Debtor and accrued income balances have fallen
  marginally in month. A significant fall in debtor
  balances will occur on 1st October with the
  circular flow clearing the 2.3m impairment
  related debtor with Sandwell PCT.

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Financial Performance Report August 2008

• Forecast Outturn
• The forecast outturn position for the Trust
  currently remains at 2.5m which is in line with
  its target required to repay the residue of the
  working capital loan.
• As reported previously, plans for targeted non
  recurrent non pay expenditure are being drawn up
  to deal with any potential excess surplus towards
  the year end. The intention of this expenditure
  will be further improvements in the patient
  experience by bringing forward planned
  expenditure from future years.
• Patient related income continues to be fairly
  buoyant and both Trust and PCT forecasts suggest
  that this performance will be maintained over the
  remainder of the year although it must be noted
  that such income can be relatively volatile from
  one month to another.
• Further attention will need to be given to pay
  expenditure in future months in the light of the
  reversal of performance in August, particularly
  the use of agency staff, in order to ensure that
  the Trust remains on course to achieve its
  planned financial position.
• Given the extent of non pay inflation in the
  economy generally and manifesting itself in some
  areas of non pay spend, this will also need to be
  closely controlled over the remainder of the year.

Conclusions Overall, the Trust has delivered a
bottom line year to date surplus of 1,625,000
which is 457,000 ahead of plan for the 5 months
to 31st August. This is a positive result leading
into the busy autumn and winter period. The
better than planned performance is largely the
result of further improvements in the income
position with in month spending being higher than
plan for both pay and non pay. Non pay
expenditure continues to reflect a prudent
approach to potential cost pressures. Although
capital expenditure continues to be lower than
plan, higher levels of expenditure were incurred
in August for pathology reconfiguration and the
City neo natal unit and further expenditure is
expected in these areas in September. Cash
balances are now more than 4m below planned
levels and a review of the forecast cash position
will be undertaken in the next few weeks.

• Recommendations
• The Trust Board is asked to
• NOTE the contents of the report and
• Approve the changes to the capital programme
  outlined above.
• Robert White
• Director of Finance Performance Management