Finance and Performance

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Document number: 1
Issue/approval date: 30/05/2022
Version number: 1.2
Status: approved
Next review date: 30/05/2024

Contents

1. Introduction and guidance statement
2. Scope
3. Definitions
4. Integrated care board reporting requirements
5. Roles and responsibilities

1 Introduction and guidance statement

1.1.1 The Losses and Special Payments guidance is prepared as procedural guidance for Integrated Care Boards (ICBs).

1.1.2 The purpose of this document is to establish best practice that can be incorporated into the ICBs Standing Financial Instructions.

1.1.3 It should be noted that the user of this procedural guidance should be compliant with the respective ICB SFIs. If there is a need to interpret or difficulty in application of this guidance, please send an email to the NHS England, head of assurance and counter fraud: england.assurance@nhs.net.

1.1.4 HM Treasury retains the authority to approve losses and special payments which are classified as being either:

• novel or contentious;
• contains lesson that could be of interest to the wider community;
• involves important questions of principle;
• might create a precedent; and/or
• highlights the ineffectiveness of the existing control systems.

1.1.5 Therefore, HMT Treasury approval is required if a transaction exceeds the delegated authority, or if transactions will set a precedent, are novel, contentious or could cause repercussions elsewhere in the public sector.

1.1.6 Losses and special payments are therefore subject to special control procedures compared to the generality of payments, and, special notation in the accounts to bring them to the attention of parliament. The annual accounts reporting requirements are detailed herein.

1.1.7 For the avoidance of doubt, all cases relating to ICB losses and special payments must be submitted to NHS England for approval if the proposed transaction values exceed the delegated limits that are detailed below or satisfy the conditions in section 1.1.4:

Expenditure type: Delegated limit
All losses: up to £300k
Special Payments including Extra- Contractual/ Statutory/ regulatory/ compensation & Ex gratia: up to £95k
Special severance & Retention payments: £0
Consolatory payments: £500

1.1.8 Losses and/or special payments that indicate or give rise to suspicion of fraud or corruption, please follow the guidance as provided by your local counter fraud specialist.

1.1.9 In dealing with individual cases, ICBs must consider the soundness of their internal control systems, the efficiency with which they have been operated, and take any necessary steps to put failings right.

1.1.10 The outcome of the review of the case under consideration (1.1.9) must be clearly indicated when submitting cases to NHS England as part of the account’s consolidation process at yearend or as part of the approval process.

2 Scope

2.1.1 This procedural document is applicable to the following NHS bodies;

• Integrated Care Boards

3 Definitions
3.1.1 Unless a contrary intention is evident or the context requires otherwise, words or expressions contained in this document will have the same meaning as set out in HMT managing public money.

3.2 Losses

3.2.1 A loss refers to any case where full value has not been obtained for money spent or committed.

3.2.2 Examples of types of losses which cannot be treated as business as usual are cash losses, bookkeeping losses, fruitless payments and claims waived or abandoned.

3.3 Special Payment

3.3.1 Special Payments relate to the following;

• any compensation payments;
• extra-contractual or ex-gratia payments; and
• any payment made without specific identifiable legal power In accordance with the National Health Service Act 2006, as amended by the Health and Care Act 2022.

3.4 Special Severance and retention payments

3.4.1 ICBs have not been delegated a limit to approve the special severance or retention payments. For detailed guidance, please refer to the special severance payments document as published on the NHSEI SharePoint finance library.

3.4.2 For clarity, any non-contractual special severance payments that are being considered for approval must be submitted to NHS England HR regional advisory teams prior to settlement.

3.4.3 The table below lists all the various expenditure classifications for losses and special payments and the applicable approvals if the final settlement sum exceeds the ICB delegated limit:

Category	Classification	Approval required from	Further approvals	Description of category
Fruitless Payment	Loss	Approval required from	Further approvals	Description of category
Bookkeeping Losses	Loss	Assurance team	NHSE/DHSC/HMT	Bookkeeping losses (un-vouched or incompletely vouched payments) including missing items or inexplicable or erroneous debit balances
Constructive loss	Loss	Assurance team	NHSE/ DHSC/ HMT	A constructive loss is a similar form of payment to stores losses and fruitless payments, but one where procurement action itself caused the loss. For example, stores or services might be correctly ordered, delivered or provided, then paid for as correct; but later, perhaps because of a change of policy, they might prove not to be needed or to be less useful than when the order was placed
Administrative costs	Loss	Assurance team	NHSE/ DHSC/ HMT	An expense incurred in controlling and directing an organisation.
Claims Waived or Abandoned	Loss	Assurance team	NHSE/ DHSC/ HMT	Losses may arise if claims are waived or abandoned because, though properly made, it is decided not to present or pursue them
Extra- contractual payments	Special Payment	Assurance team	NHSE/ DHSC/ HMT	Payments which, though not legally due under contract, appear to place an obligation on a public sector organisation which the courts might uphold. Typically, these arise from the organisation’s action or inaction in relation to a contract. Payments may be extra-contractual even where there is some doubt about the organisation’s liability to pay, e.g. where the contract provides for arbitration, but a settlement is reached without it. A payment made as a result of an arbitration award is contractual
Extra-statutory	Special Payment	Assurance team	NHSE/ DHSC/ HMT	Payments which are within the broad intention of the statute or regulation but go beyond a strict interpretation of its terms.
Extra-regulatory payments	Special Payment	Assurance team	NHSE/DHSC/HMT	Payments which are within the broad intention of the statute or regulation but go beyond a strict interpretation of its terms.
Compensation payments	Special Payment	Assurance team	NHSE/ DHSC/ HMT	Payments made to provide redress for personal injuries, traffic accidents, and damage to property They include other payments to those in the public service outside statutory schemes or outside contracts.
Special severance payments	Special Payment	NHSE Regional Director of Workforce and OD	EHRSG DHSC GAC HMT	Payments made to employees, contractors and others beyond above normal statutory or contractual requirements when leaving employment in public service whether they resign, are dismissed or reach an agreed termination of contract. Regional and further Approval is required regardless of the value of the non contractual pay package.
Ex gratia payments	Special Payment	Assurance team	NHSE/ DHSC/ HMT	Go beyond statutory cover, legal liability, or administrative rules, including payments; made to meet hardship caused by official failure or delay; out of court settlements to avoid legal action on grounds of official inadequacy; and, payments to contractors outside a binding contract, e.g. on grounds of hardship
Retention payments	Special Payment	Regional Director of Workforce and OD	None	Payments, designed to encourage staff to delay their departures, particularly where transformations of ALBs are being negotiated, are also classified as novel and contentious. Such payments always require explicit Treasury approval, whether proposed in individual cases or in groups. Treasury approval must be obtained before any commitment, whether oral or in writing, is made.

3.5 Annual assurance statements

3.5.1 As part of the new compliance and control procedures over exit packages, ICBs must submit an annual assurance statement confirming the following:

• details of all¹ exit packages (including special severance payments) that have been agreed and/or made during the year;
• that NHS England and HMT² approvals have been obtained (in relation to non-contractual pay elements or amounts that exceed the ICB delegated limits) before any offers, whether verbally or in writing, are made; and
• adherence to the special severance payments guidance as published by NHS England.

3.5.2 Further guidance will be provided to ICBs on this process.

3.6 Interpretation

3.6.1 Should any difficulties arise regarding the interpretation or application of any part of this losses and special payment guidance, the advice of the NHS England Head of assurance and counter fraud (england.assurance@nhs.net) must be sought before acting.

3.7 Delegation of Function, Duties and Powers

3.7.1 The ICB Constitution must have a governing body that makes provision for the appointment of the Audit Committee.

3.7.2 The ICB standing financial instructions should clearly indicate the role that the audit committee has in reviewing and approving losses and special payments.

3.7.3 The ICB standing financial instructions should indicate the delegated limits that have been agreed by the governing body for operational purposes.

4 Integrated care board reporting requirements

4.1 Capturing of losses and special payments

4.1.1 The ICB chief financial officer is responsible for ensuring that processes and procedures that facilitate the capturing and reporting of losses and special payments are in place and ensure that a losses and special payments register is maintained.

4.1.2 All losses and special payments for ICBs must be recorded in the register and reviewed as part of the internal controls process.

4.2 Parliamentary accountability and audit report

4.2.1 The ICB must maintain a losses and special payments register that provides the requested information to complete the NHS England group accounts.

4.2.2 It should be noted that ICBs do not have a mandatory requirement to produce a Parliamentary accountability and audit report as other entities that report directly to Parliament. However, it is a mandatory requirement that ICBs produce an audit certificate and report.

There will be a need to collect data for the NHS England consolidated account. NHS England will also use this information to complete the DHSC summarisation schedule for the DHSC consolidated account. Therefore, regardless of applicability of this report, all ICBs must ensure the summarisation schedule is completed.

4.2.3 If there are any individual cases or a group of losses or special payments that exceed or the aggregate value of £100,000, the related payment should be noted separately on the ICB yearend template completed for the NHS England group account.

5 Roles and responsibilities

5.1 Financial Control

5.1.1 Chief Financial Officer

5.1.2 It is noted and acknowledged that the roles and responsibilities for the chief financial officer vary in all the ICBs. The chief financial officer should implement a system of internal control that details the process for reporting losses, recording losses, monitoring and reporting the losses and special payments to the ICB’s audit committee based on existing reporting cycles.

5.1.3 The reporting cycle should also clarify the delegated sum that the chief financial officer can authorise as a loss or special payment. The delegated sum should be in line with the ICB escalation process for losses and special payments.

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Footnotes

1. The assurance statement must include all exit packages, thus, contractual and non contractual.
2. This is only applicable to elements of the exit packages that are classified as non contractual

Introduction

ICBs are required to publish an annual plan for the proposed use of capital resources, in line with a timetable determined by NHS England. Plans are required to cover all NHS hosted organisations within the ICS area. For Suffolk and North East Essex this includes:

• NHS Suffolk and North East Essex Integrated Care Board (SNEE ICB)
• East Suffolk and North Essex NHS Foundation Trust (ESNEFT)
• West Suffolk NHS Foundation Trust) (WSFT)
• East of England Ambulance Service NHS Trust (EEAST)

Capital Plans support the delivery of 2023/24 operational planning and strategic objectives. Key issues addressed in the development of this plan include:

• Development of diagnostic capacity.
• Development of elective capacity, whilst maintaining urgent care capacity.
• Reconfiguration of services to support the delivery of clinically safe and affordable services.
• Maintenance of a safe estate.

The plan identified in this paper comprises two key elements:
1) System Capital: also known as ‘business as usual’ capital. The system capital resource is determined at ICS level and allocated to organisations by the ICB in collaboration with hosted partner organisations.

2) Strategic or other (national) programme capital allocations. Allocations are determined by national programme teams, normally as a result of a bidding process submitted by provider organisations with the approval of the ICB.

The plan represents an initial or provisional plan that may be amended during the course of the year by additional allocations (see notes). The plan included in this paper is aligned to the (provider) Financial Planning Returns (FPR) and (system) Integrated Planning Returns (IPR) submitted on 4th May 2023.

	SNEE ICB	ESNEFT	WSFT	EEAST	Total	Notes
	£000s	£000s	£000s	£000s	£000s
System Capital
System Capital: Ringfenced	0	0	8,400	0	8,400	1
System Capital: Discretionary	1,997	28,709	11,691	12,822	55,219	2
Sub-total	1,997	28,709	20,091	12,822	63,619
Memo (Over)/Under commitment	0	-1,211	-886	276	-1,821	3
System Capital	1,997	27,498	19,205	13,098	61,798
Strategic/Other Programme Capital
New Hospital	0	0	1,028	0	1,028	4
Electronic Patient Records	0	11,250	0	0	11,250	5
Acute Reconfiguration/Elective Capacity	0	40,395	20,000	0	60,395	6,7
Diagnostic	0	8,600	12,794	0	21,394	8
Other	0	5,319	0	26,551	31,870	9
Sub-total	0	65,564	33,822	26,551	125,937
Gross Capital Expenditure	1,997	94,273	53,913	39,373	189,556
Memo
Disposals	0	-1,948	-36	0	-1,984
Grants	0	-1,501	0	0	-1,501
Lease/PFI/other technical adjustments	0	-1,567	0	0	-1,567
Sub-total	0	-5,016	-36	0	-5,052
CDEL	1,997	89,257	53,877	39,373	184,504
IFR	1997	89257	53877	39373	184504

Notes

(1) System Capital Ringfenced. Although classified as system capital, an element of resource in this category is ring-fenced for use to replace Reinforced Aerated Autoclaved Concrete (RAAC) planks that form the roof of a significant element of the West Suffolk Foundation Trust site at Bury St. Edmunds. The replacement of RAAC planks is an ongoing project, likely to complete in 2024 and is a short-term measure designed to sustain a safe estate until such time as the construction of a replacement hospital in Bury St. Edmunds is complete. Bury St. Edmunds has been identified as a priority new build within the ‘40 new hospitals’ UK Government commitment.

(2) System Capital Discretionary. SNEE operates a Board approved policy for the allocation of discretionary system capital. In summary (to simplify); allocation is determined in two stages.

(a) A minimum capital allocation, determined by in year depreciation charges, with a view to ensuring that organisations are able to maintain the condition of the current estate/assets.

(b) Additional capital allocations (the balance) allocated on an equitable basis between provider unit in accordance with criteria determined by the ICB in conjunction with NHSE (patient safety, clinical quality etc.) These capital allocations are designed to address system development priorities.

In 2023/24 the ICB determined that the value of additional capital allocations was of a magnitude (small) that meant that a separate bidding/prioritisation/allocation process was not required. As a result, the additional allocation was apportioned in the same ratio as the minimum capital allocation.

Provider organisations as individual statutory organisations determine how this resource is allocated to individual projects. The organisational risk register is a key tool in the determinant of project priorities, to avoid interruption of service caused by asset failure. Priorities often change during the course of the year, as unforeseen asset replacement is identified. The close alignment of system capital allocations and depreciation charge figures means that there is little or no scope for enhancing or improving assets.

(3) NHS England allowed the submission of system capital plans that could be ‘over-committed’ by up to 5%, to reflect that capital slippage is commonplace. In the event that there are no further allocations of system capital in 2023/24 and depending on the financial performance against target of other systems, there maybe a need to reduce planned system capital expenditure by £1.821m (2.9%).

(4) West Suffolk Hospital at Bury St. Edmunds is a designated priority hospital within the Governments New Hospital initiative. The Trust is in the process of developing the business case required for approval before construction can begin in earnest. The capital plan includes a small national programme allocation to support elements of the project that can be capitalised before approval of the final business case. It is possible that significant additional allocation may be made available to WSFT prior to the end of this financial year to commence enabling work, subject to Treasury approval of the final business case.

(5) East Suffolk and North Essex NHS FT are developing the full business case for the replacement of their electronic patient record system (the outline business case has been approved). Although the full case has yet to be approved, it is expected that approval will be granted, with expenditure commencing in Q4 2023/24 and continuing and completing in 2024/25.

(6) East Suffolk and North Essex NHS FT submitted plans for reconfiguration of acute services shortly after its formation from the predecessor Colchester and Ipswich hospital Trusts. The development of an elective surgical hub at Colchester was a key element of that business case. In addition to reconfiguration funding, the Trust has successfully applied for Elective Recovery/Targeted Investment Fund (TIF) resource to enable the further expansion of the hub to increase elective capacity, in doing so creating the largest elective orthopaedic centre in Western Europe. Elements of both project and resource have been deferred from 2022/23, as global supply chain interruption (notable relating to steel) delayed construction. The development, which addresses multiple system priorities (sustainability of services, development of elective capacity, protection of non-elective capacity and financial viability) is due for completion early financial year 2024/25.

(7) West Suffolk Hospital NHS FT has submitted a business case, not yet approved, for the development of an elective surgical hub at Newmarket. The modular construction of the facility means that early approval of the case would enable construction in Q4 20223/24. The project was included in system plans under the guidance of the NHS England Regional Office. The project would bring further ring-fenced elective capacity, reducing the impact of increased non-elective activity notably in the winter months.

(8) Diagnostic Centres. The capital plan for East Suffolk and North Essex FT includes projects for the incremental development of the community diagnostic hub facility at Clacton, in addition to investment in PACS digital imaging and storage capacity across the Trust. The plan also includes the development of a community diagnostic Hub at Newmarket the business case for which has been approved; it would support the development of the elective surgical hub being at the same location. The plan may be amended to include the development of a further community diagnostic facility within Ipswich. A bid for resource was submitted after 4th May 2023. As approval is still pending it has been excluded from the current version of the plan.

(9) East of England Ambulance Service NHS Trust, Other. This category includes the routine reprovision, using lease facilities of the emergency and non-emergency ambulance service fleet.

Introduction

ICBs are required to publish an annual plan for the proposed use of capital resources, in line with a timetable determined by NHS England. Plans are required to cover all NHS hosted organisations within the ICS area for the year 1st April 2022 to 31st March 2023. For Suffolk and North East Essex this includes:

• NHS Ipswich and East Suffolk Clinical Commissioning Group (IES CCG) 1st April 2022-30th June 2022
• NHS North East Essex Clinical Commissioning Group (NEE CCG) 1st April 2022-30th June 2022
• NHS West Suffolk Clinical Commissioning Group (WS CCG) 1st April 2022-30th June 2022
• NHS Suffolk and North East Essex Integrated Care Board (SNEE ICB), 1st July 2022- 31st March 2023. (The small capital allocation and programme for the commissioning organisations noted above is combined).
• East Suffolk and North Essex NHS Foundation Trust (ESNEFT)
• West Suffolk NHS Foundation Trust) (WSFT)
• East of England Ambulance Service NHS Trust (EEAST)

Capital Plans support the delivery of 2022/23 operational planning and strategic objectives. Key issues addressed in the development of this plan include:

• Development of diagnostic capacity.
• Development of elective capacity, whilst maintaining urgent care capacity.
• Reconfiguration of services to support the delivery of clinically safe and affordable services.
• Maintenance of a safe estate.

The plan comprises two key elements:

1) System Capital. Also known as ‘business as usual’ capital. The system capital resource is determined at ICS level and allocated to organisations by the ICB in collaboration with hosted partner organisations.

2) Strategic or other (national) programme capital allocations. Allocations are determined by national programme teams, normally as a result of a bidding process submitted by provider organisations with the approval of the ICB.

The plan represents an initial or provisional plan that may be amended during the course of the year by additional allocations. The plan included in this paper is aligned to the (provider) Financial Planning Returns (FPR) and (system) Integrated Planning Returns (IPR) submitted on 20th June 2022.

	SNEE ICB	ESNEFT	WSFT	EEAST	Total	Notes
	£000s	£000s	£000s	£000s	£000s
System Capital
System Capital: Ringfenced	0	0	21,000	0	21,000	1
System Capital: Discretionary	1,787	23,619	9,250	10,618	45,274	2
System Capital	1,787	23,619	30,250	10,618	66,274
Strategic/Other Programme Capital
New Hospital	0	0	1,060	0	1,060	3
Acute Reconfiguration	0	48,090	0	0	48,090	4
Elective Recovery	0	17,258	0	0	17,258	5
Diagnostic	0	4,519	0	0	4,519	6
Ambulance Fleet Replacement	0	0	0	19,027	19,027	7
Other	0	11,621	1,891	0	13,512
Sub-total	0	81,488	2,951	19,027	103,466
Gross Capital Expenditure	1,787	105,107	33,201	29,645	169,740
Memo
Disposals	0	-2,048	0	0	-2,048
Grants	0	-3,369	0	0	-3,369
Lease/PFI/other technical adjustements	0	-423	0	0	-423
Sub-total	0	-5,840	0	0	-5,840
CDEL	1,787	99,267	33,201	29,645	163,900
IFR	1787	99267	33201	29645	163900

Notes

(1) System Capital Ringfenced. Although classified as system capital, an element of resource in this category is ring-fenced for use to replace Reinforced Aerated Autoclaved Concrete (RAAC) planks that form the roof of a significant element of the West Suffolk Foundation Trust site at Bury St. Edmunds. The replacement of RAAC planks is an ongoing project, likely to complete in 2024 and is a short-term measure designed to sustain a safe estate until such time as the construction of a replacement hospital in Bury St. Edmunds is complete. Bury St. Edmunds has been identified as a priority new build within the ‘40 new hospitals’ UK Government commitment. The Trust has applied for additional funding for the RAAC project to allow acceleration and earlier completion.

(2) System Capital Discretionary. SNEE operates a Board approved policy for the allocation of discretionary system capital. In summary (to simplify); allocation is determined in two stages.

(a) A minimum capital allocation, determined by in year depreciation charges, with a view to ensuring that organisations are able to maintain the condition of the current estate/asset base.

(b) Additional capital allocations (the balance) allocated on an equitable basis between provider unit in accordance with criteria determined by the ICB in conjunction with NHSE (patient safety, clinical quality etc.). These capital allocations are designed to address system development priorities.

In 2022/23 the ICB undertook a limited exercise with system partners to determine the priorities additional capital allocation budget as minimum capital allocation accounted for approximately 90% of the system capita allocation. The shortage of capital over several years resulted in the conclusion that patient safety/the need to accelerate asset replacement to prevent loss of capacity through breakdown was the primary determinant for resource allocation. Whilst individual projects were prioritised, the resultant allocation of capital remained close to the proportions of capital that would have been allocated if all system capital had been allocated on the basis of in year depreciation charge estimates.

Provider organisations as individual statutory organisations determine how this resource is allocated to individual projects. The organisational risk register is a key tool in the determinant of project priorities. Priorities often change during the course of the year, as unforeseen asset replacement is identified.

(3) West Suffolk Hospital at Bury St. Edmunds is a designated priority hospital within the Governments New Hospital initiative. The Trust is in the process of developing the business case required for approval before construction can begin in earnest. The capital plan includes a small national programme allocation to support elements of the project that can be capitalised before approval of the final business case.

(4) East Suffolk and North Essex NHS FT submitted plans for reconfiguration of acute services shortly after its formation from the predecessor Colchester and Ipswich hospital Trusts. The development of an elective surgical hub at Colchester was a key element of that business case. Significant elements of that project are scheduled to be undertaken in 2022/23.

(5) East Suffolk and North Essex NHS FT has successfully applied for Elective Recovery/Targeted Investment Fund (TIF) resource to enable the further expansion of the elective hub (4 above) to increase elective capacity, in doing so creating the largest elective orthopaedic centre in Western Europe.

(6) Diagnostic Centres. The capital plan for East Suffolk and North Essex FT includes projects for the initial stages of development of a community diagnostic hub facility at Clacton.

(7) East of England Ambulance Service NHS Trust. This category includes the routine reprovision, using lease facilities of the emergency and non-emergency ambulance service fleet.