E-mail To Ian Hamilton Chief Executive Informing Him Of Financial Problems
From:
Ian Perkin
Sent:
20 February 2002 16:22
To:
Ian Hamilton
Cc:
Kevin Harbottle; Phil Sargeaunt
Subject:
Budget Setting and CRP's For 2002/03
Ian
As
promised pleased my find thoughts on the actions that the organisation needs to
take to avoid me having to report a multi-million pound overspend at the
beginning of the financial year.
1).
1% CRP requirement for Regionally approved recovery plan.
Currently
we have no proposals of any significance from General Mangers to contribute
towards the target of £1.8 million. The
Service Centre Finance Managers have raised this issue at all budget meetings
but the response has been in general that they are unable to achieve any
substantial savings, without affecting the Trust's income budget by an
equivalent or greater amount.
2).
Underspent budgets in 2001/02 (underspent at 30/11/2001).
Service
Centre Finance Managers have explained at all budget setting meetings, that if
the Trust's financial recovery plan is to be achieved, all the projected
underspends must either be maintained into the new financial year, or if this is
not the case ,alternative savings must be identified from other budgets to
compensate for what otherwise will be an unfunded increased in Trust
expenditure. The main current
problems in this area are the vacant posts in Professional and Scientific and
the vacant consultant and nursing posts associated with opening further ITU
beds. The value of the
problem is potentially at least £1.5 million.
3).
Additional CRP of 2.75%
As
we have so far failed to identify the 1% CRP needed for the achievement of the
financial recovery plan. Asking General Managers to find any further CRP's is a
somewhat academic exercise. As the
Region has already suggested the best route to achieve these savings will be to
practice cost containment, rather than to look for further savings, this would
appear to be the only route we can sensibly follow.
Currently the list of cost pressures that we have sent out to purchasers
amounts to £3.143 million and this represents a real risk to the Trusts
financial viability.
4).
Service Developments Proceeding At Risk.
A
number of new service developments that have yet to be approved by purchasers
are apparently proceeding at risk. The
value of these items currently having to be budgeted by the Service Centre
Finance Managers is at least £1.5 million.
If the commissioners do not approve these developments this will be
another major threat to the Trusts financial stability next year.
5).
Other Budgetary Pressures
Individual
budget holders are flagging up to the Service Centre Finance Managers.
These include a large number of posts that have been upgraded on the
strength of reviews carried out by the HR Directorate, but for which managers
have not identified any funding for, despite advice from Service Centre Managers
that this needs to be done. As a
further example, the increased use of anti-fungal drugs in Clinical Haemotology
is also giving rise to the need to increase budgets, quite outside any of the
costs we have identified to the purchasers in the SAFF round. The potential risk to the Trust of these "other"
pressures is at least £0.5 million.
6).
Potential Overspend That Would Have To Be Reported At Month 1 2002/03
If
no action is take to address the issues above, it is possible that when the
month 1 financial monitoring report is produced, the Trust could be seen to be
heading for an end of year overspend of approximately £ 8.4 million.
To
try to ensure that we will not end up in a situation where we are significantly
overspending budgets from month 1, it would be helpful if at this stage, to the
reinforce the budget setting process, if you could write out to General Managers
and set out the following clear rules which you expect them to follow and will
hold them accountable for, should they fail to comply with them:-
A).
The Chief Executive sees it as an absolute imperative that General
Managers work with their Service Centre Finance Managers to be able present to
the Director of Finance and IT a balanced set of budget proposals during the
week commencing 18th March. The
definition of balance being, budgets which when totalled do not exceed the cash
limit total issued by the Deputy Director of Finance.
There will be no further round of meetings to discuss the content of the
budgets and the Chief Executive will hold each General Manger and Corporate
Director individually accountable for any failure to achieve a balanced budget.
B).
It is an imperative that all General Managers submit proposals to their
Service Centre Finance Managers for costing, that will achieve the absolute
requirement of a 1% CRP.
C).
Where underspent budgets cannot be maintained in the financial year 2002/03.
It is an absolute requirement that alternative and equivalent savings
must be achieved and given to Service Centre Finance Managers to include with in
the budgets for each Service Centre.
D).
If General Managers are unable to contribute any sensible proposals towards the
additional CRP target of 2.75%, they will be required to re-visit and formulate
plans or proposals that will allow for the elimination of all unfunded cost
pressures related to their Service Centres.
E).
General Managers should understand that they should not proceed at risk with any
further Service Developments. In
future developments of this nature should only be put in place when it is clear
that the commissioners have provided the relevant funding source.
F).
Where "other budgetary pressures" are identified as part of the
budget setting process, these must be treated in the same way as non-recurring
underspends, in that the General Managers must identify alternative savings to
provide a source of funding. An
alternative method of dealing with the issue would be to formulate proposals to
contain the pressure and remove it as a budgetary problem.
To
conclude I would just suggest that future to our discussion at the Executive
Group on Monday, I remain sceptical as to the ability of Trust managers to
deliver any cost savings of any significance unless they are really pushed.
I would therefore suggest that the best way forward would be for you and
I to clear time in our diaries to meet with each of the Service Centre Chairs,
together with their General Managers and Service Centre Finance Managers to ask
them to justify on a post by post and function by function basis all the
resources that they say they need as an absolute minimum to sustain the current
level of service that they provide.
Ian