DRAFT annual accounts for 2018/19. · Title: Draft 2018/19 Annual Accounts Executive Summary The Trust submitted its unaudited 2018/19 annual accounts to NHS Improvement and to our

Report to: Board of Directors (Public)

Paper number: 2.1

Report for: Decision

Date: 23 May 2019

Report author: Mike Piercy, Deputy Director of Finance

Report of: David Wragg, Finance Director

FoI status: Report can be made public

Strategic priorities supported:

Early and effective Intervention / Helping People to live well

Cultural pillar supported:

We are empowered

Title: Draft 2018/19 Annual Accounts

Executive Summary

The Trust submitted its unaudited 2018/19 annual accounts to NHS Improvement and to our statutory auditors, Grant Thornton, in line with the national submission deadline, on the 24 April 2018.

The accounts have been subject to a financial audit by Grant Thornton, and reported their findings separately to the Audit & Risk Committee earlier this week on Monday 20 May 2019. The Chair of the Audit & Risk Committee will provide feedback from that meeting later on this meeting’s agenda.

The attached accounts are presented to the Board of Directors for approval.

Recommendation to the Board

The Board of Directors is requested to:

APPROVE and ADOPT the draft annual accounts for 2018/19.DRAFT

Risk Implications

Achievement of planned outturn position.

Finance Implications

Delivery of financial plan.

Equality and Diversity Impact / Single Equalities Impact Assessment

N/A

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1. Headline financial summary

On the 24 April, in line with national deadlines, the Trust submitted a full set of unauditedannual accounts to NHS Improvement and our external auditors, Grant Thornton. The auditof the accounts commenced on the 25 April.

The accounts presented to this Committee are for approval and will be presented to theBoard of Directors for adoption on the 23 May, prior to submission on or before the 29 May.

The unaudited accounts show that the Trust reported an overall deficit of £0.4m. Thisposition includes £4.0m of Provider Sustainability Funding awarded to the Trust, non-recurrently, by NHSI.

2. Underlying Position

The Trust was required to record a number of material, technical accounting adjustmentsresulting from events that took place during March 2019 and which have impacted on theoverall financial position. These are:

The Trust commissioned the District Valuer to undertake a revaluation of its estate, inorder that any fluctuations in property prices, particularly in relation to uncertaintyaround the UK’s withdrawal from the EU, are reflected accurately in the year endaccounts. The report was received by the Trust during March, and as a result there hasbeen a net increase to the revaluation reserve of £0.5m. A further, small impairmentwas charged against the I&E.

The Trust has disposed of the Hoo. The disposal proceeds were £5.5m, resulting in aprofit on sale of £2.8m, which is noticeably below the level included in the revised planof £4.6m.

The Trust purchased a plot of land, with its associated buildings, from WhittingtonHealth for £12.5m. However, the Trust recognises that the transaction price was basedon an assessment of the property as an asset that will provide an opportunity for theTrust to progress the SPH re development, while the value in the books in March 2019should represent an ‘in use’ valuation. As a result, the Trust deemed it prudent toimmediately commission an additional professional revaluation. This revaluation wascarried out by the District Valuer and valued the land and buildings at £5.9m, resulting inan impairment charge of £6.7m.

When the above technical adjustments are excluded, the underlying financial position is adjusted to £0.6m deficit. The following table summarises these movements:

Summary of Underlying Position

2018/19

£000

Reported deficit -428

Adjusted for:

Profit on sale of the Hoo -2,827

Impairment of Whittington property 6,650

Other impairments 22

PSF earned -4,008

Adjusted deficit after technical adjustments -591

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The Trust was set a revised control total of £2.5m surplus, which includes profit on sale. When the profit on sale is included in the above position, the performance is adjusted upwards to £2.2m surplus.

While this is only marginally short of the control total, it is pertinent that the profit on sale is non recurrent and that the recurrent position is well short of the required level. This position therefore poses a challenge to the Trust run rates in 2019/20 and beyond.

3. Month 12 Headlines

There has been an improvement in underlying performance from £2.0m deficit (at month 11) to £0.6m. The key factors underlying this improvement are outlined below:

The transfer, after discussions with the Trust’s auditors of c£0.7m from revenue to capital regarding costs associated with the SPH re-development project.

An increase in temporary staff costs (both bank and agency) from £0.7m in month 11 to £0.9m in month 12.

Month 12 saw a small increase in private placement costs during month 12 offset by an increase in Ruby Ward income.

There was a reduction in PDC dividends payable of £0.9m resulting primarily from the asset purchases, disposals and re valuations described above.

The main drivers behind the deficit position remain high outplacement costs and pressures on wards in both the Acute and R&R divisions. These factors have been consistent throughout the financial year, despite improvements in outplacement costs since December.

As at month 12, the Trust had spent £2.5m on agency, which is above the annual ceiling of £2.2m set by NHSI, and high spend on temporary staffing is a key driver behind overspends on Acute and R&R wards. It is pertinent that in recent months, the Trust’s monthly spend has predominantly been within the monthly ceiling, which is an indication of the work the Trust put in in the earlier part of the year to reduce agency spend, however month 12 saw a significant increase in both bank and agency costs.

4. Income and Expenditure

The following table shows a breakdown of the Trust’s income and expenditure position for 2018/19:

Total income increased from £150.1m to £151.9m during 2018/19, which is an increase of £1.7m. The main reasons underlying this movement are:

Statement of Comprehensive Income

2018/19 2017/18

£000 £000

Operating income from patient care activities 118,216 114,201

Other operating income 33,694 35,979

Operating expenses (151,736) (141,336)

Operating surplus/(deficit) from continuing operations 174 8,844

Finance income 291 111

Finance expenses (5) (8)

PDC dividends payable (3,715) (3,907)

Net finance costs (3,429) (3,804)

Other gains / (losses) 2,827 5,940

Share of profit / (losses) of associates / joint arrangements - -

Gains / (losses) arising from transfers by absorption - -

Corporation tax expense - -

Surplus / (deficit) for the year from continuing operations (428) 10,980

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i. An increase in CCG income of £3.2m predominantly resulting from the application of national non-tariff inflator and growth applied to existing local contracts of £1.2m and an increase in overseas visitor income of £1.2m.

ii. Funding for the additional Agenda for Change pay award of £1.5m was received in 2018/19.

iii. Reduced income from local authorities of £0.7m, mainly as a result of funding cuts from LBC.

iv. The receipt of £4.0m core, incentive and bonus PSF income which was a reduction of £2.0m on 2017/18 levels.

Expenditure has increased by £10.4m during the year, however £6.3m of this is as a result of higher fixed asset impairments recognised during month 12 than was the case in 2017/18. Pay costs have increased by £5.4m to £104.0m, as a result of the relatively large 2018/19 pay awards, incremental drift and an increase in average staff numbers from 2,052 whole time equivalents (WTE) to 2,103 WTE (which is an increase of over 2%).

5. Balance Sheet

The below table shows the Trust’s balance sheet as at 31 March 2019:

The Trust retained a strong balance sheet through 2018/19, with closing cash balances of £40.5m. This is a decrease in year, with receipts from the disposal of the Hoo being outweighed by the Trust’s net trading deficit, as well as capital spend that included the

Statement of Financial Position

31 March

2019

31 March

2018

£000 £000

Non-current assets

Property, plant and equipment 122,550 118,060

Total non-current assets 122,550 118,060

Current assets

Inventories 59 -

Receivables 17,490 14,172

Other investments / financial assets - -

Other assets - -

Non-current assets held for sale / assets in disposal groups - -

Cash and cash equivalents 40,550 48,226

Total current assets 58,099 62,398

Current liabilities

Trade and other payables (16,167) (16,202)

Borrowings - -

Other financial liabilities - -

Provisions (338) (478)

Other liabilities (70) (23)

Liabilities in disposal groups - -

Total current liabilities (16,575) (16,703)

Total assets less current liabilities 164,074 163,755

Non-current liabilities

Trade and other payables - -

Borrowings - -

Other financial liabilities - -

Provisions (38) (38)

Other liabilities - -

Total non-current liabilities (38) (38)

Total assets employed 164,036 163,717

Financed by

Public dividend capital 60,565 60,348

Revaluation reserve 48,932 50,632

Income and expenditure reserve 54,539 52,737

Total taxpayers' equity 164,036 163,717

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purchase of a property from Whittington Health. As at 31 March although the Trust has accounted for STF income (£4.0m), no cash had been received.

Overall the Trust’s fixed asset base increased from £118.1m to £122.6m over the last financial year. Capital spend for 2018/19 out-turned at £17.5m, compared to a depreciation charge of £4.2m, while the Hoo was disposed of during the year. The Trust also had a number of revaluations and impairments of its property, plant and equipment. This resulted from revaluations of the Trust’s estate by the District Valuer and had a net downwards impact on the Trust’s fixed assets of £6.1m.

6. Summary

The Trust has experienced an extremely challenging year and has returned an overall deficit of £0.4m deficit, which is adjusted to £0.6m deficit after technical adjustments relating to asset valuations, disposals and PSF income awarded.

This Board is asked, after consideration of the findings presented by our auditors and feedback from the Audit & Risk Committee, to approve and adopt the draft accounts for 2018/19.

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Camden and Islington NHS Foundation Trust

Annual accounts for the year ended 31 March 2019

DRAFT

Signed …………………………………………….

Name Angela McNabJob title Chief ExecutiveDate 23 May 2019

Foreword to the accounts


These accounts, for the year ended 31 March 2019, have been prepared by Camden and Islington NHS Foundation Trust in accordance with paragraphs 24 & 25 of Schedule 7 within the National Health Service Act 2006.


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Statement of Comprehensive Income

2018/19 2017/18

Note £000 £000Operating income from patient care activities 3 118,216 114,201 Other operating income 4 33,694 35,979 Operating expenses 7, 9 (151,736) (141,336)

Operating surplus/(deficit) from continuing operations 174 8,844

Finance income 12 291 111 Finance expenses 13 (5) (8)PDC dividends payable (3,715) (3,907)

Net finance costs (3,429) (3,804)Other gains / (losses) 14 2,827 5,940 Share of profit / (losses) of associates / joint arrangements 21 - - Gains / (losses) arising from transfers by absorption 46 - - Corporation tax expense - -

Surplus / (deficit) for the year from continuing operations (428) 10,980

Surplus / (deficit) on discontinued operations and the gain / (loss) on disposal of discontinued operations 15 - -

Surplus / (deficit) for the year (428) 10,980

Other comprehensive incomeWill not be reclassified to income and expenditure:

Impairments 8 (2,381) (1,785)Revaluations 19 2,911 573 Share of comprehensive income from associates and joint ventures 21 - - Fair value gains/(losses) on equity instruments designated at fair value through OCI 22 - - Other recognised gains and losses - - Remeasurements of the net defined benefit pension scheme liability / asset 38 - - Other reserve movements - -

May be reclassified to income and expenditure when certain conditions are met:Fair value gains/(losses) on financial assets mandated at fair value through OCI 22 - - Recycling gains/(losses) on disposal of financial assets mandated at fair value through OCI 14 - - Foreign exchange gains / (losses) recognised directly in OCI - -

Total comprehensive income / (expense) for the period 103 9,768


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Statement of Financial Position

31 March 2019

31 March 2018

Note £000 £000Non-current assets

Intangible assets 16 - - Property, plant and equipment 17 122,550 118,060 Investment property 20 - - Investments in associates and joint ventures 21 - - Other investments / financial assets 22 - - Receivables 25 - - Other assets 26 - -

Total non-current assets 122,550 118,060 Current assets

Inventories 24 59 - Receivables 25 17,490 14,172 Other investments / financial assets 22 - - Other assets 26 - - Non-current assets held for sale / assets in disposal groups 27 - - Cash and cash equivalents 28 40,550 48,226

Total current assets 58,099 62,398 Current liabilities

Trade and other payables 29 (16,167) (16,202)Borrowings 32 - - Other financial liabilities 30 - - Provisions 34 (338) (478)Other liabilities 31 (70) (23)Liabilities in disposal groups 27 - -

Total current liabilities (16,575) (16,703)Total assets less current liabilities 164,074 163,755 Non-current liabilities

Trade and other payables 29 - - Borrowings 32 - - Other financial liabilities 30 - - Provisions 34 (38) (38)Other liabilities 31 - -

Total non-current liabilities (38) (38)Total assets employed 164,036 163,717

Financed by Public dividend capital 60,565 60,348 Revaluation reserve 48,932 50,632 Financial assets reserve - - Other reserves - - Income and expenditure reserve 54,539 52,737

Total taxpayers' equity 164,036 163,717

The notes on pages 7 to 54 form part of these accounts.

Signed …………………………………………….

Name Angela McNabPosition Chief ExecutiveDate 23 May 2019


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Statement of Changes in Equity for the year ended 31 March 2019

Public dividend

capitalRevaluation

reserve

Income and expenditure

reserve Total£000 £000 £000 £000

Taxpayers' equity at 1 April 2018 - brought forward 60,348 50,632 52,737 163,717 Impact of implementing IFRS 15 on 1 April 2018 - - - - Impact of implementing IFRS 9 on 1 April 2018 - - - - Surplus/(deficit) for the year - - (428) (428)Transfers by absorption: transfers between reserves - - - - Transfer from revaluation reserve to income and expenditure reserve for impairments arising from consumption of economic benefits - - - - Other transfers between reserves - - - - Impairments - (2,381) - (2,381)Revaluations - 2,911 - 2,911 Transfer to retained earnings on disposal of assets - (2,230) 2,230 - Share of comprehensive income from associates and joint ventures - - - - Fair value gains/(losses) on financial assets mandated at fair value through OCI - - - - Fair value gains/(losses) on equity instruments designated at fair value through OCI - - - - Recycling gains/(losses) on disposal of financial assets mandated at fair value through OCI - - - - Other recognised gains and losses - - - -

Remeasurements of the defined net benefit pension scheme liability/asset - - - - Public dividend capital received 217 - - 217 Public dividend capital repaid - - - - Public dividend capital written off - - - - Other movements in public dividend capital in year - - - - Other reserve movements - - - -

Taxpayers' equity at 31 March 2019 60,565 48,932 54,539 164,036

Statement of Changes in Equity for the year ended 31 March 2018

Public dividend

capitalRevaluation

reserve

Income and expenditure

reserve Total£000 £000 £000 £000

Taxpayers' equity at 1 April 2017 - brought forward 60,348 52,640 40,961 153,949 Prior period adjustment - - - -

Taxpayers' equity at 1 April 2017 - restated 60,348 52,640 40,961 153,949 Surplus/(deficit) for the year - - 10,980 10,980 Transfers by absorption: transfers between reserves - - - - Transfer from revaluation reserve to income and expenditure reserve for impairments arising from consumption of economic benefits - - - - Other transfers between reserves - - - - Impairments - (1,785) - (1,785)Revaluations - 573 - 573 Transfer to retained earnings on disposal of assets - (796) 796 - Share of comprehensive income from associates and joint ventures - - - - Fair value gains/(losses) on available-for-sale financial investments - - - - Recycling gains/(losses) on available-for-sale financial investments - - - - Other recognised gains and losses - - - -

Remeasurements of the defined net benefit pension scheme liability/asset - - - - Public dividend capital received - - - - Public dividend capital repaid - - - - Public dividend capital written off - - - - Other movements in public dividend capital in year - - - - Other reserve movements - - - -

Taxpayers' equity at 31 March 2018 60,348 50,632 52,737 163,717


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Information on reserves

Public dividend capitalPublic dividend capital (PDC) is a type of public sector equity finance based on the excess of assets over liabilities at the time of establishment of the predecessor NHS organisation. Additional PDC may also be issued to trusts by the Department of Health and Social Care. A charge, reflecting the cost of capital utilised by the trust, is payable to the Department of Health as the public dividend capital dividend.

Revaluation reserveIncreases in asset values arising from revaluations are recognised in the revaluation reserve, except where, and to the extent that, they reverse impairments previously recognised in operating expenses, in which case they are recognised in operating income. Subsequent downward movements in asset valuations are charged to the revaluation reserve to the extent that a previous gain was recognised unless the downward movement represents a clear consumption of economic benefit or a reduction in service potential.

Income and expenditure reserveThe balance of this reserve is the accumulated surpluses and deficits of the Trust.


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Statement of Cash Flows2018/19 2017/18

Note £000 £000 Cash flows from operating activities

Operating surplus / (deficit) 174 8,844 Non-cash income and expense:

Depreciation and amortisation 7.1 4,230 5,055 Net impairments 8 6,672 333 Income recognised in respect of capital donations 4 - - (Increase) / decrease in receivables and other assets (2,700) (4,538)(Increase) / decrease in inventories (59) - Increase / (decrease) in payables and other liabilties (502) (6,128)Increase / (decrease) in provisions (145) 258 Tax (paid) / received - - Operating cash flows from discontinued operations - - Other movements in operating cash flows - -

Net cash generated from / (used in) operating activities 7,670 3,824 Cash flows from investing activities

Interest received 281 98 Purchase and sale of financial assets / investments - - Purchase of intangible assets - - Sales of intangible assets - - Purchase of property, plant, equipment and investment property (16,957) (4,525)Sales of property, plant, equipment and investment property 5,436 8,194 Receipt of cash donations to purchase capital assets - - Prepayment of PFI capital contributions - - Investing cash flows of discontinued operations - - Cash movement from acquisitions / disposals of subsidiaries - -

Net cash generated from / (used in) investing activities (11,240) 3,767 Cash flows from financing activities

Public dividend capital received 217 - Public dividend capital repaid - - Movement on loans from the Department of Health and Social Care - - Movement on other loans - - Other capital receipts - - Interest on loans - - Other interest - (7)Interest paid on finance lease liabilities - - Interest paid on PFI, LIFT and other service concession obligations - - PDC dividend (paid) / refunded (4,323) (3,884)Financing cash flows of discontinued operations - - Cash flows from (used in) other financing activities - -

Net cash generated from / (used in) financing activities (4,106) (3,891)Increase / (decrease) in cash and cash equivalents (7,676) 3,700 Cash and cash equivalents at 1 April - brought forward 48,226 44,526

Prior period adjustments - Cash and cash equivalents at 1 April - restated 48,226 44,526

Cash and cash equivalents transferred under absorption accounting 46 - - Unrealised gains / (losses) on foreign exchange - -

Cash and cash equivalents at 31 March 28.1 40,550 48,226


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Notes to the Accounts

Note 1 Accounting policies and other information

Note 1.1 Basis of preparation

NHS Improvement, in exercising the statutory functions conferred on Monitor, has directed that the financial statements of the Trust shall meet the accounting requirements of the Department of Health and Social Care Group Accounting Manual (GAM), which shall be agreed with HM Treasury. Consequently, the following financial statements have been prepared in accordance with the GAM 2018/19 issued by the Department of Health and Social Care. The accounting policies contained in the GAM follow International Financial Reporting Standards to the extent that they are meaningful and appropriate to the NHS, as determined by HM Treasury, which is advised by the Financial Reporting Advisory Board. Where the GAM permits a choice of accounting policy, the accounting policy that is judged to be most appropriate to the particular circumstances of the Trust for the purpose of giving a true and fair view has been selected. The particular policies adopted are described below. These have been applied consistently in dealing with items considered material in relation to the accounts

Note 1.1.1 Accounting conventionThese accounts have been prepared under the historical cost convention modified to account for the revaluation of property, plant and equipment, intangible assets, inventories and certain financial assets and financial liabilities.

Note 1.1.2 Going concernThese accounts have been prepared on a going concern basis.

After making enquiries, giving due consideration to histroical financial trends and strong cash balances, while recognising the impact that asset sales have had on the in year performance, the directors have a reasonable expectation that the Trust has adequate resources to continue in operational existence for the foreseeable future.

Note 1.2 Critical judgements in applying accounting policies

The following are the judgements, apart from those involving estimations (see below) that management has made in the process of applying the trust accounting policies and that have the most significant effect on the amounts recognised in the financial statements.

The Trust was required to make a number of reasonable subjective judgements regarding i) the provisions for credit notes and impairments of receivables, which are based on management’s judgement (and taking into account the national Agreement of Balances exercise and ongoing discussions with counter parties) regarding the best estimate of the amount expected to be not at risk and recoverable, ii) accruals, which are based on management's best judgement of likely receivables and payables and iii) asset valuations which are based on professional advice.

Note 1.2.1 Sources of estimation uncertaintyThe following are assumptions about the future and other major sources of estimation uncertainty that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year:

The Trust was required to make reasonable subjective judgements regarding the valuation of property assets, which are based on a valuation undertaken by an independent valuer, and was prepared in accordance with the required standards.

Note 1.3 Interests in other entities

Subsidiary entities are those over which the foundation trust has the power to exercise control or a dominant influence so as to gain economic or other benefits. The income, expenses, assets, liabilities, equity and reserves of subsidiaries are consolidated in full into the appropriate financial statement lines.

Associate entities are those over which the foundation trust has the power to exercise a significant influence. Associate entities are recognised in the foundation trust’s financial statements using the equity method. The investment is initially recognised at cost. It is increased or decreased subsequently to reflect the foundation trust’s share of the entity’s profit or loss or other gains and losses (e.g. revaluation gains on the entity’s property, plant and equipment) following acquisition. It is also reduced when any distribution e.g. share dividends are received by the foundation trust from the associate. Associates which are classified as held for sale are measured at the lower of their carrying amount and ‘fair value less costs to sell’.


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Joint ventures are separate entities over which the Trust has joint control with one or more other parties. The meaning of control is the same as that for subsidiaries. Joint ventures are accounted for by consolidating the Trust’s share of the transactions, assets, liabilities, equity and reserves of the entity.

Joint operations are activities which are carried on with one or more other parties but which are not performed through a separate entity. The foundation trust includes within its financial statements its share of the activities, assets and liabilities.

Note 1.4.1 Revenue from contracts with customersWhere income is derived from contracts with customers, it is accounted for under IFRS 15. The GAM expands the definition of a contract to include legislation and regulations which enables an entity to receive cash or another financial asset that is not classified as a tax by the Office of National Statistics (ONS). As directed by the GAM, the transition to IFRS 15 in 2018/19 has been completed in accordance with paragraph C3 (b) of the Standard: applying the Standard retrospectively but recognising the cumulative effects at the date of initial application (1 April 2018).

Revenue in respect of goods/services provided is recognised when (or as) performance obligations are satisfied by transferring promised goods/services to the customer and is measured at the amount of the transaction price allocated to those performance obligations. At the year end, the Trust accrues income relating to performance obligations satisfied in that year. Where the Trust’s entitlement to consideration for those goods or services is unconditional a contract receivable will be recognised. Where entitlement to consideration is conditional on a further factor other than the passage of time, a contract asset will be recognised. Where consideration received or receivable relates to a performance obligation that is to be satisfied in a future period, the income is deferred and recognised as a contract liability.

Revenue from NHS contractsThe main source of income for the Trust is contracts with commissioners for health care services. A performance obligation relating to delivery of a spell of health care is generally satisfied over time as healthcare is received and consumed simultaneously by the customer as the Trust performs it. The customer in such a contract is the commissioner, but the customer benefits as services are provided to their patient. Even where a contract could be broken down into separate performance obligations, healthcare generally aligns with paragraph 22(b) of the Standard entailing a delivery of a series of goods or services that are substantially the same and have a similar pattern of transfer. At the year end, the Trust accrues income relating to activity delivered in that year, where a patient care spell is incomplete.

Revenue from research contractsWhere research contracts fall under IFRS 15, revenue is recognised as and when performance obligations are satisfied. For some contracts, it is assessed that the revenue project constitutes one performance obligation over the course of the multi-year contract. In these cases it is assessed that the Trust’s interim performance does not create an asset with alternative use for the Trust, and the Trust has an enforceable right to payment for the performance completed to date. It is therefore considered that the performance obligation is satisfied over time, and the Trust recognises revenue each year over the course of the contract.

Note 1.4.2 Revenue grants and other contributions to expenditureGovernment grants are grants from government bodies other than income from commissioners or trusts for the provision of services. Where a grant is used to fund revenue expenditure it is taken to the Statement of Comprehensive Income to match that expenditure.

The value of the benefit received when accessing funds from the the Government's apprenticeship service is recognised as income at the point of receipt of the training service. Where these funds are paid directly to an accredited training provider, the corresponding notional expense is also recognised at the point of recognition for the benefit.

Note 1.4.3 Other incomeIncome from the sale of non-current assets is recognised only when all material conditions of sale have been met, and is measured as the sums due under the sale contract.

Note 1.5 Expenditure on employee benefits

Short-term employee benefitsSalaries, wages and employment-related payments such as social security costs and the apprenticeship levy are recognised in the period in which the service is received from employees. The cost of annual leave entitlement earned but not taken by employees at the end of the period is recognised in the financial statements to the extent that employees are permitted to carry-forward leave into the following period.


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Pension costs NHS Pension SchemePast and present employees are covered by the provisions of the NHS Pension Scheme. The scheme is an unfunded, defined benefit scheme that covers NHS employers, general practices and other bodies, allowed under the direction of Secretary of State, in England and Wales. The scheme is not designed in a way that would enable employers to identify their share of the underlying scheme assets and liabilities. Therefore, the scheme is accounted for as though it is a defined contribution scheme. Employer's pension cost contributions are charged to operating expenses as and when they become due.

Additional pension liabilities arising from early retirements are not funded by the scheme except where the retirement is due to ill-health. The full amount of the liability for the additional costs is charged to the operating expenses at the time the trust commits itself to the retirement, regardless of the method of payment.

Local Government Superannuation SchemeThis is a defined benefit pension scheme. The Trust has agreed to be guided by the actuarial advice given to the London Borough of Islington with regard to the appropriate level of contribution it makes to the pension fund and accounts for this in year.

Note 1.6 Expenditure on other goods and services

Expenditure on goods and services is recognised when, and to the extent that they have been received, and is measured at the fair value of those goods and services. Expenditure is recognised in operating expenses except where it results in the creation of a non-current asset such as property, plant and equipment.


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7 Note 1.7 Property, plant and equipment

7 Note 1.7.1 Recognition

Property, plant and equipment is capitalised where:

• it is held for use in delivering services or for administrative purposes• it is probable that future economic benefits will flow to, or service potential be provided to, the trust• it is expected to be used for more than one financial year • the cost of the item can be measured reliably• the item has cost of at least £5,000, or• collectively, a number of items have a cost of at least £5,000 and individually have cost of more than £250, where the assets are functionally interdependent, had broadly simultaneous purchase dates, are anticipated to have similar disposal dates and are under single managerial control.

Where a large asset, for example a building, includes a number of components with significantly different asset lives, eg, plant and equipment, then these components are treated as separate assets and depreciated over their own useful lives.

7 Note 1.7.2 Measurement

ValuationAll property, plant and equipment assets are measured initially at cost, representing the costs directly attributable to acquiring or constructing the asset and bringing it to the location and condition necessary for it to be capable of operating in the manner intended by management.

All assets are measured subsequently at valuation. Assets which are held for their service potential and are in use (ie operational assets used to deliver either front line services or back office functions) are measured at their current value in existing use. Assets that were most recently held for their service potential but are surplus with no plan to bring them back into use are measured at fair value where there are no restrictions on sale at the reporting date and where they do not meet the definitions of investment properties or assets held for sale.

Revaluations of property, plant and equipment are performed with sufficient regularity to ensure that carrying values are not materially different from those that would be determined at the end of the reporting period. Current values in existing use are determined as follows:

• Land and non-specialised buildings – market value for existing use • Specialised buildings – depreciated replacement cost on a modern equivalent asset basis.

Assets held at depreciated replacement cost have been valued on an alternative site basis where this would meet the location requirements of the services being provided.

Properties in the course of construction for service or administration purposes are carried at cost, less any impairment loss. Cost includes professional fees. Assets are revalued and depreciation commences when the assets are brought into use.

IT equipment, transport equipment, furniture and fittings, and plant and machinery that are held for operational use are valued at depreciated historic cost where these assets have short useful lives or low values or both, as this is not considered to be materially different from current value in existing use.

Subsequent expenditureSubsequent expenditure relating to an item of property, plant and equipment is recognised as an increase in the carrying amount of the asset when it is probable that additional future economic benefits or service potential deriving from the cost incurred to replace a component of such item will flow to the enterprise and the cost of the item can be determined reliably. Where a component of an asset is replaced, the cost of the replacement is capitalised if it meets the criteria for recognition above. The carrying amount of the part replaced is de-recognised. Other expenditure that does not generate additional future economic benefits or service potential, such as repairs and maintenance, is charged to the Statement of Comprehensive Income in the period in which it is incurred.


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DepreciationItems of property, plant and equipment are depreciated over their remaining useful lives in a manner consistent with the consumption of economic or service delivery benefits. Freehold land is considered to have an infinite life and is not depreciated.

Property, plant and equipment which has been reclassified as ‘held for sale’ cease to be depreciated upon the reclassification. Assets in the course of construction and residual interests in off-Statement of Financial Position PFI contract assets are not depreciated until the asset is brought into use or reverts to the trust, respectively.

Revaluation gains and lossesRevaluation gains are recognised in the revaluation reserve, except where, and to the extent that, they reverse a revaluation decrease that has previously been recognised in operating expenses, in which case they are recognised in operating income.

Revaluation losses are charged to the revaluation reserve to the extent that there is an available balance for the asset concerned, and thereafter are charged to operating expenses.

Gains and losses recognised in the revaluation reserve are reported in the Statement of Comprehensive Income as an item of ‘other comprehensive income’.

ImpairmentsIn accordance with the GAM, impairments that arise from a clear consumption of economic benefits or of service potential in the asset are charged to operating expenses. A compensating transfer is made from the revaluation reserve to the income and expenditure reserve of an amount equal to the lower of (i) the impairment charged to operating expenses; and (ii) the balance in the revaluation reserve attributable to that asset before the impairment.

An impairment that arises from a clear consumption of economic benefit or of service potential is reversed when, and to the extent that, the circumstances that gave rise to the loss is reversed. Reversals are recognised in operating expenditure to the extent that the asset is restored to the carrying amount it would have had if the impairment had never been recognised. Any remaining reversal is recognised in the revaluation reserve. Where, at the time of the original impairment, a transfer was made from the revaluation reserve to the income and expenditure reserve, an amount is transferred back to the revaluation reserve when the impairment reversal is recognised.Other impairments are treated as revaluation losses. Reversals of ‘other impairments’ are treated as revaluation gains.

7 Note 1.7.3 De-recognitionAssets intended for disposal are reclassified as ‘held for sale’ once all of the following criteria are met:

• the asset is available for immediate sale in its present condition subject only to terms which are usual and customary for such sales;• the sale must be highly probable ie:

- management are committed to a plan to sell the asset- an active programme has begun to find a buyer and complete the sale- the asset is being actively marketed at a reasonable price- the sale is expected to be completed within 12 months of the date of classification as ‘held for sale’ and- the actions needed to complete the plan indicate it is unlikely that the plan will be abandoned or significant changes made to it.

Following reclassification, the assets are measured at the lower of their existing carrying amount and their ‘fair value less costs to sell’. Depreciation ceases to be charged. Assets are de-recognised when all material sale contract conditions have been met.

Property, plant and equipment which is to be scrapped or demolished does not qualify for recognition as ‘held for sale’ and instead is retained as an operational asset and the asset’s useful life is adjusted. The asset is de-recognised when scrapping or demolition occurs.

7 Note 1.7.4 Donated and grant funded assets Donated and grant funded property, plant and equipment assets are capitalised at their fair value on receipt. The donation/grant is credited to income at the same time, unless the donor has imposed a condition that the future economic benefits embodied in the grant are to be consumed in a manner specified by the donor, in which case, the donation/grant is deferred within liabilities and is carried forward to future financial years to the extent that the condition has not yet been met.

The donated and grant funded assets are subsequently accounted for in the same manner as other items of property, plant and equipment.


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8 Note 1.7.5 Private Finance Initiative (PFI) and Local Improvement Finance Trust (LIFT) transactions

8 Note 1.7.6 Useful lives of property, plant and equipment

Min life Max lifeYears Years

Land n/a n/aBuildings, excluding dwellings 16 78 Dwellings n/a n/aPlant & machinery 1 9 Transport equipment n/a n/aInformation technology 1 8 Furniture & fittings 1 12

8 Note 1.8 Intangible assets

8 Note 1.8.1 Recognition

SoftwareSoftware which is integral to the operation of hardware, eg an operating system, is capitalised as part of the relevant item of property, plant and equipment. Software which is not integral to the operation of hardware, eg application software, is capitalised as an intangible asset.

PFI and LIFT transactions which meet the IFRIC 12 definition of a service concession, as interpreted in HM Treasury’s FReM , are accounted for as ‘on-Statement of Financial Position’ by the trust. In accordance with IAS 17, the underlying assets are recognised as property, plant and equipment, together with an equivalent finance lease liability.

Subsequently, the assets are accounted for as property, plant and equipment and/or intangible assets as appropriate.

The annual contract payments are apportioned between the repayment of the liability, a finance cost, the charges for services and lifecycle replacement of components of the asset. The element of the annual unitary payment increase due to cumulative indexation is treated as contingent rent and is expensed as incurred.

The service charge is recognised in operating expenses and the finance cost is charged to finance costs in the Statement of Comprehensive Income.

Useful lives reflect the total life of an asset and not the remaining life of an asset. The range of useful lives are shown in the table below:

Finance-leased assets (including land) are depreciated over the shorter of the useful life or the lease term, unless the trust expects to acquire the asset at the end of the lease term in which case the assets are depreciated in the same manner as owned assets above.

Intangible assets are non-monetary assets without physical substance which are capable of being sold separately from the rest of the trust’s business or which arise from contractual or other legal rights. They are recognised only where it is probable that future economic benefits will flow to, or service potential be provided to, the trust and where the cost of the asset can be measured reliably.

Internally generated intangible assetsInternally generated goodwill, brands, mastheads, publishing titles, customer lists and similar items are not capitalised as intangible assets.

Expenditure on research is not capitalised.Expenditure on development is capitalised only where all of the following can be demonstrated:• the project is technically feasible to the point of completion and will result in an intangible asset for sale or use• the trust intends to complete the asset and sell or use it• the trust has the ability to sell or use the asset• how the intangible asset will generate probable future economic or service delivery benefits, eg, the presence of a market for it or its output, or where it is to be used for internal use, the usefulness of the asset;• adequate financial, technical and other resources are available to the trust to complete the development and sell or use the asset and• the trust can measure reliably the expenses attributable to the asset during development.


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8 Note 1.8.2 Measurement Intangible assets are recognised initially at cost, comprising all directly attributable costs needed to create, produce and prepare the asset to the point that it is capable of operating in the manner intended by management.

Subsequently intangible assets are measured at current value in existing use. Where no active market exists, intangible assets are valued at the lower of depreciated replacement cost and the value in use where the asset is income generating. Revaluations gains and losses and impairments are treated in the same manner as for property, plant and equipment. An intangible asset which is surplus with no plan to bring it back into use is valued at fair value under IFRS 13, if it does not meet the requirements of IAS 40 of IFRS 5.

Intangible assets held for sale are measured at the lower of their carrying amount or “fair value less costs to sell”.

AmortisationIntangible assets are amortised over their expected useful lives in a manner consistent with the consumption of economic or service delivery benefits.


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9 Note 1.9 Inventories

Inventories are valued at the lower of cost and net realisable value. The cost of inventories is measured using the first in, first out (FIFO) method.

# Note 1.10 Investment properties

Investment properties are measured at fair value. Changes in fair value are recognised as gains or losses in income/expenditure.

# Note 1.11 Cash and cash equivalents

Cash is cash in hand and deposits with any financial institution repayable without penalty on notice of not more than 24 hours. Cash equivalents are investments that mature in 3 months or less from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value.

In the Statement of Cash Flows, cash and cash equivalents are shown net of bank overdrafts that are repayable on demand and that form an integral part of the Trust’s cash management. Cash, bank and overdraft balances are recorded at current values.

# Note 1.12 Financial assets and financial liabilities

# Note 1.12.1 RecognitionFinancial assets and financial liabilities arise where the Trust is party to the contractual provisions of a financial instrument, and as a result has a legal right to receive or a legal obligation to pay cash or another financial instrument. The GAM expands the definition of a contract to include legislation and regulations which give rise to arrangements that in all other respects would be a financial instrument and do not give rise to transactions classified as a tax by ONS.

This includes the purchase or sale of non-financial items (such as goods or services), which are entered into in accordance with the Trust’s normal purchase, sale or usage requirements and are recognised when, and to the extent which, performance occurs, ie, when receipt or delivery of the goods or services is made.

# Note 1.12.2 Classification and measurementFinancial assets and financial liabilities are initially measured at fair value plus or minus directly attributable transaction costs except where the asset or liability is not measured at fair value through income and expenditure. Fair value is taken as the transaction price, or otherwise determined by reference to quoted market prices or valuation techniques.

Financial assets are classified and subsequently measured at amortised cost, fair value through income and expenditure or fair value through other comprehensive income.

Financial liabilities are classified and subsequently measured at amortised cost or fair value through income and expenditure.

Financial assets and financial liabilities at amortised costFinancial assets and financial liabilities at amortised cost are those held with the objective of collecting contractual cash flows and where cash flows are solely payments of principal and interest. This includes cash equivalents, contract and other receivables, trade and other payables, rights and obligations under lease arrangements and loans receivable and payable.

After initial recognition, these financial assets and financial liabilities are measured at amortised cost using the effective interest method less any impairment (for financial assets). The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial asset or financial liability to the gross carrying amount of a financial asset or to the amortised cost of a financial liability.

Interest revenue or expense is calculated by applying the effective interest rate to the gross carrying amount of a financial asset or amortised cost of a financial liability and recognised in the Statement of Comprehensive Income and a financing income or expense.


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Financial assets and financial liabilities at fair value through income and expenditureFinancial assets measured at fair value through profit or loss are those that are not otherwise measured at amortised cost or at fair value through other comprehensive income. This category also includes financial assets and liabilities acquired principally for the purpose of selling in the short term (held for trading) and derivatives. Derivatives which are embedded in other contracts, but which are separable from the host contract are measured within this category. Movements in the fair value of financial assets and liabilities in this category are recognised as gains or losses in the Statement of Comprehensive income.

Impairment of financial assetsFor all financial assets measured at amortised cost including lease receivables, contract receivables and contract assets, the Trust recognises an allowance for expected credit losses.

The Trust adopts the simplified approach to impairment for contract and other receivables, contract assets and lease receivables, measuring expected losses as at an amount equal to lifetime expected losses. For other financial assets, the loss allowance is initially measured at an amount equal to 12-month expected credit losses (stage 1) and subsequently at an amount equal to lifetime expected credit losses if the credit risk assessed for the financial asset significantly increases (stage 2).

For financial assets that have become credit impaired since initial recognition (stage 3), expected credit losses at the reporting date are measured as the difference between the asset’s gross carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate.

Expected losses are charged to operating expenditure within the Statement of Comprehensive Income and reduce the net carrying value of the financial asset in the Statement of Financial Position.

# Note 1.12.3 DerecognitionFinancial assets are de-recognised when the contractual rights to receive cash flows from the assets have expired or the Trust has transferred substantially all the risks and rewards of ownership.

Financial liabilities are de-recognised when the obligation is discharged, cancelled or expires.


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# Note 1.13 Leases

Leases are classified as finance leases when substantially all the risks and rewards of ownership are transferred to the lessee. All other leases are classified as operating leases.

# Note 1.13.1 The trust as lessee Finance leasesWhere substantially all risks and rewards of ownership of a leased asset are borne by the trust, the asset is recorded as property, plant and equipment and a corresponding liability is recorded. The value at which both are recognised is the lower of the fair value of the asset or the present value of the minimum lease payments, discounted using the interest rate implicit in the lease.

The asset and liability are recognised at the commencement of the lease. Thereafter the asset is accounted for an item of property plant and equipment.

The annual rental charge is split between the repayment of the liability and a finance cost so as to achieve a constant rate of finance over the life of the lease. The annual finance cost is charged to Finance Costs in the Statement of Comprehensive Income. The lease liability, is de-recognised when the liability is discharged, cancelled or expires.

Operating leasesOperating lease payments are recognised as an expense on a straight-line basis over the lease term. Lease incentives are recognised initially as a liability and subsequently as a reduction of rentals on a straight-line basis over the lease term.

Contingent rentals are recognised as an expense in the period in which they are incurred.

Leases of land and buildingsWhere a lease is for land and buildings, the land component is separated from the building component and the classification for each is assessed separately.

# Note 1.13.2 The trust as lessorFinance leasesAmounts due from lessees under finance leases are recorded as receivables at the amount of the Trust's net investment in the leases. Finance lease income is allocated to accounting periods to reflect a constant periodic rate of return on the trust's net investment outstanding in respect of the leases.

Operating leasesRental income from operating leases is recognised on a straight-line basis over the term of the lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised as an expense on a straight-line basis over the lease term.

# Note 1.14 Provisions

The Trust recognises a provision where it has a present legal or constructive obligation of uncertain timing or amount; for which it is probable that there will be a future outflow of cash or other resources; and a reliable estimate can be made of the amount. The amount recognised in the Statement of Financial Position is the best estimate of the resources required to settle the obligation. Where the effect of the time value of money is significant, the estimated risk-adjusted cash flows are discounted using the discount rates published and mandated by HM Treasury.

Clinical negligence costsNHS Resolution operates a risk pooling scheme under which the trust pays an annual contribution to NHS Resolution, which, in return, settles all clinical negligence claims. Although NHS Resolution is administratively responsible for all clinical negligence cases, the legal liability remains with the Trust. The total value of clinical negligence provisions carried by NHS Resolution on behalf of the trust is disclosed at note 34.2 but is not recognised in the Trust’s accounts.

Non-clinical risk pooling The trust participates in the Property Expenses Scheme and the Liabilities to Third Parties Scheme. Both are risk pooling schemes under which the trust pays an annual contribution to NHS Resolution and in return receives assistance with the costs of claims arising. The annual membership contributions, and any “excesses” payable in respect of particular claims are charged to operating expenses when the liability arises.


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# Note 1.15 Contingencies

Contingent assets (that is, assets arising from past events whose existence will only be confirmed by one or more future events not wholly within the entity’s control) are not recognised as assets, but are disclosed in note 35 where an inflow of economic benefits is probable.

Contingent liabilities are not recognised, but are disclosed in note 35, unless the probability of a transfer of economic benefits is remote.

Contingent liabilities are defined as:

• possible obligations arising from past events whose existence will be confirmed only by the occurrence of one or more uncertain future events not wholly within the entity’s control; or• present obligations arising from past events but for which it is not probable that a transfer of economic benefits will arise or for which the amount of the obligation cannot be measured with sufficient reliability.

# Note 1.16 Public dividend capital

Public dividend capital (PDC) is a type of public sector equity finance based on the excess of assets over liabilities at the time of establishment of the predecessor NHS organisation. HM Treasury has determined that PDC is not a financial instrument within the meaning of IAS 32.

At any time, the Secretary of State can issue new PDC to, and require repayments of PDC from, the Trust. PDC is recorded at the value received.

A charge, reflecting the cost of capital utilised by the trust, is payable as public dividend capital dividend. The charge is calculated at the rate set by HM Treasury (currently 3.5%) on the average relevant net assets of the trust during the financial year. Relevant net assets are calculated as the value of all assets less the value of all liabilities, except for (i) donated assets (including lottery funded assets), (ii) average daily cash balances held with the Government Banking Services (GBS) and National Loans Fund (NLF) deposits, excluding cash balances held in GBS accounts that relate to a short-term working capital facility, and (iii) any PDC dividend balance receivable or payable.

In accordance with the requirements laid down by the Department of Health and Social Care (as the issuer of PDC), the dividend for the year is calculated on the actual average relevant net assets as set out in the “pre-audit” version of the annual accounts. The dividend thus calculated is not revised should any adjustment to net assets occur as a result the audit of the annual accounts.

# Note 1.17 Value added tax

Most of the activities of the trust are outside the scope of VAT and, in general, output tax does not apply and input tax on purchases is not recoverable. Irrecoverable VAT is charged to the relevant expenditure category or included in the capitalised purchase cost of fixed assets. Where output tax is charged or input VAT is recoverable, the amounts are stated net of VAT.

# Note 1.18 Corporation tax

Based on an analysis of its operations and the nature of its activities, the Trust has determined that it is has no corporation tax liability.


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# Note 1.19 Foreign exchange

The functional and presentational currency of the trust is sterling.

A transaction which is denominated in a foreign currency is translated into the functional currency at the spot exchange rate on the date of the transaction.

Where the trust has assets or liabilities denominated in a foreign currency at the Statement of Financial Position date:

• monetary items are translated at the spot exchange rate on 31 March• non-monetary assets and liabilities measured at historical cost are translated using the spot exchange rate at the date of the transaction and• non-monetary assets and liabilities measured at fair value are translated using the spot exchange rate at the date the fair value was determined.

Exchange gains or losses on monetary items (arising on settlement of the transaction or on re-translation at the Statement of Financial Position date) are recognised in income or expense in the period in which they arise.

Exchange gains or losses on non-monetary assets and liabilities are recognised in the same manner as other gains and losses on these items.

# Note 1.20 Third party assets

Assets belonging to third parties (such as money held on behalf of patients) are not recognised in the accounts since the trust has no beneficial interest in them. However, they are disclosed in a separate note to the accounts in accordance with the requirements of HM Treasury’s FReM .

# Note 1.21 Losses and special payments

Losses and special payments are items that Parliament would not have contemplated when it agreed funds for the health service or passed legislation. By their nature they are items that ideally should not arise. They are therefore subject to special control procedures compared with the generality of payments. They are divided into different categories, which govern the way that individual cases are handled. Losses and special payments are charged to the relevant functional headings in expenditure on an accruals basis, including losses which would have been made good through insurance cover had the trust not been bearing their own risks (with insurance premiums then being included as normal revenue expenditure).

However the losses and special payments note is compiled directly from the losses and compensations register which reports on an accrual basis with the exception of provisions for future losses.

# Note 1.22 Gifts

Gifts are items that are voluntarily donated, with no preconditions and without the expectation of any return. Gifts include all transactions economically equivalent to free and unremunerated transfers, such as the loan of an asset for its expected useful life, and the sale or lease of assets at below market value.


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# Note 1.23 Transfers of functions [to / from] [other NHS bodies / local government bodies]

For functions that have been transferred to the trust from another NHS / local government body, the assets and liabilities transferred are recognised in the accounts as at the date of transfer. The assets and liabilities are not adjusted to fair value prior to recognition.

For property plant and equipment assets and intangible assets, the cost and accumulated depreciation / amortisation balances from the transferring entity’s accounts are preserved on recognition in the trust’s accounts. Where the transferring body recognised revaluation reserve balances attributable to the assets, the trust makes a transfer from its income and expenditure reserve to its revaluation reserve to maintain transparency within public sector accounts.

For functions that the trust has transferred to another NHS / local government body, the assets and liabilities transferred are de-recognised from the accounts as at the date of transfer. The net loss / gain corresponding to the net assets/ liabilities transferred is recognised within expenses / income, but not within operating activities. Any revaluation reserve balances attributable to assets de-recognised are transferred to the income and expenditure reserve.

# Note 1.24 Early adoption of standards, amendments and interpretations

No new accounting standards or revisions to existing standards have been early adopted in 2018/19.

# Note 1.25 Standards, amendments and interpretations in issue but not yet effective or adopted

As required by IAS 8, trusts should disclose any standards, amendments and interpretations that have been issued but are not yet effective or adopted for the public sector Are listed below:

-IFRS 16 Leases. Application required for accounting periods beginning on or after 1 January 2019, but not yet adopted by the FReM: early adoption is not therefore permitted.-IFRS 17 Insurance Contracts. Application required for accounting periods beginning on or after 1 January 2021, but not yet adopted by the FReM: early adoption is not therefore permitted.


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Note 2 Operating Segments

The Trust threfore has no distinct and separate operating segments.

The Trust considers its' activities constitute a single segment since they are provided wholly in the UK, are subject to similar risks and rewards and all the assets are managed as one central pot.

Furthermore, the majority of the Trust's operating income is secured in the form of block contracts that do not distinguish between divisions, and financial performance to the Board does not devolve income down to operational teams.


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Note 3 Operating income from patient care activities

All income from patient care activities relates to contract income recognised in line with accounting policy 1.4.1

Note 3.1 Income from patient care activities (by nature) 2018/19 2017/18£000 £000

Mental health servicesCost and volume contract income 6,773 3,857 Block contract income 97,136 96,879 Clinical partnerships providing mandatory services (including S75 agreements) 12,765 13,465 Clinical income for the secondary commissioning of mandatory services - - Other clinical income from mandatory services - - Agenda for Change pay award central funding 1,542 -

Total income from activities 118,216 114,201

Note 3.2 Income from patient care activities (by source)

Income from patient care activities received from: 2018/19 2017/18£000 £000

NHS England 891 925 Clinical commissioning groups 98,300 95,085 Department of Health and Social Care 1,542 32 Other NHS providers 4,169 4,170 NHS other - - Local authorities 12,765 13,465 Non-NHS: private patients - - Non-NHS: overseas patients (chargeable to patient) - - Injury cost recovery scheme - - Non NHS: other 549 524

Total income from activities 118,216 114,201 Of which:

Related to continuing operations 118,216 114,201 Related to discontinued operations - -


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3 Note 3.3 Overseas visitors (relating to patients charged directly by the provider)

4 Note 4 Other operating income2018/19 2017/18

£000 £000 Other operating income from contracts with customers:

Research and development (contract) 1,622 1,602 Education and training (excluding notional apprenticeship levy income) 19,663 19,605 Non-patient care services to other bodies - - Provider sustainability / sustainability and transformation fund income (PSF / STF) 4,008 6,040 Income in respect of employee benefits accounted on a gross basis 1,009 1,002 Other contract income* 5,047 5,468

Other non-contract operating incomeResearch and development (non-contract) - - Education and training - notional income from apprenticeship fund - - Receipt of capital grants and donations - - Charitable and other contributions to expenditure - - Support from the Department of Health and Social Care for mergers - - Rental revenue from finance leases - - Rental revenue from operating leases 2,345 2,262 Amortisation of PFI deferred income / credits - - Other non-contract income - -

Total other operating income 33,694 35,979 Of which:


*The most significant item recorded under Other Income is £2,326k of estates recharges resulting from the Trust's total facilities management contract (£2,610k in 2017/18)

The Trust had no overseas visitor income relating to patients charged directly in 2018/19 or during the prior year, 2017/18.


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5 Note 5.1 Additional information on revenue from contracts with customers recognised in the period2018/19

£000

23

Revenue recognised from performance obligations satisfied (or partially satisfied) in previous periods -

5 Note 5.2 Transaction price allocated to remaining performance obligations

5 Note 5.3 Income from activities arising from commissioner requested services

2018/19 2017/18£000 £000

Income from services designated as commissioner requested services 93,238 92,026 Income from services not designated as commissioner requested services 24,978 22,175

Total 118,216 114,201

5 Note 5.4 Profits and losses on disposal of property, plant and equipment

6 Note 6 Fees and charges

HM Treasury requires disclosure of fees and charges income. The Trust had no income from charges to service users (where income from that service exceeds £1 million) in 2018/19 or for the prior year 2017/18.

Revenue recognised in the reporting period that was included in within contract liabilities at the previous period end

The Trust has exercised the practical expedients permitted by IFRS 15 paragraph 121 in preparing this disclosure. Revenue from (i) contracts with an expected duration of one year or less and (ii) contracts where the trust recognises revenue directly corresponding to work done to date is not disclosed.

Under the terms of its provider licence, the Trust is required to analyse the level of income from activities that has arisen from commissioner requested and non-commissioner requested services. Commissioner requested services are defined in the provider license and are services that commissioners believe would need to be protected in the event of provider failure. This information is provided in the table below:

The Trust made one disposal during 2018/19 which resulted in a profit on sale of £2,827k (2 disposals in 217/18 with profits on sale of £5,940k)

The Trust has no revenue from existing contracts allocated to remaining performance onligations, expected to be recognised in future years.


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Note 7.1 Operating expenses2018/19 2017/18

£000 £000 Purchase of healthcare from NHS and DHSC bodies 163 153 Purchase of healthcare from non-NHS and non-DHSC bodies 2,940 4,771 Purchase of social care 2,092 4,243 Staff and executive directors costs 104,049 98,647 Remuneration of non-executive directors 123 127 Supplies and services - clinical (excluding drugs costs) 296 348 Supplies and services - general 11,023 10,781 Drug costs (drugs inventory consumed and purchase of non-inventory drugs) 3,125 2,659 Inventories written down 31 - Consultancy costs 499 1,018 Establishment 1,099 1,280 Premises 4,108 4,258 Transport (including patient travel) 671 502 Depreciation on property, plant and equipment 4,230 5,055 Amortisation on intangible assets - - Net impairments 6,672 333 Movement in credit loss allowance: contract receivables / contract assets 5 - Movement in credit loss allowance: all other receivables and investments - (11)Increase/(decrease) in other provisions - - Change in provisions discount rate(s) (1) (3)Audit fees payable to the external auditor

audit services- statutory audit 45 45 other auditor remuneration (external auditor only) 5 5

Internal audit costs 87 108 Clinical negligence 520 497 Legal fees 197 231 Insurance 89 90 Research and development - - Education and training 696 439 Rentals under operating leases 816 353 Early retirements 180 - Redundancy (155) 378 Car parking & security - - Hospitality 17 18 Losses, ex gratia & special payments 56 106 Grossing up consortium arrangements - - Other services, eg external payroll 1,179 1,072 Other* 6,879 3,833

Total 151,736 141,336 Of which:


*Other expenditure includes £4,329k relating to sub contracted healthcare contracts (£2,562k in 2017/18)


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Note 7.2 Other auditor remuneration2018/19 2017/18

£000 £000 Other auditor remuneration paid to the external auditor:

1. Audit of accounts of any associate of the trust - - 2. Audit-related assurance services 5 5 3. Taxation compliance services - - 4. All taxation advisory services not falling within item 3 above - - 5. Internal audit services - - 6. All assurance services not falling within items 1 to 5 - - 7. Corporate finance transaction services not falling within items 1 to 6 above - - 8. Other non-audit services not falling within items 2 to 7 above - -

Total 5 5

Note 7.3 Limitation on auditor's liability

Note 8 Impairment of assets2018/19 2017/18

£000 £000 Net impairments charged to operating surplus / deficit resulting from:

Loss or damage from normal operations - - Over specification of assets - - Abandonment of assets in course of construction - - Unforeseen obsolescence - - Loss as a result of catastrophe - - Changes in market price - - Other 6,672 333

Total net impairments charged to operating surplus / deficit 6,672 333 Impairments charged to the revaluation reserve 2,381 1,785

Total net impairments 9,053 2,118

The limitation on auditor's liability for external audit work is £2m (2017/18: £2m).

The most significant impairment incurred by the Trust in 2018/19 related to property purchased from Whittington Health in March 2019. The property was formally re-valued upon acquisition, by the District Valuer, which resulted in an impairment of £6,650k.


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Note 9 Employee benefits2018/19 2017/18

Total Total£000 £000

Salaries and wages 76,314 71,894 Social security costs 7,894 7,429 Apprenticeship levy 349 335 Employer's contributions to NHS pensions 9,355 8,872 Pension cost - other - - Other post employment benefits - - Other employment benefits - - Termination benefits - - Temporary staff (including agency) 10,137 10,117

Total gross staff costs 104,049 98,647 Recoveries in respect of seconded staff - -

Total staff costs 104,049 98,647 Of which

Costs capitalised as part of assets - -

Note 9.1 Retirements due to ill-health

During 2018/19 there was 1 early retirement from the Trust agreed on the grounds of ill-health (none in the year ended 31 March 2018). The estimated additional pension liabilities of these ill-health retirements is £234k (£0k in 2017/18).

The cost of these ill-health retirements will be borne by the NHS Business Services Authority - Pensions Division.


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Note 10 Pension costs

Past and present employees are covered by the provisions of the two NHS Pension Schemes. Details of the benefits payable and rules of the Schemes can be found on the NHS Pensions website at www.nhsbsa.nhs.uk/pensions. Both are unfunded defined benefit schemes that cover NHS employers, GP practices and other bodies, allowed under the direction of the Secretary of State in England and Wales. They are not designed to be run in a way that would enable NHS bodies to identify their share of the underlying scheme assets and liabilities. Therefore, each scheme is accounted for as if it were a defined contribution scheme: the cost to the NHS body of participating in each scheme is taken as equal to the contributions payable to that scheme for the accounting period.

In order that the defined benefit obligations recognised in the financial statements do not differ materially from those that would be determined at the reporting date by a formal actuarial valuation, the FReM requires that “the period between formal valuations shall be four years, with approximate assessments in intervening years”. An outline of these follows:

The latest assessment of the liabilities of the scheme is contained in the scheme actuary report, which forms part of the annual NHS Pension Scheme (England and Wales) Pension Accounts. These accounts can be viewed on the NHS Pensions website and are published annually. Copies can also be obtained from The Stationery Office. Actuarial valuations will set the employer contribution rate payable from April 2019 and will consider the cost of the Scheme relative to the employer cost cap. There are provisions in the Public Service Pension Act 2013 to adjust member benefits or contribution rates if the cost of the Scheme changes by more than 2% of pay. Subject to this "employer cost cap" assessment, any required revisions to member benefits or contribution rates will be determined by the Secretary of State for Health after consultation with the relevant stakeholders.

b) Accounting valuation

a) Full actuarial (funding) valuation The purpose of this valuation is to assess the level of liability in respect of the benefits due under the schemes (taking into account their recent demographic experience), and to recommend the contribution rates payable by employees and employers.

The Scheme Regulations allow for the level of contribution rates to be changed by the Secretary of State for Health, with the consent of HM Treasury, and consideration of the advice of the Scheme Actuary and appropriate employee and employer representatives as deemed appropriate.


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# Note 11 Operating leases

# Note 11.1 Camden and Islington NHS Foundation Trust as a lessor

2018/19 2017/18£000 £000

Operating lease revenueMinimum lease receipts 2,345 2,262 Contingent rent - - Other - -

Total 2,345 2,262

31 March 2019

31 March 2018

£000 £000 Future minimum lease receipts due:

- not later than one year; 2,070 2,127 - later than one year and not later than five years; 5,637 5,778 - later than five years. 1,690 2,841

Total 9,397 10,746

# Note 11.2 Camden and Islington NHS Foundation Trust as a lessee

2018/19 2017/18£000 £000

Operating lease expenseMinimum lease payments 816 353 Contingent rents - - Less sublease payments received - -

Total 816 353

31 March 2019

31 March 2018

£000 £000 Future minimum lease payments due:

- not later than one year; 407 345 - later than one year and not later than five years; 894 849 - later than five years. 203 328

Total 1,504 1,522 Future minimum sublease payments to be received - -

This note discloses income generated in operating lease agreements where Camden and Islington NHS Foundation Trust is the lessor.

This note discloses costs and commitments incurred in operating lease arrangements where Camden and Islington NHS Foundation Trust is the lessee.


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Note 12 Finance incomeFinance income represents interest received on assets and investments in the period.

2018/19 2017/18£000 £000

Interest on bank accounts 291 111 Interest income on finance leases - - Interest on other investments / financial assets - - Other finance income - -

Total finance income 291 111

Note 13.1 Finance expenditure

Finance expenditure represents interest and other charges involved in the borrowing of money.2018/19 2017/18

£000 £000 Interest expense:

Loans from the Department of Health and Social Care - - Other loans - - Overdrafts - - Finance leases - - Interest on late payment of commercial debt - 7

Total interest expense - 7 Unwinding of discount on provisions 5 1 Other finance costs - -

Total finance costs 5 8

Note 13.2 The late payment of commercial debts (interest) Act 1998 / Public Contract Regulations 2015

2018/19 2017/18£000 £000

Total liability accruing in year under this legislation as a result of late payments - - Amounts included within interest payable arising from claims under this legislation - 7 Compensation paid to cover debt recovery costs under this legislation - -

Note 14 Other gains / (losses)2018/19 2017/18

£000 £000 Gains on disposal of assets 2,827 5,940 Losses on disposal of assets - -

Total gains / (losses) on disposal of assets 2,827 5,940 Gains / (losses) on foreign exchange - - Fair value gains / (losses) on investment properties - - Fair value gains / (losses) on financial assets / investments - - Fair value gains / (losses) on financial liabilities - - Recycling gains / (losses) on disposal of financial assets mandated as fair value through OCI - -

Total other gains / (losses) 2,827 5,940

The Trust disposed of a 17 Lyndhurst Gardens ("The Hoo") in March 2019. The disposal price was £5,500k. The disposal resulted in a profit on sale of £2,827k that is disclosed in these accounts.


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Note 15 Discontinued operations

The Trust had no discontinued operations during 2018/19 or for the prior year 2017/18.


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Note 16.1 Intangible assets - 2018/19

The Trust had no intangible assets in 2018/19 or in 2017/18.


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DRAFT

Note 17.1 Property, plant and equipment - 2018/19

Land

Buildings excluding dwellings

Assets under construction

Plant & machinery

Transport equipment

Information technology

Furniture & fittings Total

£000 £000 £000 £000 £000 £000 £000 £000 Valuation/gross cost at 1 April 2018 - brought forward 27,054 84,999 811 127 - 13,653 1,199 127,843

Additions 9,150 3,430 4,635 - - 256 - 17,471 Impairments (6,651) (2,381) - - - - (28) (9,060)Reversals of impairments - - - - - - - - Revaluations 201 353 - - - - - 554 Reclassifications - 674 (732) - - 58 - - Transfers to / from assets held for sale - - - - - - - - Disposals / derecognition (804) (1,908) - - - - - (2,712)

Valuation/gross cost at 31 March 2019 28,950 85,167 4,714 127 - 13,967 1,171 134,096

Accumulated depreciation at 1 April 2018 - brought forward - 1,389 - 74 - 7,488 833 9,784

Provided during the year - 2,404 - 7 - 1,709 110 4,230 Impairments - (7) - - - - - (7)Reversals of impairments - - - - - - - - Revaluations - (2,357) - - - - - (2,357)Reclassifications - - - - - - - - Transfers to / from assets held for sale - - - - - - - - Disposals / derecognition - (103) - - - - - (103)

Accumulated depreciation at 31 March 2019 - 1,326 - 81 - 9,197 943 11,546

Net book value at 31 March 2019 28,950 83,841 4,714 47 - 4,771 228 122,550 Net book value at 1 April 2018 27,054 83,610 811 53 - 6,166 366 118,060


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Note 17.2 Property, plant and equipment - 2017/18

Land



Plant & machinery

Transport equipment



£000 £000 £000 £000 £000 £000 £000 £000 Valuation / gross cost at 1 April 2017 - as previously stated 28,068 97,740 1,550 125 - 16,014 3,816 147,313

Prior period adjustments * - (14,301) - 2 - (3,977) (2,793) (21,069)

Valuation / gross cost at 1 April 2017 - restated 28,068 83,439 1,550 127 - 12,037 1,023 126,244 Additions - 547 2,872 - - 1,042 - 4,461 Impairments - (2,181) - - - - - (2,181)Reversals of impairments - - - - - - - - Revaluations 86 487 - - - - - 573 Reclassifications - 2,861 (3,611) - - 574 176 - Transfers to / from assets held for sale (1,100) (154) - - - - - (1,254)Disposals / derecognition - - - - - - - -

Valuation/gross cost at 31 March 2018 27,054 84,999 811 127 - 13,653 1,199 127,843

Accumulated depreciation at 1 April 2017 - as previously stated - 12,561 - 53 - 9,794 3,453 25,861

Prior period adjustments * - (14,299) - 2 - (4,016) (2,756) (21,069)Accumulated depreciation at 1 April 2017 - restated - (1,738) - 55 - 5,778 697 4,792

Provided during the year - 3,190 - 19 - 1,710 136 5,055 Impairments - (63) - - - - - (63)Reversals of impairments - - - - - - - - Revaluations - - - - - - - - Reclassifications - - - - - - - - Transfers to / from assets held for sale - - - - - - - - Disposals / derecognition - - - - - - - -

Accumulated depreciation at 31 March 2018 - 1,389 - 74 - 7,488 833 9,784

Net book value at 31 March 2018 27,054 83,610 811 53 - 6,166 366 118,060 Net book value at 1 April 2017 28,068 85,177 1,550 72 - 6,260 326 121,453

*The Trust in agreement with audit completed a transfer between gross cost and accumlated depreciation for alignment purposes during 2018/19.


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Note 17.3 Property, plant and equipment financing - 2018/19

Land



Plant & machinery

Transport equipment



£000 £000 £000 £000 £000 £000 £000 £000 Net book value at 31 March 2019

Owned - purchased 28,950 83,841 4,714 47 - 4,771 228 122,550 Finance leased - - - - - - - - On-SoFP PFI contracts and other service concession arrangements - - - - - - - - Off-SoFP PFI residual interests - - - - - - - - Owned - government granted - - - - - - - - Owned - donated - - - - - - - -

NBV total at 31 March 2019 28,950 83,841 4,714 47 - 4,771 228 122,550

Note 17.4 Property, plant and equipment financing - 2017/18

Land



Plant & machinery

Transport equipment



£000 £000 £000 £000 £000 £000 £000 £000 Net book value at 31 March 2018

Owned - purchased 27,054 83,610 811 53 - 6,166 366 118,060 Finance leased - - - - - - - - On-SoFP PFI contracts and other service concession arrangements - - - - - - - - Off-SoFP PFI residual interests - - - - - - - - Owned - government granted - - - - - - - - Owned - donated - - - - - - - -

NBV total at 31 March 2018 27,054 83,610 811 53 - 6,166 366 118,060


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DRAFT

Note 18 Donations of property, plant and equipment

The Trust had no donated assets in 2018/19 or during the prior year 2017/18.

Note 19 Revaluations of property, plant and equipment

Note 20.1 Investment Property

Note 20.2 Investment property income and expenses

The Trust had no investment property income or expenses as at 31 March 2019 or during the prior year 2017/18.

The Trust's freehold land and buildings are stated at their revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. The fair value measurements of the Trust's freehold land and buildings were performed by Marcus Durkie a RICS qualified member on behalf of the District Valuer Services (a professionally qualified, independent valuer not related to the Trust) during 2018/19. The last full valuation of the Trust’s land and building assets was undertaken as at 1st February 2017 by the DVS (the specialist property arm of the Valuation Office Agency).The valuation conforms to International Valuation Standards and was based on recent market transactions on arm’s length terms for similar properties. The fair value of the freehold land was determined based on the market comparable approach that reflects recent transaction prices for similar properties. The fair value of the buildings was determined using the cost approach that reflects the cost to a market participant to construct assets of comparable utility and age, adjusted for obsolescence.

The Trust recognises that it is currently considering the location of future bed provision and is actively engaged in the development of the strategic transformation plan for the North Central London sector. In light of this, the Trust has decided that it is no longer appropriate to base the replacement cost for its inpatient sites (at St Pancras Hospital and at Highgate) on the existing locations, and instead has decided that, from 2015/16, it is appropriate to base the valuations on an alternative site basis, allowing for a potential future re location across the North Central London sector. The District Valuer has taken this into consideration when preparing the valuations.

The Trust had no investment property as at 31 March 2019 or during the prior year 2017/18.


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Note 21 Investments in associates and joint ventures

Note 22 Other investments / financial assets (non-current)

Note 22.1 Other investments / financial assets (current)

The Trust had no investment in associates or joint ventures as at 31 March 2019 or during the prior year 2017/18.

The Trust had no other investments as at 31 March 2019 or during the prior year 2017/18.

The Trust had no other investments as at 31 March 2019 or during the prior year 2017/18.


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# Note 23 Disclosure of interests in other entities

The Trust had no interests in other entities as at 31 March 2019 or during the prior year 2017/18.

# Note 24 Inventories

31 March 2019

31 March 2018

£000 £000 Drugs 59 - Work In progress - - Consumables - - Energy - - Other - -

Total inventories 59 - of which:Held at fair value less costs to sell - -

Inventories recognised in expenses for the year were £24k (2017/18: £0k). Write-down of inventories recognised as expenses for the year were £31k (2017/18: £0k).


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# Note 25.1 Trade receivables and other receivables

31 March 2019

31 March 2018

£000 £000 Current

Contract receivables* 10,783 Contract assets* 4,008 Trade receivables* 3,296 Capital receivables - - Accrued income* 8,477 Allowance for impaired contract receivables / assets* (105)Allowance for other impaired receivables - (100)Deposits and advances - - Prepayments (non-PFI) 918 541 PFI prepayments - capital contributions - - PFI lifecycle prepayments - - Interest receivable 25 15 Finance lease receivables - - PDC dividend receivable 871 263 VAT receivable 512 521 Corporation and other taxes receivable - - Other receivables 478 1,159

Total current trade and other receivables 17,490 14,172

Non-currentContract receivables* - Contract assets* - Trade receivables* - Capital receivables - - Accrued income* - Allowance for impaired contract receivables / assets* - Allowance for other impaired receivables - - Deposits and advances - - Prepayments (non-PFI) - - PFI prepayments - capital contributions - - PFI lifecycle prepayments - - Interest receivable - - Finance lease receivables - - VAT receivable - - Corporation and other taxes receivable - - Other receivables - -

Total non-current trade and other receivables - -

Of which receivables from NHS and DHSC group bodies: Current 12,192 11,366 Non-current - -

*Following the application of IFRS 15 from 1 April 2018, the Trust's entitlements to consideration for work performed under contracts with customers are shown separately as contract receivables and contract assets. This replaces the previous analysis into trade receivables and accrued income. IFRS 15 is applied without restatement therefore the comparative analysis of receivables has not been restated under IFRS 15.


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Note 25.2 Allowances for credit losses - 2018/19Contract

receivables and contract

assetsAll other

receivables£000 £000

Allowances as at 1 Apr 2018 - brought forward 100 Impact of implementing IFRS 9 (and IFRS 15) on 1 April 2018 100 (100)Transfers by absorption - - New allowances arising 39 - Changes in existing allowances - - Reversals of allowances (34) - Utilisation of allowances (write offs) - - Changes arising following modification of cotractual cash flows - - Foreign exchange and other changes - -

Allowances as at 31 Mar 2019 105 -

Note 25.3 Allowances for credit losses - 2017/18

All receivables

£000 Allowances as at 1 Apr 2017 - as previously stated 127

Allowances as at 1 Apr 2017 - restated 127 Transfers by absorption - Increase in provision (11)Amounts utilised (16)Unused amounts reversed -

Allowances as at 31 Mar 2018 100

IFRS 9 and IFRS 15 are adopted without restatement therefore this analysis is prepared in line with the requirements of IFRS 7 prior to IFRS 9 adoption. As a result it differs in format to the current period disclosure.


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DRAFT

# Note 25.4 Exposure to credit risk

The Trust has no material exposure to credit risk.

# Note 26 Other assets

The Trust held no other assets as at 31 March 2019 or for the prior year ending 31 March 2018.

# Note 27 Non-current assets held for sale and assets in disposal groups2018/19 2017/18

£000 £000

NBV of non-current assets for sale and assets in disposal groups at 1 April - 1,000 Prior period adjustment -

NBV of non-current assets for sale and assets in disposal groups at 1 April - restated - 1,000

Transfers by absorption - - Assets classified as available for sale in the year - 1,254 Assets sold in year - (2,254)Impairment of assets held for sale - - Reversal of impairment of assets held for sale - - Assets no longer classified as held for sale, for reasons other than sale - -

NBV of non-current assets for sale and assets in disposal groups at 31 March - -


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# Note 27.1 Liabilities in disposal groups

# Note 28.1 Cash and cash equivalents movements

2018/19 2017/18£000 £000

At 1 April 48,226 44,526 Prior period adjustments - -

At 1 April (restated) 48,226 44,526 Transfers by absorption - - Net change in year (7,676) 3,700

At 31 March 40,550 48,226 Broken down into:

Cash at commercial banks and in hand 101 82 Cash with the Government Banking Service 40,449 48,144 Deposits with the National Loan Fund - - Other current investments - -

Total cash and cash equivalents as in SoFP 40,550 48,226 Bank overdrafts (GBS and commercial banks) - - Drawdown in committed facility - -

Total cash and cash equivalents as in SoCF 40,550 48,226

# Note 28.2 Third party assets held by the trust

31 March 2019

31 March 2018

£000 £000 Bank balances 209 171 Monies on deposit - -

Total third party assets 209 171

The Trust held cash and cash equivalents which relate to monies held by the Trust on behalf of patients or other parties. This has been excluded from the cash and cash equivalents figure reported in the accounts.

Cash and cash equivalents comprise cash at bank, in hand and cash equivalents. Cash equivalents are readily convertible investments of known value which are subject to an insignificant risk of change in value.

The Trust had no liabilities in disposal groups as at 31 March 2019 or for the prior year ending 31 March 2018


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Note 29.1 Trade and other payables

31 March 2019

31 March 2018

£000 £000 Current

Trade payables 9,375 6,161 Capital payables 890 376 Accruals 3,867 4,976 Receipts in advance (including payments on account) 34 217 Social security costs 1,129 1,074 VAT payables - - Other taxes payable 346 869 PDC dividend payable - - Other payables 526 2,529

Total current trade and other payables 16,167 16,202

Non-currentTrade payables - - Capital payables - - Accruals - - Receipts in advance (including payments on account) - - VAT payables - - Other taxes payable - - Other payables - -

Total non-current trade and other payables - -

Of which payables from NHS and DHSC group bodies: Current 3,189 3,106 Non-current - -

Note 29.2 Early retirements in NHS payables above

Note 30 Other financial liabilities

The Trust had no amounts included in the note above relating to early retirements in 2018/19 or in the previous year 2017/18.

The Trust had no derivatives or other financial liabilities in 2018/19 or in the previous year 2017/18.


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Note 31 Other liabilities

31 March 2019

31 March 2018

£000 £000 Current

Deferred income: contract liabilities 70 23 Deferred grants - - PFI deferred income / credits - - Lease incentives - - Other deferred income -

Total other current liabilities 70 23

Non-currentDeferred income: contract liabilities - - Deferred grants - - PFI deferred income / credits - - Lease incentives - - Other deferred income - - Net pension scheme liability - -

Total other non-current liabilities - -

Note 32 Borrowings

Note 32.1 Reconciliation of liabilities arising from financing activities

Note 33 Finance leases

The Trust had no borrowings at 31 March 2019 or for the prior year ending 31 March 2018.

The Trust had no liabilities arising from financing activities at 31 March 2019 or for the prior year ending 31 March 2018.

The Trust had no finance leases as at 31 March 2019 or for the prior year ending 31 March 2018.


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# Note 34.1 Provisions for liabilities and charges analysis

Pensions: early

departure costs

Pensions: injury

benefits Legal claimsRe-

structuring

Equal Pay (including

Agenda for Change) Redundancy Other Total

£000 £000 £000 £000 £000 £000 £000 £000 At 1 April 2018 46 - 60 - - 378 32 516

Transfers by absorption - - - - - - - - Change in the discount rate (1) - - - - - - (1)Arising during the year - - 28 - - 150 133 311 Utilised during the year (7) - (12) - - (16) - (35)Reclassified to liabilities held in disposal groups - - - - - - - - Reversed unused - - (26) - - (362) (32) (420)Unwinding of discount 5 - - - - - - 5

At 31 March 2019 43 - 50 - - 150 133 376 Expected timing of cash flows: - not later than one year; 5 - 50 - - 150 133 338

- later than one year and not later than five years; 22 - - - - - - 22 - later than five years. 16 - - - - - - 16 Total 43 - 50 - - 150 133 376

The Trust has made provisions for member contributions for provisions held by NHS Litigation Authority, and for potental backpay and redundancy payments.


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DRAFT

Note 34.2 Clinical negligence liabilities

Note 35 Contingent assets and liabilities

Note 36 Contractual capital commitments

31 March 2019

31 March 2018

£000 £000 Property, plant and equipment 1,750 - Intangible assets - - Total 1,750 -

Note 37 Other financial commitments

At 31 March 2019, £10,271k was included in provisions of NHS Resolution in respect of clinical negligence liabilities of Camden and Islington NHS Foundation Trust (31 March 2018: £6,328k).

The Trust had no other financial commitments as at 31 March 2019 or for the prior year ending 31 March 2018.

The Trust had no contingent assets or liabilities as at 31 March 2019 or for the prior year ending 31 March 2018.


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# Note 38 Defined benefit pension schemes

#

The Trust contributes to the London Borough of Islington pension scheme for 4 individuals who were previously employed by the Borough, but who transferred to the Trust when the Trust took responsibility for the delegated activities.

Note 38.1 Changes in the defined benefit obligation and fair value of plan assets during the year

The Trust contributes to the London Borough of Islington pension scheme for 4 individuals who were previously employed by the Borough, but who transferred to the Trust when the Trust took responsibility for the delegated activities.


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# Note 39 On-SoFP PFI, LIFT or other service concession arrangements

# Note 40 Off-SoFP PFI, LIFT and other service concession arrangements

The Trust has no PFI (or other service concession arrangements) reported on the balance sheet at 31 March 2019 or for the prior year 2017/18.

The Trust has no PFI (or other service concession arrangements) reported off the balance sheet at 31 March 2019 or for the prior year 2017/18.


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Note 41 Financial instruments

Note 41.1 Financial risk management

The Trust has negligible exposure to the risk of another party failing to discharge their obligations, as the parties that the Trust is contracted to are financed by resources voted on annually by Parliament. The Trust, therefore, is not subject to any material risk of being unable to deliver services.

The majority of the Trust's financial instruments are held in the GBS accounts or on deposit with the National Loans Fund, and the majority of its financial liabilities are in the form of public dividend capital with the Department of Health. It is not deemed therefore, that the Trust faces material levels of risk in terms of its financial instruments.

The Trust's net operating costs are incurred under service agreement contracts with local CCGs, which are financed from resources voted annually by Parliament. The Trust also largely finances its capital expenditure through internally generated resources. The Trust is not, therefore, exposed to significant liquidity risks.

The Trust has no foreign currency income or expenditure. The Trust has minimal exposure to interest rate risk. The Trust makes no variable rate deposits and as at 31 March 2019, the Trust held all its cash in interest bearing current accounts, and had no cash on deposit and no loans.


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Note 41.2 Carrying values of financial assets

£000 £000 £000

Trade and other receivables excluding non financial assets 15,189 - - 15,189 Other investments / financial assets - - - - Cash and cash equivalents at bank and in hand 40,550 - - 40,550

Total at 31 March 2019 55,739 - - 55,739

Loans and receivables

£000 £000 £000 £000 £000

Trade and other receivables excluding non financial assets 13,368 - - - 13,368 Other investments / financial assets - - - - - Cash and cash equivalents at bank and in hand 48,226 - - - 48,226

Total at 31 March 2018 61,594 - - - 61,594

Held at amortised

cost

Assets at fair value

through the I&E

Carrying values of financial assets as at 31 March 2019 under IFRS 9

Total book value

Held at fair value

through I&E

£000

Held at fair value

through OCI

IFRS 9 Financial Instruments is applied restrospectively from 1 April 2018 without restatement of comparatives. As such, comparative disclosures have been prepared under IAS 39 and the measurement categories differ to those in the current year analyses.

Held to maturity

Available-for-sale

Carrying values of financial assets as at 31 March 2018 under IAS 39

Total book value


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Note 41.3 Carrying value of financial liabilities

£000 £000 £000

Loans from the Department of Health and Social Care - - - Obligations under finance leases - - - Obligations under PFI, LIFT and other service concession contracts - - - Other borrowings - - - Trade and other payables excluding non financial liabilities 14,658 - 14,658 Other financial liabilities - - - Provisions under contract - - -

14,658 - 14,658

£000 £000 £000

Loans from the Department of Health and Social Care - - - Obligations under finance leases - - - Obligations under PFI, LIFT and other service concession contracts - - - Other borrowings - - - Trade and other payables excluding non financial liabilities 14,259 - 14,259 Other financial liabilities - - - Provisions under contract - - -

14,259 - 14,259

Note 41.4 Fair values of financial assets and liabilities

Note 41.5 Maturity of financial liabilities

31 March 2019

31 March 2018

£000 £000 14,615 14,221

5 8 22 25 16 5

14,658 14,259 Total

Carrying values of financial liabilities as at 31 March 2019 under IFRS 9

Total at 31 March 2019

Carrying values of financial liabilities as at 31 March 2018 under IAS 39

In more than five years

In more than one year but not more than two yearsIn more than two years but not more than five years

In one year or less

Held at amortised

cost

Held at fair value

through the I&E

Total at 31 March 2018

Total book value

Other financial liabilities

Held at fair value

through the I&E

Total book value

The Trust believes that the carrying value of it's financial assets and liabilities are a reasonable approximation of fair value.

IFRS 9 Financial Instruments is applied restrospectively from 1 April 2018 without restatement of comparatives. As such, comparative disclosures have been prepared under IAS 39 and the measurement categories differ to those in the current year analyses.


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Note 42 Losses and special payments

Total number of

casesTotal value

of cases

Total number of

casesTotal value

of casesNumber £000 Number £000

LossesCash losses 1 - 5 - Fruitless payments - - - - Bad debts and claims abandoned - - - - Stores losses and damage to property 1 31 - -

Total losses 2 31 5 - Special payments

Compensation under court order or legally binding arbitration award 8 46 8 103 Extra-contractual payments - - - - Ex-gratia payments 28 7 16 4 Special severence payments - - - - Extra-statutory and extra-regulatory payments - - - -

Total special payments 36 53 24 107 Total losses and special payments 38 84 29 107 Compensation payments received - -

Note 43 Gifts

Total number of

casesTotal value

of cases

Total number of

casesTotal value

of casesNumber £000 Number £000

Gifts made 6 - 8 -

2018/19 2017/18

2018/19 2017/18


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Note 44.1 Initial application of IFRS 9IFRS 9 Financial Instruments as interpreted and adapted by the GAM has been applied by the Trust from 1 April 2018. The standard is applied retrospectively with the cumulative effect of initial application recognised as an adjustment to reserves on 1 April 2018.

IFRS 9 replaces IAS 39 and introduces a revised approach to classification and measurement of financial assets and financial liabilities, a new forward-looking 'expected loss' impairment model and a revised approach to hedge accounting.

Note 44.2 Initial application of IFRS 15

IFRS 15 Revenue from Contracts with Customers as interpreted and adapted by the GAM has been applied by the Trust from 1 April 2018. The standard is applied retrospectively with the cumulative effect of initial application recognised as an adjustment to the income and expenditure reserve on 1 April 2018.

IFRS 15 introduces a new model for the recognition of revenue from contracts with customers replacing the previous standards IAS 11, IAS 18 and related Interpretations. The core principle of IFRS 15 is that an entity recognises revenue when it satisfies performance obligations through the transfer of promised goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services.

As directed by the GAM, the Trust has applied the practical expedient offered in C7A of the standard removing the need to retrospectively restate any contract modifications that occurred before the date of implementation (1 April 2018).


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Note 45 Related parties

During the year the Trust has had a significant number of material transactions with entities for which the Department of Health and Social Care is regarded as the parent Department:

Camden CCGCamden London Borough CouncilCentral and North West London NHS Foundation TrustHealth Education EnglandHM Revenue & Customs - Other taxes and duties and NI contributions Islington CCGIslington London Borough CouncilKingston CCGNHS Central London (Westminster) CCGNHS Pension Scheme (Own staff employers contributions only)NHS Pensions NHS ProfessionalsRoyal Free London NHS Foundation TrustThe Whittington Hospital NHS TrustUniversity College London Hospitals NHS Foundation Trust*The Trust has applied a de minimis limit of £1,000k.

Note 46 Transfers by absorption

Note 47 Prior period adjustments

The Trust has had no prior period adjustments during 2018/19, or for the year ending 31 March 2018

Note 48 Events after the reporting date

There are no events after the reporting date to report.

Note 49 Final period of operation as a trust providing NHS healthcare

2018/19 is not the final period of operation for the Trust.

The Trust has had no transfers by absorption during 2018/19, or for the year ending 31 March 2018


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Note 50 Pooled Budgets

Pooled Budget Memorandum Account for 2018/192018/19 2017/18

£000 £000IncomeFoundation trust 10,671 10,164London Borough of Islington 3,004 3,229

13,675 13,393

ExpenditurePay 11,311 12,528 Drugs 392 384 General Supplies and Services 53 124 Clinical Supplies and Services 15 28 Establishment 79 69 Other (Incl premesis costs) 2,012 329

13,862 13,462

Net under / (over) spend -187 -69

-1% -1%

All of the income and expenditure related to the pooled budget is accounted for within the Trust's books, and is therefore accounted for in line with the accounting policies set out in Note 1. Both the income and expenditure is included within the income and expenditure shown in subsequent notes to the accounts.

The Camden and Islington NHS Foundation Trust has a pooled budget arrangement with the London Borough of Islington. The pooled budget was established as at 1st April 2005 and is hosted by Camden & Islington NHS Foundation Trust.


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Independent auditor’s report to the Council of Governors of Camden & Islington NHS Foundation Trust

Report on the Audit of the Financial Statements

Opinion

Our opinion on the financial statements is unmodified

We have audited the financial statements of Camden & Islington NHS Foundation Trust (the ‘Trust’) for the year ended 31 March 2019 which comprise the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Equity, the Statement of Cash Flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union, and as interpreted and adapted by the Accounts Directions issued under the National Service Act 2006, the NHS foundation trust annual reporting manual 2018/19 and the Department of Health and Social Care group accounting manual 2018/19.

In our opinion the financial statements:

• give a true and fair view of the financial position of the Trust as at 31 March 2019 and of its expenditure and income for the year then ended;

• have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union, as interpreted and adapted by the Department of Health and Social Care group accounting manual 2018-19; and

• have been prepared in accordance with the requirements of the National Health Service Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Trust in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:

• the Accounting Officer’s use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

• the Accounting Officer has not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Trust’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

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Overview of our audit approach

Financial statements audit

• Overall materiality: £2,827,000, which represents 1.9% of the Trust’s gross operating expenses;

• Key audit matters were identified as:

− Valuation of land and buildings

− Occurrence and accuracy of non-block contract patient care income and other operating income and existence of associated receivable balances

• We have tested the Trust’s material income and expenditure

streams and assets and liabilities, covering 99% of the Trust’s

income, 99% of the Trust’s expenditure, 99% of the Trust’s assets

and 91% of the Trust’s liabilities

Conclusion on the Trust’s arrangements for securing economy,

efficiency and effectiveness in its use of resources

• We identified one significant risk in respect of the Trust’s

arrangements for securing economy, efficiency and effectiveness in its use of resources regarding the Trust’s financial

sustainability (see Report on other legal and regulatory requirements section).

Key audit matters

The graph below depicts the audit risks identified and their relative significance based on the extent of the financial statement impact and the extent of management judgement.

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current year and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those that had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

High

Potential financial

statement impact

High Low Extent of management judgement

Non-Block Contract income and associated receivables

Valuation of land and buildings

Management override of

controls

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Key Audit Matter How the matter was addressed in the audit

Risk 1 – Valuation of land and buildings The Trust revalues its land and buildings on a five-yearly basis to ensure that carrying value is not materially different from current value in existing use. This represents a significant estimate by management in the financial statements. We therefore identified valuation of land and buildings as a significant risk, which was one of the most significant assessed risks of material misstatement.

Our audit work included, but was not restricted to:

• Evaluating management's processes and

assumptions for the calculation of the estimate, the instructions issued to valuation experts and the scope of their work;

• Evaluating the competence, capabilities and objectivity of the valuation expert;

• Discussions with the valuer about the basis on which the valuations were carried out and challenge of the key assumptions;

• Challenging the information used by the valuer to assess completeness and consistency with our understanding;

• Testing revaluations made during the year to ensure they were recorded accurately in the Trust's asset register;

• Evaluating the assumptions made by management for those assets not revalued during the year and how management has satisfied themselves that carrying value is not materially different to current value in existing use.

• Using an auditor’s expert to corroborate the reasonableness of the valuations produced by management’s expert

The Trust’s accounting policy on valuation of property, plant and equipment is shown in note 1.7 to the financial statements and related disclosures are included in note 17 Key observations We obtained sufficient audit assurance to conclude that:

• the basis of the valuation of land and buildings was appropriate and the assumptions and processes used by management in determining the estimate were reasonable;

• the valuation of land and buildings disclosed in the financial statements is reasonable.

Risk 2 – Occurrence and accuracy of non-block contract patient care income and other operating income and existence of associated receivable balances The Trust’s significant income streams are operating income from patient care activities and other operating income. The Trust recognises income from patient care activities during the year based on the completion of these activities. This includes the block contract, which is agreed in advance at a fixed price, and non-block contract income. Patient care activities provided that are additional to those incorporated in the block contracts with NHS commissioners, are subject to verification and agreement of the completed activity by commissioners. As such, there is a risk that income is recognised in the financial statements for these additional services that is not subsequently agreed to by the commissioners. Due to the nature of block contracts we have not identified a significant risk of material misstatement in relation to block contracts. The Trust also receives other income which is predominantly in respect of research and development,


• Evaluating the Trust’s accounting policies for recognition of income for appropriateness and compliance with the Department of Health and Social Care (DHSC) group accounting manual 2018-19;

• Obtaining an understanding of the Trust's system for accounting for income and evaluating the design of the associated controls;

In respect of patient care income:

• Obtaining an exception report from the DHSC that details differences in reported income and expenditure and receivables and payables between NHS bodies, agreeing the figures in the exception report to the Trust’s financial records; and obtaining supporting information for all differences over £300,000, to corroborate the amount recorded in the financial statements by the Trust;

• Agreeing, on a sample basis, non-block contract income from patient care activities to invoices and subsequent cash receipts or, for cases in our sample where cash was yet to be receipted, to alternative evidence.;

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Key Audit Matter How the matter was addressed in the audit education and training and Provider Sustainability Funding (PSF). The risk around other operating revenues is related to the improper recognition of revenue. We therefore identified occurrence and accuracy of all non-block contract patient care income and other operating income and existence of associated receivable balances as a significant risk, which was one of the most significant assessed risks of material misstatement.

• Agreeing, on a sample basis, non-contract receivables at year end to invoices and subsequent cash receipts or, for cases in our sample where cash was yet to be receipted, to alternative evidence.

In respect of other operating income

• Agreeing, on a sample basis, other income to invoices or alternative evidence.

• Agreeing PSF income to year end confirmation from DHSC

The Trust’s accounting policy on income recognition is shown in notes 1.4.1, 1.4.2 and 1.4.3 to the financial statements and related disclosures are included in note Note 3 and Note 25 Key observations We obtained sufficient audit evidence to conclude that: • The Trusts accounting policies for recognition of

income from NHS contracts and other income complies with the DHSC Group Accounting Manual 2018/19 and has been properly applied; and

• Income from patient care income and other operating income and the associated receivable balances, are not materially misstated.

Our application of materiality

We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality in determining the nature, timing and extent of our audit work and in evaluating the results of that work.

Materiality was determined as follows:

Materiality Measure Trust

Financial statements as a whole £2,827,000 which is 1.9% of the Trust’s gross operating expenses. This benchmark is considered the most appropriate because we consider users of the financial statements to be most interested in how the Trust has expended its revenue and other funding. Materiality for the current year is at a slightly lower percentage of gross operating costs than we determined for the year ended 31 March 2018 due to a slight increase in gross operating expenses in 2018/19. We did not identify any significant changes in the Trust or the environment in which it operates

Performance materiality used to drive the extent of our testing

75% of financial statement materiality

Communication of misstatements to the Audit & Risk Committee

£141,000 and misstatements below that threshold that, in our view, warrant reporting on qualitative grounds.

The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance for potential uncorrected misstatements.

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Overall materiality – Trust

An overview of the scope of our audit

Our audit approach was based on a thorough understanding of the Trust's business, was risk based and included an evaluation of the Trust's internal controls environment including relevant IT systems and controls over key financial systems. The scope of our audit included:

• obtaining supporting evidence, on a sample basis, for all of the Trust’s material income streams covering 99% of the Trust’s revenues;

• obtaining supporting evidence, on a sample basis, for 99% of the Trust’s operating costs; • obtaining supporting evidence, on a sample basis, for property plant and equipment and the

Trust’s other material assets and liabilities. • There were no changes in the scope of the current year audit from the scope of the prior year

Other information

The Accounting Officer is responsible for the other information. The other information comprises the information included in the Annual Report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact.

We have nothing to report in this regard.

In this context, we also have nothing to report in regard to our responsibility to specifically address the following items in the other information and to report as uncorrected material misstatements of the other information where we conclude that those items meet the following conditions:

• Fair, balanced and understandable [**set out on page …**] in accordance with provision C.1.1 of the NHS Foundation Trust Code of Governance – the statement given by the directors that they consider the Annual Report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for patients, regulators and other stakeholders to assess the Trust’s performance, business model and strategy, is materially inconsistent with our knowledge of the Trust obtained in the audit; or

• Audit & Risk Committee reporting [**set out on page …**] in accordance with provision C.3.9 of the NHS Foundation Trust Code of Governance – the section describing the work of the Audit & Risk Committee does not appropriately address matters communicated by us to the Audit & Risk Committee.

25%

75%

Tolerance for potentialuncorrected mis-statements

Performancemateriality

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Other information we are required to report on by exception under the Code of Audit Practice

Under the Code of Audit Practice published by the National Audit Office on behalf of the Comptroller and Auditor General (the Code of Audit Practice) we are required to consider whether the Annual Governance Statement does not meet the disclosure requirements set out in the NHS foundation trust annual reporting manual 2018/19 or is misleading or inconsistent with the information of which we are aware from our audit. We are not required to consider whether the Annual Governance Statement addresses all risks and controls or that risks are satisfactorily addressed by internal controls.

We have nothing to report in this regard.

Our opinion on other matters required by the Code of Audit Practice is unmodified

In our opinion:

• the parts of the Remuneration Report and the Staff Report to be audited have been properly prepared in accordance with IFRSs as adopted by the European Union, as interpreted and adapted by the NHS foundation trust annual reporting manual 2018/19 and the requirements of the National Health Service Act 2006; and

• based on the work undertaken in the course of the audit of the financial statements and our knowledge of the Trust gained through our work in relation to the Trust’s arrangements for securing economy, efficiency and effectiveness in its use of resources, the other information published together with the financial statements in the Annual Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exception

Under the Code of Audit Practice, we are required to report to you if:

• we issue a report in the public interest under Schedule 10 (3) of the National Health Service Act 2006 in the course of, or at the conclusion of the audit; or

• we refer a matter to the regulator under Schedule 10 (6) of the National Health Service Act 2006 because we have reason to believe that the Trust, or a director or officer of the Trust, is about to make, or has made, a decision which involves or would involve the incurring of expenditure that was unlawful, or is about to take, or has begun to take a course of action which, if followed to its conclusion, would be unlawful and likely to cause a loss or deficiency.

We have nothing to report in respect of the above matters.

Responsibilities of the Accounting Officer and Those Charged with Governance for the financial statements

As explained more fully in the Statement of the Chief Executive’s responsibilities as the accounting

officer [set out on page(s) x to x], the Chief Executive, as Accounting Officer, is responsible for the preparation of the financial statements in the form and on the basis set out in the Accounts Directions included in the NHS foundation trust annual reporting manual 2018/19, for being satisfied that they give a true and fair view, and for such internal control as the Accounting Officer determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Accounting Officer is responsible for assessing the Trust’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Accounting Officer has been informed by the relevant national body of the intention to dissolve the Trust without the transfer of the Trust’s services to

another public sector entity.

The Audit & Risk Committee is Those Charged with Governance. Those charged with governance are responsible for overseeing the Trust’s financial reporting process.

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Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Report on other legal and regulatory requirements – Conclusion on the Trust’s arrangements for securing economy, efficiency and effectiveness in its use of resources

Matter on which we are required to report by exception - Trust’s arrangements for securing economy, efficiency and effectiveness in its use of resources

Under the Code of Audit Practice, we are required to report to you if, in our opinion we have not been able to satisfy ourselves that the Trust has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources for the year ended 31 March 2019.

We have nothing to report in respect of the above matter.

Significant risks

Under the Code of Audit Practice, we are required to report on how our work addressed the significant risks we identified in forming our conclusion on the adequacy of the Trust’s arrangements for securing

economy, efficiency and effectiveness in its use of resources. Significant risks are those risks that in our view had the potential to cause us to reach an inappropriate conclusion on the audited body’s

arrangements. The table below sets out the significant risks we have identified. These significant risks were addressed in the context of our conclusion on the Trust’s arrangements as a whole, and in forming

our conclusion thereon, and we do not provide a separate opinion on these risks.

Significant risks How the matter was addressed in the audit

Financial Sustainability, including the Impact of ‘Brexit’, in the Medium Term

Before the start of each financial year the Trust agrees to a control total set by NHS Improvement (NHSI) which determines the target financial performance for the financial year. Achievement of the control total also ensures the Trust receives additional Provider Sustainability Funding (PSF).

The Trust’s initial control total for 2018/19 was a £1,017,000 surplus, excluding any PSF funding. This was revised during the year, with the Trust’s agreement, to reflect the planned sale of The Hoo site. The control total was increased to a £2,500,000 surplus, which resulted in an increase in the Trust’s PSF allocation.

The risk is whether the Trust has adequate arrangements in place to ensure it meets its control total and therefore receive its allocated PSF funding.

The Trust forecast that it needed to make savings of £7million in 2018/19 to achieve its revised control total. £2.1 million of these savings were unidentified halfway through the year. In addition, the Trust needs to identify


• Monitoring the Trust’s performance against its operational plan and achievement of its control total for the financial year 2018/19;

• Evaluating the forecast position throughout the year and the Trust’s final outturn against budget;

• Assessing the Trust’s overall arrangements for achievement of its control total, including the realisation of profits from its planned sale of the Hoo; delivery of planned savings for 2018/19; and the establishment of financial savings plans for 2019/20;

• Understanding the Trust’s own assessment and arrangements in preparing for the UK’s EU Exit and assessing their adequacy.

Key findings

The Trust recorded a deficit of £428,000 in 2018/19, . After adjusting for PSF income received, impairments and Agenda for Change costs this gives a £2,382,00 surplus. The Trust met its initial control total but fell

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Significant risks How the matter was addressed in the audit a further £5.6 million of savings for 2019/20 to achieve future financial targets.

Further pressure could also result from uncertainties related to the planned departure of the UK from the European Union on 31st October 2019, which had the potential to adversely affect the availability and cost of staff, drugs and other supplies at the Trust.

slightly short of its revised control total and as a result its PSF income allocation was reduced.

Overall, the Trust had adequate arrangements in place to deliver its agreed control total in 2018/19.

The deficit incurred by the Trust in 2018/19:

• is relatively small, particularly in comparison to that recorded by other NHS Trusts in 2018/19;

• arose predominantly as a result of a large non-recurring impairment in respect of a land purchase made towards the end of 2018/19.

The Trust has adequate arrangements in place for the development of additional savings plans for 2019/20. As per the Operational Plan submitted in February 2019, the Trust has identified savings plans for £5 million of the Trust’s £5.6 million savings target.

The UK was due to leave the EU on the 29th March, however an extension has since been granted to 31st October. We are satisfied that the Trust has adequate arrangements in place for preparing for the impact that the UK’s exit from the EU could have.

Responsibilities of the Accounting Officer

The Accounting Officer is responsible for putting in place proper arrangements for securing economy, efficiency and effectiveness in the use of the Trust’s resources.

Auditor’s responsibilities for the review of the Trust’s arrangements for securing economy, efficiency and effectiveness in its use of resources

We are required under paragraph 1 of Schedule 10 of the National Health Service Act 2006 to be satisfied that the Trust has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources and to report where we have not been able to satisfy ourselves that it has done so. We are not required to consider, nor have we considered, whether all aspects of the Trust’s arrangements for securing economy, efficiency and effectiveness in its use of resources are operating effectively.

We have undertaken our review in accordance with the Code of Audit Practice, having regard to the guidance on the specified criterion issued by the Comptroller and Auditor General in November 2017, as to whether in all significant respects, the Trust had proper arrangements to ensure it took properly informed decisions and deployed resources to achieve planned and sustainable outcomes for taxpayers and local people. The Comptroller and Auditor General determined this criterion as that necessary for us to consider under the Code of Audit Practice in satisfying ourselves whether the Trust put in place proper arrangements for securing economy, efficiency and effectiveness in its use of resources for the year ended 31 March 2019, and to report by exception where we are not satisfied.

We planned our work in accordance with the Code of Audit Practice. Based on our risk assessment, we undertook such work as we considered necessary to be satisfied that the Trust has put in place proper arrangements for securing economy, efficiency and effectiveness in its use of resources.

Report on other legal and regulatory requirements - Certificate We certify that we have completed the audit of the financial statements of Camden & Islington NHS Foundation Trust in accordance with the requirements of Chapter 5 of Part 2 of the National Health Service Act 2006 and the Code of Audit Practice.

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Use of our report

This report is made solely to the Council of Governors of the Trust, as a body, in accordance with Schedule 10 of the National Health Service Act 2006. Our audit work has been undertaken so that we might state to the Trust’s Council of Governors those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Trust and the Trust’s Council of Governors, as a body, for our audit work, for this report, or for the opinions we have formed.

[**Signature**]

Paul Dossett, Key Audit Partner for and on behalf of Grant Thornton UK LLP, Local Auditor London [**Date**]

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© 2019 Grant Thornton UK LLP | Audit Findings Report for Camden & Islington NHS Foundation Trust | 2018/19

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This version of the

report is a draft. Its

contents and subject

matter remain under

review and its contents

may change and be

expanded as part of the

finalisation of the report.

The Audit Findingsfor Camden & Islington NHS Foundation Trust

20th May 2019

Year ended 31 March 2019

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2

ContentsSection Page

1. Headlines 3

2. Financial statements 4

3. Value for money 12

4. Independence and ethics 16

Appendices

A. Action plan

B. Audit adjustments

C. Fees

The contents of this report relate only to those matters which came to our attention during the conduct of our normal audit procedures which are designed for the purpose of expressing our opinion on the financial statements. Our audit is not designed to test all internal controls or identify all areas of control weakness. However, where, as part of our testing, we identify control weaknesses, we will report these to you. In consequence, our work cannot be relied upon to disclose all defalcations or other irregularities, or to include all possible improvements in internal control that a more extensive special examination might identify. This report has been prepared solely for your benefit and should not be quoted in whole or in part without our prior written consent. We do not accept any responsibility for any loss occasioned to any third party acting, or refraining from acting on the basis of the content of this report, as this report was not prepared for, nor intended for, any other purpose.

Grant Thornton UK LLP is a limited liability partnership registered in England and Wales: No.OC307742. Registered office: 30 Finsbury Square, London, EC2A 1AG. A list of members is available from our registered office. Grant Thornton UK LLP is authorised and regulated by the Financial Conduct Authority. Grant Thornton UK LLP is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. Services are delivered by the member firms. GTIL and its member firms are not agents of, and do not obligate, one another and are not liable for one another’s acts or omissions.

Your key Grant Thornton team members are:

Paul Dossett

Engagement Lead

T: +44 (0)207 728 3180

E: [email protected]

Amber Banister

Audit Manager

T: +44 (0)207 865 2021

E: [email protected]

Hiruni Weerasekera

In-Charge Auditor

T: +44 (0)207 728 3215

E: [email protected] DRAFT


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3

HeadlinesThis table summarises the key findings and other matters arising from the statutory audit of Camden & Islington NHS Foundation Trust (‘the Trust’) and the preparation of the Trust'sfinancial statements for the year ended 31 March 2019 for those charged with governance.

FinancialStatements

Under International Standards of Audit (UK) (ISAs) and the NationalAudit Office (NAO) Code of Audit Practice ('the Code'), we arerequired to report whether, in our opinion:• the Trust's financial statements give a true and fair view of the

financial position of the Trust and it’s income and expenditure

for the year; and• The Trust’s financial statements, and the parts of the

Remuneration Report and the Staff Report to be audited, have been properly prepared in accordance with International Financial Reporting Standards as adopted by the European Union, and as interpreted and adapted by the Accounts Directions issued under the National Health Service Act 2006, the NHS foundation trust annual reporting manual 2018/19 and the Department of Health and Social Care group accounting manual 2018/19.

We are also required to report whether other information published together with the audited financial statements in the Annual Report, is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

Our audit work was completed on site during April and May. Our findings are summarised on pages 4 to 15. We have identified 4 adjustments to the financial statements however these have not resulted in an adjustment to the Trust’s £428,000

deficit position. Audit adjustments are detailed in Appendix C. We have also raised recommendations for management as a result of our audit work in Appendix A.Our work is substantially complete and there are no matters of which we are aware that would require modification of our audit opinion, subject to the following outstanding matters;- receipt of management representation letter and- review of the final set of financial statements.We have concluded that the other information to be published with the financial statements, is consistent with our knowledge of your organisation and the financial statements we have audited.Our anticipated audit report opinion will be unmodified

Value for Money arrangements

Under the National Audit Office (NAO) Code of Audit Practice ('theCode'), we are required to report by exception if, in our opinion, theTrust has not made proper arrangements to secure economy,efficiency and effectiveness in its use of resources ('the value formoney (VFM) conclusion’).

We have completed our risk based review of the Trust’s value for money arrangements.

We have concluded that Camden & Islington NHS Foundation Trust has proper arrangements to secure economy, efficiency and effectiveness in its use of resourcesWe have nothing to report by exception. Our findings are summarised on pages 4 to 15.

Statutory duties The National Health Service Act 2006 (‘the Act’) also requires us to:• report to you if we have applied any of the additional powers

and duties ascribed to us under the Act; and• To certify the closure of the audit.

We have not exercised any of our additional statutory powers or duties.We have completed the majority of work under the Code and expect to be able to certify the completion of the audit when we give our audit opinion.

Acknowledgements

We would like to take this opportunity to record our appreciation for the assistance provided by the finance team and other staff during our audit.

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SummaryOverview of the scope of our auditThis Audit Findings Report presents the observations arising from the audit that are significant to the responsibility of those charged with governance to oversee the financial reporting process, as required by International Standard on Auditing (UK) 260 and the Code of Audit Practice (‘the Code’). Its contents will be discussed with management, the

Board and the Audit & Risk Committee.As auditor we are responsible for performing the audit, in accordance with International Standards on Auditing (UK) and the Code, which is directed towards forming and expressing an opinion on the financial statements that have been prepared by management with the oversight of those charged with governance. The audit of the financial statements does not relieve management or those charged with governance of their responsibilities for the preparation of the financial statements.Audit approachOur audit approach was based on a thorough understanding of the Trust's business and is risk based, and in particular included:• An evaluation of the Trust's internal controls environment, including its IT systems and

controls;

• Substantive testing on significant transactions and material account balances, including the procedures outlined in this report in relation to the key audit risks

We have not had to alter or change our audit plan, as communicated to you on 21st

January 2019.

ConclusionWe have substantially completed our audit of your financial statements and subject to outstanding queries being resolved, we anticipate issuing an unqualified audit opinion following the Audit & Risk Committee meeting on 20th May 2019 and the Board of Directors meeting on 23rd May 2019.

These outstanding items include:- receipt of management representation letter; and- review of the final set of financial statements.

Financial statements

Materiality calculations remain the same as reported in our audit plan We detail in the table below our determination of materiality for Camden & Islington NHS Foundation Trust.

Our approach to materialityThe concept of materiality is fundamental to the preparation of the financial statements and the audit process and applies not only to the monetary misstatements but also to disclosure requirements and adherence to acceptable accounting practice and applicable law.

Trust Amount (£)

Materiality for the financial statements £2,827,000

Performance materiality £2,120,000

Trivial matters £141,000DRAFT


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5

Going concernFinancial statements

Our responsibilityAs auditors, we are required to “obtain sufficient appropriate audit evidence about the appropriateness of management's use o f the going concern assumption in the preparation and presentation of the financial statements and to conclude whether there is a material uncertainty about the entity's ability to continue as a going concern” (ISA (UK) 570).

Going concern commentary

Management's assessment process

The Director of Finance assesses the Trust’s current

financial performance, the projected income base, progress against the development and delivery of efficiency savings, the robustness of the Trust’s balance sheet and liquidity

levels throughout the year. This assessment is then used to determined the appropriateness of the use of the going concern basis of accounting at year end.

Auditor commentary • the Trust has a reasonable expectation that it has adequate resources to continue in operational existence for the

foreseeable future. For this reason, the Trust believe that it is appropriate to continue to adopt the going concern basis in preparing the accounts

• Management's process for assessing going concern is a continuous process throughout the year to ensure continued adequacy of the assumption. Their assessment is multi faceted, focussing beyond cashflow and also incorporating liquidity, savings efficiencies and income projections. For these reasons we deem the Trust’s

processes in relation to going concern to be adequate.

Work performed We assessed a variety of factors which could impact the ability of the Trust to continue as a going concern to determined whether managements assessment was appropriate.These factors included the adequacy of the cash reserves held by the Trust, the ability of the Trust to meet its liabilities as they fall due and the ability to predict and maintain cashflow over the next 12 months

Auditor commentary• We are satisfied that the Trust has low current liability to current asset ratio providing assurance that it can meet its

debts as they fall due• We are satisfied that the Trust has adequate cash reserves with £40.5m held at 31 March 2019 this has been driven

by sustained breakeven performance over several years and strong programme of planned asset sales.• We are satisfied that the Trust has been able to produce a cashflow forecast which demonstrates stability in these

cash reserves over the next 12 months

Concluding comments We are satisfied that the use of the going concern

assumption in preparing the accounts is appropriate.

Auditor commentary• The going concern assumption is appropriate and therefore does not impact our ability to provide an unmodified

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6

Significant findingsRisks identified in our Audit Plan Commentary

Revenue recognition

Trusts are facing significant external pressure to restrain budget overspends and meet externally set financial targets, coupled with increasing demand for mental health service referrals. In this environment, we have considered the rebuttable presumed risk under ISA (UK) 240 that revenue may be misstated due to the improper recognition of revenue.

The Trust’s main income streams are income from block contracts with

commissioners, non-block contract patient care income, Provider Sustainability Funding (PSF) income and other income.

We have rebutted this presumed risk for block contract income as this income principally derived from contracts that are agreed in advance at a fixed price.

We have not deemed it appropriate to rebut this presumed risk for all other material streams of non-block contract patient care income, Provider Sustainability Funding (PSF) income and other income.

We have therefore identified the occurrence and accuracy of these income streams of the Trust and the existence of associated receivable balances as a significant risk, which was one of the most significant assessed risks of material misstatement and a key audit matter.

Auditor commentaryOur audit work included, but was not restricted to:

• Evaluating the Trust’s accounting policies for recognition of income for appropriateness and

compliance with the Department of Health and Social Care (DHSC) group accounting manual 2018-19;

• Obtaining an understanding of the Trust's system for accounting for income and evaluating the design of the associated controls;

In respect of patient care income:• Obtaining an exception report from the DHSC that details differences in reported income and

expenditure and receivables and payables between NHS bodies, agreeing the figures in the exception report to the Trust’s financial records; and obtaining supporting information for all

differences over £300,000, to corroborate the amount recorded in the financial statements by the Trust;

• Agreeing, on a sample basis, non-block contract income from patient care activities to invoices and subsequent cash receipts or, for cases in our sample where cash was yet to be receipted, to alternative evidence.;

• Agreeing, on a sample basis, non-contract receivables at year end to invoices and subsequent cash receipts or, for cases in our sample where cash was yet to be receipted, to alternative evidence.

In respect of other operating income• Agreeing, on a sample basis, other income to invoices or alternative evidence. • Agreeing Provider Sustainability Funding income to year end confirmation from DHSC

We have detailed two disclosure issues in our table of adjusted misstatements relating to the reclassification of the PSF accrual from contract receivables to contract assets under the IFRS15 definition and correcting the omission of Agenda for Change pay award central funding income from Note 3.1.

We obtained sufficient audit evidence to conclude that:• The Trusts accounting policies for recognition of income from NHS contracts and other income

complies with the DHSC Group Accounting Manual 2018/19 and has been properly applied; and

• Income from patient care income and other operating income and the associated receivable balances, are not materially misstated.

Financial Statements

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Management override of controlsUnder ISA (UK) 240 there is a non-rebuttable presumed risk that the risk of management over-ride of controls is present in all entities. The Trust faces external pressures to meet agreed targets, and this could potentially place management under undue pressure in terms of how they report performance.

We therefore identified management override of control, in particular journals, management estimates and transactions outside the course of business as a significant risk, which was one of the most significant assessed risks of material misstatement.

Auditor commentaryOur audit work included, but was not restricted to• evaluating the design effectiveness of management controls over journals• analysing the journals listing and determine the criteria for selecting high risk unusual journals • testing unusual journals made during the year and after the draft accounts stage for appropriateness and

corroboration• testing journals where we have identified minor separation of duties issues to ensure that mitigating controls are in

place • gaining an understanding of the accounting estimates and critical judgements applied made by management and

consider their reasonableness • evaluating the rationale for any changes in accounting policies, estimates or significant unusual transactions.

Our interim audit work identified a potential control weakness in relation to those with super user access to the ledger, were using on screen notes to store passwords. This was reported in our Audit Plan. We have since followed up this issue and confirmed that it has been resolved.From our initial planning and risk assessment at the Trust we also became aware of some minor segregation of duties issues whereby the Financial Controller and Financial Systems Administrator have super user access to the general ledger, giving them the ability to undertake a complete transaction process. Our work detailed above did not find there to be any issues associated with journals as a result of this issue.

Our year end audit work has not identified any further issues in respect of management override of controls.


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Valuation of land and buildingsThe Trust revalues its land and buildings on a five-yearly basis to ensure that carrying value is not materially different from current value in existing use. This represents a significant estimate by management in the financial statements.

We therefore identified valuation of land and buildings as a significant risk, which was one of the most significant assessed risks of material misstatement.

Auditor commentaryOur audit work included, but was not restricted to:

• Evaluating management's processes and assumptions for the calculation of the estimate, the instructions issued to valuation experts and the scope of their work;

• Evaluating the competence, capabilities and objectivity of the valuation expert; • Discussions with the valuer about the basis on which the valuations were carried out and challenge of the key

assumptions;• Challenging the information used by the valuer to assess completeness and consistency with our understanding;• Testing revaluations made during the year to ensure they were recorded accurately in the Trust's asset register; • Using an auditor’s expert to corroborate the reasonableness of the findings produced by management’s expert

• Evaluating the assumptions made by management for those assets not revalued during the year and how management has satisfied themselves that carrying value is not materially different to current value in existing use.

We obtained sufficient audit assurance to conclude that: • the basis of the valuation of land and buildings was appropriate and the assumptions and processes used by

management in determining the estimate were reasonable;• the valuation of land and buildings disclosed in the financial statements is reasonable.


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Significant matters discussed with management

Risks identified in our Audit Plan Commentary

Significant events or transactions that occurred during the year

Auditor commentary• The Trust disposed of one significant asset during the financial year 2018-19, Lyndhurst Gardens (“the Hoo”) in

February 2019. We have reviewed the calculation for profit on sale and the accounting treatment and disclosure of this disposal.

• The Trust put this asset up for auction in November 2018, but was not able to receive the reserve price of £7.2m. The property was then returned to auction in February 2019, at which point it was sold for £5.5m (£1.7m lower than the initial planned disposal price).

• A profit of £2.8m was realised from the sale of this fixed asset. • This disposal was a significant transaction close to year end as it enabled the Trust to achieve its original pre PSF

control total. However the sale of this asset, and the fact that it did not achieve the required profit on sale, was a factor in the Trust not achieving its revised control total and additional incentive PSF.

• This disposal was also significant due to the DHSC announcement that in future financial years (from 2019/20 onwards), Trusts will not be able to count the profits on sale from property disposals towards the achievement of their control totals. Therefore, disposing of this asset in the current financial year was key.

• From our discussions with management and review of Board minutes, we are aware that this site was declared as surplus to requirements in order to commence the disposal process during the current financial year (September 2018).

• We challenged management on continuing to hold this asset as an operational asset and requested the Trust to demonstrate for the basis for the asset not being classified as a surplus asset at the point it was declared surplus. Management provided us with evidence of the site continued to be used for delivery of services until it was disposed. As such, we agree the site continued to be used operationally and did not need to be reclassified as surplus or held for sale within the Trust's asset register.

• Based on the work performed, no issues have been noted in regards to the disposal of this asset. We have gained sufficient assurance that this was an in year disposal which has been accounted for appropriately.


This section provides commentary on the significant matters we discussed with management during the course of the audit.

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Significant findings – judgements and estimatesFinancial statements

Summary of management’s approach Audit Comments Assessment

Non-Contract Activity Provision £2.6m

The Trust includes a provision within their accounts for NHS income, not related to its pre-agreed block contracts with commissioners, which it has not received at year end. The Trust has a policy of identifying all NHS invoices for which it has not yet received the income for at 31 March 2019. As part of the Agreement of Balances (AOB) exercise it contacts each counterparty to confirm the income it is expecting and to seek agreement from that counterparty. The Trust then includes a provision for all NHS income for which they do not receive a response with agreement to pay the amount. This approach is deemed to be prudent as they provide for income which is disputed, clarification sought from the counterparty and nil responses.

For 2018/19 this provision reduces the receivables balance in the Statement of Financial Position by £2.6m. This is below our materiality level and therefore although deemed to be prudent does not carry the risk of material misstatement.

• Obtaining an exception report from the DHSC that details differences in reported income and expenditure and receivables and payables between NHS bodies (AOB), agreeing the figures in the exception report to the Trust’s financial records; and obtaining supporting

information for all differences over £300,000, to corroborate the amount recorded in the financial statements by the Trust

• Reviewing the appropriateness of the assumptions the Trust has made in arriving at its calculation of the estimate

• Assessing completeness and accuracy of the underlying information used to determine the estimate by comparing the estimate per counterparty, on a sample basis, to the counterparty correspondence

Land and Buildings – £113m at valuation or gross cost

Land and buildings comprises £88m of specialised assets such as Highgate Mental Health Centre, which are required to be valued at depreciated replacement cost (DRC) at year end, on a modern equivalent asset basis. Management have determined the amount of space and location required for ongoing service delivery in the light of their current and projected service needs and have instructed the valuer accordingly.

The remainder of land and buildings (£25m) are not specialised in nature and are required to be valued in existing use (EUV) at year end. The Trust has engaged the Valuation Office Agency to complete the valuation of properties as at 01/03/2019, on a desktop basis. A full valuation is carried out on a five yearly cyclical basis, with the last full valuation done as at 01/02/2016.

100% of total land and buildings were revalued at 31 March 2019. The revaluation of properties has resulted in a net decrease of £7m.The total year end valuation of land and buildings was £113m, a net decrease of £2m from 2017/18 (£111m).

Our work included:• Assessing completeness and accuracy of the

underlying information used to determine the estimate• Appropriateness of any alternative site assumptions• Impact of any changes to valuation method• Consistency of estimate against near neighbours/GE

report• Reasonableness of the change in the value of the

estimate• Adequacy of disclosure of estimate in the financial

statements

Assessment We disagree with the estimation process or judgements that underpin the estimate and consider the estimate to be potentially materially misstated We consider the estimate is unlikely to be materially misstated however management’s estimation process contains assumptions we consider optimistic We consider the estimate is unlikely to be materially misstated however management’s estimation process contains assumptions we consider cautious We consider management’s process is appropriate and key assumptions are neither optimistic or cautious

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Other communication requirementsFinancial Statements

We set out below details of other matters which we, as auditors, are required by auditing standards and the Code to communicate to those charged with governance.

Issue Commentary

Matters in relation to fraud • We have previously discussed the risk of fraud with the Audit & Risk Committee. We have not been made aware of any other incidents

in the period and no other issues have been identified during the course of our audit procedures.

Matters in relation to related parties

• We are not aware of any related parties or related party transactions which have not been disclosed

Matters in relation to laws and regulations

• You have not made us aware of any significant incidences of non-compliance with relevant laws and regulations and we have not identified any incidences from our audit work.

Written representations • A letter of representation has been requested from the Trust which is included in the Audit & Risk Committee papers

Confirmation requests from third parties

• We were provided by the National Audit Office with central third party confirmations in respect of the Trust’s PDC capital ba lances, PDC dividends paid during the period and of the Trust’s Month 12 Agreement of Balances (AoB) mismatches within other NHS bodies.

• We were also provided with confirmation over the Trust’s year-end cash balances from the relevant financial institutions

Accounting practices • We have evaluated the appropriateness of the Trust’s accounting policies, accounting estimates and financial statement disclosures.

Our review found no material omissions in the financial statements.

Audit evidence and explanations/significant difficulties

• All information and explanations requested from management was provided.

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Other responsibilities under the CodeFinancial statements

Issue Commentary

Other information We are required to give an opinion on whether the other information published together with the audited financial statements

(including the Annual Report), is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

No inconsistencies have been identified

Auditable elements of Remuneration Report and Staff Report

We are required to give an opinion on whether the parts of the Remuneration Report and Staff Report subject to audit have been prepared properly in accordance with the requirements of the Act, directed by the Secretary of State with the consent of the Treasury.

We have audited the elements of the Remuneration Report and Staff Report , as required by the Code. We found no issues We propose to issue an unqualified opinion

Matters on which we report by exception

We are required to report on a number of matters by exception in a number of areas: If the Annual Governance Statement does not meet the disclosure requirements set out in the NHS foundation trust annual reporting

manual 2018/19 is misleading or inconsistent with the information of which we are aware from our audit The information in the annual report is materially inconsistent with the information in the audited financial statements or apparently

materially incorrect based on, or materially inconsistent with, our knowledge of the [Group/Trust] acquired in the course of performing our audit, or otherwise misleading.

If we have applied any of our statutory powers or dutiesWe have nothing to report on these matters

Review of accounts consolidation schedules and specified procedures on behalf of the group auditor

We are required to give a separate audit opinion on the Trust accounts consolidation schedules and to carry out specified procedures (on behalf of the NAO) on these schedules under group audit instructions. In the group audit instructions the Trust was selected as a sampled component.

At the current stage of testing; • The procedures we carried out on the Trust's accounts consolidation schedules did not identify any significant issue, however further

checks will be completed on the audited financial statements.

Certification of the closure of the audit

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Value for Money

Risk assessment

We carried out an initial risk assessment in December 2019 and identified one significant risk in respect of Financial Sustainability, including the Impact of ‘Brexit’, in the Medium Term . We communicated this risks to you in our Audit Plan dated 21st

January 2019.

We have continued our review of relevant documents up to the date of giving our report, and have not identified any further significant risks where we need to perform further work.

We carried out further work only in respect of the significant risks we identified from our initial and ongoing risk assessment.

Value for MoneyBackground to our VFM approach

We are required to satisfy ourselves that the Trust has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources and report by exception where we are not satisfied. This is known as the Value for Money (VFM) conclusion.

We are required to carry out sufficient work to satisfy ourselves that proper arrangements are in place at the Trust. In carrying out this work, we are required to follow the NAO's Auditor Guidance Note 3 (AGN 03) issued in November 2017. AGN 03 identifies one single criterion for auditors to evaluate: “In all significant respects, the audited body takes properly informed decisions and deploys

resources to achieve planned and sustainable outcomes for taxpayers and local people.”

This is supported by three sub-criteria, as set out below:

Informed decision making

Value for Money

arrangements criteria

Sustainable resource

deployment

Working with partners & other third

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Our work

AGN 03 requires us to disclose our views on significant qualitative aspects of the Trust's arrangements for delivering economy, efficiency and effectiveness.We have focused our work on the significant risks that we identified in the Trust's arrangements. In arriving at our conclusion, our main considerations were:• The Trust’s performance against its operational plan and achievement of its control total

for the financial year 2018/19;• The Trust’s forecast position throughout the year and final outturn against budget;

• The Trust’s overall arrangements for achievement of its control total, including the

realisation of profits from its planned sale of the Hoo; delivery of planned savings for 2018/19; and the establishment of financial savings plans for 2019/20;

• The Trust’s own assessment and arrangements in preparing for the UK’s EU Exit and

assessing their adequacy.We have set out more detail on the risks we identified, the results of the work we performed, and the conclusions we drew from this work on page 14

Overall conclusion

Based on the work we performed to address the significant risks, we are satisfied that the Trust had proper arrangements for securing economy, efficiency and effectiveness in its use of resources. The text of our report, which confirms this can be found at Appendix E.

Recommendations for improvement

No issues noted.

Significant difficulties in undertaking our workWe did not identify any significant difficulties in undertaking our work on your arrangements which we wish to draw to your attention.

Significant matters discussed with managementThere were no matters where no other evidence was available or matters of such significance to our conclusion or that we required written representation from management or those charged with governance.

Value for Money

Value for Money

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Key findings

We set out below our key findings against the significant risks we identified through our initial risk assessment and further risks identified through our ongoing review of documents.

Value for Money

Significant risk Findings Conclusion

Financial Sustainability, including the Impact of ‘Brexit’, in the Medium Term

Before the start of each financial year the Trust agrees to a control total set by NHS Improvement (NHSI) which determines the target financial performance for the financial year. Achievement of the control total also ensures the Trust receives additional Provider Sustainability Funding (PSF).The risk is whether the Trust has adequate arrangements in place to ensure it meets its control total and therefore receive its allocated PSF funding.Further pressure could also result from uncertainties related to the planned departure of the UK from the European Union on 29th March 2019, which had the potential to adversely affect the availability and cost of staff, drugs and other supplies at the Trust.

Ahead of the 2018/19 financial year the Trust was set a control total by NHSI to achieve an overall surplus of £2.195m. This included core Provider Sustainability Fund (PSF) of £1.178m therefore giving a pre PSF control total of £1.017m surplus. Subsequently, the Trust was offered the opportunity to re-forecast of its outturn position in order to take advantage of the 2 for 1 PSF incentive scheme put forward by NHSI. As a result the Trust had to make a control total surplus of £2.5m before achievement of PSF. To reach its new control total under this incentive the Trust increased its expected profit on sale of the Hoo.At year end the Trust has achieved an underlying deficit of £0.428m, inclusive of PSF, profit on sale and impairments. After adjusting for PSF achieved of £4.008m, impairments of £6.679m and £0.14m adjustment agreed by NHSI for the Agenda for Change Pay Award cost pressure the Trust has achieved financial performance of £2.382m surplus. This behind the revised control total of £2.5m but ahead of the original pre PSF control total. Therefore the Trust achieved its core PSF funding and incentive PSF at a rate of 1 for 1 as opposed to the 2 for 1 rate that could have been achieved.Although a small deficit has been achieved and the revised control total not met we have determined that this does not cause us to modify our opinion on the basis of financial sustainability. The rationale for this conclusion is that:• The underlying deficit financial position achieved of £428,000 is relatively small

in comparison to other Trusts experiencing deficits in the challenging NHS environment

• The deficit is predominantly achieved as a result of a large non-recurring impairment. The Trust purchased land from the Whittington Hospital towards the end of the year at a negotiated price of £12.5m for the furtherance of its St Pancras Development Project. The site requires development for Camden and Islington's purposes and therefore a large impairment of £6.6m has been incurred. This is not expected to recur in the 2019/20 year as the site will undergo development to improve its condition and bring it in to use.

• The Trust has a previous track record of meeting its control total and breaking even over the last few years

Auditor view

We have concluded that the Trust has proper arrangements in all significant respects to ensure it delivered value for money in its use of resources.

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Key findings

We set out below our key findings against the significant risks we identified through our initial risk assessment and further risks identified through our ongoing review of documents.

Value for Money

Significant risk Findings Conclusion

Financial Sustainability, including the Impact of ‘Brexit’, in the Medium Term (continued)

• The Trust has a good track record of delivering its savings plans. They have identified £5.6m of savings for the 19/20 year and reduced the level of unidentified savings to £582,000 compared to the prior year of £2m we do not deem this to be an indicator at this stage of financial instability.

One political factor which had the potential to cause significant instability in the Trust's finances is the impact of our EU Exit. The initial date the UK was due to leave the EU was the 29th March, however an extension has now been granted by the EU to 31st October 2019. Even with this extension there is still the requirement for all organisations, including Trusts such as Camden & Islington to analyse the potential effect and prepare appropriately. We obtained the Trust's preparedness review and communications internally, from this review we have determined that the effect of Brexit on Camden & Islington is unlikely to be significant in the short term and that the review undertaken by the Trust is robust and ongoing. As such we do not deem the uncertainty around our exit from the EU to have a significant adverse impact on the Trust's ability to continue to provide services.

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Independence and ethics We confirm that there are no significant facts or matters that impact on our independence as auditors that we are required or wish to draw to your attention. We have complied with the Financial Reporting Council's Ethical Standard and confirm that we, as a firm, and each covered person, are independent and are able to express an objective opinion on the financial statements We confirm that we have implemented policies and procedures to meet the requirements of the Financial Reporting Council’s Eth ical Standard and we as a firm, and each covered person, confirm that we are independent and are able to express an objective opinion on the financial statements.Further, we have complied with the requirements of the National Audit Office’s Auditor Guidance Note 01 issued in December 2017 which sets out supplementary guidance on ethical requirements for auditors of local public bodies.Details of fees charged are detailed in Appendix D

Independence and ethics

Audit and Non-audit services

For the purposes of our audit we have made enquiries of all Grant Thornton UK LLP teams providing services to the Trust. The following non-audit services were identified, as well as the threats to our independence and safeguards that have been applied to mitigate these threats.

Fees £ Threats identified Safeguards

Audit related

Assurance of the Trust’s

Quality Report5,000 Self-Interest (because

this is a recurring fee)The level of this recurring fee taken on its own is not considered a significant threat to independence as the fee for this work is £5,000 in comparison to the total fee for the financial statements audit of £44,500 and in particular relative to Grant Thornton UK LLP’s turnover overall. Further, it is a fixed fee and there is no

contingent element to it. These factors all mitigate the perceived self-interest threat to an acceptable level.

These services are consistent with the Trust’s policy on the allotment of non-audit work to your auditors All services have been approved by the Audit & Risk Committee None of the services provided are subject to contingent fees.DRAFT


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Action planWe have identified 2 recommendations for the Trust as a result of issues identified during the course of our audit. We have agreed our recommendations with management and we will report on progress on these recommendations during the course of the 2019/20 audit. The matters reported here are limited to those deficiencies that we have identified during the course of our audit and that we have concluded are of sufficient importance to merit being reported to you in accordance with auditing standards.

Controls High – Significant effect on control system Medium – Effect on control system Low – Best practice

Appendix A

Assessment Issue and risk Recommendations

• During our review of the IT control environment at risk

assessment and planning it was noted that there were instances with staff, particularly those with super user access to the ledger, were using on screen notes to store passwords. This is deemed a control weakness as the passwords are readily available and present a risk to manipulation of the financial statements should they be used for unauthorised access to the ledger.

We are aware that there is a policy in place around safe storage of passwords at the Trust and therefore it would be our recommendation that this policy be widely enforced.

Management response:

Following discussion of this issue with management we have been informed that they have since communicated that inappropriate storage of passwords is unacceptable and these on screen notes have since been removed.

The audit followed up this response and continued to observe adherence to the policy throughout the audit

Audit Follow Up:

During the year end audit we did not observe users, especially those with super user access to the ledger, using on screen notes to store passwords.

• During our review of the control environment in relation to

employee remuneration we became aware that the Trust do not routinely review exception reports from the payroll system. This is deemed to be a control weakness as not monitoring monthly variances could lead to errors in the employee remuneration of the Trust not being identified in a timely manner.

We would recommend that the Trust review exception reports as a way of identifying errors in payroll on a timely basis. This should be done at least monthly in line with the payroll cycle.

Management response:We have been informed that payroll staff are now reviewing exception reports however this control was not in place throughout the year.

Audit Response:

We will follow this up during the 19/20 audit by viewing evidence that exception reports have been reviewed. This would potentially allow us to rely on a controls approach to our employee remuneration testing in the 19/20 audit.

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Audit AdjustmentsWe are required to report all non trivial misstatements to those charged with governance, whether or not the accounts have been adjusted by management.

Impact of adjusted misstatementsAll adjusted misstatements are set out in detail below along with the impact on the key statements and the reported net expenditure for the year ending 31 March 2019.

DetailStatement of Comprehensive Income £‘000

Statement of Financial Position £’ 000

Impact on adjusted net surplus/(deficit) £’000

1 Classification error between Other Payables and Trade Payables due to figures being incorrectly entered into the consolidation schedule.

- Dr Other Payables 600Cr Trade Payables 600

-

Overall impact £0 £0 £0

Appendix C

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Audit Adjustments

Disclosure omission Detail Auditor recommendations Adjusted?

Note 3.1 Income from patient care activities (by nature)

The Trust has received £1.542m in the year in relation to the Agenda for Change pay award central funding. This has been omitted from Note 3.1. Disclosure amendment only as the income is included in the total per Note 3.1 and also within the income on the Statement of Comprehensive Income.

• As this value is above trivial we recommended this be amendedManagement response• The Trust have agreed to amend Note 3.1

✓

Note 17.1 Property, Plant and Equipment (PPE)

Reclassifications from Assets Under Construction (AUC) have been omitted form from the draft PPE note. £674,000 of Buildings and £57,000 of IT Equipment has been completed in year and therefore needs to be reclassified from AUC to Buildings and IT respectively.There is no impact on total NBV disclosed on the Balance Sheet


✓

Note 25.1 Trade and Other Receivables

£4.008m of contract receivables have been disclosed in Note 25.1 which relate to an accrual for PSF. Per the IFRS15 definition this should be classified as contract assets rather than contract receivables.


✓

Misclassification and disclosure changesThe table below provides details of misclassification and disclosure changes identified during the audit which have been made in the final set of financial statements.

Appendix C

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Fees

Proposed fee Final fee

Trust Audit 44,500 44,500

Total audit fees (excluding VAT) £44,500 £44,500

Non Audit Fees

Fees for other services Fees

Audit related services:• Quality Report

5,000

£5,000

Appendix D

We confirm below our final fees charged for the audit and provision of non-audit services

Audit Fees

• The fees reconcile to the financial statements.

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© 2019 Grant Thornton UK LLP. All rights reserved.

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Grant Thornton UK LLP is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate, one another and are not liable for one another’s acts or omissions.

grantthornton.co.uk

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Grant Thornton UK LLP 110 Bishopsgate London EC2N 4AY

20th May 2019

Dear Sirs

Camden & Islington NHS Foundation Trust Financial Statements for the year ended 31 March 2019

This representation letter is provided in connection with the audit of the financial statements of [Click here and enter client name] for the year ended 31 March 2019 for the purpose of expressing an opinion as to whether the financial statements are presented fairly, in all material respects in accordance with International Financial Reporting Standards, the NHS Foundation Trust Annual Reporting Manual issued by NHS and the Department of Health and Social Care Group Accounting Manual 2018-19.

We confirm that to the best of our knowledge and belief having made such inquiries as we considered necessary for the purpose of appropriately informing ourselves:

Financial Statements

i. As Trust Board members, we have fulfilled our responsibilities under the National Health Services Act 2006 for the preparation of the financial statements in accordance with International Financial Reporting Standards, the NHS Foundation Trust Annual Reporting Manual (the ARM) and the Department of Health and Social Care Group Accounting Manual 2018-19 (GAM); in particular the financial statements are fairly presented in accordance therewith.

ii. We have complied with the requirements of all statutory directions affecting the Trust and these matters have been appropriately reflected and disclosed in the financial statements.

iii. The Trust has complied with all aspects of contractual agreements that could have a material effect on the financial statements in the event of non-

Trust Headquarters] 4

th Floor, East Wing

St Pancras Hospital 4 St Pancras Way London NW1 0PE www.candi.nhs.uk

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http://www.candi.nhs.uk/

compliance. There has been no non-compliance with requirements of the Care Quality Commission or other regulatory authorities that could have a material effect on the financial statements in the event of non-compliance.

iv. We acknowledge our responsibility for the design, implementation and maintenance of internal control to prevent and detect fraud.

v. Significant assumptions used by us in making accounting estimates, including those measured at fair value, are reasonable.

vi. In calculating the amount of income to be recognised in the financial statements from other NHS organisations we have applied judgement, where appropriate, to reflect the appropriate amount of income expected to be derived by the Trust in accordance with the International Financial Reporting Standards and the GAM. We are satisfied that the material judgements used in the preparation of the financial statements are soundly based, in accordance with International Financial Reporting Standards and the GAM, and adequately disclosed in the financial statements. There are no other material judgements that need to be disclosed.

vii. We acknowledge our responsibility to participate in the Department of Health and Social Care's agreement of balances exercise and have followed the requisite guidance and directions to do so. We are satisfied that the balances calculated for the Trust ensure the financial statements and consolidation schedules are free from material misstatement, including the impact of any disagreements.

viii. Except as disclosed in the financial statements:

a. there are no unrecorded liabilities, actual or contingent

b. none of the assets of the Trust has been assigned, pledged or mortgaged

c. there are no material prior year charges or credits, nor exceptional or non-recurring items requiring separate disclosure.

ix. Related party relationships and transactions have been appropriately accounted for and disclosed in accordance with the requirements of International Financial Reporting Standards and the GAM.

x. All events subsequent to the date of the financial statements and for which International Financial Reporting Standards and the GAM require adjustment or disclosure have been adjusted or disclosed.

xi. We have considered the adjusted misstatements, and misclassification and disclosures changes schedules included in your Audit Findings Report. The financial statements have been amended for these misstatements, misclassifications and disclosure changes and are free of material misstatements, including omissions.

The financial statements are free of material misstatements, including omissions.

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xii. Actual or possible litigation and claims have been accounted for and disclosed in accordance with the requirements of International Financial Reporting Standards.

xiii. We have no plans or intentions that may materially alter the carrying value or classification of assets and liabilities reflected in the financial statements.

Information Provided

xiv. We have provided you with:

a. access to all information of which we are aware that is relevant to the preparation of the financial statements such as records, documentation and other matters;

b. additional information that you have requested from us for the purpose of your audit; and

c. unrestricted access to persons within the Trust from whom you determined it necessary to obtain audit evidence.

xv. We have communicated to you all deficiencies in internal control of which management is aware.

xvi. All transactions have been recorded in the accounting records and are reflected in the financial statements.

xvii. We have disclosed to you the results of our assessment of the risk that the financial statements may be materially misstated as a result of fraud.

xviii. We have disclosed to you all information in relation to fraud or suspected fraud that we are aware of and that affects the Trust and involves:

a. management;

b. employees who have significant roles in internal control; or

c. others where the fraud could have a material effect on the financial statements.

xix. We have disclosed to you all information in relation to allegations of fraud, or suspected fraud, affecting the Trust's financial statements communicated by employees, former employees, analysts, regulators or others.

xx. We have disclosed to you all known instances of non-compliance or suspected non-compliance with laws and regulations whose effects should be considered when preparing financial statements.

xxi. We have disclosed to you the identity of the Trust's related parties and all the related party relationships and transactions of which we are aware.

xxii. We have disclosed to you all known actual or possible litigation and claims whose effects should be considered when preparing the financial statements.

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Annual Report

xxiii. The disclosures within the Annual Report fairly reflect our understanding of the Trust’s financial and operating performance over the period covered by the financial statements.

Annual Governance Statement

xxiv. We are satisfied that the Governance Statement fairly reflects the Trust’s risk assurance framework and we confirm that we are not aware of any significant risks that are not disclosed within the Governance Statement.

Approval

The approval of this letter of representation was minuted by the Trust’s Audit & Risk Committee at its meeting on 20th May 2019

Yours faithfully

Angela McNab

Chief Executive

Date 20th

May 2019

David Wragg

Director of Finance

Date 20th

May 2019

Signed on behalf of the Governing Body

DRAFT

Documents

DRAFT annual accounts for 2018/19. · Title: Draft 2018/19 Annual Accounts Executive Summary The Trust submitted its unaudited 2018/19 annual accounts to NHS Improvement and to our