Finance Committee Month 12 2009 1

Finance ReportMonth 12 2009/10

Paper 15(i)

Finance Committee Month 12 2009 2

Executive Summary

• Income & expenditure reported a £0.7m surplus in month– The reported in month surplus is in line with plan. The planned result was a £0.7m surplus.– Clinical income is £2.0m below plan. Other operating income is in line with plan. – Pay was favourable versus plan by £1.2m. The key driver remains vacancies. – Non-Pay was £0.3m favourable versus plan in the month. Additional consultancy and external hotel services contract

account for the variance in month.– The net savings generated by the Cost Improvement Programme have not always been realised against original

categories of spend. This has therefore resulted in increased savings in pay and lower savings within non-pay.

• Cost Improvement Programme– £1.2m of total net savings have been phased into M12 contributing to the surplus this month. Savings of £1.2m have

been reported and are above plan in month.– Total 2009/10 CIP’s are broadly delivering in line with expectations. This is above originally planned levels.

• Actual out-turn– The reported operational deficit for 2009/10 is £9.9m which is in line with plan and forecast.

• Financial Risk Rating – The Monitor Financial Risk Rating is 1. This is in line with expectations.

• Cash– The cash position remains tight. The Trust is moving from stress to distress.– The Trust Board continues to monitor its going concern status on a fortnightly basis.

Finance Committee Month 12 2009 3

• The month 12 financial results are reported against the revised Trust budget of a £9.9m deficit for

2009/10.– £9.2m of CIPs have now been allocated to cost centre level or Directorate (previously £9.2m).– Where this has still not been possible, £1.1m of CIPs remain within individual Executive Leads (previously

£1.1m). These are profiled in line with original delivery expectations.– Planned savings of £1.2m have been assumed in the month 12 budgeted position.– Actual savings are reported as £1.3m in month which is in line with plan.– Income has been reported using month 11 YTD actual data and an estimate for month 12.

• The CIP embedded in the budget is consistent with the numbers contained in the Turnaround report.

Progress on CIP delivery is explored in greater detail in the turnaround report, with overall financial

performance of which CIP is only one element being explored in this report.

• Following the agreement of the SLA with East Berkshire PCT the M12 income assumption is based

on the signed contract plan value of £149.0m• The SLA position for Bucks PCT is agreed. The M12 position is in line with this agreement.

Key assumptions

Finance Committee Month 12 2009 4

Note: Results reported one month in arrears

CommentaryThe Trust remains as a FRR of 1. This is driven by all 5 metrics. The main determinants of that are;

- Planned deficit £9.9m

- Weak EBITDA

- Weak working capital position

Performance is not expected to change in year

Monitor risk rating score

ScoringFRR Metrics by quarterall on YTD basis

Q1 YTD Actual

Q2 YTD Actual

Q3 YTD Actual

M11 YTD Actual

Full year forecast

EBITDA margin -4.4% -2.4% -0.6% 0.0% 0.8%EBITDA % of plan 0.0% 0.0% 0.0% 14.0% 86.1%ROA -13.6% -10.3% -7.3% -6.1% -4.7%I&E surplus margin -9.9% -7.5% -5.8% -5.2% -4.4%Liquidity 0.0 -4.0 -5.0 -4.8 -3.3

Financial Risk Rating 1 1 1 1 1

Finance Committee Month 12 2009 5

CommentaryThe Trust is reporting a £0.7m surplus for M12, which is £0.1m adverse versus plan.IncomeTotal Trust Income is £1.5m below plan in month. A provision has been made in month to reflect the uncertainty surrounding non-payment of invoices from Berkshire East. A penalty notice for 18 week performance was received from Berkshire East PCT for £0.2m.ExpenditurePay is £1.1m favourable to plan in month. The key driver remains vacancies and the reporting of Project Management Office support costs within non pay. Non pay is £0.3m favourable to plan in the month. Additional consultancy and external catering and linen costs are offset by a review of accruals and a higher level of CIP’s delivered through non-pay than originally planned. FinancingReduced interest receivable and higher depreciation charges account for the variance.

Income and Expenditure summary

Income & expenditure by category - 2009/ 10As at month 12 (March)

2009-10Revised Month 10 Month 11 Month 12 Plan Actual Variance Plan Actual Variance

plan in month in month in month to date to date to date

Total income 226,199 19,053 18,062 17,982 19,516 17,982 (1,534) 226,203 223,874 (2,329)

Pay 154,230 12,475 12,421 11,640 12,806 11,640 1,166 154,442 150,760 3,682Non-pay 70,303 5,587 5,522 4,646 4,909 4,646 263 70,095 71,414 (1,319)

Total expenditure 224,533 18,062 17,944 16,287 17,715 16,287 1,429 224,537 222,174 2,363

EBITDA 1,666 991 118 1,695 1,800 1,695 (105) 1,666 1,700 34

Total financing costs 11,570 1,000 995 1,012 1,007 1,012 (5) 11,570 11,628 (58)

Net Surplus/ (deficit) (9,904) (9) (877) 683 793 683 (110) (9,904) (9,929) (25)

EBITDA - Earnings Before Interest Dividends & Amortisation

2009-10In Month2009-10

Surplus/(deficit) per month (£m)

-3

-2.5

-2

-1.5

-1

-0.5

0

0.5

1

Apr May J un J ul Aug Sep Oct Nov Dec J an Feb Mar

P lan Actual

Finance Committee Month 12 2009 6

Agency expenditure• Agency costs have increased by £0.4m versus last month with spend of £1.1m compared

to £0.7m in February. • Agency nursing costs have increased versus last month with spend of £0.4m compared

to £0.3m in January. • Admin and clerical agency costs are £0.3m in month which is in line with last months

expenditure. • Medical agency costs have increased to £0.2m during March as anticipated due to

additional locum appointments within A&E and Surgery.

Consultancy / Turnaround support• £0.8m was spent in the month. YTD spend of £5.5m is £0.5m above plan and £0.1m

above forecast. This was driven by the recruitment of Programme and Project Managers

to support the implementation phase of the Turnaround Plan.

Other expenditure issues

Finance Committee Month 12 2009 7

Short term cash flow forecast for the period ended 2 July 2010

■ This is an update to the March base case short term cash flow issued previously. The cash flow for 2010/11 is consistent with the underlying assumptions in the Turnaround Plan. Section 1.5 highlights the main risks and issues.

■ The main assumptions are: 2010/11 Income in line with base case in the Turnaround Plan – awaiting conformation of actual SLA position. Expenditure continues at current run rate (adjusted for inflation). PCT advance of £9 million received week ending 2 April 2010 and two further payments of £1.5 million each in July and October 2010. BEPCT is seeking to make these payments

conditional. This is not consistent with the Trust’s understanding of the agreement. Turnaround costs are £750k per month. No transitional funding (as not yet agreed). No redundancy payments. A number of creditors will need to be normalised in April and May, the largest being NHS Supply Chain.

■ The forecast shows that with PCT support of £9 million the Trust will have adequate funds throughout the short term planning period. The forecast does not includes any PDC dividend payments. On page 6 a summary of the cash position excluding the £9 million PCT cash advance has been shown which demonstrates the underlying cash deficit.

■ The Trust does not currently have access to its working capital facility. Work continues to secure funding for the Turnaround implementation and this forecast currently assumes that no funding is available.

■ Work continues on agreeing a settlement of drugs and devices invoices.

■ This forecast does not include the impact of any savings programmes not already in the run rate, and operates on the assumption that further cash savings are not released in the 13 week period, the cash generation programme is also excluded. Additional 18 week costs are also excluded.

Variance analysis against March base case:■ The Trust is £4.4 million ahead of the March base case forecast.

7

Cash Analysis

£’m

BEPCT Income (2.3) Invoices still awaiting approval £0.7 million received this weekOther Income 0.2 Timing difference – income received ahead of planPDC Dividend 1.9 DeferredPayroll Costs 0.3Creditors 3.8 Timing differencesCapex 0.5 Timing differencesTotal Variance 4.4