Finance Report to the Board

FINANCE REPORT TO THE BOARD

PERIODENDED 31ST MAY 2017

Contents

PGE
Summary financial position / 3
Overview of segmental performance / 4
Overall expenditure trends / 5-8
Key assumptions and risks / 9-10
Balance sheet / 11-13
Capital expenditure / 14-18
Appendices
Appendix 1 Detailed segmental performance / 19-25

Summary financial position

The reported surplus for the first two months of the year is £11k and at this very early stage in the financial year, we are anticipating a break-even position. We have identified a small number of key pressure areas in year, but are confident that in-year slippage will be sufficient to address these.

The Month 2 position for each segment of the organisation is as follows:

Core Services / ITS Programme / Trading / Managed Services / Total
£'000 / £'000 / £'000 / £'000 / £'000
Income / 9,966 / 3,470 / 8,058 / 3,636 / 25,130
Payroll / 7,509 / 313 / - / 242 / 8,064
Non Pay / 2,435 / 3,157 / 8,058 / 3,405 / 17,055
Total Expenditure / 9,944 / 3,470 / 8,058 / 3,647 / 25,119
Surplus/(Deficit) / 22 / - / - / (11) / 11

Segmental performance

The performance of each of the organisation’s segments is detailed in Appendix 1. At this early stage of the year, it is not possible to look at expenditure trends but any emerging issues are summarised below:

Core Services

Core services are reporting a small surplus for the first two months of the year. We continue to see pay under-spends across some areas, and are taking actions to address this potentially significant surplus.

ITS programme

The ITS revenue programme spend for the first two months is £3.5m and full funding for this is assumed. The final programme budget for the year is currently being discussed with HSCB.

Trading

Trading income and expenditure is just over £8m for the first two months of the financial year.

Managed services

These services, consisting of student nurse bursaries, healthy start programme, SUMDE payments for medical and dental training, HSC wide management trainee programme, the HSC interpreting service and sundry recharges to other bodies where BSO is the employer of convenience, are all fully funded through either RRL allocations or straight recharges to HSC customers. Full funding is currently assumed against all these with the exception of regional trainees where we are aware funding will be insufficient to cover costs, and we are recognising a small deficit.

Overall expenditure trends

Pay expenditure (Core services)

Approximately 75% of BSO’s core services annual expenditureis on pay costs. Total pay expenditure for core services for the first two months was £7.5m, against a budget of £7.9m, an underspend of £0.4m, reflecting continuing vacancy levels across some of the larger payroll areas such as ITS, PALS and FPS. A detailed analysis of variances against budget is presented in Appendix 1.The graph below shows actual vs budgeted spend for the largest areas within core services.

Non pay expenditure (core services)

Expenditure for the first two months on non-pay within core services was £2.4m, against a budget of £2.2m, an over-spend of £0.2m. The chart below illustrates that this overspend is a combination of an under-spend in shared services and core ITS non-pay, balanced with an overspend in other areas such as FPS. At this stage any directorate overspends reflect provisions being made for planned expenditure.

Income (core services)

Core services income within BSO for the first two months of the year is £9.9m, compared to a budget of £10m, a slight under-receipt of around £150k, relating mainly to profiling of the income budget for leadership centre. A detailed analysis of variances against budget is given in Appendix 1.The largest areas of income generation are shown below:

Non core services

Expenditure in relation to non-core services (including trading), for the first two months was just over £15m, and funding has been assumed against nearly all of this (see below).

As these services are provided by BSO on behalf of either DoH, HSCB or in the case of trading transactions, HSC customers, there is less risk to BSO in relation to this spend. The key emphasis for BSO is to ensure that we work closely with the organisations we provide these services for, and that any anticipated shortfalls or surpluses in indicative funding are highlighted as soon as possible.

The graph below shows the anticipated income and expenditure for the largest spend areas within these services. We are reporting a small deficit in respect of funding for management trainee scheme.

Assumptions and risks

The BSO assumes that all services which are provided on behalf of the Department of Health will be fully funded. Given the early stage in the year, and the current lack of a 2017/18 budget, then to an extent all our income at this point is assumed income.

The key risks to our ability to deliver a year end break even position were outlined in our 2017/18 financial strategy. The current status of these is set out below.

Key risk / Current status
Uncertainty around the financial allocation for 2017/18, both those directly made to BSO, and the impact of reductions in allocations to BSO’s customers. / At the time of preparation of this report there is still no formal agreed budget for any government department, and budgets therefore remain approved subject to the outcome of this process.
The continued limited internal audit assurance in respect of payroll shared services could lead to difficulties in securing payment for this service, and this could destabilise BSO’s overall financial position. / We are currently holding SLA meetings with all customers and this issue remains high on the agenda. There are no current indications that any HSC body plans to withhold payment for any services.
Inability to recurrently deliver RRL savings, particularly if a full year impact of these is notified to us in the latter part of the financial year. / At the time of preparation of this report we have not received any notification regarding the level of RRL savings for 2017/18.
Ability to fill current vacancies. BSO has over the last 2-3 years experienced levels of vacancies that have resulted in non-recurrent pay surpluses, that have had to be managed. / We continue to work with managers to ensure vacancies are filled.
Securing confirmation of the levels of assumed income, particularly given current budgetary uncertainty. / All assumed income is included in monthly monitoring returns sent to DoH.
Continued lack of funding for inescapable pressures. For the last number of years BSO has not received funding for pay and non-pay inflationary uplifts for RRL funded services. This has resulted in an additional savings target for the organisation, as these pressures cannot be avoided. For 2017/18 this also includes an inescapable apprenticeship levy. / At the time of preparation of this report we have not received any notification of our RRL allocation for the year. We have not assumed any pay and price uplift in our opening 2017/18 budgets.

Balance sheet position at 31ST May 2017

Non Current Assets / Cost / Deprec.
Land Cost / 2,865 / 0
Buildings Cost / 9,484 / (1,293)
Assets Under Construction / 0 / 0
Plant and Machinery / 268 / (172)
Transport Equipment / 1,423 / (772)
Information Technology / 54,773 / (33,859)
Furniture and Fittings / 1,960 / (581)
70,773 / (36,677) / 34,096
Intangible Software / 86,057 / (39,727)
Intangible Software Licenses / 6,724 / (5,323)
Intangible Assets Under Construction / 1,712 / 0
94,493 / (45,050) / 49,443
83,539
Current Assets
Inventories / 3,531
Trade & other receivables / 25,234
Prepayments and accrued income / 530
Commercial Banks and cash in hand / 1,752
31,047
TOTAL ASSETS / 114,586
Current Liabilities
Other taxation and social security / 1,444
Bank overdraft / 0
Trade revenue & capital payables / 527
Accruals and deferred income / 8,723
10,694
NON CURRENT ASSETS LESS NET CURRENT ASSETS/LIABILITIES / 103,892
Non Current Liabilities
Other Payables, accruals and deferred income / 0
Provisions
Prov Former Dir / 77
Prov Other Staff / 352
Prov Other / 148
577
ASSETS LESS LIABILITIES / 103,315
TAXPAYERS' EQUITY
Revaluation reserve / 8,143
General reserve B/fwd / 77,037
Grant In Aid less RRL / 20,778
Non cash - Depreciation etc / (2,654)
Non cash - Provisions arising / 0
Surplus in Period / 11
18,135
103,315

Inventories

The stock balance at 31 May 2017 was £3.5m (31 March 2017 £3.7m).

Trade & other receivables

The balance of trade receivables and prepayments at 31 May 2017 was £25.8m (31 March 2017 £26.6m). This balance is comprised of trade debt including inter-HSC, balances owed by client NDPBs and VAT.

Bank & cash / overdraft

The reconciled bank position of £1.8m includes BSO No 1 and No 2 accounts and the Central accounts which are managed by BSO. Also included is a petty cash balance of £1k.

Trade & other payables

The balance of trade and other payables 31 May 2017 was £9.2m (31 March 2017 was £31.3m).

7.Capital

7.1Capital sources

The BSO typically receives capital funding in respect of the following:

• General capital allocation (from DoH/HSCB);
• IT General Capital (from HSCB);
• ITS Programme (from HSCB);
• BSTP (from HSCB under ITS Programme); and
• MAGIC (from HSCB).

7.2General capital allocation

The BSO has submitted both a list of IT capital bids and general capital bids to the HSCB and DoH respectively. The total bids submitted are £1,309k. of which £525k relates to HSCB IT capital bids and £784k relates to DoH general capital bids. The DoH bids have been categorised as essential and desirable, with totals £745k and £39k respectively. All business cases have been received prior to SMT approval.BSO has not received formal confirmation of any CRL (Capital Resource Limit) approval on any of the requested projects.

The submitted bids are summarised in Table 4, overleaf.

Table 4 – Capital bids 2017/18

1. BIDS TO HSCB UNDER IT – GENERAL FUNDING

Project name / Description / Planned cost (£000’s) / Funding source
Purchase of counter/scanner for Pharmacy / Currently the FPS Pharmaceutical service
are required to remove one of there
scanners from Business as Usual use in
order to perform recounts. This can result
in a backlog and increases pressure on the
Department to meet deadlines. The
purchase of a new additional scanner would
alleviate this problem by allowing our
processes to continue uninterrupted. / 15 / HSCB
Welfare Reform - Statutory requirement – Universal Credit Implementation - is to be rolled out from September 2017 / The Government plans to implement a new welfare payment to replace many existing benefits with a Universal Credit.
Currently patients can receive financial assistance for Dental and Ophthalmic care depending on the benefit received.
Changes are required to the FPPS system and the Ophthalmic claiming and payment system. Supporting literature and claim forms to facilitate this implementation will be needed. / 200 / HSCB
EDRMS (Digitisation of HR Personnel Files) / A new electronic document record management system (EDRMS ) / 194 / HSCB
Audio Visual equipment for: Clady Villa, Altnagelvin and Craigavon / CEC are keen to deliver training to multiple sites at one time. Current audio visual equipment presentation materials are screened on out of date equipment. / 78 / HSCB
Upgrade of Audio Visual Conferencing Facilities for HSC Leadership Centre / Current AV equipment is out of date. This will secure more modern audio visual equipment in order to support high quality delivery / 21 / HSCB
Campsie - VOIP / Extend the VOIP system to include Campsie warehouse and thus reduce telephony costs / 12 / HSCB
6 laptops to support training for eProc and eTendersNI / Support delivery of training on eProc and eTendersNI. / 5 / HSCB

1. BIDS TO DoH FOR ESSENTIAL PROJECTS

Replace washer/disinfector and extend decontamination facility at Lissue / To replace the current washer/disinfector which is over 10 years old and at end of life. / 410 / DoH
New Drawbar Trailer / To replace the current Drawbar Trailer originally bought with XKZ 1621 in 2009. / 25 / DoH
4 x Electric Reach Trucks / To replace four existing electric reach trucks in the BSO fleet, which are over 15 years old and no longer viable to maintain and repair. / 100 / DoH
5 x Electric Order Pickers / To replace five existing electric order pickers in the BSO fleet, which are over 15 years old and not viable to maintain and repair. / 50 / DoH
2 x 10T Vehicles / To replace two existing 10T vehicles in the BSO fleet, which are over 7 years old as per the BSO fleet replacement policy to reduce maintenance revenue costs and improve environmental efficiency. / 100 / DoH
Vehicle Routeing Software & Hardware Accessories / To optimise the routeing for home delivery and collection of community equipment and continence products. This will ensure vehicle capacity is maximised, fuel and driver time are efficient. / 60 / DoH

1. BIDS TO DHSSPS FOR DESIRABLE PROJECTS

VCON replacement (Franklin Street) / With multiple offices, Managers often partake in conference calls or regional meetings in which office managers have to travel to a specific location to take part. Video conferencing can allow a video system and microphones at each location. / 16 / DoH
Aircon Installation (Lissue) / The installation of Aircon is needed for the conference room which is used for external meetings and Committees for the Office of Research & Ethics (OREC) and Contractors and Clients for Procurement & Logistics Services (PALS). / 9 / DoH
Shower Installation (Leadership Centre) / Installation of shower facilities will encourage staff to consider alternative modes of transport and potentially a change in their personal approach to health & wellbeing. / 14 / DoH

7.4ITS Programme

The full year budget available from the HSCB under ITS programme is expected to be £3.05m, of which BSO has not received a confirmed CRL. Expenditure for ITS programme was £255k as at 31 May 2017

7.5BSTP

The budget for BSTP Project for the year ended 31 March 2018 is expected to be £209k. BSO has not received a confirmed CRL. Expenditure on BSTP at 31 May 2017 was £5k.

7.6Mobile Assistance for Groups and Individuals within the Community – Stroke (MAGIC).

BSO received approval for business case for MAGIC in 15/16 for £647k over a 5 year period, of which £162k budget relates to third year of funding 2017/18. Expenditure on the project is £14k as at 31 May 2017.

Appendix 1 Detailed Divisional performance

Table
1 / Summary of budgeted and actual outturn
2 / Analysis of core services
3 / Analysis of operations directorate
4 / Analysis of customer care and performance directorate
5 / Analysis of other areas
6 / Analysis of managed services

TABLE 1 SUMMARY OF BUDGETED AND ACTUAL OUTTURN

TABLE 2 ANALYSIS OF CORE SERVICES

TABLE 3 ANALYSIS OF OPERATIONS DIRECTORATE

TABLE 4 ANALYSIS OF CUSTOMER CARE AND PERFORMANCE DIRECTORATE

TABLE 5 ANALYSIS OF OTHER AREAS

NB: The deficit within ‘ other’ area of £389k year to date reflects the provision for expenditure on a number of key pressure areas identified by the senior management team.

TABLE 6 ANALYSIS OF MANAGED SERVICES

1