Item 6 - Finance Report - 2021-22
North Lanarkshire Council · 22 June 2022
Back to Health and Social Care Integration Joint Board — 22 June 2022 and its agenda
Text extracted from the council's PDF. Layout and reading order may differ from the original.
Page 1
1 REPORT Item No: 6 1. PURPOSE OF REPORT 1.1 This paper is coming to the Integration Joint Board (IJB): For approval For endorsement For noting 1.2 This report provides a summary of the financial position of the North Lanarkshire Health and Social Care Partnership (HSCP) for the period from 1 April 2021 to 31 March 2022. 2. ROUTE TO THE INTEGRATION JOINT BOARD 2.1 This paper has been: Prepared By; Chief Financial Officer Reviewed By; Chief Officer 3. RECOMMENDATIONS 3.1 The IJB is asked to agree the following recommendations: (1) Note the contents of the report; (2) Note the confirmation of the additional non-recurring Scottish Government funding to respond to the Covid-19 pandemic and to recover and remobilise health and social care services during 2021/2022; (3) Endorse the principle that uncommitted 2021/2022 Covid-19 funding will be transferred to a ring-fenced reserve to address ongoing Covid-19 costs in 2022/2023; (4) Note that the financial outturn at 31 March 2022 is an underspend of £74.670m (NHSL - £58.697m; NLC - £15.973m). 4. VARIATIONS TO DIRECTIONS SUBJECT: Financial Monitoring Report 2021/2022 TO: Integration Joint Board Lead Officer for Report: Ross McGuffie Chief Officer Author(s) of Report Marie Moy Chief Financial Officer DATE: 22nd June 2022 Yes No N/A
Page 2
2 5. BACKGROUND/SUMMARY OF KEY ISSUES 5.1 This report is based on the financial monitoring reports received from the Director of Finance of NHS Lanarkshire (NHSL) and the Head of Financial Solutions of North Lanarkshire Council (NLC). The position detailed in these reports is therefore based on the information contained in each partner’s respective financial systems and includes accruals and adjustments in-line with their financial policies. This is the final financial monitoring report presented in respect of the financial year 2021/2022. 6. CONCLUSIONS 6.1 The financial position as at 31 March 2022 is summarised as follows: there is a net underspend of £58.697m on the core budgets within Health Care Services; details of which are provided at Appendix 1. there is a net underspend of £15.973 on the core budgets within Social Care and Housing Services; details of which are provided at Appendix 2 The total underspend of £74.670m represents approximately 12% of the total financial envelope available. 6.2 The Covid-19 pandemic has created significant financial management and financial planning challenges for both partners and the IJB. These challenges have centred around the difficulties in predicting the costs associated with the response to and recovery from the Covid-19 pandemic and the constantly evolving funding allocations from the Scottish Government. 6.3 Additional Scottish Government funding was confirmed on 25 February 2022 which meets in full the 2021/2022 Covid-19 costs included in the Lanarkshire Remobilisation Plan for both partners. 6.4 The underspends detailed in section 6.1 include the spend against covid-19 funding; during 2021/2022 the spend amounted to £13.412m (NHSL £5.347m) and (NLC £8.065m). This left a balance of £31.686m uncommitted at the 31 March 2022, which has been transferred to a ring-fenced reserve to address ongoing Covid-19 costs in 2022/2023. This funding is to be used before further funding is requested through the Local Mobilisation Planning process in 2022/2023. 6.5 The Covid-19 funding transferred to the ring-fenced reserve can be used to support continuation of costs which were funded in 2021/2022 as a direct result of Covid-19. The use of these allocations to meet Covid-19 expenditure must be agreed by the IJB Chief Finance Officer and the NHS Board Director of Finance. It is important to note that the funding should be targeted at meeting all additional costs of responding to the Covid-19 pandemic in the Integration Authority as well as the NHS Board. 6.6 Any proposed utilisation of the earmarked reserves to meet new expenditure that had not been funded in 2021/2022 will require the prior agreement of the Scottish Government in advance of the expenditure being incurred. It also remains important that reserves are not used to fund recurring expenditure, given the non- recurring nature of Covid-19 funding. The Covid-19 financial position is being closely monitored.
Page 3
3 6.7 The main factors contributing to the financial position are summarised at sections 7 and 8. 7. REASONS FOR MAJOR VARIANCES – HEALTH CARE SERVICES 7.1 Locality and Other Services 7.1.1 There is a net underspend of £4.549m. 7.1.2 The net underspend on pay costs totals £4.733m and is mainly due to vacancies across Nursing Services and Administration and Clerical staff within the localities totalling 64.30 WTE. There are incremental pay increases and unfunded enhancements across many services however these cost pressures are being offset in-year by the vacancies. 7.1.3 In respect of non-pay costs, there is a net overspend totalling £0.184m. The overspend is mainly due to payments in respect of Strathcarron Hospice (£0.568m). This cost is being managed on a non-recurring basis. A recurring funding solution requires to be identified. The overspend across non-pay costs is partly offset by underspends in respect of drug and travel costs. 7.2 Addiction Services 7.2.1 There is an underspend of £2.336m. 7.2.2 The underspend across pay costs is £0.386m. An underspend of £1.950m is reported in respect of non-pay costs. 7.3 Medical and Nursing Directorate 7.3.1 There is a net underspend of £0.758m. 7.3.2 An underspend of £0.076m is being reported in respect of the medical directorate. There is an overspend across pay costs of £0.011m which is offset by an underspend of £0.087m in respect of non-pay costs. 7.3.3 The nursing directorate is underspent by £0.682m. There is an underspend across pay costs of £0.658m and an underspend of £0.024m in respect of non-pay costs. 7.4 Prescribing 7.4.1 An underspend of £1.500m has been reported. 7.4.2 The prescribing budget has reduced by £1.349m since 31 March 2021. The majority of the budget reduction relates to the savings target of £1.186m which has been removed from the budget. The non-recurring funding of £0.978m received from the Scottish Government last year to address the price increases in two drugs and Flu costs has also been removed. The budget reductions have been partly offset by uplifts in-year to cover inflation. 7.4.3 Prescribing activity figures for the period from April 2021 to January 2021 have been received. Prescribing activity is 1.70% higher when compared to the same period last year. The cost per item remains at a high level. There continue to be significant risks in respect of prescribing activity and the costs as a result of both
Page 4
4 the Covid-19 pandemic and also the withdrawal from the European Union. Work is continuing to implement the planned prescribing savings targets. Prescribing costs will continue to be closely monitored. 7.5 Out of Area Services 7.5.1 There is a net overspend of £0.404m across non-pay costs. 7. REASONS FOR MAJOR VARIANCES – HEALTH CARE SERVICES (CONT.) 7.6 Area Wide Services 7.6.1 There is a net underspend of £1.676m mainly in respect of support for Refugees and Displaced People (£0.400m), Health Improvement Services (£0.030m) and Pharmacy Services (£1.391m). The funding for Refugees and Displaced People was received in December 2021. 7.6.2 Area Wide Services include central nursing services, corporate services, health promotion services, pharmacy services and winter planning services. The underspend comprises of an underspend of £1.439m across pay costs and an underspend of £0.237m across non-pay costs. 7.7 Hosted Services Led By North Lanarkshire 7.7.1 There is a net underspend in the hosted services which are led by the North Lanarkshire HSCP. The net underspend is £16.596m which includes the following significant variances: Mental Health and Learning Disability Services £10.328m underspend Children and Adolescents Mental Health Services £5.285m underspend Podiatry Services £0.280m underspend Speech and Language Therapy Services £0.405m underspend Dietetics Services £0.285m underspend Sexual Health Services £0.134m underspend Immunisation Service (£1.367m) overspend 7.7.2 The net underspend on Mental Health and Learning Disability Services is £10.328m. There is a net underspend across pay costs of £1.427m. This is due to 51.25 WTE vacancies mainly in nursing posts with some vacancies in psychology posts and administration posts (£2.133m). The underspend has been partly offset by overspends totalling £0.706m. This includes locum costs across Medical Services (£0.568m) and other overspends totalling £0.138m which include the use of bankaide across the inpatient areas and incremental increases within the community areas. There is a net underspend across non-pay costs of £8.901m. The total underspend to date is £9.085m however this is offset by overspends totalling £0.111m. The overspend relates to the Forensic Psychiatry Services (£0.083m) and Adult Psychotherapy (£0.028m). This position also includes additional allocations from Scottish Government in year.
Page 5
5 7.7.3 The net underspend within Children and Adolescents Mental Health Services is £5.285m and is due to vacancies (£5.443m) across nursing and administration posts (49.48 WTE) as well as additional new monies received in year from Scottish Government remaining unspent at year end. There is also an overspend on non-pay costs (£0.158m). 7.7.4 There is an underspend of £0.280m within Podiatry Services which is mainly due to 8.57 WTE podiatrist vacancies (£0.269m) and an underspend across non-pay costs of £0.011m. 7.7.5 There is an underspend of £0.405m within Speech and Language Therapy Services which is mainly due to 14.59 WTE posts (£0.311m) and an underspend across non-pay costs of £0.094m. 7.7.6 There is an underspend of £0.285m within Dietetics Services which is mainly due to 4.26 WTE vacancies across dietician, admin and clerical posts (£0.175m) and an underspend across non-pay costs of £0.110m. 7.7.7 There is an underspend of £0.134m within Sexual Health Services which is mainly due to 1.58 WTE medical, nursing, admin and clerical vacancies (£0.088m) and an underspend across non-pay costs of £0.046m. 7. REASONS FOR MAJOR VARIANCES – HEALTH CARE SERVICES (CONT.) 7.7 Hosted Services Led By North Lanarkshire (Cont.) 7.7.8 There is an overspend within Immunisation Services of £1.367m which is partly due to an overspend on pay costs (£0.063m) but mainly due to an overspend on non-pay costs in respect of the cost of drugs (£1.304m). 7.7.9 In line with the Integrated Resource Advisory Group Finance Guidance, the lead partner for a hosted service is responsible for managing any overspends incurred. With the exception of ring-fenced funding, the lead partner can also retain any underspends which may be used to offset the overspends. This arrangement has been in place since 1 April 2016. 7.7.10 The IJB was previously advised that the hosted services principal is currently being reviewed. The outcome of the review will be reported to future meetings of both the North Lanarkshire IJB and the South Lanarkshire IJB for approval. 7.8 Hosted Services Led By South Lanarkshire 7.8.1 The hosted services which are led by the South Lanarkshire HSCP, in-line with the hosted services agreement, a break-even position is reported. 7.8.2 Primary Care Services are a hosted service which is led by the South Lanarkshire IJB. The Primary Care and Mental Health Transformation Fund and the Primary Care Improvement Fund are ring-fenced funding allocations. Any underspend is therefore retained for use across Lanarkshire and is not used to offset other overspends incurred by the South Lanarkshire IJB. 7.8.3 An underspend position of £9.796m is reported in respect of the Primary Care and Mental Health Transformation Fund and the Primary Care Improvement Fund. This is due to funding allocated by Scottish Government in year which will be utilised during future years.
Page 6
6 7.9 Covid-19 Pandemic – Additional Health and Social Care Costs 7.9.1 The additional costs which have been incurred in response to the Covid-19 pandemic continued to be reported to the Scottish Government through the Lanarkshire Mobilisation Plan. The actual costs incurred for Covid-19 for 2021/2022 total £13.412m. These have been met from existing IJB Covid-19 reserve (£2.265m) with the balance(£11.147m) being met by the additional Scottish Government funding announced on 25 February 2022. As highlighted at 6.4, uncommitted 2021/2022 Covid-19 funding at 31 March 2022 of £31.686m will be transferred to a ring-fenced reserve to meet ongoing 2022/2023 Covid-19 costs. 7.10 Average Vacancy Factor 7.10.1 The vacancy position against the funded establishment at 31 March 2022 is summarised as follows: Establishment Actual Variance 2,825 WTE 2,665 WTE 160 WTE vacancies 100% 93% 6% 7.10.2 The staff resource is 160 WTE (6%) under-established over the year. Additional hours are worked through bank aide, overtime and excess part time hours, the cost of which is included within the financial position reported and these are included in the final figure. 7 REASONS FOR MAJOR VARIANCES – HEALTH CARE SERVICES (CONT.) 7.11 Notional Set-Aside Allocation 7.11.1 The set-aside budget is a notional budget which represents the consumption of hospital resources by North Lanarkshire residents. The opening budget each year is increased by any relevant SG funding uplifts and modified to reflect any agreed changes to the specific delegated hospital services that shift the balance between hospital and community care. There were no agreed shifts during 2021/22 so the closing budget of £65.164m represents the impact of the 1.5% NHS allocation uplift and pay funding of £1.152m on opening budget of £63.066m. 7.11.2 In respect of the financial year 2021/2022, the notional set-aside budget is restated to reflect the 1.5% inflationary uplift on the recurring baseline (£0.946m) and also the 1.8% pay uplift (£1.152m). The notional set-aside budget for 2021/2022 is therefore £65.154m. 7.11.3 The 2019/2020 activity data from the Information Services Division (ISD) is not yet available. As highlighted at the North Lanarkshire IJB (Performance, Finance and Audit) Committee on 25 May 2021, the complexity in allocating costs contributes to a time lag. There is also a further delay in receiving the activity data as a result of the Covid-19 pandemic. A local pilot was being progressed within NHSL to ascertain if reliance could be placed on more current activity information linked to the NHSL financial ledger prior to being validated by the ISD. The outcome of this work however was impacted on by the Covid-19 pandemic both in terms of resource capacity to undertake the work and the relevance of the outcomes during the period of the pandemic. The time lag and complexities of this exercise are not however a barrier to progressing local plans. These are costed by adopting a “bottom up” approach.
Page 7
7 7.11.4 In line with the accounting policy previously agreed, this notional set-aside budget will be included in the IJB Annual Accounts 2021/2022 as an estimate of expenditure. It is recognised that this will not necessarily reflect the actual usage of these hospital services by the IJB however it has been endorsed as an acceptable approach pending further updates from ISD. It is also recognised that, in the future, the 2020/2021 and the 2021/2022 activity levels will not be representative of previous normal activity levels due to the impact of the Covid-19 pandemic. This will require to be taken into consideration. 7.11.5 The calculation of the notional set-aside allocation and the confirmation of actual activity levels is a complex accounting process. The NHSL Director of Finance, in consultation with the IJB Chief Financial Officer, continues to develop the monitoring arrangements for the Hospital Acute Services. 8. REASONS FOR MAJOR VARIANCES – SOCIAL CARE SERVICES 8.1 A net underspend of £15.793m is reported as at 31 March 2022. This is an increase of £4.246m since the net underspend of £11.727m which was reported as at 4 February 2022. The main factors contributing to this year-to-date financial position are highlighted below. 8.2 A net underspend of £0.093M is reported within employee cots which relates to vacancy management across the Service, partly offset by cost pressures resulting from demand within home support. 8.3 An underspend of £0.324m is reported within property costs which reflects lower than anticipated demand for housing adaptations within Council houses of £0.302m, this underspend will be retained within the Housing Revenue Account. 8.4 An underspend of £0.696m is reported in respect of supplies and services. Expenditure on supplies for client’s budgets and demand for equipment and adaptations are less than anticipated. The additional costs being incurred in respect of the provision of PPE to protect staff and service users against the Covid-19 virus will be offset by Covid-19 funding. 8. REASONS FOR MAJOR VARIANCES – SOCIAL CARE SERVICES (CONT.) 8.5 An underspend of £0.374m is reported in respect of transport and plant costs. This is due to lower than anticipated staff mileage costs coupled with lower than anticipated costs on vehicle contract hire within Integrated Day Services and Locality Support Services. 8.6 An underspend of £7.164m is reported in respect of administration costs. 8.6.1 The underspend is mainly due to the additional funding (£6.400m) received from the Scottish Government for winter planning systems pressures in 2021/2022 and also to facilitate longer term improvement in service capacity across health and social care services. The NLC partner will submit a request to the IJB to ring-fence the underspend from the winter pressures funding as a reserve to ensure it is available to support the transformational change programme as set out in the North Lanarkshire IJB Business Plan.
Page 8
8 8.6.2 An underspend of £0.843m across the carers budget in 2021/2022 is also reported. Social Care Services have recently reviewed all carer provision and budget allocations. The anticipated underspend across the carers budget is reflective of the part-year implementation of contracts. The NLC partner will submit a request to the IJB to earmark the underspend across the carers budget as a reserve to ensure it is utilised solely for carer provision in future years. 8.7 There is an underspend of £7.987m across payments to other bodies. The underspend is primarily due to the staff shortages and vacancies within the Care at Home sector who provide services to individuals via the Self-Directed Support commissioning framework. It is anticipated that these are in-year underspends only and these budgets will be required in full in 2022/2023. 8.8 Income is under-recovered by £0.744m, which is an adverse variance. This is partly due to the under-recovery of income from the community alarm charge, Home Support Services and Integrated Day Care Services which is lower than anticipated as a result of the Covid-19 pandemic. The implementation of the charge for community alarms was delayed due to the impact of the Covid-19 pandemic. The charge is now in place. Social Care Services continue to closely monitor the changes in the uptake of this essential service and are pro-actively responding to enquiries. The previously agreed NHS Lanarkshire partner contribution to the Integrated Equipment and Adaptations Service is also less than the actual cost of the service. This is currently being monitored. 8.9 The additional social care costs which have been incurred in response to the Covid-19 pandemic are also continuing to be reported to the Scottish Government through the 2021/2022 Lanarkshire Mobilisation Plan. 8.10 The projected Covid-19 costs for 2021/2022 will be met by Scottish Government funding. As highlighted at 6.4, uncommitted 2021/2022 Covid-19 funding at 31 March 2022 will be transferred to a ring-fenced reserve to meet ongoing 2022/2023 Covid-19 costs. 9. 2021/2022 SAVINGS 9.1 Financial Strategy 2021/2022 9.1.1 On 23 March 2021, the IJB approved the financial strategy to address the projected funding gap in 2021/2022 totalling £2.485m (NHSL - £1.032m; NLC - £1.453). 9.2 Health Care Savings 9.2.1 On 23 March 2021, the IJB approved total prescribing efficiencies of £1.632m. The prescribing budget was reduced by £1.186m, which represents 73% of the original target of £1.632m. The decision to reduce the prescribing budget by £1.186m instead of £1.632m was based on the financial information available at the start of the financial year taking into consideration projected prescribing activity
Page 9
9 levels and anticipated prices in 2021/2022. Further prescribing efficiencies would be progressed in 2022/2023. 9.2.2 As at 31 March 2022, an underspend position of £1.500m is reported in respect of the prescribing budget. This includes achievement of prescribing efficiencies of £1.234m. 9.3 Social Care Savings 9.3.1 This financial year 2021/2022 is the second year of the three-year Efficiency Programme approved by the IJB and the NLC partner in March 2020. The gross savings target is £1.453m. The NLC partner is therefore progressing the previously agreed savings plans. 9.3.2 The Service uses a variety of information, records and processes to monitor achievement of its approved budget savings; the service delivered £1.368m (94%) of the savings target. The budget gap of £0.086m was addressed during the year by the additional non-recurring 2021/2022 Scottish Government Covid-19 funding confirmed on 25 February 2022. 10. RESERVES 10.1 During 2021/2022 a total of £8.336m was drawn down from reserves (NHSL - £7.564m; NLC - £0.772m) and the surplus of £74.670m was added (NHSL - £58.697m; NLC - £15.973m). The reserves balance as at 31 March 2022 is therefore as follows: £m % Ring-fenced reserves 45.718 38% Ear-marked reserves 70.050 59% Contingency reserves 3.684 3% Total 119.452 100% 10.2 The 2021/2022 IJB Reserves Strategy continues to be monitored in consultation with the Director of Finance of NHSL and the Head of Financial Solutions of NLC. 11. RISK 11.1 Risk management arrangements are in place for the IJB and each partner. The IJB risk register has been reviewed and updated. The main risk associated with the in- scope budget during 2021/22 was that either or both partners would overspend. However as detailed within this report the financial outturn for the year was an underspend 11.2 The financial years 2020/2021 and 2021/2022 have been unprecedented. The emergency response to the Covid-19 pandemic has had a significant operational and financial impact on service delivery, the achievement of the Strategic Commissioning Plan and the financial planning assumptions of the original IJB Financial Plans.
Page 10
10 11. RISK (CONT.) 11.3 Although a non-recurring underspend has been reported, health and social care services continue to face demand pressures including home support, self-directed support, direct payments, independent care home placements, hospice care and health care services recovery plans. 11.4 The operational and financial impact of the response to the Covid-19 pandemic continues to be monitored by the IJB and both partners in line with their agreed emergency response arrangements and also the recovery, redesign and remobilisation work to reinstate services. The whole system approach continues to be adopted by NHSL, NLC and South Lanarkshire Council. 11.5 Additional non-recurring Scottish Government funding for Covid-19 and Remobilisation costs in 2021/2022 was confirmed on 25 February 2022. Although the risk in 2021/2022 of an overspend as a result of the Covid-19 pandemic has now been removed, the risk that the health and social care Covid-19 and Remobilisation costs in 2022/2023 and beyond will exceed the funding available continues to be assessed as high-risk. 11.6 Risk management arrangements are in place for the IJB and each partner. The respective risks are managed by both NHSL and NLC through their detailed budget management processes. In addition to these mitigating actions, the IJB Financial Plan 2021/2022 is closely monitored and the IJB Medium to Long Term Financial Pan is being updated. 12. IMPLICATIONS 12.1 NATIONAL OUTCOMES The effective management of financial resources contributes to the achievement of the national outcomes. 12.2 ASSOCIATED MEASURE(S) Each partner is required to remain within their approved budgetary provision. The IJB Financial Plan 2021/2022 is currently being reviewed. 12.3 FINANCIAL This paper has been reviewed by Finance: Yes No N/A 12.4 RISK ASSESSMENT/RISK MANAGEMENT The financial risks are detailed at section 15. The strategic financial risks detailed in the IJB Risk Register have also been updated and are included in a separate report to the IJB. 12.5 PEOPLE None 12.6 STAKEHOLDER ENGAGEMENT The Director of Finance of NHSL and the Head of Financial Solutions of NLC both continue to be consulted on the financial position of the North Lanarkshire IJB.
Page 11
11 12.7 INEQUALITIES & FAIRER SCOTLAND DUTY Equality and Diversity Impact Assessment Completed & Fairer Scotland Impact Assessment Form Completed: Yes No N/A 12. IMPLICATIONS (CONT.) 12.8 CARBON MANAGEMENT IMPLICATIONS Yes No N/A 13. BACKGROUND PAPERS None. 14. Appendices North Lanarkshire Health Care Services Financial Outturn 2021/2022 Appendix 1 North Lanarkshire Social Care Services Financial Outturn 2021/2022 Appendix 2 ........................................... CHIEF OFFICER (or Depute) Members seeking further information about any aspect of this report, please contact Marie Moy on telephone number 01698 453709
Page 12
Appendix 1 12 North Lanarkshire Health Care Services Financial Outturn 2021/2022
Page 13
Appendix 2 13 North Lanarkshire Social Work Services Financial Outturn 2021/2022 CATEGORY ANNUAL PROJECTED OUTTURN BUDGET OUTTURN VARIANCE EMPLOYEE COSTS 75,548,757 75,454,912 93,845 PROPERTY COSTS 2,878,181 2,553,735 324,446 SUPPLIES & SERVICES 5,471,562 4,775,144 696,418 TRANSPORT & PLANT 1,681,395 1,306,497 374,898 ADMINISTRATION COSTS 7,646,825 481,935 7,164,890 PAYMENTS TO OTHER BODIES 137,124,820 129,137,351 7,987,469 OTHER EXPENDITURE 38,856 5,067 33,789 TOTAL EXPENDITURE 230,390,396 213,714,641 16,675,755 NLC CONTRIBUTION 164,787,426 164,787,426 0 NLC CONTRIBUTION - HOUSING 1,970,000 1,668,368 (301,632) NLC CONTRIBUTION - TRANSPORT 550,737 539,200 (11,537) INCOME FROM HEALTH 53,121,607 53,076,154 (45,453) INCOME FROM HEALTH - COVID FUNDING 8,065,089 8,065,089 0 FEES AND CHARGES 1,553,309 1,122,748 (430,561) OTHER LOCAL AUTHORITIES 30,000 32,475 2,475 USE OF IJB RESERVES 0 0 0 OTHER INCOME 312,228 396,198 83,970 TOTAL INCOME 230,390,396 229,687,658 (702,738) NET EXPENDITURE 0 (15,973,017) 15,973,017