NHS FDs under pressure: tricky operation

Finance directors have a reputation for wanting to achieve. No-one likes to
report bad news. FDs of bluechips know analysts will trawl through their trading
statements and annual accounts with a fine tooth comb. Any hint of potential
weakness is likely to spell a drop in share price.

But spare a thought for their counterparts in the NHS, under the pressure of
tough statutory targets. These include avoiding incurring a deficit, no matter
how poor their funding, while delivering 3% efficiency gains for 2008/09.

What’s happened?

The 12-month jail sentence of Mid Essex Hospital Services NHS Trust’s
financial director Philip Neal, for falsifying accounts to reveal a surplus
rather than deficit, has brought the issue into sharp relief.

His board decided the best way to get rid of a predicted £5m debt was to sell
some land. Neal was responsible for the sales, but he submitted inflated
valuations for the land. The valuations meant that for the financial year
2005/06 the trust reported a £1m surplus when in fact it was £10m in deficit.

While no-one would condone falsifying accounting, his sentence, given there
were no obvious victims and the fraud was for limited financial gain (he got a
small bonus of £2,500 for making the figures work), seemed a tad on the severe

Former FDs of trusts have expressed frustration with the Department of
Health’s financial targets and some of the unrealistic expectations of trust
board members.

The problem is the pressure to perform is intense, with the prospect of NHS
trusts that have still failed to gain foundation status being snapped up by
their more successful counterparts.

Trust chief executives have been leaning on FDs to get results – year-end
accounts in surplus – no matter how poor the level of commissions the trust has
managed to negotiate from the primary healthcare trusts.

What’s going to happen?

The pressure on FDs is likely to become heavier when the full effects of the
Corporate Manslaughter and Homicide Act, which came into force this week [6
April], kick in.

If patients die as a result of under-resourced services then the police can
swoop in to investigate trust board members, including the FD.

Investigators will look into what they could have done to prevent a potential
situation where patients’ safety was compromised.

Cost-cutting to deliver efficiency gains and surplus accounts will need to be
balanced against ensuring patients’ lives are not put in danger by hospital

Who’d work in the public sector?

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