Health service accounts spared qualification

Sir John Bourn, head of the National Audit Office, said the NHS’s position could have been much worse if agreement had not been reached with the Treasury to postpone implementation of two new accounting rules.

Nevertheless the accounts escaped qualification, as predicted in Accountancy Age in February.

Health authorities reported an aggregate surplus of £18m while NHS trusts reported an overall deficit of £36m for the year ending 1998/99. Colin Reeves, director of finance and performance at the NHS revealed in February that negotiations with the Audit Commission and the National Audit Office were at a critical stage in an effort to clear the last remaining stumbling blocks to clearing the accounts without qualification.

In the case of FRS 11 on fixed assets, had it been put into practice Sir John estimates a further £366m loss would have been placed on the expenditure and income account as a result of impairment to fixed assets.

NHS trusts would also have faced problems if they had they adjusted for downward revaluation of land and buildings with an estimated £750m charged against income and expenditure.

Sir John said: ‘The NHS continues to make improvements in its financial control over the £36bn spent by health authorities and NHS trusts. However, more work is necessary to ensure that accounting for these large sums fully and clearly reports the financial position of health authorities and NHS trusts on a consistent basis.’

There is more bad news in the accounts. The NAO found that despite surpluses in 1998-99 health authorities were predicting a deficit of £80m by the second quarter of 1999-2000.

NHS trusts were also forecasting a massive increase in their deficit to £117m.

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