Publication - Advice and guidance

Health and social care integration: finance guidance

Published: 26 Jun 2015
Directorate:
Community Health and Social Care Directorate
Part of:
Health and social care
ISBN:
9781785443343

Guidance on financial matters relating to health and social care integration, for the assistance of health boards and local authorities.

132 page PDF

1.3 MB

132 page PDF

1.3 MB

Contents
Health and social care integration: finance guidance
Executive Summary

132 page PDF

1.3 MB

Executive Summary

1 BACKGROUND AND INTRODUCTION

1.1 The Public Bodies (Joint Working) (Scotland) Act 2014 was passed by the Scottish Parliament on 25 February 2014 and received Royal assent in April. It establishes the framework for the integration of health and social care in Scotland.

1.2 The Scottish Government established the Integrated Resources Advisory Group (IRAG) to consider the financial implications of integrating health and social care, and to help develop professional guidance. This guidance and advice addresses financial matters and is being issued to assist Health Boards and Local Authorities in preparing for integration.

1.3 A summary of the key financial issues and recommendations covered in this guidance is set out below. Both models of integration - delegation to an integration joint board, and delegation to a lead agency - are covered.

2 DELEGATION TO AN INTEGRATION JOINT BOARD

2.0.1 The Integration Joint Board is a legal entity in its own right, created by Parliamentary Order, following Ministerial approval of an Integration Scheme. It will operate under public sector good practice governance arrangements which are proportionate to its transactions and responsibilities.

2.0.2 The Integration Scheme sets out the detail of the integration arrangement, as agreed by the Health Board and Local Authority; its content is specified in regulations and these including several provisions on finance related matters.

2.0.3 The Health Board and Local Authority will delegate functions and make payments to the Integration Joint Board in respect of those functions. Additionally, the Health Board will also, where appropriate, set aside amounts in respect of large hospital functions for use by the Integration Joint Board.

2.0.4 The Integration Joint Board has responsibility for the planning, resourcing and operational delivery of all integrated services. Decisions on integrated services are made by the Integration Joint Board, which produces the Strategic Plan.

2.0.5 The Integration Joint Board gives direction and makes payment, where relevant, to the Health Board and Local Authority for delivery of the services in line with the Strategic Plan. The Integration Scheme sets out how the managerial arrangements across the integrated arrangements flow back to the Integration Joint Board and the Chief Officer.

2.0.6 The legislation uses the term payment for the transfer of resources by the Health Board and Local Authority to the Integration Joint Board and for the allocation back from the Integration Joint Board to the Health Board and Local Authority for operational delivery. This term does not necessitate cash transactions and it is recommended that the majority of the accounting for these should be via book entries within the ledgers of the Health Board and Local Authority, one of which should host the accounts of the Integration Joint Board.

2.0.7 The Integration Joint Board will lead the preparation of the Strategic Plan with other stakeholders, in line with the principles and duties set out in the legislation. The resources in the Strategic Plan will comprise:

a) The payment made to the Integration Joint Board by the Local Authority for delegated adult social care services;

b) The payment made to the Integration Joint Board by the Health Board for delegated healthcare services; and

c) The amount set aside by the Health Board for any delegated services provided in large hospitals for the population of the Integration Joint Board.

2.0.8 The Integration Joint Board will be able to allocate resources between these three components (a) to (c), above in line with the Strategic Plan.

2.09 The Integration Joint Board will devolve appropriate responsibility and accountability for resources to localities so that they are empowered to make decisions that achieve shifts in outcomes in line with the Strategic Plan.

2.1 Financial governance

2.1.1 When established, the Integration Joint Board is required to appoint a Chief Officer and a financial officer responsible for its financial administration. It is recommended that the latter is a joint appointment from the senior finance team of either the Health Board or Local Authority. The Chief Officer can be appointed to this role, and should this be the case and he/she does not hold a professional accounting qualification, it is recommended that arrangements are put in place to provide him/her and the Integration Joint Board with financial advice from a suitably qualified person; the arrangement should be included in the annual governance statement.

2.1.2 The Health Board accountable officer and the Local Authority Section 95 Officer discharge their responsibility, as it relates to the resources that are delegated to the Integration Joint Board, by the provisions in the Integration Scheme.

2.1.3 The Integration Joint Board financial officer is responsible for the administration of the financial resources delegated to it and will discharge this duty by:

  • Establishing financial governance systems for the proper use of the delegated resources;
  • Ensuring that the Strategic Plan meets the requirement for best value in the use of the Integration Joint Board's financial resources; and
  • Ensuring that the directions to the Health Board and Local Authority require that the financial are spent according to the allocations in the Strategic Plan.

2.1.4 The financial resources allocated to the Health Board and the Local Authority by the Integration Joint Board for the delivery of services are the responsibility of the Health Board accountable officer and the Local Authority Section 95 Officer; and the Chief Officer is accountable to them for the use of financial resources in his/her operational role in the Health Board and Local Authority.

2.2 Financial assurance and reporting

2.2.1 The Integration Joint Board will need to put in place systems to establish good governance arrangements, including proportionate:

  • Financial regulations;
  • Risk management and insurance provision; and
  • Internal audit arrangements.

2.2.2 The equivalent arrangements in the Health Board and Local Authority will need to be reviewed and revised to incorporate any changes brought about by the integration arrangements.

2.2.3 The legislation requires that the Integration Joint Board is subject to the audit and accounts regulations and legislation of a body under Section 106 of the Local Government (Scotland) Act 1973. This determines that the Integration Joint Board will produce audited accounts, that the external audit will be undertaken by auditors appointed by the Accounts Commission and that the financial statements will be prepared according the Code of Practice in Local Authority Accounting in the UK.

2.2.4 The financial statements (including an annual governance statement) will be proportionate to the limited volume of transactions undertaken by the Integration Joint Board; a set of illustrative statements are included in this guidance.

2.2.5 The Integration Joint Board will be required to produce accounts for 2015/16 covering the period from the date of its establishment to the end of March 2016.

2.2.6 The Local Authority and Health Board will need to produce group accounts on the basis that the Integration Joint Board is a joint venture.

2.2.7 The Integration Joint Board will publish an Annual Performance Report which will include provisions on financial performance and Best Value.

2.3 Financial planning

2.3.1 The Strategic Plan will incorporate a medium term financial plan for the resources within the scope of the Strategic Plan. The Integration Joint Board will publish an Annual Financial Statement setting out the total resources included in each year of the plan.

2.3.2 It is recommended that the Health Board and Local Authority Directors of Finance and the Integration Joint Board financial officer establish a process of regular in-year reporting and forecasting to provide the Chief Officer with management accounts for both arms of the operational budget and for the Integration Joint Board as a whole.

2.3.3 The resources in the first year should be based on the due diligence carried out during the shadow period. The due diligence process is vitally important and it is recommended that it should be based on the existing financial plans of the Local Authority and Health Board, including planned efficiencies, on the financial performance during the shadow period and on past financial performance in recent years. In subsequent years the Chief Officer and the Integration Joint Board financial officer will develop a business case for its resources in line with the method set out in the Integration Scheme.

2.4 VAT status

2.4.1 HMRC have confirmed that the Integration Joint Board is not a taxable person under the VAT Act 1994 as it will not provide services directly.

2.5 Capital and asset management

2.5.1 In preparing the Strategic Plan the Chief Officer will consider all of the resources which are required to deliver the integration outcomes including the relevant non-current assets owned by the Heath Board and Local Authority. It is recommended that the Chief Officer develops business cases for capital investment for consideration as part of their respective capital planning processes.

3 DELEGATION BETWEEN PARTNERS - LEAD AGENCY

3.0.1 The Integration Scheme will set out the detail of the integration arrangement, including which body will be the lead agency, as agreed by the Health Board and Local Authority. Its content is specified in regulations including several provisions on finance related matters.

3.0.2 When the Integration Scheme is approved, the Scottish Ministers will inform the Health Board and Local Authority that they can proceed with the arrangement. The Chief Executive of the lead agency becomes responsible for developing the Strategic Plan according to the arrangements set out in the legislation.

3.0.3 The Health Board or Local Authority will delegate functions and make payments to the lead agency in respect of those functions. Where the Local Authority is the lead agency, the Health Board will also set aside amounts in respect of large hospital functions for use under the scope of the Strategic Plan.

3.0.4 The lead agency will produce the Strategic Plan for the use of these resources. Where the Local Authority is the lead agency it will give direction to the Health Board for use of the resources set aside for services provided in large hospitals.

3.0.5 The lead agency will lead the preparation of the Strategic Plan with other stakeholders, in line with the principles and duties set out in the legislation. The resources in the Strategic Plan will comprise:

a) Payment made to the lead agency by the delegating body;

b) Budgets in the lead agency for the services to be managed in conjunction with the delegated services; and

c) Where the Local Authority is the lead agency, the amount set aside by the Health Board for services provided in large hospitals used by the partnership population.

3.0.6 The lead agency will be able to vire resources between the three components (a) - (c) above in line with the Strategic Plan.

3.0.7 The lead agency will devolve appropriate responsibility and accountability for resources to localities so that they are empowered to make decisions that achieve shifts in outcomes in line with the strategic Plan.

3.1 Financial governance

3.1.1 The Financial governance systems of the lead agency will apply to the integrated resources.

3.2 Financial assurance and reporting

3.2.1 The accountable officer of the lead agency is responsible for financial matters relating to the integrated resources. It will be necessary to review and revise the:

  • Financial regulations;
  • Risk management and insurance provision; and
  • Internal audit arrangements.

To include the delegated services.

3.2.2 The reporting in the financial statements of the Local Authority and Health Board should follow the existing accounting treatments and will include appropriate disclosure of the lead agency arrangement.

3.2.3 The Lead agency will publish an Annual Performance Report which will include provisions on financial performance and Best Value.

3.3 Financial planning

3.3.1 The Strategic Plan will incorporate a medium term financial plan for the resources within the scope of the Strategic Plan. An Annual Financial Statement will be published setting out the total resources included in each year of the plan.

3.3.2 The Chief Executive for the lead agency will develop a business case for its resources in line with the method set out in the Integration Scheme. The resources in the first year should be based on the due diligence carried out during the shadow period. The due diligence process is vitally important and it is recommended that it should be based on the existing financial plans of the Local Authority and Health Board, including planned efficiencies, on the financial performance during the shadow period and on past financial performance in recent years.

3.4 VAT status

3.4.1 HMRC guidance will apply to Scotland which will allow a VAT neutral outcome. Worked examples are included in the guidance.

3.5 Capital and asset management

3.5.1 The capital assets owned (or leased) by the delegating body will be used to provide the integrated services together with the lead agency's capital assets.

3.5.2 This can be achieved by the transfer of assets between the Health Board or Local Authority, but where assets are not transferred, a number of options are available to facilitate the use of capital assets by the lead agency; each of these options has different financial implications.

3.5.3 It is recommended that the capital investment needed to deliver the Strategic Plan is included in the lead agency's capital plan. If funding is required from the delegating body, the Chief Executive of the lead agency should prepare a business case as required by the delegating body.

3.6 Accounting treatments

3.6.1 There are a number of budgetary issues that arise under lead agency arrangements due to statutory mitigations being available to Local Authorities which are not available to Health Boards. The main areas where statutory mitigations may make an impact are:

  • Where there are proposals for the transfer of staff from Local Authority to Health Board employment, in the accounting for employee benefits under International Accounting Standard 19; and
  • Asset transfers.

3.6.2 It is recommended that both the Health Board and Local Authority consider the implications of these matters during the shadow period.

4 CONCLUSION

4.1 Further information on all of the above matters is provided in the detailed guidance in the sections which follow. In addition advice may be obtained from the contacts listed in section E or through the integration mailbox irc@scotland.gsi.gov.uk

4.2 The Scottish Government would like to thank members of IRAG, the five finance workstreams[1] and the LASAAC/TAG short life working group for their input and advice throughout the preparation of the guidance.


Contact

Email: hscintegration@gov.scot