3. Financial Assurance
Integration Joint Boards will be established during 2015/16 and so will not be able to formally participate in the financial assurance process until that point. One of most important items of business for a newly established Integration Joint Board will be to obtain assurance that its resources are adequate to allow it to carry out its functions and to assess the risks associated with this. In order to facilitate this, it is recommended that:
- The shadow Chief Officer and the shadow Chief Finance Officer work with the Health Board and Local Authority Directors of Finance in carrying out the assurance work up to establishment of the Integration Joint Board. Where the shadow Chief Finance Officer has not been identified, the Health Board and Local Authority Directors of Finance should provide advice to the shadow Chief Officer.
- The shadow Integration Joint Board should receive regular reports on the assurance work until the IJB is established and the IJB audit committee (or committee(s) carrying out equivalent function) should receive them thereafter; and
- The Health Board and Local Authority internal auditors provide a report to the Health Board and Local Authority audit committees (copied to the shadow Integration Joint Board) on the assurance process that has been carried out by the Health Board and Local Authority.
The financial assurance process should focus on two main areas: financial governance; and financial assurance and risk assessment for the delegated resources.
3.1 Financial Governance
The legislation sets out the finance provisions that must be included in the Integration Scheme and the Integrated Resource Advisory Group guidance (IRAG) and the model integration scheme provide further information on these.
The Health Board accountable officer and the Local Authority section 95 officer must ensure that these provisions enable them to discharge their responsibilities in respect of the resources that will be delegated to the Integration Joint Board; similarly, the shadow Chief Finance Officer must ensure that the provisions provide the IJB with the financial information and support systems to enable it to carry out its functions.
3.2 Financial Assurance and Risk Assessment
In order to assess whether the resources delegated to the Integration Joint Board are adequate for it to carry out its functions, the shadow Chief Officer and shadow Chief Finance Officer must review the provisions in the Integration Scheme that set out the method of determining the payments and amounts to be made available to the IJB; this should include both the method for setting the initial sums and that to be followed in subsequent years.
3.2.1 Assurance for the Initial Sums
It is recommended that the initial sums should be determined on the basis of existing Health Board and Local Authority budgets, actual spend and financial plans for the delegated services. It is important that the plans are tested against recent actual expenditure and that the assumptions used in developing the plans and the associated risks are fully transparent.
To assist in this it is recommended that:
- The budget in the financial plan is assessed against actual expenditure reported in the management accounts for the most recent two/three years. Ideally, the roll forward of the budget for the delegated services and the actual expenditure over this period should be understood;
- Material non-recurrent funding and expenditure budgets for the delegated services and the associated risks are identified and assessed;
- The medium term financial forecast for the delegated services and associated assumptions and risks is reviewed;
- Savings and efficiency targets and any schemes identified are clearly identified and the assumptions and risks are understood by all partners. This is a key part of the assurance process and the experience from Highland partners is that it is a potential source of future disagreement (see annex A); it is advised that partners devote sufficient time to understand the targets, efficiency schemes and associated assumptions and risks;
- All risks should be quantified where possible and measures to mitigate risk identified. Risks could be classified as delivery of efficiency savings; on-going risks; emerging risks;
- The amount set aside for the IJB consumption of large hospital services is consistent with the methods recommended in the IRAG guidance on the set aside resource and that the assumptions and risks are assessed.
Partners should be aware that the financial regimes, cultures and terminology differ between Health Boards and Local Authorities with the potential for confusion when reviewing the budget-particularly in the definition of what represents a recurrently balanced budget. It is recommended that partners are clear about the definitions of the terms used in their assurance work.
In line with normal budget monitoring practice, it is advised that a review be carried out during the post integration period to compare actual performance against the assumptions in the plan.
A key lesson from the experience of Highland partnership is that partners may find it useful to consider treating the first year as a transitional year and agree to a risk sharing arrangement with adjustments being made through subsequent year's allocations; if partners adopt this approach, it is recommended that it is incorporated in the Integration Scheme.
3.2.2 Assurance for Subsequent Years
It is recommended that the method included in the Integration Scheme for determining the payments to the IJB in subsequent years is consistent with the approach set out in section 4.2 of the IRAG guidance. Similarly, it is recommended that the method included in the Integration Scheme for determining the amount to be set aside in subsequent years for consumption of large hospital services should be assessed against the methods recommended in the separate IRAG guidance on the set aside resource.
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