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Annual Report 2004 - 2005: Financial review
Annual Report 2004-05 Financial Review

Review of the year 2004/2005
Costs for management and administration
Retirements due to ill health
Income from Primary Care Trusts
Audit services
Accounting policies
Summary financial statements

Download a printable version of the Trust's 2004/05 Annual Report

Review of the year 2004/2005

The Trust ended the year having spent £9,978,000 more than it received in income during the year. The majority of the Trustís income came from contracts with Primary Care Trusts for providing care and treatment for patients but it also received income from a range of other sources such as private patients, income for training medical and other staff and monies for some specific projects, for example implementation of information systems. The Trust had to contend with considerable cost pressures during 2004/05 including the national pay initiatives of Agenda for Change and the consultantís contract which were only partially funded, non-pay inflationary rises on items such as plastics consumables as well as the costs incurred in meeting patient access and emergency care targets. 

Part way through the financial year it became clear that the Trust could not balance its income and expenditure position. Additional central funding that had been anticipated early in the year had not been forthcoming and the scale of the cost pressures mentioned above were quantified. The Trust set in place savings plans for the last quarter of the financial year and managed to keep the deficit to just under £10m or 4.2%of income. In addition to financial management of its income and expenditure account the Trust also had financial duties during the year relating to cash management and capital management. Targets and achievements in relation to these areas are shown in the table.

In preparing these accounts the Trust has acted on the advice of its external auditors and restated its 2003/04 accounts to reflect income that was received in 2003/04 from local PCTs and that is repayable in 2004/05 and 2005/06. The restated accounts properly show this funding as a loan to the Trust in 2003/04. The result of this adjustment is the 2003/04 deficit of £519,000 has been restated as a deficit of £4,652,000. Having ended the last two financial years in deficit the Trust faces an extremely difficult financial challenge in 2005/06 and is aiming to meet this challenge by working both within the Trust to improve efficiency and reduce costs and with colleagues in other organisations such as PCTs to agree plans to return the local health economy to financial balance as soon as possible.

A complete set of accounts can be obtained from the Finance Directorate telephone 01923 217103. Carolyn Hughes, Director of Finance


Target Achievement
Cash management External Financing Limit
The Trust is given an external
financing limit which it is
permitted to undershoot.
The Trust achieved this target
matching cash flow financing
to the external financing limit.

Better Payment Practice Code
The code required the Trust to
aim to pay all valid non-NHS
invoices by the due date or
within 30 days of receipt of
goods or valid invoice,
whichever is later.

The Trust paid 83% of
relevant bills by the due date
when measured by number
(81% measured by value).
Capital management Capital Resource Limit
The Trust is given a capital
resource limit which it is not
permitted to overspend.

The Trust underspent against
the CRL. This was mainly due
to the receipt of disposal
proceeds from two properties,
the sales of which were
completed in March 2005.
Capital cost absorption rate
The Trust is required to absorb
the cost of capital at a rate of
3.5% of average relevant net

The rate is calculated as the
percentage that dividends
paid on public dividend
capital, totalling £6,173k,
bears to the average relevant
net assets of £160,614k, that
is 3.8%. The 3.8% is within
the Department of Healthís
materiality range of 3.00%
to 4.00%.

Fundraising Ė a big thank you!
The generous charitable gifts and donations received by the Trust over the year have made it possible to purchase many important items of equipment for patients.

  • The Hemel Stroke Appeal was successfully launched in July to raise funds for the new Stroke Unit at Hemel Hempstead General Hospital.
  • The Special Care Baby Unit continues to receive great support from the parents and families of their little patients.
  • Mrs Elsie Little, Chair of the WRVS, and her team of volunteers at St Albans Hospital raised £3,000 to buy equipment for the Pre-operative Assessment Clinic at the hospital.


Picure of Fundraising event

Costs for management and administration
Full details can be found in the section entitled "Summary Financial Statements" on this page.

The Trust applied the nationally agreed pay increase to all staff and therefore complied with the Secretary of Stateís requirement that pay increases for managers overall should not exceed 3.6%. The pay increase was in fact 3.225%. The Trust has a well-established Joint Consultative Committee, which provides a monthly forum for managers and staff side representatives to discuss and agree any changes to working arrangements or terms and conditions of employment.

Retirements due to ill health
During 2004/05 there were seven (prior year 2003/04: six) early retirements from the Trust agreed on the grounds of ill health. The estimated additional pension liabilities of these ill-health retirements will be £348k (2003/04: £145k). The cost of these ill-health retirements will be borne by the NHS Pensions Agency. A copy of our full accounts is available. Please contact our Director of Finance on 01442 217612.

Income from Primary Care Trusts
The Trust obtains about £150m of its income from the four West Herts PCTs with Watford having the largest share at £60m and Hertsmere the smallest at £10m. Thereafter, Hillingdon PCT accounted for £11m and Harrow PCT some £4m. In total the Trust had SLAs with 93 PCTs covering Surrey, Sussex, Kent, Berkshire, Buckinghamshire, Bedfordshire, Hertfordshire, North London, parts of Essex and the Midlands as far north as Barnsley.

Audit Services
The Audit Commission acts as the Trustís External Auditor. Audit fees per the 2004-05 accounts were £222k. There were no further assurance or other audit services.

Accounting Policies
The Trust follows recognised NHS accounting policies. The NHS is currently moving all staff to a single pay spine (Agenda For Change) which requires all staff to be assimilated by 1 October 2005. A provision has been made within the Trustís budget as only a proportion of staff have been moved to the new pay scale. At this time the full impact of Agenda For Change is unknown.

Summary financial statements 
Click on the following links to view the summary financial statements in the 2004/05 Annual Report

View table: Income and expenditure account for the year ended 31 March 2005
View table: Statement of total recognised gains and losses for the year ended 31 March 2005
View table: Balance Sheet as at 31 March 2005
View table: Financial Performance Targets 
View table: Other Operating Income
View table: Management Costs 
View table: Better Payment Practice Code 
View table: Income from Activities 
View table: Cash Flow Statement for the year ended 31 March 2005
View table: Profit (Loss) on Disposal of Fixed Assets