Introduction

This document presents the results of all NHS trusts and NHS foundation trusts (termed ‘providers’) in England. The Department of Health and Social Care (DHSC) uses the provider sub-consolidation as part of the DHSC group accounts. We are very grateful to NHS providers for their co-operation in reporting their data to us.

These accounts are presented separately from those of NHS England as NHS England is not the parent body of NHS trusts and NHS foundation trusts.

The introduction describes the legal requirements for NHS trust and NHS foundation trust accounts and organisational changes in the provider sector in 2022/23 and 2023/24.

NHS trusts

Paragraph 11A(3) of Schedule 4 of the National Health Service Act 2006 (the 2006 Act) (as inserted by Section 87 of the Health and Care Act 2022) requires each NHS trust to prepare annual accounts for each financial year ending 31 March. These annual accounts must be audited by auditors appointed by the NHS trust.

NHS trusts that cease to exist as separate legal entities during the year (including on authorisation as an NHS foundation trust) prepare accounts for their final period as directed by the Secretary of State and have them audited.

NHS foundation trusts

Paragraph 25 of Schedule 7 to the 2006 Act (as amended by paragraph 31(3) of Schedule 5 to the Health and Care Act 2022) requires each NHS foundation trust to prepare annual accounts for the period beginning on the date it is authorised and ending the following 31 March and for each successive 12-month period. These annual accounts must be audited by auditors appointed by the NHS foundation trust’s council of governors. The trust must lay a copy of the accounts, and any auditor’s report on them, before Parliament and send them to NHS England.

NHS foundation trusts that cease to exist as separate legal entities before the end of the year continue to prepare accounts for their final period as directed by NHS England and have them audited, but do not present them to the council of governors.

Basis of preparation for consolidated NHS provider accounts

Section 65Z4 of the National Health Service Act 2006 (as inserted by Section 14 of the Health and Care Act 2022) requires NHS England to prepare, for each financial year, a set of accounts that consolidates the annual accounts of all NHS trusts and NHS foundation trusts. The Secretary of State has given directions on the content and form of these consolidated accounts and the principles to be applied in preparing them. The Comptroller and Auditor General is required to examine, certify and report on the consolidated NHS provider accounts and send a copy of his report to the Secretary of State and NHS England. NHS England is required to lay the consolidated provider accounts and the Comptroller and Auditor General’s report before Parliament.

Organisation terminology

NHS Improvement, as the operating name for the NHS Trust Development Authority and Monitor legal entities, was the organisation responsible for the oversight of NHS providers during the first quarter of 2022/23, the comparative period in these accounts. From 2019, NHS Improvement operated jointly with NHS England. On 1 July 2022 the NHS Trust Development Authority and Monitor were abolished and their functions transferred to NHS England. These consolidated accounts reference other documents issued by NHS England: in some cases these will have been issued by predecessor legal bodies. Documents issued by the NHS Trust Development Authority and Monitor before they were abolished are treated, from 1 July 2022, as having been issued by NHS England. 

Changes in legal status of NHS providers

These consolidated NHS provider accounts incorporate the results of all NHS trusts and NHS foundation trusts. Entities for which legal status changed in 2022/23 or 2023/24 are as follows:

Review of financial performance of NHS providers

* The application of IFRS 16 liability measurement principles to PFI and other service concession liabilities in 2023/24 increased the provider sector deficit on an IFRS basis by £1,094 million: see note 25.4 to the financial statements. Had this accounting policy change not been applied the number of providers reporting a deficit would have been 119. More information is provided in the ‘Remeasurement of PFI liabilities’ section.

The NHS continued to manage significant operational and financial pressures throughout 2023/24, impacting the delivery of the NHS long term plan. These included high inflation and disruption from industrial action, together with some areas such as cancer care experiencing record levels of demand.  Despite these pressures the provider sector completed more elective pathways than in the previous financial year and exceeded its performance ambitions for cancer diagnosis.

The provider sector delivered a net deficit before impairments and gains and losses on transfers by absorption for the year ended 31 March 2024 of £2,312 million (2022/23: £457 million net deficit) and held cash of £10.8 billion as at 31 March 2024 (31 March 2023: £12.8 billion). NHS providers are not required to break even in every year. Providers are required to exercise their functions in line with the relevant plans of the integrated care board and system partners to achieve balance across the integrated care system as a whole, allowing for local allocation and prioritisation of available resources.

The following table shows the profile of NHS providers that made up the sector during 2023/24. Providers are classified by their principal services but they may also provide other services. More analysis by trust type is set out in note 2 to the financial statements.

* The aggregate of the surplus/(deficit) from individual provider accounts does not equal the consolidated deficit in these accounts due to eliminating lease arrangements between NHS providers

The results for the year showed that, excluding the consolidation of charitable funds, 75 NHS providers (36%) (2022/23: 107 (50%)) delivered a surplus or broke even and 136 providers (64%) (2022/23: 105 (50%)) reported a deficit before impairments and transfers by absorption. The impact of inflationary uplifts to PFI liabilities on the new accounting basis is discussed later in this commentary. The gross deficit of all providers in deficit increased from £1,009 million in 2022/23 to £2,550 million in 2023/24. Of the 107 trusts that reported a surplus in 2022/23, 52 (49%) reported a deficit in 2023/24, while only 21 (20%) of the 105 trusts reporting a deficit in 2022/23 reported a surplus in 2023/24.

Figure 1 shows the distribution of providers’ surplus or deficit for 2023/24 and 2022/23. The two lines are plotted independently. The incremental impact of applying IFRS 16 liability measurement principles to private finance initiative (PFI) schemes has been removed from the 2023/24 data series to provide comparability with the previous year. More information on the impact of applying this accounting policy change is given later in this commentary.

Figure 1: Surplus/(deficit) before impairments and absorption transfers (excluding the impact of applying IFRS 16 principles to PFI liabilities)

Where NHS charitable funds are locally deemed to be controlled by an NHS provider, the financial results of the charities are consolidated in these accounts. 41 NHS providers consolidated charitable funds, contributing an aggregate deficit of £83 million (2022/23: 44 providers consolidated a £2 million deficit) and net assets of £264 million (31 March 2023: £348 million). This includes a £70 million outflow of resources relating to the change in status of two previously consolidated charities which became independent during the year. 

The NHS Oversight Framework sets out the principles for system accountability and improvement support where appropriate. Providers who are in segment 4 of the oversight framework are entered into the Recovery Support Programme (RSP). This programme provides focused and integrated support to systems as well as individual organisations. As at 31 March 2024, 17 providers reporting a deficit for the year were also receiving support in the RSP (31 March 2023: 13 providers). This support may not be finance related in all cases.

206 of 211 NHS provider audited accounts have been completed at the time of finalising these consolidated accounts on 1 November 2024 (2022/23: 210 of 212). All 206 have unqualified true and fair audit opinions (2022/23: two ‘except for’ qualifications). The results of five providers have been consolidated based on unaudited accounts information provided by the Trust. Further information is provided in note 32 to these consolidated financial statements. The timeliness of local and national accounts is discussed further in the consolidated annual governance statement.

All providers have prepared financial statements on a going concern basis. HM Treasury’s Financial Reporting Manual (FReM) defines that a public sector body will be a going concern where continuation of the provision of services is anticipated in the future. The same definition is applied by NHS providers in preparing their financial statements. The accounting policies contain our going concern assessment for these consolidated accounts.

Operating income

In the year to 31 March 2024, 211 NHS providers generated total operating revenues of £128.9 billion, an increase of £7.7 billion (6.4%); a real terms increase of 0.12% when adjusted for inflation*. This increase of £7.7 billion includes additional funding for pay uplifts in 2023/24 and a 1.8% net uplift in contract prices with commissioners.

Operating expenditure

Total operating expenditure increased from £121.0 billion in 2022/23 to £130.6 billion in 2023/24, with key movements set out below. Excluding impairments, operating expenditure increased by £8.4 billion (7.0%) from £119.9 billion to £128.4 billion; a real terms increase of 0.75% when adjusted for inflation*.

* This is calculated with reference to the GDP deflator for 2023/24 published by HM Treasury on 1 July 2024

Figure 2: Expenditure bridge 2022/23 to 2023/24

High inflation has continued to impact the NHS during 2023/24 through energy prices and the cost of supplies and services. But almost 52% (£5.0 billion) of the increase in operating expenditure related to employee costs, which is largely driven by the pay awards for 2023/24. A focus on recruitment and the impact of industrial action has also further driven up staff costs.

Just over half of the increase in supplies and services (£0.8 billion) relates to drug costs including an increase in spend on high cost drugs used, including cancer treatments funded directly by NHS England.

Impact of impairments

Impairments to the carrying value of assets are charged to operating surplus except where previous revaluation surpluses remain: in such cases a reduction is first recognised in the revaluation reserve to the extent of the remaining surplus for that asset. Where the impairments are the result of a permanent loss, such as fire damage, they are always charged to expenditure. In 2023/24 net impairments charged to income and expenditure were £2,188 million (2022/23: £1,054 million). A further £1,451 million of net impairments was charged to reserves (2022/23: £518 million), reducing previously recognised revaluation surpluses. Providers also recognised revaluation surpluses directly in reserves totalling £1,197 million (2022/23: £2,431 million). This results in a net downwards valuation movement on non-current assets of £2,442 million compared to a net upwards valuation movement of £859 million in 2022/23.

There were 170 NHS providers recording a net impairment within surplus/deficit in 2023/24 (2022/23: 135) while 24 providers recorded net reversals of impairments (2022/23: 64).

Of the £2,188 million of net impairments charged to income and expenditure, 87% arose from changes in market price (2022/23: 91%). These impairments reflect market conditions at the time of valuation and not a deterioration in the service potential of the asset. Further details of impairments are provided in note 10 to the accounts.

Application of IFRS 16 liability measurement principles to PFI and other service concession arrangements

Service concession arrangements in the NHS including PFI schemes are long term contracts between an NHS body and a private third-party operator where the private sector designs, builds, finances and operates an NHS asset and provides related services. Payments to the operator under these schemes are allocated between payments for the asset (recognised as a liability on the statement of financial position), a financing cost and payment for the services. The majority of scheme payments are uplifted annually for inflation.

In previous years, scheme liabilities have been accounted for as imputed lease liabilities and measured in accordance with International Accounting Standard (IAS) 17. Inflationary increases on payments for the asset were expensed as contingent rent when incurred. From 1 April 2023, liability measurement principles of the newer International Financial Reporting Standard (IFRS) 16 have been applied, requiring scheme liabilities to be remeasured when inflationary uplifts occur. Such remeasurements are charged to finance costs in the year that the remeasurement of the liability is accounted for. This accounting policy change has been implemented from 1 April 2023 without restatement of comparatives and the cumulative impact at 1 April 2023 has been taken to reserves.

On 1 April 2023, prior to remeasurement, 97 NHS providers held PFI liabilities totalling £7.7 billion. Remeasuring these liabilities for inflation since the start of the schemes increased the liabilities by £5.3 billion (70%). Further remeasurements of £1.6 billion arose from the inflationary uplifts applied during 2023/24. This increase in PFI liabilities has partly contributed to net assets in the consolidated accounts reducing from £51.7 billion at 31 March 2023 to £46.4 billion at 31 March 2024.

In addition to the impact on the statement of financial position, remeasurement of scheme liabilities also had a significant impact on the surplus/deficit reported by NHS providers. Inflation was high before and during 2023/24 resulting in the impact of remeasurement (charged to finance costs) outweighing the reduction in contingent rent. Although PDC dividend charges reduced as a result of the decrease in net assets, application of IFRS 16 to these schemes increased the provider sector in year deficit by a net £1.1 billion. Seventeen providers who reported a deficit before impairments and transfers in 2023/24 would have reported a surplus if PFI liability remeasurement had not been applied.

Net finance costs

Net finance costs in 2023/24 showed a net increase of £1,055 million to £2,812 million. Finance costs arising from PFI and similar schemes increased by £1,402 million, of which £1,294 million was the incremental impact of in-year remeasurement of the liabilities under IFRS 16 principles (excluding the £175 million impact on PDC dividend). This offsets the £352 million increase in interest income generated by NHS providers on cash surpluses due to higher interest rates; the Bank of England base rate was 5.25% for much of the year.

Working capital and borrowings

At 31 March 2024, NHS providers held cash and cash equivalents of £10.8 billion; equivalent to 4.7 weeks’ operating costs in a sector with annual revenue of £120.6 billion (31 March 2023: 6.1 weeks). This revenue figure excludes the 6.3% NHS pension contribution made by NHS England. Revenue cash support may be provided by the Department of Health and Social Care to ensure essential day to day spend can be met thereby protecting the continuity of patient services. During 2023/24, 44 providers received public dividend capital to support short term revenue requirements, totalling a net £1,190 million (2022/23: 11 providers, £155 million). Providers in receipt of revenue support must work with NHS England to improve their financial position.

The number of receivables days has increased to 14.7 days in 2023/24 (2022/23: 13.3 days). Payable days decreased to 37.8 days in 2023/24 from 40.6 days in 2022/23. Providers are monitored on their reported timeliness in paying suppliers.

Total long-term and working capital borrowing at 31 March 2024 was £22.1 billion (31 March 2023: £16.1 billion). This increase in borrowings is mainly a result of the application of IFRS 16 measurement principles to PFI and other service concession liabilities, which increased by £6.6 billion as a result of this change.

Capital expenditure

Providers’ ability to invest in capital schemes is limited by constraints in DHSC’s departmental capital expenditure limit. Integrated care systems are allocated capital budgets termed capital envelopes to cover day-to-day operational capital investment which allows for local prioritisation of available resources within the system. These allocations are supplemented with centrally allocated funds to cover nationally strategic projects such as new hospitals and hospital upgrades. Further resource is also made available to cover national programmes. In 2023/24 this included programmes such as community diagnostic centres, increasing elective capacity, mental health urgent and emergency care improvements and frontline digitisation.

Systems are required to ensure that capital plans take into account the impact on organisations’ carbon emissions and deliver on objectives for a ‘net-zero’ National Health Service.  Net-zero estates plans include examples of heat-source decarbonisation, investment in on-site renewable energy and efficiency interventions such as artificial intelligence energy management.

Total purchases and new or modified leases of property, plant and equipment and intangible assets were £8.2 billion (2022/23: £7.8 billion). More than half (65%) of capital spend was on land and buildings, with a further 19% on plant, equipment and transport, 10% on information technology, and 6% on other capital (Figure 3).

Figure 3: Proportion of capital spend by type, 2023/24

The NHS continues to invest in the redevelopment of estates to support the delivery of high-quality healthcare and maintain patient safety while also delivering on environmental targets. In June 2023, University Hospitals Sussex NHS Foundation Trust began treating patients in the new Louisa Martindale Building; the first and largest stage of the redevelopment of Sussex County Hospital and part of Government’s ‘new hospital programme’. The development established modernised medical wards and expanded facilities for critical care and neurosciences. East Suffolk and North Essex NHS Foundation Trust completed its two-year investment in community diagnostic services in January 2024 when its final services opened in Clacton. The diagnostic centre is now able to provide patients living in North Essex with a full range of fast, convenient health tests closer to home.

Understanding the NHS position

Central government and NHS bodies prepare their accounts under the principles of International Financial Reporting Standards (IFRS) as adopted by HM Treasury. However central government departments also report their financial outturn on an alternative basis where some items are treated differently, such as interests in private finance initiative (PFI) schemes. It is on this basis that DHSC holds NHS England to account. The government reporting basis is against the ‘non-ringfenced revenue departmental expenditure limit’ (NRF RDEL). The provider outturn on this basis can be combined with the position for the NHS England group to see the overall NHS outturn:

* As contained in annex A1 of the government’s financial directions to NHS England 2023/24

** NHS England annual report and accounts 2023/24: financial performance note)

In 2023/24, the NHS’s overall net expenditure was £234 million higher than budget (being 0.1% of the budget); this was due to decisions on NHS pay that could not have been anticipated and planned for during the course of the financial year.

Wider context

More information on the performance of the NHS in 2023/24 and priorities going forward can be found in NHS England’s annual report and accounts.

Amanda Pritchard, Chief Executive Officer
15 November 2024

Statement of accounting officer’s responsibilities and accountability framework

I am designated as the Accounting Officer for NHS England. In this capacity I am responsible for ensuring that NHS England prepares consolidated NHS provider accounts to send to the Secretary of State and the Comptroller and Auditor General. I am not the accountable/accounting officer for each individual NHS trust/NHS foundation trust; this is the role of each local chief executive. An NHS trust’s chief executive is designated as the accountable officer when their appointment is confirmed by NHS England. NHS foundation trust chief executives are designated as the accounting officer by the NHS Act 2006.

Professor Stephen Powis was the accounting officer for NHS Improvement (being the Monitor and NHS Trust Development Authority legal entities) for the first part of the 2022/23 financial year up to 30 June 2022. On 1 July 2022 Monitor and the NHS Trust Development Authority were abolished and their functions transferred to NHS England. I, as Chief Executive of NHS England, received assurances from Professor Stephen Powis at this date.

NHS trusts

The Secretary of State is responsible for determining, with HM Treasury’s approval, the form of accounts each NHS trust must adopt. This is described in the Department of Health and Social Care’s Group Accounting Manual (GAM), which is based on HM Treasury’s Financial Reporting Manual (FReM). NHS England has set out the responsibilities of each NHS trust accountable officer to ensure:

• there are effective management systems in place to safeguard public funds and assets
• the trust achieves value for money from the resources available to it
• the trust’s expenditure and income have been applied to the purposes intended by Parliament and conform to the authorities which govern them
• effective and sound financial management systems are in place
• the Trust’s annual accounts give a true and fair view.

NHS England has set out the responsibilities of NHS trust directors to:

• apply suitable accounting policies consistently
• make reasonable judgements and estimates
• make a statement within the accounts on whether applicable accounting standards have been followed, and to disclose and explain any material departures and
• prepare the financial statements on a going concern basis and disclose any material uncertainties over going concern.

NHS foundation trusts

NHS England is responsible for determining, with the Secretary of State’s approval, the form of accounts each NHS foundation trust must adopt. The NHS foundation trust annual reporting manual (FT ARM), which is based on the FReM, sets out the responsibilities of each NHS foundation trust accounting officer to:

• apply suitable accounting policies consistently
• make reasonable judgements and estimates
• make a statement within the accounts on whether applicable accounting standards have been followed, and to disclose and explain any material departures
• ensure the use of public funds complies with the relevant legislation, delegated authorities and guidance
• confirm that the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for patients, regulators and stakeholders to assess the NHS foundation trust’s performance, business model and strategy and
• prepare the financial statements on a going concern basis and disclose any material uncertainties over going concern.

Consolidated NHS provider accounts

In discharging its responsibilities in accordance with the directions to NHS England issued by the Secretary of State, NHS England has prepared consolidated NHS provider accounts on a basis consistent with the individual NHS providers’ accounts and consolidated in accordance with International Financial Reporting Standards (IFRS), as amended for NHS providers by the FReM, the FT ARM and the GAM.

The Secretary of State’s directions require NHS England to prepare these consolidated NHS provider accounts to:

• give a true and fair view of the state of affairs of NHS trusts and foundation trusts collectively as at the end of the financial year and the comprehensive income and expenditure, changes in taxpayers’ equity and cash flows for the financial year then ended
• disclose any material expenditure or income that has not been applied for the purposes intended by Parliament or material transactions that have not conformed to the authorities that govern them.

As far as I am aware, there is no relevant audit information of which the auditors of the consolidated NHS provider accounts are unaware. As Accounting Officer I have taken all the steps I ought to have taken to make myself aware of any relevant audit information and to establish that the auditors are aware of this information.

Amanda Pritchard, Chief Executive
15 November 2024

Annual governance statement

This annual governance statement (AGS) for the NHS provider sector has been prepared in the context of the accountability framework set out above. It has been prepared as a consolidation of the sector position based on reference to:

• the segmentation of providers under the NHS Oversight Framework
• disclosures in local annual governance statements and
• the audit reports issued by local external auditors.

Scope of responsibility

NHS England’s Board is not responsible for the internal control and systems of NHS providers; this is the responsibility of each NHS provider’s board.

NHS trusts

As accountable officer, each NHS trust’s chief executive is accountable to NHS England and is responsible for maintaining a sound system of internal control that supports the achievement of the trust’s policies, aims and objectives. In addition, the chief executive, as accountable officer, has responsibility for safeguarding public funds and the organisation’s assets as set out in the NHS trust accountable officer memorandum.

NHS foundation trusts

As accounting officer, each NHS foundation trust’s chief executive has responsibility to Parliament for maintaining a sound system of internal control that supports the achievement of the trust’s policies, aims and objectives. In addition, the chief executive, as accounting officer, has responsibility for safeguarding public funds and the organisation’s assets as set out in the NHS foundation trust accounting officer memorandum.

Purpose of the system of internal control

NHS England’s system of internal control is designed to support the achievement of its policies, aims and objectives and ensure compliance with legal and other obligations on NHS England and NHS trusts and foundation trusts. As part of this system, NHS England has the following processes to ensure these accounts provide a ‘true and fair’ view of the affairs of NHS providers:

• contributing to the development of guidance to NHS trusts and NHS foundation trusts through the Department of Health and Social Care’s (DHSC’s) Group Accounting Manual (GAM); this has been approved by HM Treasury
• providing guidance to foundation trusts through the NHS foundation trust annual reporting manual (FT ARM); this has been approved by the Secretary of State
• relying on the external auditors appointed by each NHS trust/NHS foundation trust’s council of governors to ensure the truth and fairness of each set of accounts consolidated into these accounts; these auditors have each undertaken an audit in accordance with the Code of audit practice (audit code), issued by the Comptroller and Auditor General, supported by the National Audit Office (NAO)
• appointing the Quality Assurance Directorate of the Institute of Chartered Accountants in England and Wales and Audit Quality Review department of the Financial Reporting Council to review the quality of the work of NHS foundation trust auditors and consider their findings. The audits of NHS trusts are reviewed under similar arrangements by Statute, not overseen by NHS England
• attending the NAO’s Local Auditors’ Advisory Group and associated technical networks, to which senior representatives from each of the audit suppliers appointed as auditors of NHS providers are invited; the forum members discuss technical audit and accounting issues in the public sector, including those concerning NHS bodies and
• consideration by NHS England’s management and by its Audit and Risk Assurance Committee of the consolidated accounts and the processes established to derive them.

Each NHS provider’s annual report and accounts includes an AGS for the year ended 31 March 2024. Each individual AGS explains how the accountable/accounting officer has reviewed the effectiveness of internal control during the period and highlights any significant control issues where the risk cannot be effectively controlled.

Timeliness of local and national accounts

In preparing the consolidated provider accounts based on consolidation schedules from NHS providers, we are reliant on each provider submitting their audited annual report and accounts to us. We and the Department of Health and Social Care issue directions to NHS bodies on the timing by which these should be submitted.

There are many reasons why a set of audited accounts for a local NHS body may go beyond the deadline: for example this may reflect illness in the preparer finance team or audit team, or a significant issue may be encountered that takes time to resolve, which may reflect weaknesses in an entity’s preparation of its accounts. Auditors need to be able to complete their work independently of outside influence and take the necessary time to ensure their audit opinion is the right one and supported by appropriate audit evidence. It is also important that there is a properly functioning local audit market to allow audited bodies to hold their auditors to account for delivery. We support the Financial Reporting Council’s current NHS audit market study which will include examining whether this market is functioning effectively.

The timeline on which these national accounts are finalised depends on both when the deadline for local audited accounts is set, and compliance with that deadline. For many years prior to 2019/20 the local audit deadline in the NHS was around the end of May. The deadline is set in consultation with the audit firms on what they are prepared to sign up to. In recent years the local audit deadline has been around the end of June.

The vast majority of NHS bodies and their auditors have continued to meet the deadline set for submission of audited accounts. We do not have a backlog of previous years’ outstanding audits affecting a subsequent year. However the rate of compliance with the audited accounts deadline for providers in 2021/22 showed a significant deterioration compared to historic norms. This improved in 2022/23 and has improved again for 2023/24 but remains below those historic norms. A critical mass of completed local audits for 2023/24 (with respect to national materiality) has been achieved earlier than in 2022/23, but reaching this point has again taken longer than planned. The time taken to resolve cases where the deadline is missed has generally reduced, but this remained elongated in a small number of cases. The accounts for University Hospitals Birmingham NHS Foundation Trust were finalised in October 2024 (the audited accounts for Northern Care Alliance NHS Foundation Trust were also finalised in October 2024 but this delay was caused by the auditor waiting for assurance from the auditors of the local government pension scheme for which the Trust is an admitted body). Other local accounts remained unaudited at the time of finalising disclosures in these accounts as detailed on page 24. Finalising these consolidated accounts was delayed compared to our original plan.

Nonetheless a number of actions have contributed to these consolidated accounts being published earlier this year (November) rather than January as in recent years since 2019/20:

• an early focus on guidance and training to support the NHS finance community on potential challenges; notably the material remeasurement of PFI liabilities
• more proactively monitoring NHS bodies to ensure they had appointed auditors for the financial year in good time
• a rigorous system of monitoring NHS bodies before and after the audited accounts deadline to support them in managing their audited accounts to completion
• prompt escalation of NHS bodies requiring more support to ensure targeted support from the appropriate part of NHS England to bring resolution of issues
• planning the expected timing of audited accounts delivery to work out where alternative assurance may be needed nationally and completing this work at an earlier point than previously and
• constructive working with the National Audit Office (NAO) to assess sources of assurance, including the NAO implementing alternative approaches for gaining assurance over key balances where local audits are delayed by outstanding local government pensions assurance.

More broadly NHS England continues to work to improve timeliness in financial reporting including:

• encouraging auditors to give clear reporting to audit committees where the preparer’s quality of draft accounts or working papers needs to improve
• working closely with NHS bodies to ensure they appoint external auditors in good time, which helps increase the likelihood of deadlines being achieved
• regular engagement with partners including the Ministry of Housing, Communities and Local Government and the Financial Reporting Council on policy matters affecting the broader local audit system: in particular the government’s approach of implementing ‘backstop’ dates to resolve backlogs in local government audits has been done with care to minimise potential adverse impacts on the NHS
• contributing to the Financial Reporting Council’s market study into the NHS audit market, including a look at the supply of audit capacity
• working with NHS bodies where financial reporting issues arise to ensure they are able to address findings effectively
• regular engagement with the audit firms and responding to their feedback to continue to strengthen the NHS financial reporting landscape, and working with partners to make sure training and guidance is available for preparers and
• liaising with broader stakeholders on wider matters that can cause delays in NHS accounts, for example sign offs of local government pension scheme audits, which directly affects a handful of NHS providers with a corresponding impact on these consolidated accounts.

NHS England and DHSC have an ambition to return to laying the main national consolidated accounts (being the DHSC group, NHS England group and consolidated provider accounts) before Parliament in advance of the summer Parliamentary recess in July. Achieving this in the years ahead would present challenges for financial reporting in the NHS: it would require the audit community to accept a significantly earlier deadline for audited accounts, better compliance with the deadline by both preparers and auditors, and further streamlining in the national processes for preparation and audit. The forthcoming application of a new auditing standard governing group audits will, from 2024/25, significantly expand the quantum of work the NAO is required to perform in relying on local NHS provider audits. More timely finalisation of this year’s accounts will allow important planning work to understand the impact of this on national accounts timelines for 2024/25 and beyond.

Overview of internal control systems at NHS trusts and NHS foundation trusts

Regularity

Regularity means the use of public funds complies with the relevant legislation and delegated authorities. Local NHS provider auditors do not issue an opinion on local regularity, but do perform specific procedures as part of their reporting to the NAO. The application of materiality to regularity requires judgement: irregular spending might be material by nature (in a high profile area for example) without the quantum of spend being material. As set out in the statement of accounting officer’s responsibilities, NHS England is required to disclose any material irregularity in the consolidated provider accounts. NHS providers generally have broad powers in spending money but we assess overall regularity by:

• reviewing the detail of our oversight and regulatory decisions (these concepts are explained below) to consider whether they highlight any regularity concerns
• confirmation from our regional teams whether they are aware of any irregular activity in providers
• collating any referrals of unlawful expenditure or activity submitted by local auditors (these are commonly termed ‘section 30 referrals’ and are explained further below)
• considering any fraud investigations known to NHS England
• reviewing the confirmation statements on regularity that each NHS provider chief executive is required to make in their statement of accounting/accountable officer responsibilities
• correlating sources of information on special severance payments and other forms of special payments, where specific controls apply and
• responding to any information provided to the NAO as part of their group audit.

NHS Oversight Framework

The NHS Oversight Framework for 2022/23 continued to apply through 2023/24. It provides the framework for overseeing the delivery of high quality, sustainable care with a focus at both local system and organisational level and identifying potential support needs.

The Framework describes a process to identify where NHS organisations may benefit from or require support to meet the standards required of them in a sustainable way and deliver the overall objectives for the sector in line with the priorities set out in the 2023/24 Operational Planning Guidance and other documents.

To provide an overview of the level and nature of support required across systems, inform oversight arrangements and target support capacity as effectively as possible, NHS England regional teams allocate NHS organisations to one of four ‘segments’. 

A segmentation decision indicates the scale and general nature of support needs, from no specific support needs (segment 1) to a requirement for mandated intensive support (segment 4). A segment does not determine specific support requirements. By default, all NHS organisations are allocated to segment 2 unless the criteria for moving into another segment are met. These criteria have two components:

1. objective and measurable eligibility criteria based on performance against the six oversight themes using the relevant oversight metrics (the themes are: (i) quality of care, access and outcomes; (ii) people; (iii) preventing ill-health and reducing inequalities; (iv) leadership and capability; (v) finance and use of resources; (vi) local strategic priorities)
2. additional considerations focused on the assessment of system leadership and behaviours, and improvement capability and capacity.

An NHS trust or foundation trust will be placed in segment three or four where it has been found to have significant support needs that may require formal intervention and mandated support. They will be subject to enhanced direct oversight by NHS England (in partnership with their ICB) and, depending on the nature of the problem(s) identified, additional reporting requirements and financial controls.

While NHS trusts were exempt from the requirement to apply for and hold a licence in 2022/23, NHS England ensured that NHS trusts were treated via equivalent methods to those applied to NHS foundation trusts. This included giving directions where necessary to ensure compliance. NHS trusts were issued licences on 1 April 2023 and from 2023/24 have been subject to the same licence conditions as NHS foundation trusts.

Segmentation of NHS providers is updated regularly. The table below summarises NHS providers’ segmentation as at 31 March 2024. A prior year comparative is not provided as this table provides a snapshot at that point in time and the design and application of the Oversight Framework may evolve over time.

Segmentation at 31 March 2024

NHS providers in segment 3 or 4

Where an NHS provider is triggering a specific concern, NHS England will work with the ICB to understand why this concern has arisen and if a support need exists. Based on this assessment, NHS England will agree the subsequent level of support that is required. Where there is a need for mandated support by NHS England the provider will be placed into segment 3 or 4, depending on the complexity of the support need.

A segment 3 decision will result in a bespoke support offer led by the NHS England regional team drawing on system and national expertise as required.

Segment 4 decisions are reserved for those trusts experiencing long standing complex issues or serious failures in areas such as quality, safety, leadership, governance or financial plans. A segment 4 decision will always trigger a referral to NHS England’s national Recovery Support Programme (RSP). Decisions on referrals into this programme are made by an executive committee of NHS England based on recommendations from Regional Directors or the Care Quality Commission. Where a referral into the RSP for a trust is agreed a dedicated Improvement Director will be appointed to work alongside the Trust leadership as well as the ICB and regional team to oversee the development and delivery of an improvement plan.  A diagnostic review will be undertaken to identify underlying drivers that need to be addressed and embed improvement upstream to prevent further deterioration and enable stabilisation.

Enforcement action

Where an NHS provider is in breach of its licence conditions (or where NHS England has reasonable grounds for suspecting a breach), NHS England may also consider the use of its enforcement powers. These powers include, among others, agreeing enforcement undertakings or issuing directions to the provider to secure compliance and ensure the breach does not recur. Details of any enforcement action is publicly available via the Provider Directory on our website.  

In exceptional circumstances an NHS trust or NHS foundation trust may be placed in trust special administration. Administration is a regime for ensuring the continuity of essential services in the event of provider financial distress. No trusts or foundation trusts were subject to trust special administration in 2022/23 or 2023/24.

NHS trusts’ and NHS foundation trusts’ significant internal control weaknesses

Sources of information

In the information that follows, NHS England has collated a number of sources of information to disclose the position for NHS providers.

NHS Oversight Framework segment 3 or 4

Where an NHS provider is in Oversight Framework segment 3 or 4 and is receiving mandated support, the support offered to the provider will be defined in terms of the Oversight Framework themes.

NHS England placing an NHS provider into segment 3 or 4 and mandating support would normally indicate the existence of control weaknesses or failings in the trust’s control environment.

Other significant control issues

NHS providers may also declare other matters as significant control issues. NHS England’s FT ARM for NHS foundation trusts and AGS guidance for NHS trusts gives guidance on how to determine whether an internal control matter is ‘significant’ but does not prescribe an approach; this is a matter for each trust’s board. The table that follows includes all cases where trusts have disclosed one or more significant control weaknesses in their annual governance statement.

External auditor’s conclusion on use of resources

In addition to the ‘true and fair’ audit opinion on the accounts, external auditors of NHS trusts and NHS foundation trusts are required to conclude whether the trust has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources. Where the auditor identifies significant issues, the auditor reports that they are unable to satisfy themselves that the trust has made these proper arrangements. Such reporting does not imply that the ‘true and fair’ audit opinion on the provider’s accounts is qualified. These conclusions are listed in the table that follows. In each case we summarise if this modification relates to the same matters as the reason for Oversight Framework segmentation as 3 or 4 by NHS England.

Defining a significant internal control issue for this document

Our starting point for this consolidated annual governance statement is where a trust has locally assessed and disclosed a significant internal control issue in its own annual governance statement.

In addition, regardless of whether these have been reported locally, we also deem the following to be evidence of significant internal control weaknesses:

• NHS Oversight Framework segmentation of 3 or 4 by NHS England during the year
• the external auditor modifying their use of resources conclusion.

In the table that follows we also disclose notes on other non-standard forms of the auditor’s reporting. We do not consider that entries here necessarily represent a significant internal control weakness.

Summary of results

The table below provides a summary of the detail that follows:

Providers consolidated without an audit report

The consolidated provider accounts for 2022/23 describes how that document was finalised with two providers not having received their audit report. These have now been subsequently received:

• Buckinghamshire Healthcare NHS Trust in March 2024
• East Suffolk and North Essex NHS Foundation Trust in January 2024

The consolidated provider accounts for 2023/24 have been prepared using unaudited information for five providers as the audit reports remained outstanding at the time of finalising these disclosures on 1 November 2024:

More information on the approach taken for finalising these accounts with respect to national materiality is provided in note 32 to the consolidated financial statements.

Modifications of ‘true and fair’ audit opinion in prior year: University Hospitals of Leicester NHS Trust

The 2022/23 audit opinion for University Hospitals of Leicester NHS Trust was qualified in two respects: evidence for plant and equipment asset existence, and the impact of additional qualifications in previous years’ financial statements affecting comparative figures for 2021/22. More detail is provided in the annual governance statement in the consolidated provider accounts for 2022/23 on page 24.

The Trust’s financial statements audit opinion for 2023/24 is unmodified and the Trust’s audited accounts were submitted in line with the national deadline set by NHS England.

List of providers with matters to report

This table lists the NHS trusts and NHS foundation trusts for which there are matters to report in the relevant columns. It therefore does not list all NHS providers. Column (3) lists significant internal control issues disclosed in local annual governance statements, excluding matters relating to the same issues as covered by NHS England’s mandated support. Therefore, the absence of a tick in this column does not necessarily mean the provider disclosed no significant internal control issues in its local AGS.

Word version of table: providers with matters to report

Special severance payments

NHS providers are required to obtain approval in advance of making non-contractual departure payments (termed ‘special severance payments’) to employees. At the time of finalising the disclosures in these consolidated provider accounts on 1 November 2024, there are five outstanding cases where payments were made without prior authorisation.  These have been submitted to HM Treasury retrospectively and HM Treasury’s view is awaited. These cases, while currently irregular, have been judged as individually and collectively not material by nature to these consolidated accounts. The Comptroller and Auditor General has commented on this area in his Report on page 44. We will continue to reinforce the requirement that such payments be approved by HM Treasury in advance of offers being made.

Auditor referrals of matters arising

Under Section 30 of the Local Audit and Accountability Act 2014 for NHS trusts, and under Schedule 10 to the NHS Act 2006 for NHS foundation trusts, where an auditor believes that the body or an officer of the body:

• is about to make, or has made, a decision which involves or would involve the incurring of expenditure which is unlawful, or
• is about to take, or has taken, a course of action which, if pursued to its conclusion, would be unlawful and likely to cause a loss or deficiency

the auditor should make a referral to the Secretary of State (for NHS trusts)/NHS England (for NHS foundation trusts).

39 NHS trusts (2022/23: 38 This figure was 37 at the time of finalising the consolidated provider accounts for 2022/23. The auditor subsequently submitted a section 30 referral relating to the NHS trust breakeven duty at Buckinghamshire Healthcare NHS Trust which is referenced in the 2022/23 audit report, making this total now 38) and no NHS foundation trusts (2021/22: none) were subject to such referrals in 2023/24. 38 of these referrals relate to a failure by the trust to meet the statutory breakeven duty target (2022/23: all 38). This requires an NHS trust to achieve a cumulative breakeven over a three or five-year period. The underlying issues in trust finances are disclosed as part of the detail on significant internal control issues presented above. The statutory breakeven duty does not apply to NHS foundation trusts. The Trust with a referral in 2023/24 for a different matter is noted in the detailed table above.

Amanda Pritchard, Chief Executive
15 November 2024

The certificate of the Comptroller and Auditor General to the Houses of Parliament

Opinion on consolidated financial statements

I certify that I have audited the Consolidated NHS Provider Accounts for the year ended 31 March 2024 under the National Health Service Act 2006.

The Consolidated NHS Provider Accounts comprise the:

• Consolidated Statement of Financial Position as at 31 March 2024;
• Consolidated Statement of Comprehensive Income, Consolidated Statement of Cash Flows and Consolidated Statement of Changes in Equity for the year then ended; and
• the related notes including the significant accounting policies.

The financial reporting framework that has been applied in the preparation of the consolidated financial statements is applicable law and UK adopted International Accounting Standards.

In my opinion, the financial statements:

• give a true and fair view of the state of affairs of NHS trusts and NHS foundation trusts, taken collectively, as at 31 March 2024 and of their deficit for the year then ended; and
• have been properly prepared in accordance with the National Health Service Act 2006 and Secretary of State directions issued thereunder.

Opinion on regularity

In my opinion, in all material respects, the income and expenditure recorded in the financial statements have been applied to the purposes intended by Parliament and the financial transactions recorded in the financial statements conform to the authorities which govern them.

Basis for opinions

I conducted my audit in accordance with International Standards on Auditing (UK) (ISAs UK), applicable law and Practice Note 10 Audit of Financial Statements and Regularity of Public Sector Bodies in the United Kingdom (2022). My responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of my certificate.

Those standards require me and my staff to comply with the Financial Reporting Council’s Revised Ethical Standard 2019. I am independent of NHS England and of NHS trusts and NHS foundation trusts, taken collectively, in accordance with the ethical requirements that are relevant to my audit of the financial statements in the UK. My staff and I have fulfilled our other ethical responsibilities in accordance with these requirements.

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.

Conclusions relating to going concern

In auditing the financial statements, I have concluded that NHS England’s use of the going concern basis of accounting in the preparation of the consolidated financial statements is appropriate.

Based on the work I have performed, I have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on NHS trusts’ and NHS foundation trusts’ collective ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

My responsibilities and the responsibilities of the Accounting Officer with respect to going concern are described in the relevant sections of this certificate.

The going concern basis of accounting for the Consolidated NHS Provider Accounts is adopted in consideration of the requirements set out in HM Treasury’s Government Financial Reporting Manual, which require entities to adopt the going concern basis of accounting in the preparation of the financial statements where it is anticipated that the services which they provide will continue into the future.

Other Information

The other information comprises information included in the Consolidated NHS Provider Accounts but does not include the consolidated financial statements nor my auditor’s certificate and report. The Accounting Officer is responsible for the other information.

My opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in my certificate, I do not express any form of assurance conclusion thereon.

In connection with my audit of the financial statements, my responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements, or my knowledge obtained in the audit, or otherwise appears to be materially misstated.

If I identify such material inconsistencies or apparent material misstatements, I am required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work I have performed, I conclude that there is a material misstatement of this other information, I am required to report that fact.

I have nothing to report in this regard.

Opinion on other matters

In my opinion, based on the work undertaken in the course of the audit, the information given in the introduction, review of financial performance of NHS providers, statement of accounting officer’s responsibilities and accountability framework, and the annual governance statement for the financial year for which the financial statements are prepared is consistent with the consolidated financial statements and is in accordance with the applicable legal requirements.

Matters on which I report by exception

In the light of the knowledge and understanding of NHS trusts and NHS foundation trusts, taken collectively, and their environment obtained in the course of the audit, I have not identified material misstatements in the introduction, review of financial performance of NHS providers, statement of accounting officer’s responsibilities and accountability framework, and the annual governance statement.

I have nothing to report in respect of the following matters which I report to you if, in my opinion:

• adequate accounting records have not been kept by NHS England or returns adequate for my audit have not been received from branches not visited by my staff; or
• I have not received all of the information and explanations I require for my audit; or
• the annual governance statement does not reflect compliance with HM Treasury’s guidance.

Responsibilities of the Accounting Officer for the financial statements

As explained more fully in the statement of accounting officer’s responsibilities and accountability framework, the accounting officer is responsible for: 

• maintaining proper accounting records;
• providing the C&AG with access to all information of which management is aware that is relevant to the preparation of the financial statements such as records, documentation and other matters;
• providing the C&AG with additional information and explanations needed for his audit;
• providing the C&AG with unrestricted access to persons within NHS England (and NHS trusts and NHS foundation trusts) from whom the auditor determines it necessary to obtain audit evidence;
• preparing the information which comprises the introduction, review of financial performance of NHS providers, the statement of accounting officer’s responsibilities and accountability framework and the annual governance statement in accordance with the National Health Service Act 2006, and with the directions made thereunder by the Secretary of State;
• the preparation of the consolidated financial statements in accordance with the applicable financial reporting framework and for being satisfied that they give a true and fair view;
• such internal controls as the accounting officer determines is necessary to enable the preparation of financial statements to be free from material misstatement, whether due to fraud or error; and
• assessing NHS trusts’ and NHS foundation trusts’ collective ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the accounting officer anticipates that the services provided by NHS trusts and NHS foundation trusts will not continue to be provided in the future.

Auditor’s responsibilities for the audit of the financial statements

My responsibility is to audit, certify and report on the financial statements in accordance with the National Health Service Act 2006.

My objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue a certificate that includes my opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Extent to which the audit was considered capable of detecting non-compliance with laws and regulations including fraud

I design procedures in line with my responsibilities, outlined above, to detect material misstatements in respect of non-compliance with laws and regulations, including fraud. The extent to which my procedures are capable of detecting non-compliance with laws and regulations, including fraud is detailed below.

Identifying and assessing potential risks related to non-compliance with laws and regulations, including fraud

In identifying and assessing risks of material misstatement in respect of non-compliance with laws and regulations, including fraud, I considered the following:

• the nature of the sector, control environment and operational performance including the design of NHS trusts’ and NHS foundation trusts’ accounting policies and performance incentives;
• inquired of management, NHS England’s head of internal audit and those charged with governance, including obtaining and reviewing supporting documentation relating to NHS England’s policies and procedures on:
  • identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;
  • detecting and responding to the risks of fraud and whether they had knowledge of any actual, suspected, or alleged fraud; and
  • the internal controls established to mitigate risks related to fraud or non-compliance with laws and regulations including NHS England’s controls relating to NHS England’s compliance with the National Health Service Act 2006 and Managing Public Money
• discussed with the engagement team regarding how and where fraud might occur in the consolidated financial statements and any potential indicators of fraud.

As a result of these procedures, I considered the opportunities and incentives that may exist within NHS trusts and NHS foundation trusts for fraud and identified the greatest potential for fraud in the following areas: revenue recognition, posting of unusual journals, complex transactions, and bias in management estimates. In common with all audits under ISAs (UK), I am also required to perform specific procedures to respond to the risk of management override.

I obtained an understanding of NHS trusts’ and NHS foundation trusts’ framework of authority as well as other legal and regulatory frameworks in which NHS trusts and NHS foundation trusts operate, focusing on those laws and regulations that had a direct effect on material amounts and disclosures in the financial statements or that had a fundamental effect on the operations of NHS trust and NHS foundation trusts. The key laws and regulations I considered in this context included the National Health Service Act 2006, the Health and Social Care Act 2012, the Health and Care Act 2022, Managing Public Money, employment law, and tax legislation.

In addition, I considered regulations and regularity relating to exit packages and, in particular, special severance payments, as I identified the completeness and regularity of special severance payments as a significant risk.

Audit response to identified risk

To respond to the identified risks resulting from the above procedures:

• I reviewed the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant laws and regulations described above as having direct effect on the financial statements;
• I enquired of management and the Audit and Risk Assurance Committee concerning actual and potential litigation and claims;
• I reviewed minutes of meetings of those charged with governance and the board and internal audit reports;
• in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business; and enquiring with the auditors of NHS trusts and NHS foundation trusts about the findings of their audits with respect to management override of control; and
• in addressing the risk of fraud in revenue recognition, I notified the auditors of NHS trusts and NHS foundation trusts of the need to consider the presumed risk of fraud in revenue recognition and enquired with them around the findings of their audits with respect to fraud in revenue recognition.

I communicated relevant identified laws and regulations and potential risks of fraud to all engagement team members and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.

A further description of my responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of my certificate.

Other auditor’s responsibilities

I am required to obtain evidence sufficient to give reasonable assurance that the expenditure and income recorded in the financial statements have been applied to the purposes intended by Parliament and the financial transactions recorded in the financial statements conform to the authorities which govern them.

I communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control I identify during my audit.

Gareth Davies, Comptroller and Auditor General
 22 November 2024                                                      

National Audit Office
157-197 Buckingham Palace Road
Victoria, London, SW1W 9SP

Report of the Comptroller and Auditor General to the Houses of Parliament

Introduction

1. The National Health Service Act 2006 (the “2006 Act”) requires NHS England to prepare a Consolidated NHS Provider Accounts (“CPA”) for each financial year. The CPA is a consolidation of the 211 NHS trusts and NHS foundation trusts (“NHS providers”) in England. The CPA is in turn consolidated into the Department of Health and Social Care (DHSC) group accounts. I consider the CPA to be a significant component of DHSC and my audit of the CPA must be complete before I complete my audit of DHSC.

2. I am required to examine, certify, and report on the CPA. I provide an opinion on whether the CPA gives a “true and fair” view of the finances of NHS providers, taken collectively. I also provide an opinion on whether the transactions recorded in the CPA have been applied to the purposes intended by Parliament and whether they conform to the authorities which govern them (“regularity”).

3. In this report I set out my observations on the performance of NHS providers in delivering accounts to support the timely production of the CPA (and in turn DHSC’s group accounts), given significant delays experienced in 2022-23, and on the regularity framework for the CPA and NHS providers, including some special severance payments made by NHS providers that are currently irregular. In addition, I highlight the current state of NHS financial sustainability and refer to a more detailed report I published in July 2024 on NHS financial management and sustainability.

Delays with NHS providers producing audited accounts

4. NHS providers are audited by a number of different audit firms. NHS providers are responsible for appointing their external auditors (“local auditors”). Local auditors must comply with the Code of Audit Practice (“the Code”) published in April 2020 for 2023-24 audits of NHS providers. Under the Local Audit and Accountability Act 2014 (the “2014 Act”), I am responsible for the preparation, publication, and maintenance of the Code. The Code sets out what local auditors are required to do to fulfil their statutory responsibilities under the 2014 Act.

5. The Code stresses the need for local auditors to report on a timely basis. Section 1.19 of the Code requires local auditors to report on a timely basis. Timely reporting includes producing audit reports in time, insofar as the auditor can do so under auditing standards, to allow local bodies to comply with the requirements placed on them to publish their audited financial statements. It also means ensuring that when matters of concern arise during the audit, the auditor raises them promptly with the body and considers whether the matter needs to be brought to public attention at the appropriate time.

6. In 2022-23 there were significant delays in NHS providers finalising their accounts. 163 NHS provider audits were completed by 30 June 2023 (the deadline NHS England set for NHS provider accounts to be audited in 2022-23), meaning just over three quarters of NHS providers achieved the target date set by NHS England. By 31 October 2023, 203 (95.8%) NHS provider audits were completed. This was the latest practical date to enable certification of the CPA and DHSC annual report and accounts by 30 November 2023, which was the initial agreed certification date for those accounts. The CPA 2022-23 and the DHSC annual report and accounts 2022-23 were not certified until 22 January 2024.

7. The timetable set by NHS England for the CPA 2023-24 required local auditors to complete the statutory audits of NHS providers by 28 June 2024. This deadline was set to enable NHS England to produce the CPA in good time, to allow DHSC to have its group accounts certified and laid in Parliament before the Christmas Parliamentary Recess 2024, thus enabling DHSC to publish its 2023-24 annual report and accounts a month earlier than in 2022-23. At a Public Accounts Committee hearing on 13 March 2024, regarding the timeliness of the DHSC annual report and accounts 2022-23, DHSC’s stated aspiration was “to bring it (laying of the annual report and accounts) forward by at least a month each year” (Public Accounts Committee (Q104), 2022-23). Before the Covid-19 pandemic, DHSC and NHS England (covering both the NHS England group account and the CPA) routinely laid their annual reports and accounts in Parliament before the Parliamentary summer recess. The last time this happened was for the 2018-19 accounts.

8. Of the 211 NHS providers, 173 had their 2023-24 annual reports and accounts audited by 28 June 2024. 0% of NHS providers achieved the target date set by NHS England. By 31 July 2024, 197 (93.4%) NHS provider audits were completed, and this number rose to 204 (96.7%) by 30 September 2024. This was the latest practical date to enable certification of the CPA by 31 October 2024, which was the initial planned certification date.

9. At the point NHS England finalised the CPA, five NHS provider audits remained outstanding, and these entities account for material transactions and balances in the CPA. By 31 October 2024, 206 (97.6%) NHS provider audits were completed, with the remaining five audits outstanding as the CPA was finalised by NHS England. NHS England has had to perform alternative procedures to obtain sufficient assurance that the material transactions and balances in the outstanding NHS providers are not materially misstated, in the context of the CPA. My staff have reviewed the procedures performed by NHS England and are content that in the context of the CPA, the results are sufficient and appropriate. I have therefore issued a clean true and fair audit opinion in respect of the CPA 2023-24. Note 32 to the CPA provides details of the transactions and balances relating to these five NHS providers.

10. NHS England recognises the risks of failure to submit audited accounts in accordance with the timetable and has been proactive in using its influence to support NHS providers and local auditors with timely delivery. As set out in the annual governance statement LINK, NHS England demonstrates a clear understanding of the risks around timeliness of audited NHS provider annual reports and accounts, including the delays this has caused to CPA certification. NHS England has set out the range of interventions it has used to support NHS providers and local auditors to try to accelerate the audit of NHS provider accounts. This has helped enable NHS England to finalise the CPA in November 2024, over two months earlier than has been the case for the last four years.

11. In 2024-25 NHS England should continue to proactively monitor audit progress of NHS provider accounts. NHS England has been proactive in 2023-24 in monitoring the progress of late NHS provider accounts, including engaging with the NHS providers, local auditors, my staff, HM Treasury and the Financial Reporting Council (which regulates local audit firms). NHS England continues to be concerned about the capacity of local auditors to bring forward certification to enable the CPA, and hence DHSC, to lay their annual reports and accounts in Parliament significantly earlier than in 2023-24, while noting publication has been brought forward considerably compared to the last four years.

12. I have concerns given the wider local audit challenges set out in my report, Progress update: Timeliness of local auditor reporting on local government in England – NAO report. There could be some risk in the delivery of 2024-25 NHS local audits due to the wider local audit system issues and significant delays in local government audits as the auditors work to clear this backlog. The Ministry of Housing, Communities and Local Government has issued amended regulations to introduce statutory deadlines for publication of local government audited accounts, which is intended to work alongside a new Code which I have developed and is intended to support measures to address the backlog.

Regularity framework for the CPA and NHS providers

13. Under the National Health Service Act 2006, NHS England is required to produce the CPA. This Act also requires that I examine, certify and report on the CPA. I am required to give a regularity opinion on the CPA. In the terms of my engagement with NHS England, as well as providing an opinion on whether the CPA gives a true and fair view and have been properly prepared in accordance with the Secretary of State’s directions, I also confirm I will provide a regularity opinion, and report on whether, in my opinion, in all material respects, the expenditure and income presented in the CPA have been applied to the purposes intended by Parliament and whether the financial transactions conform to the authorities which govern them.

14. The auditors of NHS providers do not provide a regularity opinion on the accounts of NHS trusts or NHS foundation trusts. This is in contrast with section 21 of the 2014 Act which does require the auditors of integrated care boards (ICBs) which consolidate into the NHS England group accounts) to provide a regularity opinion. Despite there not being a requirement for NHS providers to have a regularity opinion, the accounting officers of NHS foundation trusts do have a responsibility for the propriety and regularity of public finances as set out in the NHS Foundation Trust Accounting Officer Memorandum issued by NHS England. The directors of NHS trusts are responsible under the National Health Service Act 2006 for safeguarding the assets of the trust and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities, and the accountable officers of NHS trusts have a responsibility for the propriety and regularity of public finances as set out in the Accountable Officer Memorandum issued to NHS trust chief executives by NHS England on their appointment. My staff liaise with the local auditors of NHS providers to ensure they provide me with sufficient and appropriate evidence to support my CPA regularity opinion. 

Special severance payments

15. Special severance payments are paid to employees outside of normal statutory or contractual requirements when leaving employment in public service whether they resign, are dismissed or reach an agreed termination of contract. Managing Public Money (“MPM”) confirms that “Special severance payments when staff leave public service employment should be exceptional. They always require HM Treasury approval because they are usually novel, contentious and potentially repercussive. So departments should always consult the HM Treasury in advance when considering a special severance payment.” MPM is clear that HM Treasury approval is required for all special severance payments, regardless of value, and that HM Treasury approval should be sought before any offers, whether oral or in writing, are made. The DHSC Group Accounting Manual (paragraph 2.85) confirms that all DHSC group bodies must follow MPM.

16. NHS providers made 51 special severance payments, at a cost of £916,000 in 2023-24. Five of these special severance payments have not been approved by HM Treasury and are therefore currently irregular. HM Treasury is currently considering whether to grant retrospective approval of these five special severance payments, which totalled £180,868. While most NHS providers follow the correct procedures when proposing to enter into a special severance payment arrangement, some NHS providers are not following the requirements set by HM Treasury. The five unapproved special severance payments were made by Ashford and St Peter’s Hospital NHS Foundation Trust, Lincolnshire Community Health Services NHS Trust, Nottinghamshire Healthcare NHS Foundation Trust (this trust made two unapproved special severance payments) and Kent and Medway NHS and Social Care Partnership NHS Trust.

17. I have decided not to qualify my regularity opinion in respect of the five unapproved special severance payments. These special severance payments are not material by value to CPA. I have concluded they are not material by their nature and have therefore not qualified my regularity opinion in respect of these payments. NHS England should reiterate in guidance to the NHS provider sector on how the relevant principles of MPM apply to both NHS trusts and NHS foundation trusts and reiterate that approval for special severance payments should be sought from HM Treasury before any offers are made to staff. NHS England should ensure its regional teams, who are often the first point of contact for NHS providers, are also aware of MPM requirements. NHS England should also ensure Human Resources (HR) teams within NHS England regions and NHS providers are aware of MPM requirements regarding special severance payments and that these HR personnel are involved in discussions and negotiations that may lead to special severance payments being made.

Financial sustainability in the NHS

18. On 23 July 2024, I published a report on NHS Financial Management and Sustainability, highlighting the unprecedented scale of challenges facing the NHS today and in the years ahead. I reported that the NHS’s financial position is worsening because of a combination of long-standing and recent issues, including failure to invest in the NHS estate, inflationary pressures, and the cost of post-pandemic recovery. Many NHS bodies failed to break even in both 2022-23 and 2023-24.

19. The overall financial performance of the NHS provider sector, together with the NHS England group, will be reported in the DHSC annual report and accounts 2023-24, when it is published shortly. I will comment on this in my report on the DHSC annual report and accounts 2023-24.

Gareth Davies, Comptroller and Auditor General
22 November 2024                                                

National Audit Office
157-197 Buckingham Palace Road
Victoria, London, SW1W 9SP

Consolidated accounts

This section of the document contains important tables and figures that are an essential part of this document. However, due to accessibility reasons, it is published as a word document. but some of the elements may still not be fully accessible to all users. Please contact england.web@england.nhs.uk if you have a problems with this document.

Consolidate accounts 2023/24 – word version.

A print ready PDF version of the full report is available on the GOV.uk website.