1. Making Sense of the Accounts

2. Objectives To help you understand: your responsibilities in relation to financial matters the format of the FT’s annual report and accounts what the primary financial statements report the role of the external auditor Monitor’s financial risk ratings

3. Making Sense of the Accounts 3 Governors’ responsibilities in relation to financial matters

4. Financial matters Governors’ responsibilities: to represent interests of members & partners in local health economy to receive FT’s annual report and accounts, and auditors report on accounts - presented to governors at AGM - opportunity to comment but not change - informs governors about their other statutory duties - forum for governors to ask questions

5. Making Sense of the Accounts 5 Format of the annual report and accounts

6. Format of annual report and accounts Annual report comprises: Directors’ report including and management commentary on the performance of the FT Remuneration report Code of Governance disclosures Quality report Sustainability, equality and diversity disclosures

7. Format of annual report and accounts Annual accounts comprise: Foreword Four primary statements - Statement of Comprehensive Income -Statement of Financial Position - Statement of Changes in Taxpayers’ Equity - Statement of Cash Flows -Notes to the accounts Directors’ Statement of Responsibilities Statement on Internal Control Auditor’s report

8. Making Sense of the Accounts 8 What the primary financial statements report

9. What the primary financial statement report Statement of Comprehensive Income records the FT’s income and expenditure for the year with any other recognised gains and losses includes cash items e.g. expenditure on staff and supplies, and non- cash e.g. change in value of the FT’s assets If income exceeds expenditure FT is in surplus, if expenditure exceeds income there is a deficit

10. What the primary financial statements report Statement of Financial Position snapshot of the FT’s financial position at 31 March assets - what the FT owns or is owed, liabilities - what the FT owes taxpayers’ equity – public funds invested in the FT

11. What the primary financial statements report Statement of Changes in Taxpayers’ Equity shows changes in Reserves & Public Dividend Capital over the year: - Public Dividend Capital is the public sector equity finance based on the excess of assets over liabilities when the predecessor NHS Trust was established - no prescribed format for this statement but Monitor includes an approach it its FT Annual Reporting Manual

12. What the primary financial statements report Statement of Cash Flows summarises the cash flows in and out of the FT during the financial year cash flows are analyses under three headings: - operating activities - investing activities - financial activities focus is on cash implications of FT actions

13. What the primary financial statements report Notes to the Accounts further analysis of items on the face of the primary statements - operating income and expenses - property plant and equipment additional disclosures - accounting policies - critical accounting estimates and judgements - Private Patient Income cap - Prudential Borrowing Limit

14. Making Sense of the Accounts 14 The role of the external auditor

15. External auditors: satisfy themselves that the FT has: –prepared its accounts properly –made proper arrangement for securing economy, efficiency and effectiveness in its use of resources review the annual report to assess whether it is consistent with the financial statements report main audit findings to ‘Those Charged with Governance’ (Audit Committee) give an opinion to governors as to whether accounts are ‘true and fair’

16. Making Sense of the Accounts 16 Monitor’s financial risk ratings

17. Risk rating is an indication of the likelihood of a FT breaching the terms of its authorisation Four key criteria: –achievement of financial plan –underlying performance –financial efficiency –liquidity

18. Objectives To help you understand: your responsibilities in relation to financial matters the format of the FT’s annual report and accounts what the primary financial statements report the role of the external auditor Monitor’s financial risk ratings

19. Next steps Draft accounts ready for audit by 22 April Audited 2010/11 accounts and annual report due to be sent to Monitor by 7 June