The importance of strong financial governance in the NHS: questions to consider
07 August 2017
As providers and commissioners’ financial positions have deteriorated over the last 12 to 18 months, we have seen an ever-increasing focus on financial governance and leadership. Sudden changes in the financial position of trusts and clinical commissioning groups (CCGs) cause significant concerns for the regulators who need to rapidly understand the underlying cause. While working with a number of NHS organisations, we have found inadequate financial governance to be a common issue. Our experience shows us that there are five key areas where financial governance is weak:
- an over-optimistic outlook
- poor budgeting with lack of ownership
- inadequate financial information
- unclear ownership and accountability
- a lack of escalation of risks and exceptions.
Questions you should be asking
Undertaking a financial governance review is a good way to understand what has gone wrong and why. In our briefing published by the HFMA we set out a range of questions for organisations to ask themselves, focusing on:
- in-year reporting
- financial controls
- contract management and commissioning
- workforce arrangement
- risk management.
Boards and governing bodies have a key leadership role to play in ensuring these questions are considered and responded to.
What are the key steps to take?
Good financial governance has never been so important.
- Trusts and CCGs should be conducting reviews pro-actively to identify any early warning signs, considering areas such as:
- robustness of basic systems and controls
- quality of budgeting process and buy-in from budget holders
- whether risk management/ escalation processes are fit for purpose
- whether people understand their roles and responsibilities
- the extent that board/ governing body members are fully engaged
- the capacity and skill-set of the leadership/ senior management team to respond to current challenges
- adequacy of information available to budget holders
- quality of financial reporting – is it realistic and forward-looking.
- In addition, management need to ensure that the finance team in their organisation has the right skills and capabilities and establish whether any of these need to be strengthened. Finance function effectiveness reviews are a good mechanism to obtain a baseline of the team’s relative strength and the way forward.
- Finally, in all of this organisations need to consider the quality impact of all financial and operational changes. Good financial governance should support the organisation as it strives to meet its challenges here and now, and look ahead to the future.
To find out more please contact Joanna Watson, Matthew Plummer or Matthew Elmer.