[Withdrawn] Agreement of balances 2022 to 2023: Q4 (month 12) update
Updated 6 March 2023
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Introduction
The agreement of balances (AoB) exercise is key in ensuring that the Department of Health and Social Care (DHSC) group accounts are not materially misstated. Additionally, it is also important in demonstrating good financial management across the organisations that make up the group and should not be undertaken in isolation from the day-to-day accounts.
This document should be read in conjunction with the ‘Agreement of balances guidance 2022 to 2023’ on the DHSC agreement of balances: accounting group page.
Updates
1. Quarter 3 (month 9) 2022 to 2023 exercise
DHSC would like to say thank you for everyone’s participation in the Q3 (month 9) exercise.
2. Quarter 4 (month 12) 2022 to 2023 exercise
Group bodies are reminded that the agreement of receivables and payables, and income and expenditure is mandatory at month 12.
The thresholds for month 12 2022 to 2023 agreements have been set as follows:
- £300,000 for receivables and payables
- £3 million for income and expenditure
There are no changes to the thresholds for issuing statements:
- £2,500 for receivables and payables
- £2 million for income and expenditure
Where there are significant mismatches between organisations, we expect bodies to work together to reach agreement and make adjustments where appropriate. DHSC and NHS England (NHSE) will be closely monitoring the mismatches at month 12. Counterparties should be prepared for DHSC and NHSE to follow up significant differences with the relevant organisations.
3. Quarter 4 changes to DHSC group bodies 2022 to 2023
NHS Digital (HIC033)
NHS Digital demised on 1 February 2023 and became part of NHSE. This change will impact the 2022 to 2023 month 12 agreement of balances, such that organisations should not have receivable and payable balances with NHS Digital as at 31 March 2023 - all such balances should be mapped to NHSE CBA033.
Ten months of income and expenditure with HIC033 (1 April 2022 to 31 January 2023) should still be reported and agreed with HIC033. However, organisations should not have income and expenditure for the 2 months 1 February 2023 to 31 March 2023 or accruals and prepayments with HIC033.
4. Lessons learned from month 9
Income and expenditure with clinical commissioning groups (CCGs)
On 1 July 2022, integrated care boards (ICBs) were established and clinical commissioning groups (CCGs) were abolished following a transfer of services.
As detailed in Annex 1 the income and expenditure for the 3 months to 30 June 2022 with the CCGs must be included within the data collection forms at Q4. There should be no additional income and expenditure recorded for CCGs after 30 June 2022.
A review of month 9 returns has highlighted the following issues for a number of bodies:
• CCG transactions for Q1 have been incorrectly omitted from Q3 returns
• CCG transactions for Q1 have been incorrectly included as ICB transactions
• ICB transactions for Q2 and Q3 have been incorrectly included as CCG transactions
All organisations should ensure that CCG and ICB transactions are recorded against the correct entity.
The CCG transactions reported at Q4 are expected to be in line with the CCG income and expenditure reported in the Q1 agreement of balances exercise.
Income and expenditure with NHSE sub-entities
Organisations are reminded that NHSE operates as 9 sub-entities for agreement of balances purposes: a core central team (CBA033), 7 regions and one central specialised commissioning team.
It is essential that transactions are recorded against the correct NHSE sub-entity.
A review of month 9 returns has highlighted a significant volume and value of mismatches resulting from use of an incorrect NHSE sub-entity.
See the section ‘Agreeing balances – recording sub-entity transactions’ in the agreement of balances guidance 2022 to 2023 for further information on recording NHSE sub-entity transactions.
5. Quarter 1 to quarter 3 updates
See Annex 1, below, for updates from quarter 1 to quarter 3 which are still applicable for quarter 4. These include leasing transactions (IFRS 16) and changes to DHSC group bodies.
AoB contact lists
Contact lists have been refreshed for 2022 to 2023 Q4 (month 12) and will be circulated by DHSC and NHSE in the week commencing 6 March 2023. All organisations’ contact details are reviewed and updated via DHSC and NHSE.
Where not already the case, organisations should make arrangements to ensure that, for future periods, generic email addresses are set up, as these are less likely to require amendment. If an email containing your statement is returned as undeliverable, inform your national body so the issue can be resolved or escalated for this and future exercises.
Annex 1 – quarter 1 to quarter 3 updates
Leasing transactions (IFRS 16)
Following the implementation of IFRS 16 on 1 April 2022, transactions relating to leases will be reflected differently in the accounts of lessees and some sub-lessors.
For Q4 (month 12), the balances and transactions to be included for leases in the AoB process will be limited to those arising from invoices for leasing transactions. Invoices or accruals (due but not yet invoiced) for leasing activity should be included on statements, agreed and recorded on collection schedules.
Balances and transactions that have not been invoiced – such as un-invoiced balance sheet items, and non-cash income and expenditure items – are excluded from the process.
For receivables and payables, any non-invoiced finance lease receivables and payables relating to future lease payments are now outside the scope of the agreements process.
For income and expenditure agreements, any ledger transactions that relate to invoiced or accrued (due but not yet invoiced) lease payments are included on statements and agreed. The value included should be the entire lease payment including any amounts that would be accounted for as principal. These amounts are included in the reconciliation to accounts data so should not be removed in the ‘adjusted’ column.
Detailed guidance accompanying collection forms will explain how the amounts subject to agreement, for leases, are reconciled to the accounts data.
NHSE will provide further guidance to NHSE group bodies for adjustments required for lease payments by counterparty and how these balances will impact AoB submissions at month 12.
Changes to DHSC group bodies 2022 to 2023
There have been a number of changes to DHSC group bodies that will need to be taken into account for AoB exercises in 2022 to 2023. The contact and counterparty lists have been updated to reflect these changes.
Changes as a result of the Health and Care Act 2022
The Health and Care Act 2022 received Royal Assent on 28 April 2022.
On 1 July 2022, ICBs were established under the act, and CCGs and London Shared Services (previously North East London CSU NELCSU) were abolished and their services transferred to ICBs on 1 July 2022.
The functions of Monitor and NHS Trust Development Authority (NHS TDA) transferred to NHSE, with Monitor and NHS TDA also abolished on 1 July 2022.
As a result of these changes, there should be no receivable and payable balances with CCGs, London Shared Services, Monitor or NHS TDA for Q4 (month 12). Use the contact details in the updated Q4 (month 12) contact list for agreement of any outstanding receivable or payable balances with the successor bodies.
Appendix 5 of the agreement of balances guidance on the DHSC agreement of balances: accounting group page provides a mapping of CCGs to successor ICBs to aid organisations in issuing receivable statements to the correct successor organisation.
The Q1 (month 3) exercise completed earlier in the year covered the income and expenditure for the 3 months to 30 June 2022 with these bodies. There is no requirement to re-issue statements. However, any income and expenditure with these bodies must be included within the data collection forms at Q4.
Medicines and Healthcare products Regulatory Agency (MHRA) (MHP033)
From 1 April 2022, the Medicines and Healthcare products Regulatory Agency’s (MHRA) trading fund status was revoked. MHRA is now an executive agency that will be consolidated into DHSC group accounts.
As a result of this change, MHRA will now participate in the AoB exercises and take part in agreement of balances from Q3 (month 9).