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Published 25 August 2022
© Crown copyright 2022
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This publication is available at https://www.gov.uk/government/publications/framework-agreement-between-the-department-of-health-and-social-care-and-nhs-digital/annex-a-finance-and-accounting
This annex provides additional detail on the finance and accounting arrangements for NHS Digital.
The Secretary of State will give NHS Digital its budget for the year in a formal budget allocation letter to be sent to the NHS Digital Chief Executive.
The Secretary of State will give NHS Digital grant-in-aid funding for the year. The grant-in-aid will normally be paid monthly. NHS Digital will comply with the general principle, that there is no payment in advance of need.
Cash balances accumulated during the course of the year from grant-in-aid or other Exchequer funds shall be kept to a minimum level consistent with the efficient operation of NHS Digital.
Grant-in-aid not drawn down by the end of the financial year shall lapse. Subject to approval by Parliament of the relevant estimates provision, where grant-in-aid is delayed to avoid excess cash balances at the year-end, the department will make available in the next financial year any such grant-in-aid that is required to meet any liabilities at the year end, such as creditors.
NHS Digital will be subject to a quarterly consolidation reporting schedule, for determining cover, and making any in-year changes to budgets, and will provide monthly updates to the Department of Health and Social Care (DHSC) Finance Business partners in meetings organised by the Digital Oversight Team.
As accounting officer (AO), the chief executive must ensure that, in any financial year, NHS Digital’s spending in each of the following categories does not exceed the limit set by the Secretary of State for that year:
The AO must also ensure that:
In addition to their specific financial responsibilities, the NHS Digital Board have a shared responsibility to facilitate the effective financial management of the health and social care system, including delivery of the controls imposed upon the system by HM Treasury.
NHS Digital is able to charge NHSE a reasonable fee in respect of the cost of complying with a direction given by NHSE for NHS Digital to establish and operate an information collection or analysis system under section 254 of the 2012 Act. Similarly, if NHSE gives a direction to NHS Digital under regulation 32 of the National Institute for Health and Care Excellence (Constitution and Functions) and the Health and Social Care Information Centre (Functions) Regulations 2013, S.I. 2013/259, requiring NHS Digital to exercise such systems delivery functions of NHSE as are specified in the direction, the direction must permit NHS Digital to charge NHSE a reasonable fee in respect of the cost of complying with the direction. If the Secretary of State gives NHS Digital a direction under regulation 32 requiring NHS Digital to exercise a systems delivery function of the Secretary of State, the direction may include provision about payments to NHS Digital for things done in carrying out the direction.
NHS Digital may charge for anything it does pursuant to its additional functions in section 270 of the 2012 Act.
Where NHS Digital responds to a direct request from other commissioners, such as NHSE, either as a result of a direction or otherwise, it must notify the Digital Oversight Team if there is any potential conflict with, or impact upon, statutory requirements, Remit Letter deliverables, or any priority activity; NHS Digital is expected to manage the risks associated with additional work undertaken.
NHS Digital will produce a business plan each year, reflecting the objectives of the remit. Indicative financial budgets for both administration and programme funded activity will be discussed from the outset of business planning, incorporating any requirement to deliver overall efficiencies relevant to DHSC and its ALBs. The plan will include the funding for which NHS Digital is directly responsible.
The business plan will need to identify detailed revenue, capital and cash forecasts for grant-in-aid funded activity, and also equivalent expenditure associated with any other income sources. It will need to clearly identify the distinction between costs and income falling inside and outside the administration budget regime.
In relation to financial reporting, the department is required by HM Treasury to report in-year financial performance and forecasts for all its arm’s length bodies, by estimate line, and in a specified format, to a strict timetable. NHS Digital is required to comply with departmental plans and schedules which enable the department to meet HM Treasury deadlines, and the department’s overall financial planning to meet HM Treasury spending controls through the Shared Financial Planning Agreement.
NHS Digital must prepare annual accounts for each financial year ending 31 March, and interim accounts for shorter periods if required. In relation to these accounts, NHS Digital must:
NHS Digital must publish an annual report of its activities together with its audited accounts after the end of each financial year. Information on performance against key financial targets is within the scope of the audit and should be included in the notes to the accounts. The report and accounts are to be signed by NHS Digital’s Accounting Officer and laid before Parliament by NHS Digital and made available on NHS Digital’s website, in accordance with the guidance in the Government Financial Reporting Manual (FReM). A draft of the report should be submitted to the department in line with the published timetable.
The AO must also ensure that NHS Digital participates fully in all agreement of balances exercises initiated by the department, and in the form specified by the department, and that it agrees income and expenditure and payables and receivables balances both with other organisations within the department’s resource accounting boundary and, for the purposes of the Whole of Government Accounts (WGA), with other government bodies outside that boundary. In doing so, NHS Digital should seek to agree all outstanding balances but, in any case, should keep within any level of materiality set by the department.
To meet the requirements for internal audit, NHS Digital must:
The department is committed to the development of a group assurance model for DHSC and its arm’s length bodies. NHS Digital will engage with the department in the development of the group assurance model.
The Government Internal Audit Agency will provide the audit service (including having access to all previous audit documentation).
For external audit, the Comptroller and Auditor General (C&AG) audits NHS Digital’s annual accounts. In the event that NHS Digital has set up and controls subsidiary companies, NHS Digital will, in the light of the provisions in the Companies Act 2006, ensure that the C&AG is appointed auditor of those company subsidiaries that it controls and/or whose accounts are consolidated within its own accounts. NHS Digital shall discuss with the department the procedures for appointing the C&AG as auditor of the companies.
The C&AG may carry out examinations into the economy, efficiency and effectiveness with which NHS Digital has used its resources in discharging its functions. For the purpose of these examinations the C&AG has statutory access to documents as provided for under section 8 of the National Audit Act 1983. In addition, NHS Digital is to provide, in conditions to grants and contracts, for the C&AG to exercise such access to documents held by grant recipients and contractors and sub-contractors as may be required for these examinations; and is to use its best endeavours to secure access for the C&AG to any other documents required by the C&AG which are held by other bodies.
Paragraph 9.5 of the Framework Agreement requires NHS Digital to abide by any relevant cross-Government efficiency controls. These controls will be communicated to NHS Digital.
Once the budget has been approved by DHSC, and subject to the Secretary of State’s instructions and any other processes set out in this document, NHS Digital has authority to incur expenditure approved in the budget without further reference to the department, on the following conditions:
NHS Digital must obtain the department’s prior written approval before entering into any undertaking to incur expenditure outside its delegations or not provided for in its business plan as approved by the department. In addition, the department’s prior written approval is required when:
For major projects, NHS Digital will participate in the department’s common assurance and approval process.
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