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Part of NHS Digital annual report and accounts 2018 to 2019

Accounts

Financial statements for NHS Digital for the year 2018-19, and notes to the accounts.

Summary

Financial statements for NHS Digital for the year 2018-19, and notes to the accounts.


Financial statements

Statement of comprehensive net expenditure for the year ended 31 March 2019

Expenditure Note

2018-19

£000

Represented 2017-18

£000

Staff costs 3 177,798 164,331
Termination benefits 3 11,165 659
Operating expenditure 5 218,031 179,709
Depreciation and amortisation 5 33,705 32,756
Impairment of property, plant and equipment 5 - 56
Loss on disposal of non-current assets 5 217 624
Total expenditure   440,916 378,135
Less income 4 (33,583) (35,245)
Net operating expenditure for the financial year   407,333 342,890
Net expenditure for the financial year   407,333 342,890

Details of the representation can be found on note 3.

All income and expenditure derives from continuing operations.

Notes 1 to 20 form part of these financial statements.

Statement of financial position at 31 March 2019

Non-current assets Note 31 March 2019 £000 31 March 2018 £000
Property plant and equipment 6 24,101 28,252
Intangible assets 7 136,140 89,445
Other non-current receivables 8 6,103 3,045
Total non-current assets   166,344 120,742

 

Current assets Note 31 March 2019 £000 31 March 2018 £000
Trade and other receivables 9 25,096 31,149
Cash and cash equivalents 10 21,204 23,929
Total current assets   46,300 55,078
Total assets   212,644 175,820

 

Current liabilities Note 31 March 2019 £000 31 March 2018 £000
Trade and other payables 11 (61,934) (42,376)
Provisions 12 (1,543) (64)
Total current liabilities   (63,477) (42,440)
Total assets less current liabilities   149,167 133,380

 

Non-current liabilities Note 31 March 2019 £000 31 March 2018 £000
Provisions 12 (3,666) (2,546)
Total assets less total liabilities   145,501 130,834

 

Taxpayers' equity  and other reserves Note 31 March 2019 £000 31 March 2018 £000
General reserve   145,501 130,834
Total taxpayers' equity and other reserves   145,501 130,834

Notes 1 to 20 form part of these financial statements.

All financial statements were approved by the Board on 5 June 2019 and signed on its behalf by:

Sarah Wilkinson
Chief Executive
26 June 2019

Statement of cash flows for the year ended 31 March 2019

Cash flows from operating activities Note

2018-19

£000

2017-18

£000

Net operating expenditure for the financial year   (407,333) (342,890)
Adjustment for non-cash transactions:      
- depreciation and amortisation 5 33,705 32,756
- impairments of property, plant and equipment 5 - 56
- loss on disposal of non-current assets 5 217 624
- provisions arising during the year 12 2,784 548
- provisions reversed unused 12 (158) -
(Increase) / decrease in non-current receivables 8 (3,058) 1,190
Decrease in trade and other receivables 9 6,053 2,777
Increase in trade and other payables 11 19,558 11,553
Decrease / (increase) in capital accruals   1,133 (2,749)
Provisions utilised 12 (27) (26)
Net cash outflow from operating activities   (347,126) (296,161)

 

Cash flows from investing activities Note

2018-19

£000

2017-18

£000

Purchase of property, plant and equipment   (5,620) (15,054)
Purchase of intangible assets   (71,979) (46,290)
Net cash outflow from investing activities   (77,599)  (61,344)

 

Cash flows from financing activities Note

2018-19

£000

2017-18

£000

Grant in aid from the Department of Health and Social Care: cash drawn down in the year   422,000 366,000
Net financing   422,000 366,000
Net (decrease) / increase in cash in the period 10 (2,725) 8,495
       
Cash and cash equivalents at the beginning of the period 10 23,929 15,434
Cash and cash equivalents at the end of the period 10 21,204 23,929
Net (decrease) / increase in cash in the period 10 (2,725) 8,495

All cash flows relate to continuing activities.

Statement of changes in taxpayers’ equity for the year ended 31 March 2019

General reserve

£000

Balance at 31 March 2017

107,724

 

Changes in taxpayers' equity

General reserve

£000

Net expenditure for the financial year (342,890)
Total recognised income and expense (342,890)
Grant in aid from the Department of Health and Social Care: cash drawn down in the year 366,000
Total grant-in-aid funding 366,000
Balance at 31 March 2018 130,834

 

Changes in taxpayers' equity General reserve £000
Net expenditure for the financial year (407,333)
Total recognised income and expense (407,333)
Grant in aid from the Department of Health and Social Care: cash drawn down in the year 422,000
Total grant-in-aid funding 422,000
Balance at 31 March 2019 145,501

Note 1 to the accounts

1.1 General information 

The Health and Social Care Information Centre (NHS Digital) is an executive non-departmental government body established under the Health and Social Care Act 2012. The address of its registered office and principal place of business are disclosed in the introduction to the annual report. The principal activities of NHS Digital are to improve health and care by providing national information, data and IT services for patients, clinicians, commissioners and researchers. It is accountable to the Secretary of State for Health and Social Care for discharging its functions, duties and powers effectively, efficiently and economically. The Department of Health and Social Care actively undertakes this role on his behalf on a day-to-day basis.

1.2 Basis of accounting

The financial statements have been prepared in accordance with the 2018-19 Government Financial Reporting Manual (FReM) issued by HM Treasury as interpreted for the health sector in the Department of Health and Social Care Group Accounting Manual (GAM). The accounting policies contained in the FReM apply International Financial Reporting Standards (IFRS) as adopted and interpreted for the public sector context. Where the FReM permits a choice of accounting policy, the accounting policy which is judged to be most appropriate to the particular circumstances for the purpose of giving a true and fair view has been selected. The particular policies adopted by NHS Digital are described below. They have been applied consistently in dealing with items that are considered material to the accounts.

These accounts have been prepared under the historical cost convention, modified to account for the revaluation of tangible fixed assets. This is in accordance with directions issued by the Secretary of State for Health and Social Care and approved by HM Treasury. The presentational currency is pounds sterling and, unless otherwise stated, the accounts have been prepared to the nearest pounds thousands (£000).

No accounting standard changes were adopted early in 2018-19.

The FReM does not require the following standards and interpretations to be applied in 2018-19:

  • IFRS 16 Leases - implementation for those entities that follow the FReM has been deferred for 2019-20. Adoption will take place in 2020-21. NHS Digital currently has total future commitments under operating leases of £113 million, which IFRS 16 would require to be recognised on the statement of financial position as right of use assets with corresponding lease liabilities. NHS Digital is assessing the extent to which services other than those currently identified as containing a lease per IAS 17 and IFRIC 4 may be identified as a right of use asset under the revised recognition criteria. The finalisation of the public sector interpretations and adaptations for IFRS 16 will enable conclusion of the assessment. If IFRS 16 had applied in 2018-19, the impact would have been to bring commitments under operating leases of approximately £16 million on to the statement of financial position as right of use assets, with a corresponding lease liability
  • IFRS 17 Insurance Contracts - effective for accounting periods beginning on or after 1 January 2021, but not yet adopted by the 2018-19 FReM. The application of IFRS 17 would not have a material impact on the accounts for 2018-19, had it been applied in the year

1.3 Income

Income is recognised to the extent that it is probable that the economic benefits will flow to NHS Digital and the income can be reliably measured.

The main source of funding is a parliamentary grant from the Department of Health and Social Care within an approved cash limit, which is credited to the general reserve. The grant is recognised in the financial period in which it is received.

In line with IFRS 15, contract income is not recognised until a signed agreement is in place; in previous years, income may have been recognised from the point at which work commenced. The impact of this change was that £3.5 million of income was not recognised in the year as the probability of payment was not certain at the balance sheet date. This income may have been recognised had the accounting standards and policies of the prior year still applied, and this would have resulted in higher income reported in the statement of comprehensive net expenditure, and correspondingly higher contract receivables not yet invoiced in the statement of financial position. At the date the accounts were signed by the Accounting Officer, only £0.05 million of this income had been invoiced. Income is recognised in proportion to the fulfillment of the performance obligations set out in the agreement. Some performance obligations may be fulfilled by third parties under contract. Performance obligations are satisfied: as data, reports and analysis are supplied; or by the passage of time as the service is delivered; or as time and material costs are incurred; or by the fulfillment of specific milestones. Where recognition is based on time and materials incurred or achievement of milestones, income is recognised as progress and / or costs incurred are agreed with the customer, either by correspondence or at project and programme board meetings.

The practical expedient in IFRS 15.121 has not been applied. All consideration for contracts is received in the form of cash. Warranties are not offered in relation to services provided, and hence refunds and returns do not apply. There are no assets recognised from the costs incurred to obtain or fulfil a contract with a customer.

Non-contract income is recognised when it has been invoiced, and relates to smaller income streams.

All prices are based on full cost recovery.

Contract liabilities refer to income received in the year for which the related costs have not yet been incurred.

1.4 Administration, programme and annually managed expenditure

The analysis of income and expenditure for non-departmental public bodies between administration and programme is only required to be consistent with returns made for the purposes of the Department of Health and Social Care Group consolidation. The net operating expenditure for the financial year in the consolidation return, submitted to the Department of Health and Social Care, was split between net administration expenditure of £122.6 million and net programme expenditure of £282.1 million.The difference between the total of the administration and programme expenditure and the net operating expenditure for the year reported in the statement of comprehensive net expenditure is attributable to expenditure falling under the annually managed expenditure heading, which relates to the creation and usage of provisions and certain impairments.

1.5 Taxation

NHS Digital is not liable to pay corporation tax. Income is shown net of VAT, and expenditure is shown net of recoverable VAT. Irrecoverable VAT is charged to the most appropriate expenditure heading or capitalised if it relates to a non-current asset.

1.6 Losses and special payments 

Losses and special payments are items that Parliament would not have contemplated when it agreed funds for the health service or passed legislation. By their nature they are items that ideally should not arise. They are therefore subject to special control procedures compared with the generality of payments. They are divided into different categories, which govern the way each individual case is handled.

Losses and special payments are charged to the relevant functional headings in the statement of comprehensive net expenditure.

1.7 Employee benefits

Salaries, wages and employment-related payments are recognised in the period in which the service is received from employees. The cost of leave earned but not taken by employees at the end of the period is recognised in the financial statements to the extent that employees are permitted to carry forward leave into the following period.

1.8 Non-current assets

A. Capitalisation

All assets falling into the following categories are capitalised:

1) intangible assets include software development expenditure and the purchase of computer software licences, where they are capable of being used for more than one year and:

  • individually have a cost equal to or greater than £5,000; or
  • collectively have a cost of at least £5,000 and, the assets are functionally interdependent, they had broadly simultaneous purchase dates, are anticipated to have simultaneous disposal dates and are under single managerial control

Development expenditure is transferred to other categories of non-current assets when the development is sufficiently complete to enable the asset as a whole to be fully deployed and effective for the management’s intended purpose.

2) tangible assets which are capable of being used for more than one year, and:

  • individually have a cost equal to or greater than £5,000; or
  • collectively have a cost of at least £5,000 and, the assets are functionally interdependent, they had broadly simultaneous purchase dates, are anticipated to have simultaneous disposal dates and are under single managerial control; or
  • form part of the initial equipping and setup cost of a new asset irrespective of their individual cost

Internally generated assets are recognised if, and only if, all of the following have been demonstrated:

  • the technical feasibility of completing the intangible asset so that it will be available for use
  • the intention to complete the intangible asset and use it
  • the ability to use the intangible asset
  • how the intangible asset will generate probable future economic benefits
  • the availability of adequate technical, financial and other resources to complete the intangible asset and use it
  • the ability to measure reliably the expenditure attributable to the intangible asset during its development

Expenditure on research activities and project management costs are recognised as an expense in the period in which it is incurred.

B. Carrying gross cost

Non-current assets are initially recognised at cost, including expenditure such as installation directly attributable to bringing them into working condition. Subsequently, non-current assets are held at current value in existing use. Any increase in value is credited to the revaluation reserve, except to the extent that it reverses a revaluation decrease for the same asset previously recognised as an expense. In such a case the increase is credited to the statement of comprehensive net expenditure to the extent of the decrease previously expensed. A decrease in carrying amount arising on the restatement in value of the asset is charged as an expense to the extent that it exceeds the balance, if any, held in the revaluation reserve relating to a previous revaluation of that asset.

Assets are assessed either using appropriate indices provided by the Office for National Statistics or, in the case of internal software developments, by considering the inflation rates of staff and other resources and other potential efficiency factors. The current value in existing use at March 2019 was not materially different to the original historic cost and thus no adjustment has been incorporated, except for land and buildings which are subject to a professional valuation. The carrying values of all assets are reviewed for impairment if events or changes in circumstances indicate the carrying value may not be appropriate.

C. Depreciation

Development expenditure is not depreciated until such time as the asset is available for use. Otherwise, depreciation and amortisation is charged on a straight-line basis to write off the costs or valuation of tangible and intangible non-current assets, less any residual value, over their estimated useful lives as follows:

1) intangible software development assets are amortised, on a straight-line basis, over the estimated life of the asset or 10 years, whichever is less. The asset lives are reviewed on an annual basis considering the degree of evolution of the asset and what plans, if any, are being made for its replacement

2) purchased computer software licences are amortised over the term of the licence or five years, whichever is less

3) property, plant and equipment is depreciated on a straight-line basis over its expected useful life as follows:

  • buildings 27 years
  • fixtures and fittings 1 to 12 years
  • office, information technology, short life equipment 1 to 5 years

The estimated useful lives and residual values are reviewed annually.

1.9 Research and development 

Expenditure incurred on pure and applied research is treated as an operating charge in the year in which it is incurred. Development expenditure is for the development of specific business systems. Expenditure which does not meet the criteria for capitalisation is treated as an operating cost in the year in which it is incurred. Development expenditure meeting the criteria for capitalisation is treated as an intangible asset under construction until such time as the asset is brought into use.

1.10 Leases

Leases are classified as finance leases when substantially all the risks and rewards of ownership are transferred to the lessee. All other leases are classified as operating leases.

Amounts held under finance leases are initially recognised, at the inception of the lease, at fair value or, if lower, at the present value of the minimum lease payments, with a matching liability for the lease obligation to the lessor. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to the statement of comprehensive net expenditure.

Operating lease payments are recognised as an expense on a straight-line basis over the lease term. Lease incentives are recognised initially as a liability and subsequently as a reduction of rentals on a straight-line basis over the lease term.

Contingent rentals are recognised as an expense in the period in which they are incurred.

1.11 Provisions

Provisions are recognised when a present obligation exists as a result of a past event, and it is probable that NHS Digital will be required to settle that obligation. Provisions are measured at the directors’ best estimate of the expenditure required to settle the obligation at the reporting date, and are discounted to present value where the effect is material.

1.12 Contingent liabilities

In addition to contingent liabilities disclosed in accordance with IAS 37, NHS Digital discloses for parliamentary reporting and accountability purposes certain statutory and non-statutory contingent liabilities where the likelihood of a transfer of economic benefit is remote, but which have been reported to Parliament in accordance with the requirements of the GAM. Where the time value of money is material, contingent liabilities that are required to be disclosed under IAS 37 are stated at discounted amounts and the amount reported to Parliament separately noted. Contingent liabilities that are not required to be disclosed by IAS 37 are stated at the amounts reported to Parliament.

1.13 Pensions

Past and present employees are covered by a number of pension schemes including the NHS Pension Scheme and the Principal Civil Service Pension Scheme. These schemes are unfunded, defined benefit schemes. They are not designed to be run in a way that would enable NHS bodies to identify their share of the underlying scheme’s assets and liabilities. Therefore, the schemes are accounted for as if they were defined contribution schemes, with the cost to the body participating in the scheme taken as equal to the contributions payable to the scheme for the accounting period. Early retirements, other than those due to ill health, are not funded by the schemes. The full amount of the liability for the additional costs is charged to expenditure at the time the retirement agreement is committed, regardless of the method of payment.

1.14 Critical accounting judgements and key sources of estimation uncertainty

In the application of the accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying value of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The following are the critical judgements and estimations that the directors have made in the process of applying the accounting policies and that have the most significant effect on the amounts recognised in financial statements:

  • revenue recognition - NHS Digital receives income from various sources to cover the cost of expenditure on project related and other activities - expenditure is regularly incurred over several financial years and income is released to the statement of comprehensive net expenditure in order to reflect the completion of performance obligations
  • dilapidation provision - NHS Digital has provided £3.3 million in respect of anticipated dilapidation costs of its leased accommodation across its estate where required. Management has used external property advisors to assess likely liabilities at the end of the leases
  • termination benefits provision - NHS Digital is undertaking a significant internal restructure to meet the future expectations of the organisation - this restructure is split into three waves and the first wave is nearing completion. Costs of £11.2 million have been accounted for, of which £4.9 million has been accrued, and a further £1.3 million is included in provisions in respect of specific employees who have been notified as at risk but have not received formal notice - these calculations are based on specific individual quotes for assumed departure dates
  • employment taxes - Liabilities have been identified for several employment-related taxes, which have been included in accruals - this includes £4.3 million for IR35 and £0.7 million for employees’ home-to-work travel. The calculations follow HMRC methodology, but have yet to be finalised
  • developed systems - NHS Digital manages a suite of national infrastructure systems as well as a number of large internal data collection systems and databases - much of the development of such systems is undertaken in-house and a detailed assessment is required to determine the level of capitalisation of such work. In addition, management undertakes an annual review of the likely asset life, over which these systems should be amortised
  • valuation of non-current assets - NHS Digital uses a mixture of appropriate Office for National Statistics indices and estimates or other inflation factors to assess the value of non-current assets - the difference in the calculated value to the historical cost is not material, and has therefore not been adjusted

1.15 Business and geographical segments

NHS Digital has adopted IFRS 8 Operating Segments. IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the business that are regularly reviewed by the Chief Executive, to allocate resources to the segments and to assess their performance.

1.16 Cash and cash equivalents

Cash is cash-in-hand and deposits with any financial institution repayable without penalty on notice of not more than 24 hours. Cash equivalents are investments that mature in 3 months or less from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value.

1.17 Financial instruments

NHS Digital has adopted IFRS 9 Financial Instruments in line with the FReM. This has not had a material impact. NHS Digital operates largely in a non-trading environment and the majority of its income is from other government or NHS bodies. Consequently NHS Digital is not exposed to the significant degree of financial risk that is faced by most other business entities. NHS Digital has no borrowings and relies largely on grant in aid from the Department of Health and Social Care for its cash requirements. NHS Digital is therefore not exposed to liquidity risks. All cash balances are held within the Government Banking Service and all material assets and liabilities are denominated in sterling, so it is not exposed to interest rate or material currency risks.

Financial assets are recognised on the statement of financial position when NHS Digital becomes party to the financial instrument contract or, in the case of trade receivables, when the goods or services have been delivered. Financial assets are derecognised when the contractual rights have expired or the asset has been transferred. NHS Digital has no financial assets other than trade receivables. Trade receivables do not carry any interest and are stated at their nominal value, less any provision for expected credit losses.

Financial liabilities are recognised on the statement of financial position when NHS Digital becomes party to the contractual provisions of the financial instrument or, in the case of trade payables, when the goods or services have been received. Financial liabilities are derecognised when the liability has been discharged, that is, the liability has been paid or has expired. NHS Digital has no financial liabilities other than trade payables. Trade payables are not interest bearing and are stated at their nominal value.

1.18 Going concern

The NHS Digital financial statements have been produced on a going concern basis. Confirmation has been received of the main grant in aid budget allocation for the 2019-20 financial year in line with the business plan submitted, and funding flows have already commenced.


Note 2 to the accounts

Statement of operating costs by activity

IFRS 8 requires operating segments to be defined on the basis of internal reports that are regularly reviewed by the Chief Executive. 

The NHS Digital Board monitors the performance and resources of the organisation by directorate. The statement of financial position is reported internally as a single segment. Accordingly, no segmental analysis of assets and liabilities is reported. 

For the year ended 31 March 2019

Financial category

Assurance and Risk Management

£000

Corporate Services

£000

Data, Insights and Statistics

£000

Live Services and Cyber Security

£000

Platforms and Infrastructure

£000

Product Development

£000

Strategy, Policy and Governance

£000

Total

£000

Income (453) (407) (12,491) (342) (2,591) (16,926) (373) (33,583)
Staff costs 11,610 20,301 36,135 19,118 43,895 49,785 8,119 188,963
Professional fees 346 2,251 8,326 4,610 25,563 21,224 3,240 65,560
Information technology 53 994 6,669 16,886 82,111 19,846 204 126,763
Accommodation 14 10,024 167 146 707 457 58 11,573
Travel and subsistence 165 1,619 616 340 642 2,153 249 5,784
Marketing, training and events 21 3,052 100 726 122 233 405 4,659
Office services 1 1,790 39 10 235 285 118 2,478
Other 2 516 60 69 385 166 16 1,214
Loss on disposal of non-current assets - 45 - - 96 76 - 217
Depreciation / amortisation 58 884 3,790 178 17,940 10,490 365 33,705
Reallocation of central costs 3,496 (41,069) 14,275 6,914 (6,220) 20,479 2,125 -
Non-staff costs 4,156 (19,894) 34,042 29,879 121,581 75,409 6,780 251,953
Net expenditure 15,313 - 57,686 48,655 162,885 108,268 14,526 407,333

The reallocation of central costs attributes central overheads to programmes and services. The composition of directorates has changed during the year, and the figures for 2017-18 are not directly comparable.

Assurance and Risk Management

Provides independent assurance that strategic and delivery risks are being managed appropriately and in line with our approach to risk across live services, change programmes and corporate functions. Provides oversight to ensure compliance with standards and accurate and timely information, intelligence, analysis, and insight to enable robust decision-making.

Corporate Services

The centre of expertise and management for financial, commercial, people and workforce functions. Is delivering the Org 2 transformation programme, which is reshaping the way NHS Digital organises itself, develops its capabilities and supports the work of its programmes.

Data, Insights and Statistics

As the data custodian for the health and care system, has primary responsibility for improving data quality and our ability to link data, transforming our data architecture and platforms and providing independent and reliable statistics to guide policy and research. All work is guided by an absolute respect for data privacy and a commitment to empowering healthcare research and the UK life sciences sector.

Live Services and Cyber Security

Responsible for the reliable performance and secure operation of all of the live systems and services that we operate for the health and care system. Includes the Information Technology Operations Centre and the Cyber Security Operations Centre.

Platforms and Infrastructure

Provides the core infrastructure and platforms that connect digital service providers across the health and care system and delivers platforms to support NHS Digital’s data management and product development.

Product Development

Designs and delivers new applications and services commissioned by NHS England, NHS Improvement, Public Health England and other arm’s-length bodies to help citizens, patients and clinicians across primary, secondary and social care. Works with the external healthcare market and fosters digital knowledge and capabilities across the system.

Strategy, Policy and Governance

Defines our strategic direction based on the needs of our clients and evolving political, technical, government and market environments. Liaises with the department of health and social care, third parties and internal teams to ensure coherent and clear policies and governance. Provides clinical and information governance, guidance and oversight.

For the year ended 31 March 2018

Financial category

Care Services

£000

Data and Integration

£000

Digital Transformation and Engagement

£000

Finance and Corporate Services

£000

Implementation and Programmes

£000

Operations and Assurance Services

£000

Provider Digitisation and Programmes

£000

Workforce

£000

Total

£000

Income (1,067) (9,960) (3,280) (611) (109) (12,267) (7,951) - (35,245)
Staff costs 10,505 33,025 29,661 14,516 15,573 36,372 18,255 7,083 164,990
Professional fees 2,615 10,954 17,734 2,076 1,376 5,634 4,024 308 44,721
Information technology 723 3,600 63,106 548 12,435 28,565 3,246 7 112,230
Accommodation 52 79 210 10,745 80 104 57 102 11,429
Travel and subsistence 342 761 1,717 598 933 735 588 201 5,875
Marketing, training and events 97 164 1,256 89 265 587 149 236 2,843
Office services 12 109 211 1,439 13 259 2 227 2,272
Other 1 2 12 225 5 9 1 84 339
Depreciation / amortisation 1 2,412 102 1,009 4,759 20,311 4,842 - 33,436
Reallocation of central costs 3,076 11,610 10,920 (30,634) 5,248 (6,910) 5,860 830 -
Non-staff costs 6.919 29,691 95,268 (13,905) 25,114 49,294 18,769 1,995 213,145
Net expenditure 16,357 52,756 121,649 - 40,578 73,399 29,073 9,078 342,890

Note 3 to the accounts

Staff costs

Permanent staff

2018-19

£000

Represented 2017-18

£000

Salaries and wages 142,608 134,803
Social security costs 16,417 14,788
Apprenticeship levy  681 657
Employer superannuation contributions - NHS Pension Scheme 17,778 17,192
Employer superannuation contributions - other 439 447
Staff seconded to other organisations 1,159 1,331
Capitalised employed staff costs (16,669) (16,180)
Total 162,413 153,038

 

Other staff  2018-19 £000 Represented 2017-18 £000
Temporary staff 5,049 2,388
Contractors 10,551 9,573
Staff seconded from other organisations 693 1,147
Capitalised other staff costs (908) (1,815)
Total 15,385 11,293

 

Permanent and other staff 2018-19 £000 Represented 2017-18 £000
Total staff costs 177,798 164,331
Termination benefits 11,165 659
Total staff costs including termination benefits 188,963 164,990

The 2017-18 disclosure has been represented to separate capitalised costs between permanent staff and all other staff, and to create a new subheading for termination benefits. There has been no change to overall costs.


Note 4 to the accounts

Income

Contract income

2018-19

£000

Represented 2017-18

£000

Programme and project management 5,428 6,082
Service delivery 23,000 22,953
Surveys and data collection 1,099 2,205
Fees and charges 2,229 2,235
Total 31,756 33,475

 

Non-contract income

2018-19

£000

Represented 2017-18

£000

Service delivery 401 213
Surveys and data collection 2 6
Non-trading income 1,371 1,551
Apprenticeship levy utilisation 53 -
Total 1,827 1,770
Total for contract and non-contract income 33,583 35,245

Following the adoption of IFRS 15, the 2017-18 income has been reanalysed between contract and non-contract. There was no change to the 2017-18 income in total.

Income from programme and project management relates to workstreams primarily for the Department of Health and Social Care, NHS England and Public Health England, together with staff time recharged to the Department of Health and Social Care national programmes.

Income from service delivery covers a range of data management, system support and hosting, training and helpdesk services.

Income from surveys and data collection refers to undertaking health surveys and other data-collection activities.

Fees and charges relate to data services and are detailed as part of the Financial analysis.

£502,928 of income was included in contract liabilities at 31 March 2018 and has been recognised in full in 2018-19.

£927,030 of the income recognised in 2017-18 was uninvoiced accrued income; during 2018-19 the actual sum invoiced in respect of these accruals was £1,011,111.

Payment terms are 14 days for all income types.

Contract income expected to be recognised in future periods, related to contract performance obligations, not yet completed at the reporting date:

-

Contract income not yet invoiced

£000

Contract income invoiced and deferred

£000

Total

£000

Not later than one year 2,788 487 3,275
Between one and five years 842 103 945
Later than five years - - -
Total 3,630 590 4,220

Note 5 to the accounts

Expenditure

Expenditure

2018-19

£000

2017-18

£000

Workpackages and professional fees 59,327 36,978
Data collection and surveys 4,478 5,831
Legal fees 1,429 1,613
Chair and non-executive directors’ emoluments 122 131
Marketing, training and events 4,447 2,590
Travel 5,784 5,875
Premises and establishment 12,050 11,505
IT maintenance and support 27,332 31,091
IT managed services 99,431 81,139
General office supplies and services 1,968 2,026
Communications 437 419
Insurance 167 205
External audit fees 115 115
Internal audit fees 211 184
Apprenticeship levy training 53 -
Expected credit loss on contract receivables 2 -
Expected credit loss on non-contract receivables 3 -
Other 675 7
Operating expenditure 218,031 179,709
Depreciation - property, plant and equipment 8,500 8,543
Amortisation - intangible assets 25,205 24,213
Impairments - property, plant and equipment - 56
Loss on disposal of non-current assets 217 624
Non-cash transactions 33,922 33,436
Total expenditure 251,953 213,145

Note 6 to the accounts

Non-current assets – property, plant and equipment (2018-19)

Cost or valuation

Land

£000

Buildings

£000

Computer hardware

£000

Fixtures and fittings

£000

Total

£000

At 1 April 2018 310 1,170 48,339 9,922 59,741
Additions - - 2,442 2,519 4,961
Reclassification - - (469) - (469)
Disposals - - (4,079) (1,797) (5,876)
At 31 March 2019 310 1,170 46,233 10,644 58,357

 

Depreciation Land £000 Buildings £000 Computer hardware £000 Fixtures and fittings £000 Total £000
At 1 April 2018 - 435 25,600 5,454 31,489
Provided during the year - 42 7,624 834 8,500
Reclassification - - (8) - (8)
Disposals - - (3,960) (1,765) (5,725)
At 31 March 2019 - 477 29,256 4,523 34,256
Net book value at 1 April 2018 310 735 22,739 4,468 28,252
Net book value at 31 March 2019 310 693 16,977 6,121 24,101

The total depreciation charged in the statement of comprehensive net expenditure, in respect of assets held under finance leases and hire purchase contracts, was £nil.

The gross cost of property, plant and equipment that has been fully depreciated but is still in use is £14,850,382.

The freehold building was independently valued in March 2019 at existing use by the local District Valuation Office.

The valuation was materially the same as the carrying value and therefore no adjustment has been made. All tangible assets are owned by NHS Digital.

Non-current assets – property, plant and equipment (2017-18)

Cost or valuation

Land

£000

Buildings

£000

Computer hardware

£000

Fixtures and fittings

£000

Total

£000

At 1 April 2017 310 1,170 38,803 8,783 49,066
Additions - - 13,792 1,139 14,931
Disposals - - (4,256) - (4,256)
At 31 March 2018 310 1,170 48,339 9,922 59,741

 

Depreciation

Land

£000

Buildings

£000

Computer hardware

£000

Fixtures and fittings

£000

Total

£000

At 1 April 2017 - 393 21,828 4,516 26,737
Provided during the year - 42 7,563 938 8,543
Impairments - - 56 - 56
Disposals - - (3,847) - (3,847)
At 31 March 2018 - 435 25,600 5,454 31,489
Net book value at 1 April 2017 310 777 16,975 4,267 22,329
Net book value at 31 March 2018 310 735 22,739 4,468 28,252

The total depreciation charged in the statement of comprehensive net expenditure, in respect of assets held under finance leases and hire purchase contracts, was £nil.

The gross cost of property, plant and equipment that has been fully depreciated but is still in use is £14,277,505.

The freehold building was valued in March 2014 at existing use by the local Valuation Office. We consulted with the local Valuation Office in December 2016, who clarified that the market for this type of property has not materially changed since 2014, and a further valuation report has therefore not been commissioned.

All tangible assets are owned by NHS Digital.


Note 7 to the accounts

Non-current assets - intangible assets (2018-19)

Cost or valuation

Software licenses

£000

Information technology

£000

Development expenditure

£000

Websites

£000

Total

£000

At 1 April 2018 23,464 12,779 20,082 1,692 166,017
Additions 120 46,382 23,684 1,319 71,505
Reclassification 292 25,571 (25,394) - 469
Disposals (7,863) (1,294) - - (9,157)
At 31 March 2019 16,013 191,438 18,372 3,011 228,834

 

Amortisation

Software licenses

£000

Information technology

£000

Development expenditure

£000

Websites

£000

Total

£000

At 1 April 2018 15,254 60,124 - 1,194 76,572
Provided during the year 2,991 21,955 - 259 25,205
Reclassification 8 - - - 8
Disposals (7,769) (1,322) - - (9,091)
At 31 March 2019 10,484 80,757 - 1,453 92,694
Net book value at 1 April 2018 8,210 60,655 20,082 498 89,445
Net book value at 31 March 2019 5,529 110,681 18,372 1,558 136,140

The total amortisation charged in the statement of comprehensive net expenditure, in respect of assets held under finance leases and hire purchase agreements, was £nil.

The gross cost of intangible assets that were fully amortised but still in use is £28,697,110.

Internally generated assets have a carrying value at 31 March 2019 of £42,455,177 and the additions in the year amounted to £17,577,160. They are amortised in line with our amortisation policy, with the charge in year amounting to £8,279,527.

Research and development expenditure associated with intangible asset development has been recognised as an expense in Note 5 and is categorised by the nature of the spend incurred.

The value of own staff capitalised within intangible assets additions amounts to £17,577,160.

All intangible assets are owned by NHS Digital.

Non-current assets - intangible assets (2017-18)

Cost or valuation

Software licenses

£000

Information technology

£000

Development expenditure

£000

Websites

£000

Total

£000

At 1 April 2017 23,386 152,686 3,222 1,165 180,459
Additions 4,831 24,292 19,514 527 49,164
Reclassification - 2,654 (2,654) - -
Disposals (4,753) (58,853) - - (63,606)
At 31 March 2018 23,464 120,779 20,082 1,692 166,017

 

Amortisation

Software licenses

£000

Information technology

£000

Development expenditure

£000

Websites

£000

Total

£000

At 1 April 2017 16,902 97,681 - 1,165 115,748
Provided during the year 3,101 21,083 - 29 24,213
Disposals (4,749) (58,640) - - (63,389)
At 31 March 2018 15,254 60,124 - 1,194 76,572
Net book value at 1 April 2017 6,484 55,005 3,222 - 64,711
Net book value at 31 March 2018 8,210 60,655 20,082 498 89,445

The total amortisation charged in the statement of comprehensive net expenditure, in respect of assets held under finance leases and hire purchase agreements, was £nil.

The gross cost of intangible assets that were fully amortised but still in use is £29,366,329.

Internally generated assets have a carrying value at 31 March 2018 of £32,654,395 (see Note below) and the additions in the year amounted to £17,995,504 (see Note below). They are amortised in line with our amortisation policy, with the charge in year amounting to £7,724,427.

Research and development expenditure associated with intangible asset development has been recognised as an expense in Note 5 and is categorised by the nature of the spend incurred.

The value of own staff capitalised within intangible assets additions amounts to £17,995,504.

All intangible assets are owned by NHS Digital.

Note: figures have been restated as incorrectly stated in the 2017-18 accounts.


Note 8 to the accounts

Other non-current receivables 

-

31 March 2019

£000

31 March 2018

£000

Prepayments 6,103

3,045

 

Non-current prepayments relate to software licences and support, and extended hardware warranties.


Note 9 to the accounts

Trade and other receivables

Amounts falling due within one year

31 March 2019

£000

Represented 31 March 2018

£000

Contract receivables invoiced 6,372 11,587
Other receivables 276 408
Value added tax 6,271 4,588
Deposits and advances 16 16
Prepayments and other receivables 11,609 13,623
Contract receivables not yet invoiced 543 830
Other accrued income 9 97
Total 25,096 31,149

The reduction in contract receivables is due to improved partnership-working with key customers, leading to earlier agreement and payment.

Following the adoption of IFRS 15, trade receivables and accrued income have been reanalysed between contract and non-contract balances. There was no change to the 2017-18 receivables in total.


Note 10 to the accounts

Cash and cash equivalents

-

31 March 2019

£000

31 March 2018

£000

Balance at 1 April 2018 23,929 15,434
Net changes in cash and cash equivalents (2,725) 8,495
Balance at 31 March 2019 21,204 23,929

Bank balances were held during the year with the Royal Bank of Scotland under the Government Banking Service.

At 31 March 2018, £5,539,200 of the balance reported above was held in a solicitor’s client account pending a contract completion. The contract subsequently did not complete, and the cash was returned to NHS Digital in April 2018.


Note 11 to the accounts

Trade and other payables

Amounts payable within one year

31 March 2019

£000

31 March 2018

£000

Trade and other payables 12,907 8,305
Income tax, national insurance and superannuation 7,607 6,834
Contract liabilities 590 503
Accruals 40,830 26,734
Total 61,934 42,376

Following the adoption of IFRS 15, ‘deferred income’ has been renamed as ‘contract liabilities’.


Note 12 to the accounts

Provisions for liabilities and charges

-

Dilapidations

£000

Injury benefit

£000

Termination benefits

£000

Total

£000

Balance at 1 April 2018 2,028 582 - 2,610
Arising during the year 1,400 94 1,290 2,784
Utilised during the year - (27) - (27)
Reversed unused (158) - - (158)
Balance at 31 March 2019 3,270 649 1,290 5,209

 

Expected timing of cash flows

Dilapidations

£000

Injury benefit

£000

Termination benefits

£000

Total

£000

Within one year 226 27 1,290 1,543
One to five years 3,044 106 - 3,150
Over five years - 516 - 516

The dilapidations provision refers to the anticipated costs for remedial works at the end of property leases, and is based on an assessment made by an external property advisor or an internal assessment using industry standard estimates. As part of the strategic review of our locations all dilapidations provisions were reassessed during the year. At Skipton House (London) we are a sub-tenant of the Department of Health and Social Care (DHSC); following discussions with the DHSC Estates Team a new provision of £780,000 has been made in respect of this building.

The injury benefit costs refer to an award where quarterly payments are made to the NHS Pension Scheme.

Termination benefits relate to the anticipated costs of redundancies where specific employees have been notified as at risk, but formal notice has not been provided.


Note 13 to the accounts

Capital commitments

Capital commitments amount to £2,224,626 (31 March 2018: £7,811,429). Of this £918,966 relates to ordered IT equipment and office furniture, and £1,305,660 relates to software licences and development work.


Note 14 to the accounts

Other financial commitments

NHS Digital has not entered into any non-cancellable contracts (which are not operating leases) for the provision of services as at 31 March 2019 (31 March 2018: £nil).


Note 15 to the accounts

Contingent assets and liabilities

Contingent liabilities amount to £26,000,000 (31 March 2018: £nil), and relate to the estimated termination benefits in relation to Waves 2 and 3 of the Org2 change programme. The anticipated cost for the liability has been derived from the Wave 1 outturn, but the future liability is dependent on the assessment process. The waves are expected to be completed by summer 2020, although this is contingent on the availability of funding.


Note 16 to the accounts

Commitments under operating leases

Expenditure includes the following in respect of operating leases

2018-19

£000

2017-18

£000

Accommodation 4,955 5,000
Other operating leases 70 95

At the reporting date non-cancellable operating lease commitments were:

Land and buildings

31 March 2019

£000

31 March 2018

£000

Not later than one year 5,040 4,643
Between one and five years 20,989 11,232
Later than five years 86, 820 122
Total 112,849 15,997

 

Other leases

31 March 2019

£000

31 March 2018

£000

Not later than one year 36 53
Between one and five years 29 38
Later than five years - -
Total  65 91
Total land and buildings and other leases 112,913 16,088

During the financial year NHS Digital committed to occupy two floors of the new Leeds Government Hub from October 2020, on a 25-year term without break clauses, as a sub-tenant of HM Revenue and Customs. The Hub will bring together most Leeds-based staff into one building, enabling a phased exit from various existing buildings.


Note 17 to the accounts

Related parties

The Health and Social Care Information Centre, also known as NHS Digital, is an executive non-departmental public body created by the Health and Social Care Act 2012. It is sponsored by the Department of Health and Social Care (DHSC), and the Department together with its associated bodies are therefore regarded as related parties. During the year NHS Digital had the following transactions with DHSC group bodies: income £28.1 million and expenditure £8.2 million, and at 31 March 2018 had the following balances with DHSC group bodies: £6.3 million receivables and £3.4 million payables. The major customers within the group were the Department of Health and Social Care, NHS England and Public Health England. The majority of expenditure was in respect of transactions with the Department of Health and Social Care.

In addition, NHS Digital has had a number of transactions with other government departments and other central and local government bodies. In order to reduce the volume of detailed disclosures, IAS 24 does not require the disclosure of transactions between bodies under the control of the same government.

During the year, NHS Digital received invoices from Accenture (UK) Limited totalling £33,294,830 excluding VAT. The Chair and two non-executive directors of NHS Digital hold shares in Accenture (UK) Limited. £18,166,254 of this related to the NHSmail contract, which was novated from the Department of Health and Social Care to NHS Digital as part of the transfer of informatics programmes on 1 December 2016. No special terms and conditions were applicable to transactions with related parties, no guarantees or securities were accepted or given, all transactions were or will be settled in cash, and no provisions were made for doubtful debts in respect of these transactions. The bad debt expense in the year relating to related parties amounted to: £nil (2017-18: £nil).

- Related to roles within NHS Digital

Amounts payable at 31 March 2019

£000

Amounts receivable at 31 March 2019

£000

Income in 2018-19

£000 

Expenditure in 2018-19

£000

Accenture (UK) Ltd Non-executive directors 2,282 - - 33,295
Chartered Institute of Internal Auditors Chartered Institute of Internal Auditors - - - 1
Imperial College London Chief Executive - 33 64 11
Kings College London Chief Executive - 13 11 -
McKinsey & Company Non-executive director - 2 1 1,550
Royal College of Physicians Chief Medical Officer - 3 20 10
University of Oxford Chief Executive - 286 451 26
University of Portsmouth Chief Medical Officer - - - 1
University of Warwick Non-executive directors - 14 29 10
Total - 2,282 351 576 34,904

No other related party transactions were noted with key management other than remuneration and expenses as disclosed in the remuneration report.


Note 18 to the accounts

Financial instruments

As the cash requirements of NHS Digital are met through grant in aid by the Department of Health and Social Care, and invoiced income largely received from the Department of Health and Social Care and its related bodies, financial instruments play a more limited role in creating and managing risk than would apply to a non-public sector body. The majority of financial instruments relate to contracts to buy non-financial items in line with NHS Digital’s expected purchase and usage requirements, and NHS Digital is therefore exposed to little credit, liquidity or market risk:

  1. market risk - NHS Digital was not exposed to material currency risk or commodity risk. All material assets and liabilities were denominated in sterling. NHS Digital had no significant interest bearing assets or borrowings subject to variable interest rates, hence income and cash flows were largely independent of changes in market interest rates.
  2. credit risk - credit risk arises from invoices raised to customers for services provided. Most high value receivables relate to balances with the Department of Health and Social Care and its related bodies against purchase orders and therefore do not represent a significant credit risk. NHS Digital had a comparatively small value of external receivables and therefore disclosure of the largest individual debt balances was not considered in the evaluation of overall credit risk.
     
Movement in the provision for expected credit losses

2018-19

£000

2017-18

£000

Balance at 1 April 1 2
Provided for in the year 6 1
Reversed unutilised (1) (1)
Amounts written-off during the year as uncollectible - (1)
Balance at 31 March 6 1

The provision for expected credit losses is assessed on an individual debt basis.

The table below shows the ageing analysis of trade receivables at the reporting date:

-

Current

£000

< 30 days overdue

£000

31-60 days overdue

£000

> 61 days overdue

£000

Total

£000

Balance at 31 March 2019 2,479 3,130 739 300  6,648
Balance at 31 March 2018 9,018 2,649 133 195 11,995

NHS Digital’s standard payment terms are 14 days from date of invoice. The maximum exposure to credit risk at the reporting date is the fair value of each class of receivables mentioned above. NHS Digital did not hold any collateral as security.

  1. liquidity risk - liquidity risk is managed through regular cash flow forecasting. NHS Digital had no external borrowings and relies on grant in aid from the Department of Health and Social Care for its cash requirements and was therefore not significantly exposed to liquidity risks.

The table below analyses NHS Digital’s financial liabilities, which will be settled on a net basis in the period of less than one year. The carrying value of financial liabilities was not considered to differ significantly from the contractual undiscounted cash flows:

-

31 March 2019

£000

31 March 2018

£000

Current liabilities 61,934 42,376

Note 19 to the accounts

Events after the reporting period ended

In accordance with IAS 10, events after the reporting period are considered up to the date on which the accounts are authorised for issue.

There are no post statement of financial position events that would require to be adjusted.


Note 20 to the accounts

Authorised date for issue

NHS Digital’s Annual Report and Accounts are laid before Parliament. IAS 10 requires NHS Digital to disclose the date on which the Annual Report and Accounts are authorised for issue.

The Accounting Officer authorised these financial statements for issue on 1 July 2019.

Last edited: 13 January 2020 3:30 pm