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These accounts have been prepared under a direction issued by the Secretary of State for Health in accordance with the Health and Social Care Act 2012 and the 2018-19 Government Financial Reporting Manual issued by HM Treasury, as interpreted for the health sector by the Department of Health and Social Care Group Accounting Manual.

The accounting policies contained in the Financial Reporting Manual apply the International Financial Reporting Standards (IFRS) as adopted and interpreted for the public sector context.

The accounts comprise a statement of financial position, a statement of comprehensive net expenditure, a statement of cash flows and a statement of changes in taxpayers’ equity, all with related notes.

There has been an ongoing increase in our role in recent years as the delivery partner for a significant investment in IT systems for the NHS. Additional revenue and capital funding has been received for the development and maintenance of frontline informatics systems and services. Many of these programmes are now well advanced and are at various stages of implementation.

This level of funding is expected to decline from 2020-21 and the organisation has started an internal restructure to meet the changing requirements. Some 198 redundancies have been agreed in 2018-19 while plans are being made to make approximately 400 further redundancies in the next few years but also recruit new staff with other specialist skills and retrain existing staff.

Going concern

The planned reduction in funding from 2020-21 is known and management is making strategic adjustments to meet the changing requirements of the organisation. The funding provided to us has been largely agreed based on our three-year business plan submission and, while it will be challenging, we believe it will be financially manageable. We have therefore prepared the accounts on a going concern basis.


Financial analysis

The table below provides a summary of our results from an internal funding perspective:

2018–19

£000

2017–18

£000

Grant-in-aid allocation from the Department of Health and Social Care* 406,895 354,702
Other income 33,583 35,245
Total funding and income 440,478 389,947
Operating expenditure** (438,312) (377,557)
Underspend 2,166 12,390

*The grant-in-aid allocation is the agreed revenue allocation provided by the Department of Health and Social  Care  for 2018-19. The amount shown in the statement of changes to taxpayers’ equity on page 135 is the cash drawn down in the year which also includes that used for capital expenditure and other working capital requirements.

**excludes movement in provisions, which is accounted for separately.

Our core grant in aid supports, amongst others, the:

  • development of new and existing informatics systems used by front line services
  • collection, analysis and dissemination of a range of data-related services, including the publication of 265 reports of official or national statistics
  • development and maintenance of clinical and information standards and terminologies
  • support for frontline services in a range of informatics-related services and systems
  • IT infrastructure, estates and support functions for the organisation

Overall, we have remained within our financial targets in the year. Operating expenditure excluding the movement in provisions was £438.3 million, resulting in a revenue underspend of £2.2 million.

The provision of data-related services and our corporate support activities are classified as ‘administration’, with all other activities treated as ‘programme’. We underspent against our administration budget by £9.7 million but overspent on programme activities by £7.5 million.

Income analysis

Income, in addition to the grant-in-aid funding, includes the:

  • development of informatics-related systems
  • design and management of clinical audits
  • hosting, management and development of a range of key IT systems on behalf of the NHS
  • provision of contact centre services
  • extraction of data and information and dissemination to customers, both inside and outside of the NHS
  • training services

Income in 2018-19 was £33.6 million, slightly less than the £35.2 million generated in 2017-18.

Most of our significant invoiced income is supported by agreed workpackages and is on a time and materials basis. In accordance with IFRS 15, some £3.4 million of income was not recognised in 2018-19 but will be recognised in 2019-20 when signed agreements are in place.

We have developed a charging policy and a rate card for staff time, with the aim of charging all customers based on full cost recovery.

Fees and charges in 2018-19 relates to ‘data-related services’. This is the provision of health-related data to customer requirements, data-linkage services and data extracts for research purposes. No charges are made for the actual data, only for the cost of providing the data to the customer in the format and to the specification required, including a fee for ensuring information governance requirements are complied with.

The fees and charges note below is subject to audit:

2018-19

£000

2017-18

£000

Income 2,229 2,235
Expenditure (2,218) (2,121)
Surplus 11 114

Operating expenditure


Work packages provide short term specialist input, outsourced services and software development skills and have increased to supplement internal teams.

However, the ratio of temporary staff has remained largely consistent at 3%.

Non-current assets

The capital expenditure limit for 2018-19 was £106.9 million.

The actual capital expenditure was as follows:

2018-19

£000

2017-18

£000

Internally and externally developed software 47,701 24,819
Development expenditure 23,684 19,514
IT hardware, including esktop and corporate infrastructure 2,442 13,792
Software licences, including desktop and corporate infrastructure licences 120 4,831
Refurbishments, fitting out new office space and furniture 2,519 1,139
Net book value of disposals (217) (624)
Total 76,249 63,471

Our informatics transformation programmes have resulted in a near doubling of expenditure on developed software. This is part of the natural lifecycle of these large infrastructure projects.

A significant proportion of the new software and development expenditure has been created internally, with the value of internal time capitalised amounting to £17.6 million (2017-18: £18.0 million). This data is captured by either a time recording system or by information technology management tools, with the average hourly charge rate determined by the employee’s grade. The rate includes the total direct cost of  employment  together  with an incremental direct overhead cost, comprising of estate and IT costs. General overhead is not capitalised. Project management time is only capitalised where time is directly attributable to the development of the asset.

In 2017-18, we upgraded internal technologies, including laptops, tablets and mobiles, to improve staff efficiency and working practices. Expenditure in these categories in 2018-19 was considerably lower.

Other non-current receivables refer to those transactions where the prepayment is in excess of 12 months in the future and include software licences that cannot be capitalised together with support and extended hardware warranties.

Current assets and liabilities

Contract receivable balances amounted to £6.4 million (31 March 2018: £11.6 million). This is a significant reduction and is largely due to finalising workpackages with our key customers earlier in the year and therefore being able to invoice more promptly.

Prepayments under one year were £11.6 million (31 March 2018: £13.6 million). Contract receivables not yet invoiced (which represents work completed but not yet invoiced) were £0.5 million (31 March 2018: £0.8  million).

The amount more than 60 days overdue was £0.3 million (31 March 2018: £0.2 million). Debts of £15 were written off and £6,312 was provided for as irrecoverable. Debts previously provided of £1,158 were released following recoveries of the amounts due.

We had very limited exposure to financial instruments with balances only consisting of cash, trade receivables and payables.

Cash flow was managed to meet operational requirements throughout the year by drawing down sufficient cash from the grant-in-aid allocation.

We seek to comply with the Better Payments Practice Code by paying suppliers within 30 days of receipt of an invoice. The percentage of non-NHS invoices paid within this target was 99.1% (31 March 2018: 99.5%). The days outstanding at 31 March 2019 increased to 13.3 days from 11.5 days at 31 March 2018, reflecting a higher than normal volume of invoices processed in March 2019.

Better payments practice code Number £000
Total non-NHS bills paid 2018-19 10,338 307,789
Total non-NHS bills paid within target 10,186 305,104
Percentage of non-NHS bills paid within target 98.1% 99.1%
Total NHS bills paid 2018-19 228 6,787
Total NHS bills paid within target 193 5,926
Percentage of NHS bills paid within target 84.6% 87.3%
Total value of invoices processed in 2018-19 - 354,221
Total value of invoices outstanding at 31 March 2019 - 12,907
Number of days outstanding - 13.3

The calculations of the Better Payment  Practice Code use the formula agreed by users of  NHS Shared Business Services (SBS). SBS stipulates that the number of days outstanding is calculated from the date a validly  presented  invoice  is  processed on the SBS system to the date a payment  is initiated. We are conscious that this calculation can understate the time taken because it takes considerable time from the invoice date to processing the invoice on the system. SBS offers a free solution to all suppliers called Tradeshift, which allows suppliers to electronically upload invoices to the SBS system in real time, which reduces this delay.

Government guidance is to pay 80% of all suppliers’ invoices that are not disputed within five working days. This target is particularly challenging for NHS Digital given the complexity of many of our transactions. In 2018-19, we paid 33.7% (2017-18: 40.4%) based on volume, and 41.6% based on value (2017-18: 50.0%) within the five-day target.

Sustainable development

Information about our environmental impact and sustainability is included in our sustainability report.

Auditors

These accounts have been audited by the Comptroller and Auditor General, who has been appointed under statute and is responsible to Parliament. The audit fee for 2018-19 was £115,000, which was unchanged from 2017-18. The audit fee only includes audit work. No additional payments were made.

The Accounting Officer has taken all steps to ensure she is aware of any relevant audit information and to ensure that NHS Digital’s auditors are aware of that information. To the best of the Accounting Officer’s knowledge, there is no relevant audit information of which NHS Digital’s auditors are unaware.

The internal audit service during the financial year was provided by the Government Internal Audit Agency.


Managing performance and risk

Managing performance

Effective performance management across our organisation ensures we meet our statutory obligations and our commitments to stakeholders. It facilitates the delivery of our strategic and operational goals and minimises risk for NHS Digital and stakeholders. We use financial and non-financial Key Performance Indicators (KPIs) and other management information to continuously monitor performance.

Each KPI is assessed on a Red Amber Green threshold model, with detailed analysis when performance issues occur. These indicators are integral to the routine business of the Board and our Executive Management Team and are published regularly on our website as part of the Board papers.

For most of 2018-19, KPIs were organised into the following areas:

Group Description Responsible director
Programme delivery Provides a consolidated view of the delivery status of our portfolio of programmes, focussing on the overall delivery confidence, and including aggregated findings from gateway reviews Executive Director, Product Development
IT service performance Reports on the performance of information technology services for health and care providers, looking at service availability, incident response times, and high severity service incidents Deputy Chief Executive and Senior Information Risk Owner
Workforce Includes workforce planning and recruitment, staff turnover, staff engagement, training and development, personal development reviews, and sickness absence rates Chief People Officer
Data security Provides a composite view of internal and external information security incidents and related cyber issues Deputy Chief Executive and Senior Information Risk Owner
Financial management Covers the management of NHS Digital finances and the other significant funding streams we manage. The performance reports also include the organisation's management accounts Chief Finance Officer

Toward the end of 2018-19, additional KPIs were developed to measure data services and information governance.

Rolling 12-month performance tracker

Performance indicator Apr 18 May 18 Jun 18 Jul 18 Aug 18 Sep 18 Oct 18 Nov 18 Dec 18 Jan 19 Feb 19 Mar 19
Programme delivery A/G A/G A/G A/G A/G A A A A A A A
Data services - - - - - - - - A A A A
Live IT service performance - A R G A A G A R G A R
Data security A/G A/G A/G A/G A/G A/G A/G A/G A/G A/G A/G G
Information governance - - - - - - - - G G G G
Workforce - A A A A A A A A A A A
Financial management - G G G G G R R R A A/G A/G

R=red A=amber G=green

Narrative in support of some of the above KPI's at 31 March included:

Programme delivery

Overall, programme delivery confidence remained at a stable level of ‘amber’ throughout 2018-19, reflecting the complexity of the Digital Transformation Portfolio. Some programmes have demonstrated improved delivery confidence as they have moved to the delivery stage and have met a number of  ministerial commitments and key programme outcomes.

The programme delivery KPI has evolved significantly. It now provides an enriched narrative focusing on key achievements and outcomes, and supports better understanding and scrutiny of issues and challenges. Programmes reporting by exception (‘red’ and ‘amber/red’) have been categorised as:

  • programmes that require additional funding and/or business case approval
  • programmes with delivery delays
  • highly complex and adaptive programmes

Live IT service performance

Live IT service performance is reported as an average of ‘amber’ for 2018-19 as a whole.

The average availability achieved across all live services was 99.95%, with 84% of the 260 high severity service incidents logged in 2018-19 achieving their fix-time target.

A specific service highlight was that the NHS Spine’s core messaging service performance remained excellent in 2018-19, with an average availability of 100%.

Workforce

Workforce is reported as  ‘amber’. 2018-19 saw 124 external recruits join and 428 employees leave, resulting in a net decrease of 304 employees.

Some of the leavers were managed exits, which were part of the restructuring of the organisation that began in 2018. We have seen an increase in turnover, which was 14.2% for the financial year. Turnover due to voluntary leavers increased during this period from 5.8% to 9.0%. Short-term staff sickness remained within target levels and was lower than 2017-18 overall. Long-term sickness increased from 1.4% to 2.1% (FTE), with most of this increase occurring after October 2018. This has stabilised since February 2019.

Financial management

Financial management reported as ‘green’  for the year as net revenue costs are less than 0.5% below budget. Revenue expenditure at month 12 is expected to be £0.7 million under budget (excluding depreciation). This is in line with our forecast outturn position of within 1% of budget all year.

Capital expenditure at month 12 is anticipated to be £30.5 million under budget. Our forecast outturn position has been reporting an underspend since early in the year and this has enabled the Department of Health and Social Care to use this, along with emerging underspend, during the final quarter. Capital underspends are due to programme scope changes, changes in our procurement approach and slower than anticipated increases in programme activity.

 


At the start of 2018-19, there were 552 deliverables dated before the end of 2020-21 in programme plans across the Digital Transformation Portfolio.

These deliverables include a combination of  ministerial commitments, key target outcomes (expected for both patients and health care practitioners) and their supporting key delivery milestones. 231 of these milestones had been delivered by the end of this year and a further 186 are on track to be completed on time.

Milestones behind schedule or at risk are inevitable in such a complex portfolio with multiple dependencies. We ensure that the most appropriate interventions are taken to manage and minimise impacts on costs and the overall delivery of the portfolio.

NHS Digital, in collaboration with NHSX, is undertaking a prioritisation exercise to ensure strategic alignment with the Secretary of State for Health and Social Care’s technology vision and the NHS Long Term Plan. This is likely to result in a change of the scope and delivery plans for some Digital Transformation Portfolio programmes and outcomes, and associated deliverables will need to be updated.


Managing risk

We have completed a major refresh of our strategic and other significant risks during the financial year. The use of risk management performance metrics is starting to drive an overall improvement in data quality and risk-management behaviours, whilst further refinements are continuing. A fuller explanation of our risk management process is here in this report.

The significant strategic risks facing the organisation, together with the key mitigating activities in place during 2018-19, which have been reviewed by the Board, are set out below:

Risk description  How we are managing the risk
Delivering commissioned levels of patient and citizen quality, safety and experience Ensuring clinical governance is embedded within programmes and live services
Maintaining critical systems and services that we operate to minimise risks of patient harm Maintaining agreed service levels, undertaking business continuity, and disaster recovery plans which are tested and regularly updated
Effective delivery and user adoption of the elements of the Digital Transformation Portfolio for which we are responsible Adopting portfolio governance and programme management including ongoing re-prioritisation
Safe, secure and appropriate collection, analysis and dissemination of high quality and timely data, including data disseminated to third parties Continuation of robust data governance processes including compliance with GDPR. We also undertake audit activity over the data usage by third parties.
Guarding against information security threats to our internal systems and those national systems for which we are responsible Ensuring all relevant staff are subject to personnel vetting and continuing supporting, promoting and operating a security operations centre to continually assess, detect and manage cyber security threats
The commencement of NHS Digital internal organisational restructuring (referred to as Org2) which is addressing gaps in our capacity and capability A strategy, project plan and regular reporting to TRaMCo. The work includes incorporating lessons learnt from the completion of wave one.
Monitoring the capacity and capability of critical suppliers The commercial and supplier engagement team undertake supplier performance management assessments.
Meeting our financial obligations to ensure financial stability and sustainability Regular reviews of affordability and ensuring adherence to the spend authorisation framework
The risk exposures arising from the exit of the UK arising from the European Union, originally scheduled for March 2019. We have constructed a response plan in conjunction with the wider NHS and other government parties

Sarah Wilkinson

Chief Executive

26 June 2019

 

Last edited: 13 January 2020 4:05 pm