Annex B

The Framework Agreement sets out the governance and accountability arrangements between the Department of Health and NHS England. This annex provides additional detail on the finance and accounting arrangements which complements the Framework Agreement itself. 

The Secretary of State will give HSCIC its budget for the year in a letter to be sent to the HSCIC Chief Executive from the Department's Senior Departmental Sponsor (SDS). The Secretary of State will give HSCIC grant-in-aid funding for the year (see Delegations and financial management, paragraph 2). The grant-in-aid will normally be paid in monthly instalments on the basis of written applications showing evidence of need. HSCIC 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 the HSCIC. 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.

As Accounting Officer, the Chief Executive must ensure that, in any financial year, HSCIC's spending in each of the following categories does not exceed the limit set by the Secretary of State for that year:

• revenue (non ring-fence)
• revenue (ring-fence)
• capital
• annually managed expenditure
• technical accounting/budgeting

The Accounting Officer must also ensure that:

• HSCIC's total spending on administration in any financial year does not exceed the budget provided without specific agreement from the Department; and that
• in any given year the cash usage of HSCIC does not exceed the cash limit (allotment) for HSCIC plus any payments received which are used to offset expenditure that would have otherwise scored against this limit.

Each of the controls referred to in paragraphs 2 and 3 above must be met individually.

In addition to their specific financial responsibilities, the HSCIC Board have a shared responsibility to facilitate the effective financial management of the health system, including delivery of the controls imposed upon the system by HM Treasury. Effective partnerships developed with other relevant bodies, particularly NHS England, Public Health England will be the key to this. 

The HSCIC is able to charge NHS England a reasonable fee in respect of the cost of complying with a direction given by NHS England for HSCIC to establish and operate an information collection or analysis system under section 254 of the 2012 Act. Similarly, if NHS England gives a direction to HSCIC 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 HSCIC to exercise such systems delivery functions of NHS England as are specified in the direction, the direction must permit HSCIC to charge NHS England a reasonable fee in respect of the cost of complying with the direction. If the Secretary of State gives HSCIC a direction under regulation 32 requiring HSCIC to exercise a systems delivery function of the Secretary of State, the direction may include provision about payments to HSCIC for things done in carrying out the direction.

HSCIC may charge for anything it does pursuant to its additional functions in section 270 of the 2012 Act, and calculate the charge on an appropriate commercial basis. However the carrying out of HSCIC‟s additional functions must be connected with the collection, analysis, publication or other dissemination of information and must not to a significant extent interfere with the performance by HSCIC of any statutory function.

HSCIC will be requested to produce a business plan each year (see 'Process for setting objectives'). The plan should be costed: supporting guidance issued by the Department will provide the format and level of financial detail needed. 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 the Department and its arm's length bodies The plan will include the funding for which the HSCIC is directly responsible. Programme funds which are owned by the Department of Health or other sponsoring body, such as NHS England, and spent on behalf of that body may be included in the business  plan to give context on the systems and services delivered and the support being provided; such detail will not be included without prior agreement.

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. HSCIC 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.

HSCIC must prepare annual accounts for each financial year ending 31 March, and interim accounts for shorter periods if required. In relation to these accounts, HSCIC must:

• ensure that accounts are prepared according to the form, content, methods and principles prescribed by the Secretary of State in his annual group accounting instructions
• submit these accounts (both unaudited and audited) to the Department by a date to be specified by the Secretary of State and
• submit these accounts to the Comptroller and Auditor General (C&AG) for audit as soon as reasonably practicable after the year end (or, in the case of any interim account, as soon as reasonably practicable after the end of the interim period to which that interim account relates)

HSCIC 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 HSCIC's Accounting Officer and laid before Parliament by HSCIC and made available on HSCIC'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 Accounting Officer must also ensure that HSCIC 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, HSCIC should seek to agree all outstanding balances but in any case should keep within any level of materiality set by the Department. 

The 'Audit' section of the Framework Agreement sets out the high level requirements for audit.

To meet the requirements for internal audit, HSCIC must:

• ensure the Department is satisfied with the competence and qualifications of the Head of Internal Audit and the requirements for approving appointments in accordance with Public Sector Internal Audit Standards
• prepare an audit strategy, taking into account the Department‟s priorities, and forward the audit strategy, periodic audit plans and annual audit report, including HSCIC‟s Head of Internal Audit‟s opinion on risk management, control and governance as soon as possible to the Department
• keep records of fraud and theft suffered by HSCIC and notify the Department of any unusual or major incidents as soon as possible

The department is committed to the development of a group assurance model for DH and its arm's length bodies. HSCIC has agreed, in principle, that its internal audit provision will be delivered as part of a shared service once the contract period for its initial provider has expired. HSCIC will engage with the Department in the development of the group assurance model.

The Department's group internal audit service has a right of access to all documents prepared by HSCIC's internal auditor, including where the service is contracted out (until such time when the contract expires, after which Group Internal Audit will provide the audit service – including having access to all previous audit documentation).

For external audit, the Comptroller and Auditor General (C&AG) audits HSCIC's annual accounts. In the event that HSCIC has set up and controls subsidiary companies, HSCIC 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. HSCIC shall discuss with the Department the procedures for appointing the C&AG as auditor of the companies.

The C&AG:

• will consult the Department and HSCIC on whom – the National Audit Office or a commercial auditor – shall undertake the audit(s) on his behalf, though the final decision rests with the C&AG;
• has a statutory right of access to relevant documents including, by virtue of section 25(8) of the Government Resources and Accounts Act 2000, those held by another party in receipt of payments or grants from HSCIC;
• will share with the Department information identified during the audit process and the audit report (together with any other outputs) at the end of the audit, in particular on issues impacting on the Department's responsibilities in relation to financial systems within HSCIC;
• will, where asked, provide the Department and other relevant bodies with regulatory compliance reports and other similar reports which the Department may request at the commencement of the audit and which are compatible with the independent auditor's role.

The C&AG may carry out examinations into the economy, efficiency and effectiveness with which HSCIC 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, HSCIC 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. 

The section 'Delegations and financial management' of the Framework Agreement requires HSCIC to abide by any relevant cross-Government efficiency controls. The Secretary of State has approved the establishment of revised controls for HSCIC, applicable specifically to and only for its expenditure on transition activities concerned with developing itself as a new organisation, where these activities will by their very nature be critical to the success of the system-wide reforms. These controls will be communicated to HSCIC.

Once the budget has been approved by the Department and subject to the Secretary of State‟s instructions and any other processes set out in this document, HSCIC has authority to incur expenditure approved in the budget without further reference to the Department, on the following conditions:

• HSCIC will comply with its delegated authorities, which cannot be altered without the prior agreement of the Department, noting that authority to approve novel, contentious or repercussive proposals cannot be delegated from HM Treasury; and
• inclusion of any planned and approved expenditure in the budget will not remove the need to seek formal departmental approval where any proposed expenditure is outside the delegated limits or is for new schemes not previously agreed.

HSCIC 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:

• incurring expenditure for any purpose that is or might be considered novel or contentious, or which has or could have significant future cost implications
• making any significant change in the scale of operation or funding of any initiative or particular scheme previously approved by the Department
• making any change of policy or practice which has wider financial implications that might prove repercussive or which might significantly affect the future level of resources required or
• carrying out policies that go against the principles, rules, guidance and advice in Managing Public Money

For major projects, HSCIC will participate in the Department‟s common assurance and approval process.