Performance analysis

The accounting policies contained in the Financial Reporting Manual apply International Financial Reporting Standards (IFRS) as adopted and interpreted for the public sector context. The accounts comprise a statement of comprehensive net expenditure, a statement of financial position, a statement of cash flows and a statement of changes in taxpayers’ equity, all with related notes.

The accounts have been prepared on a going concern basis. Funding for 2022-23 is in place, and the continuation of provision of services is demonstrated through the plans agreed with our delivery partners. Although the merger of NHS Digital with NHS England has been announced, with the merger being effective on 1 April 2023, our functions will continue, and therefore in accordance with the DHSC Group Accounting Manual the going concern basis for preparing the financial statements remains appropriate.

NHS Digital is a non-departmental public body and the majority of our funding is grant-in-aid from the Department of Health and Social Care.

Our outturn for the year against our key financial controls was as follows:

Revenue expenditure

Table shows outturn against the non-ring fenced revenue expenditure limit. As such, the figures exclude depreciation, amortisation, impairments and absorption transfers of functions between group bodies.

¹ The grant-in-aid is the revenue expenditure limit agreed with the Department of Health and Social Care. The amount shown in the statement of changes to taxpayers’ equity is the cash drawn down in the year, which also includes that used for capital expenditure and working capital requirements.

Capital expenditure

Table shows outturn against the capital expenditure limit.

¹ The grant-in-aid is the capital expenditure limit agreed with the Department of Health and Social Care. The amount shown in the statement of changes to taxpayers’ equity is the cash drawn down in the year, which also includes that used for revenue expenditure and working capital requirements.

A significant proportion of our delivery is project-based, such as the development of new or enhanced national systems, or relates to the response to the COVID-19 pandemic. As such, requirements, timescales and volumes of transactions can vary quickly, and we work closely with the Department of Health and Social Care, NHS England and the UK Health Security Agency to ensure early identification of changing demands, and enable the reallocation of funding within the Technology Transformation Portfolio at the earliest opportunity.

2021-22 saw further increases in the scope of delivery and workload across all areas. Additionally, on 1 October 2021 the National Disease Registration Service transferred to NHS Digital from Public Health England, together with 329 staff and £11.1 million of funding. Our delivery is described in detail in the Performance Report. Our performance against our programmes was regularly reviewed by our Board, with risks managed accordingly and measured against key performance indicators noted. During the year, changes in our delivery focus were closely monitored and indicators were updated to ensure an accurate reflection of our performance. 

Our performance against our programmes was regularly reviewed by our Board, with risks managed accordingly and measured against key performance indicators as noted in this report.  During the year, changes in our delivery focus were closely monitored and indicators were updated to ensure an accurate reflection of our performance.

In addition to our grant-in-aid funding, we also received income from a range of activities and services including:

• the development of informatics-related systems
• the design and management of clinical audits
• the hosting, management, and development of IT systems for the NHS
• providing contact centre services  
• extracting data and disseminating it to customers, inside and outside the NHS
• providing training

Income from these activities and services in 2021-22 was £44.9 million, a small decrease on the £45.3 million generated in 2020-21. Most of our significant invoiced income is supported by agreed work packages and is on a time and materials basis. At the end of 2020-21 £1.8 million of income had not been recognised, since signed agreements were not yet in place. This income was subsequently recognised in 2021-22. All contract income for 2021-22 was supported by signed agreements, and was therefore recognised in the year.

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

Our major customers are NHS England and the Department of Health and Social Care (DHSC). As part of the cessation of Public Health England and the creation of the UK Health Security Agency, some of the work we deliver that was previously commissioned by Public Health England is now commissioned by NHS England.

Total permanent and temporary staff costs increased to £263.1 million (2020-21: £207.7 million), with salary costs increasing primarily due to an increase in the number of staff, and contingent labour and secondees rising to £91.7 million (2020-21: £44.3 million). The significant increase in temporary staff was mainly due to the continued expanded scope of delivery started in the previous year related to the COVID-19 response.

Operating expenditure increased significantly to £380.8 million (2020-21: £296.0 million), driven by the increased use of work packages to provide short-term specialist input and software development skills on key projects, and increased use of outsourced managed services to provide support and maintenance for existing services, and capacity and functions such as call centres to enable increased public take-up of services such as the NHS App.

Depreciation, amortisation, impairments and disposals rose to £111.1 million (2020- 21: £90.9 million) of which net impairment of assets comprised £40.2 million (2020-21: £17.4 million) as a result of the accounting and audit requirement for the external professional valuation and impairment of the National Coronavirus Testing System arising from the exceptional pandemic circumstances in which it was developed.

More information relating to net revenue expenditure can be found in Note 2 of the Notes to the accounts. The ‘Corporate’ segment in the chart includes Corporate Services, Assurance and Risk Management, Strategy, Policy and Governance and Central net expenditure.

Developed software and development expenditure utilised a mix of supplier and internal resources, with the value of internal time capitalised amounting to £16.3 million (2020-21: £12.5 million). 

A significant part of our capital expenditure during the year was the continued development of the National Coronavirus Testing System. This supports the end-to-end testing journey, from booking a test at a test centre, or ordering test kits for home delivery, to the operation of test centres, and the dissemination of results both to the individual and for data analysis and reporting. During the year we added additional functionality to cater for international arrivals, data feeds to the NHS App for the COVID Pass, a digital reader to support the upload of lateral flow test results and changes to support the response to the Omicron variant. We also increased the capabilities for the bulk registration of tests, increased the speed of data flows, improved the monitoring for variants of concern, and continued to cater for the specific requirements of each of the Devolved Administrations. The National Coronavirus Testing System accounted for £70m (2020-21: £47.1m) of our capital expenditure during the year. 

We also continued to develop our other national systems, in response to both the pandemic and ongoing healthcare needs. 

We have applied indexation to non-current assets in existence at 1 April 2021, using a mix of Office for National Statistics indices, actual pay awards and assessments of other supplier cost increases. The indexation impact was an increase in net book value of £1.4 million. The exception was software licences, where indexation has not been applied from 1 April 2019 onwards. From this date, software licences have been held at depreciated historical cost, on the basis that they are short-life assets and, as such, depreciated historical cost is considered a suitable proxy for current value in existing use.

Other non-current receivables include software licences where the subscription period is greater than a year. These have not been revalued.

Contract receivable balances amount to £9.7 million (31 March 2021: £12.7 million). The decrease in contract receivables was more than offset by the increase in contract receivables not yet invoiced to £7.1 million (31 March 2021: £2.0 million) which represents work completed but not yet invoiced. The increase in contract receivables not yet invoiced was due to a number of income agreements being signed towards the end of the year; this income has been invoiced to customers early in the 2022-23 financial year.

Prepayments under 1 year amount to £19.0 million (31 March 2021: £14.0 million), the increase being primarily due to software licence subscriptions.

We seek to comply with the Better Payments Practice Code (BPPC) by paying suppliers within 30 days of receipt of valid invoice. The percentage of non-NHS invoices paid within this target was 99.1% (31 March 2021: 99.5%). Creditor days outstanding at 31 March 2022 reduced to 14.1 days from 31.4 days at 31 March 2021, which is reflective of the exceptionally high level of payments to suppliers achieved during March.

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 2021-22 was £166,500 (2020-21: £150,000). The audit fee only includes audit work. No additional payments were made.

The Accounting Officer has taken all steps to ensure he 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 our auditors are unaware.

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

Information about our environmental impact and sustainability is included in Appendix A. 

Effective performance management across our organisation ensures we meet our statutory obligations and commitments to stakeholders. It facilitates the delivery of our strategic and operational goals and minimises risk for both NHS Digital and its stakeholders.

We continue to make improvements to the performance management process to ensure rigorous monitoring and the reporting of key management information across the organisation. Financial and nonfinancial key performance indicators (KPIs) and other management information are a primary tools used to continuously monitor and report on performance.

These indicators are integral to NHS Digital’s routine business, and support the decision-making processes of the Board and our Executive Management Team (EMT). Performance reporting is undertaken monthly to our EMT and 6 times a year to the Board, with our performance reports published regularly on our website as part of the board papers.

Significant changes and improvements to performance reporting were made in 2021-22 to ensure that KPIs were in line with industry standards and aligned with NHS Digital’s strategic objectives. Each KPI, reviewed in detail by the Board in February 2022, has a clear definition and target that is tied to a set of objectives or key priority areas. Our performance reporting provides an enriched narrative that focuses on key achievements and outcomes, supporting better understanding, transparency and appropriate scrutiny of issues and challenges faced by the organisation.

Each KPI is assessed based on the red, amber, green (RAG) model, with detailed analysis where performance issues are identified. To ensure that KPIs were aligned with NHS Digital’s objectives, they were categorised under 5 main priority areas for the organisation:

• running NHS Digital well
• operating safe, reliable, and cyber-secure live services
• delivering products and platforms that meet user needs
• maximising the quality and utility of NHS data
• making NHS Digital a fantastic place to work

Delivery remained stable at an amber rating throughout 2021-22, reflecting the complexity of the Technology Transformation Portfolio. Overall, Data Services, Platforms, IT Operations and Cyber Operations averaged a rating of amber/green throughout 2021-22, indicating they met many of their key programme outcomes. The following programmes were reported with either a red or amber/red rating, continuing to present delivery challenges throughout 2021-22:

• GP Data for Planning and Research
• GP Appointment Data
• Direct Care APIs
• Digital Transformation of Screening
• Primary Care Registration Management

NHS Digital has worked with NHS England and other partners to prioritise the transformation portfolio through 2021-22 and develop delivery plans for the financial year 2022-23.

Performance reporting for Data Services underwent reviews throughout the year, resulting in changes to KPIs reported to ensure that reporting was directly linked to the objectives of the organisation and directorate. By the end of the year, reporting was based on 2 key focus areas: ‘Publications’ and ‘Direct Data Access’. Overall, the Publications KPI was rated amber/green, with the majority of publications released on or before the target publication date. A red rating was reported in January 2022 due to resourcing and operational issues that were outside of NHS Digital’s control.

The ‘Direct Data Access via the Data Access Request Service’ KPI was introduced in February 2022, with a green rating reported in March 2022 – a clear improvement from the red rating reported the previous month. The average number of days an application remained in the assurance and approval stage reduced from 41 in February 2022 to 31 in March 2022, a 24.3% improvement. 

Reporting on IT service performance was mainly against 3 KPIs

• Availability Performance (reported throughout the year)
• High Severity Service Incident (HSSI) rate (reported since October 2021)
• Customer Service Function (CSF) Performance – Service Level Attainment KPI (reported since August 2021)

Overall, ‘Availability Performance’ improved in the second half of 2021-22 with a reported green rating for 3 out of 6 months, compared to a red rating reported for 3 out of 5 months in the first half of the year. This indicates improved service availability, with an average availability of 99.9% across all reported services at the end of the year.

The ‘Higher Severity Service Incident Rate’ KPI improved significantly in the last 3 months of the year, reporting a green rating over this time period, primarily due to focused service improvement plans that were put in place, as well as a reduction in volume of some key services, such as the National Coronavirus Testing System, as a result of the ‘Living with COVID-19’ strategy.

A green rating was generally reported for the ‘Customer Service Function Performance - Service Level Attainment’ KPI, achieving the target in 5 out of the 7 months of reporting, with volumes and service level attainment remaining steady and consistent.

The 2 KPIs, ‘Freedom of Information Act Requests received, closed and compliance with statutory timetables’ and ‘Data Subject Access Requests received, closed and compliance with statutory timetables’, had a green rating reported month on month throughout 2021-22, indicating that we have achieved our statutory timelines all year.

The 3 KPIs on which workforce performance reporting was based were ‘Organisation Capacity and Capability’, ‘Time to Offer’ and ‘Diversity and Inclusion’. The ‘Capacity and Capability’ KPI remained below the monthly target full-time equivalent staff (FTE) throughout the year, reporting mainly an amber rating, and red ratings for February and March 2022. As of the end of March 2022, 86% of the target staffing model had been filled in terms of FTEs. Appointments into 311 roles were made in the last 3 months of the year, 193 external roles and 118 internal roles, with another 245 start dates confirmed or verbal offers accepted.

An amber rating was reported for the ‘Time to Offer’ KPI throughout the year, with the time to offer for external roles averaging 6.3 weeks and internal roles averaging 5.59 weeks (the target is 5 weeks). Time to offer is calculated from the start of advertising to the successful candidate’s verbal offer date. Considering the large volume of recruitment activity across the organisation, the performance of the Time to Offer KPI is not unexpected. We are focusing on progressing candidates through the recruitment journey as quickly as possible to achieve the 5-week target. Internally, we provide a breakdown of time taken for each step of the process to enable individual directorates to identify and focus on areas of improvement.

On average, the ‘Diversity and Inclusion’ KPI reported an amber rating through most of 2021-22, although we reported 3 periods where we met our stated targets. There remains an increased focus and work to improve diversity and inclusion across our workforce. Through our outreach engagement events, we are inviting communities from underrepresented groups to come and learn more about us as an employer and we are continuing to encourage applications from a diverse range of candidates.

Performance reporting for mandatory training is based on a selection of our mandatory training courses, outlined in the KPIs below:

• Data Security Awareness
• Health and Safety Awareness
• Clinical Informatics Professional Group

Data Security Awareness reported an overall amber rating, with an average of 94% of all staff (permanent and non-permanent staff, including contractors) completing the annual training. An overall amber rating was reported for Health and Safety Awareness in 2021-22, with an average of 92% of all staff completing the training. All statistics above are as at February 2022. Work to drive improvement continues to form a key part of the directorates’ conversations, with a stated target of at least 95% completion. Finally, the Clinical Informatics Professional Group KPI reported a green rating across the year with one exception of an amber rating. 

Overall, an amber rating was reported for financial performance based on 2 KPIs:

• revenue
• capital

The amber ratings for both KPIs were due the challenges of balancing the changing demands of the ongoing pandemic response with both funding and delivery capacity and, towards the end of the financial year, the uncertainty created by the announcement of the ‘Living with Covid-19’ strategy, and it’s potential impact on the future usage and longevity of non-current assets that directly support the pandemic response, and the National Coronavirus Testing System in particular.

Our clinical governance reporting was based on the following KPIs:

• Risk and Issue Trend
• Clinical Risks Reviewed
• Preventing Future Deaths

Overall, our clinical governance remains generally strong as evidenced by our KPI performance in this area. The ‘Risk and Issue Trend’ KPI was rated amber overall, with a green rating reported for 3 months of the year. The rating is a composite score based on risks in ‘live’ services. It considers absolute numbers and levels of risk as well as the numbers of risks deescalated, or closed, month-on-month. Overall risk levels remained relatively stable throughout the year. Increases in the number of risks were related to operational processes and resourcing, as well as the significant number of change initiatives supported by the organisation during the year. This reflects the organisational desire to streamline processes and ensure ongoing safe, efficient working as we support the wider healthcare sector.

The ‘Clinical Risks Reviewed’ KPI was reported from July 2021 with an overall green rating, indicating that at least 90% of all red risks were reviewed at the Critical Risk Incident Safety Panel. The ‘Preventing Future Deaths’ KPI was also reported from July 2021, with an overall green rating. NHS Digital’s clinical safety processes reasonably reduced the likelihood of harm or death to patients, with no Regulation 28 Preventing Future Deaths Reports issued by coroners which named NHS Digital. There continues to be good engagement with clinical risk management activities. Strategic deployment of clinical support to maintain risk management and oversight is planned, following recruitment activities undertaken during 2021-22.

Simon Bolton 

Interim Chief Executive

2 November 2022