Auditors slam NHS Lothian for lack of financial planning

7 Aug 19

Auditors have warned that the financial sustainability of NHS Lothian remains a “significant risk”, with a budget gap of £26m this year expected to spiral beyond £80m by 2021-22.

The board, which has faced criticism over its handling of a contract to build a flagship children’s hospital in Edinburgh, had “no clear plans” to address the shortfall, having relied on an increasing volume of non-recurring savings to achieve financial balance last year.  

The opening of the Royal Hospital for Children and Young People, scheduled for July, has been indefinitely delayed due to safety concerns, following disputes between the board and the IHSL consortium, which was responsible for the building work. 

The annual audit report, which had been due for publication next month, but was issued early in light of “ongoing public interest” in the hospital project, said the board faced ever increasing challenges in achieving financial sustainability while maintaining an appropriate level of performance.

“We have concluded that financial sustainability continues to be a significant risk for 2019-20 onwards, with difficult decisions forced in optimising the balance between financial and non-financial performance metrics,” it said. 

The board, which has an annual budget of £1.6bn and a workforce of around 26,000, is required under the Scottish Government’s revised financial framework to submit a three-year financial plan.

That plan showed a financial gap of £26m in 2019-20, “notably increasing” to over £70m next year and beyond £80m the year after, the report found.

“At this stage, there are no clear plans to close the financial gap on a recurring basis,” it said.

Although work continued on developing a medium to long term financial strategy, including working with regional partners, NHS Lothian should provide clearer plans for where and how savings would be delivered, it added. 

The report also found that the board had agreed an additional £11.6m payment to the consortium to resolve outstanding technical issues with the new hospital, on top of the £150m construction cost and £80m of enabling and equipment work beyond the scope of the deal.   

However, it said that all the options reasonably available to the board came with some adverse impact, whether financial or non-financial, including impact on service redesign.

Susan Goldsmith, finance director of NHS Lothian, said the report highlighted that the board had provided evidence of detailed evaluation of the options open to it before proceeding with the settlement agreement.

“It also shows that the board sought technical advice and expertise throughout the project to ensure the safety of patients, staff and visitors remained the priority throughout,” she said.

Caroline Gardner, Auditor General for Scotland, said the progress of the hospital project had been monitored, and that a “close interest” would be taken in forthcoming reviews into safety and governance. 

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