Reporting joint care and health accounts

31 May 17

Pooled Better Care Fund budgets have to be reflected in the accounts of those involved. How this is done depends on who controls what


Pooled Better Care Fund budgets have to be reflected in the accounts of those involved. How this is done depends on who controls what


The Better Care Fund (BCF) is with us until at least 2020 and with it a major – and relatively new – application of pooled budgets. 

CIPFA’s main guidance on pooled budgets was last updated in 2009, before the BCF came in. Many of the principles discussed in Pooled Budgets: a Practical Guide for Local Authorities and the National Health Service remain relevant, especially as the BCF operates primarily within the context of the NHS Act 2006. Nonetheless, it makes sense to issue an update to take account of NHS reorganisation and the introduction of the BCF in 2015-16. That revision is planned for the summer. 

Meanwhile, issues continue to emerge on how to apply the BCF, which has become, alongside sustainability and transformation partnerships, the primary means of taking forward the integration of health and social care in all areas by 2020. 

Reporting pooled budgets
As a pooled budget is not an entity in itself, for financial reporting purposes it has to be reflected in the accounts of the pooling organisations. How that should be done depends on who controls the related activity, as set out by IFRS 10. Likely options are summarised below: the full range of collaborative arrangements and their implications can be found in CIPFA’s Accounting for Collaboration in Local Government publication.

There will be individual control if one body (the investor) exercises power over the other (the investee) and is exposed to variable returns from its involvement with the investee (returns may be positive, negative or both), and can potentially use its power over the investee to affect the levels of returns. 

Where there is more than one investor and no single investor can direct investee activities without the cooperation of the others, there is no individual control. Joint control then exists, which requires all the parties, or a group of the parties, to direct anything that significantly affects these activities together; no single party controls the arrangement on its own, and any one party can prevent any of the others from controlling what happens. 

It is likely that all parties to a BCF pooled budget agreement will have joint control. However, this depends on the exact terms of the agreement and the nature of the funding streams it covers; it should therefore be kept under review on a case by case basis.

A joint arrangement in which assets and liabilities are held in a separate vehicle can be a joint venture (which brings its own complications) or a joint operation. As no separate vehicle is created under BCF arrangements, where joint control exists, it is classified as a joint operation. 

The position can be stated thus: as the BCF pooled budget is a joint arrangement solely for the purpose of working together, it is likely that no single body will have power of control over the other parties to the agreement. 

Practical consequences 
A BCF pooled budget agreement should set out the nature of the activities it covers, as well as how the parties intend to operate those activities together. That would be expected, given that the policy intention is to bring about the integration of health and social care commissioning. This enables each party to identify its share of the assets and liabilities for accounting purposes. Each partner then accounts for its share of income, expenditure, assets liabilities and cash flows in line with the agreement. 

To summarise, all parties must have a thorough understanding of relevant events and transactions, and the accounting outcome has to be consistent with the arrangement. If the BCF is set up in the usual way, relevant gross expenditure and income should be reflected in the accounts of the pooling organisations, and should not be netted off for reporting purposes. Local authorities, for example, should report the gross and net position for social care, so spend funded through the BCF can be identified. 

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