Health and social care integration: finance guidance

3 Financial reporting

3.1 Statutory accounts

3.1.0.1 This section includes advice produced by a short life working group with members drawn from LASAAC/TAG; a copy of the full guidance is included at Section D.

3.1.0.2 The legislation requires that the Integration Joint Board is subject to the audit and accounts provisions of a body under Section 106 of the Local Government (Scotland) Act 1973. (Section 13). This will require audited annual accounts to be prepared with the reporting requirements specified in the relevant legislation and regulations (Section 12 of the Local Government in Scotland Act 2003 and regulations under section 105 of the Local Government (Scotland) Act 1973). These will be proportionate to the limited number of transactions of the Integration Joint Board whilst complying with the requirement for transparency^[13] and true and fair reporting in the public sector.

3.1.0.2 The Local Authority and Health Board should include additional disclosures in their statutory accounts which reflect their formal relationship with the Integration Joint Board.

3.1.1 Financial statements of the Integration Joint Board

What individual reporting statements will be required for the Integration Joint Board?

3.1.1.1 The reporting requirements for the annual accounts are set out in legislation and regulations and will be prepared following the Local Authority Code of Practice. It is anticipated that they will include:

• Management commentary;
• Statement of responsibilities;
• Annual governance statement;
• Remuneration report;
• Balance sheet;
• Statement of income and expenditure;
• Statement of accounting policies and notes to the accounts; and
• Audit report.

Who will be responsible for signing the annual accounts?

3.1.1.2 The overall governance arrangements for the Integration Joint Board will determine who is responsible for signing the financial statements and will be specified in regulations (Regulations under section 105 of the Local Government (Scotland) Act 1973). It is anticipated that the statements will be signed as follows:

• Management commentary: Chief Officer, Chair, Integration Joint Board financial officer
• Statement of responsibilities: Integration Joint Board financial officer.
• Annual governance statement: Chief Officer, Chair
• Remuneration report: Chief Officer and Chair.
• Balance sheet: Integration Joint Board financial officer.

3.1.1.3 Guidance on financial assurance can be found in section 2.1.

What is the timetable for preparing the annual accounts?

3.1.1.4 The Integration Joint Board financial statements must be completed to meet the audit and publication timetable specified in regulations (Regulations under section 105 of the Local Government (Scotland) Act 1973). The timetable should also ensure that the Health Board and Local Authority can meet their statutory audit and publication requirements for their individual and group financial statements as appropriate.

3.1.1.5 The Health Board will follow a different time line to the Local Authority and the Integration joint Board, with audited accounts required by 30 June. By this date, the regulations require the Integration Joint Board to have prepared and submitted accounts to the appointed auditor. The minimum information required by the Health board to prepare its accounts and group accounts by the 30^th June statutory deadline is:

• The balances held at the year-end;
• The transactions in the year;
• A schedule of other information including assurances needed for the governance statement.

3.1.1.6 It is recommended that arrangements are established to review and agree balances and transactions on a regular basis during the financial year and not as a one-off exercise at the year end. This process should be set out in the Integration Scheme.

3.1.1.7 Undertaking this activity should be regarded as a key responsibility for the Chief Financial Officer of the IJB, the Local Authority s95 officer and the Health Board Director of Finance.

3.1.8 A proposed timetable is set out in table 1. It is recommended that the timetable is agreed in advance with the external auditors of the Local Authority, Health Board and the Integration Joint Board.

Table 1: Proposed timetable for audit and publication of the Integration Joint Board annual accounts

Milestone	Deadline
Agreement of in year transactions and year end balances with Local Authority and Health Board	30 April
Draft annual accounts produced and submitted for audit.	30th June
Inspection of accounts and lodging of objections.	Completed by 29 July
Accounts Signed.	30th September
Publication of audited annual accounts	30th October

What should be included in the management commentary?

3.1.1.9 The management commentary should be prepared using proper accounting practice^[14]. The Scottish Government anticipates that guidance, applicable to all Scottish local government bodies, will be developed regarding the management commentary. Until such guidance is developed it is recommended that the minimum content includes:

• Purpose and objective of the Integration Joint Board referring to the Integration Scheme and Strategic Plan; and
• A High level operating review, referring to the performance report.

What should be included in the Integration Joint Board annual governance statement?

3.1.1.10 The Integration Joint Board governance statement will be prepared as required by the Code of Practice with the detailed content determined by local arrangements including:

• The governance framework including the operation of the board or sub-committees if relevant;
• Assessment of the corporate governance arrangements with reference to compliance with generally accepted best practice principles;
• Assessment of the risk management arrangements and risk profile; and
• Assessment of the system of internal control;

See appendix 1 to section B.

3.1.1.11 Where the Health Board and Local Authority are delivering services on behalf of the Integration Joint Board these will be included in the reporting of their own annual governance statements.

Who will provide assurance to the Health Board, Local Authority and the Integration Joint Board?

3.1.1.12 The Chief Officer must provide any relevant information required by the Health Board and Local Authority to enable their statements to be prepared within the statutory timetable for the preparation and publication of the financial statements. Similarly the Health Board and Local Authority should report to the Integration Joint Board annually on matters for inclusion in the Integration Joint Board governance statement.

What is expected to be included in the accounting policies?

3.1.1.13 It will be responsibility of the financial officer to determine the appropriate accounting policies for the Integration Joint Board. It is expected that the following polices would be included:

• Accounting convention and basis of preparation;
• Going concern;
• VAT status;
• Related parties;
• Post balance sheet events;
• Debtors and creditors; and
• Reserves

What are the financial reporting requirements for the non-integrated budgets managed by the Chief Officer such as children's services?

3.1.1.14 The non-integrated budgets are not required to be reported in the annual accounts where there is no payment to the Integration Joint Board and they are not included in the scope of the Strategic Plan. An explanation of the arrangement may be included where appropriate.

Will there be a template available for preparation of the annual accounts?

3.1.1.15 Illustrative annual accounts are provided as an appendix to this section. More detailed advice may be issued by LASAAC in due course in advising on Local government accounting.

Will annual accounts be required in the first year?

3.1.1.16 Yes; accounts will be required for the period from the date of establishment of the Integration Joint Board, on the basis that there will be relevant transactions, such as Integration Joint Board operating costs.

3.1.1.17 In cases where the commencement date for delegation of functions and resources (published in the strategic plan) is during 2015/16, the accounts should include the part year contributions from the Health Board and Local Authority and the part year payments from the Integration Joint Board for carrying out its directions; and the Integration joint Board operating costs.

3.1.1.18 In cases where the commencement date for delegation of functions and resources (published in the strategic plan) is April 2016, the accounts should include the Integration joint Board operating costs.

3.1.1.19 Note that support services provided to the Integration Joint Board by the Health Board and Local Authority under a Service Level Agreement should be included in the operating costs only where the Integration Joint Board has control over the support services; this may be via either:

• Consideration paid by the Integration Joint Board to the Health Board/Local Authority; and/or
• Provisions in the Service Level Agreements; and/or
• Compensation through a reduction in Health Board/Local Authority contributions to the Integration Joint Board.

3.1.1.20 Where support services are not included in the operating costs, this should be explained in the notes to the accounts.

3.1.2 Reporting in the Health Board and Local Authority annual accounts

3.1.2.1 The two primary transactions with the Integration Joint Board (i.e. the Health Board and Local Authority contribution to the Integration Joint Board; and the payments in support of the directions made by the Integration Joint Board to the Local Authority and Health Board) are distinct and separate transactions.

How should the contribution to the Integration Joint Board be reported?

3.1.2.2 The payment to the Integration Joint Board and the amount set aside for hospital services should be recorded as a separate line within the relevant expenditure analysis in the note to the accounts of the Health Board and Local Authority.

How will the payments in support of the directions made by the Integration Joint Board to the Local Authority and Health Board and the associated expenditure be reported?

3.1.2.3 The allocation from the Integration Joint Board including the amount set aside, should be disclosed as income from the Integration Joint Board in the income analysis and the corresponding expenditure in the expenditure analysis in the notes to the accounts.

3.1.2.4 The Comprehensive Income and Expenditure Statement / Statement of Comprehensive Net Expenditure should include:

	£m
Contributions to IJB (including sum set aside)	a,aaa
Expenditure on IJB Services	b,bbb
Gross Expenditure	c.ccc
Income from IJB for Commissioned Services (including sum set aside)	(d,ddd)
Gross Income	(d,ddd)
Net Expenditure	e,eee

3.1.2.5 The change in the trend analysis for the gross expenditure of the Health Board and Local Authority should be clearly explained and presented each partner's financial statements. LASAAC and TAG will, either separately or jointly, provide further guidance in this respect.

Is there a need to prepare group accounts?

3.1.2.6 Yes; it is anticipated that the default classification of an Integration Joint Board will be as a 'Joint Venture' under IFRS 11.

3.1.2.7 This assessment is finely balanced and practitioners and auditors will take into account the operation of the Integration Joint Board in forming their opinion; consequently it is possible that some Integration Joint Boards may be classed as Joint Operations.

3.1.2.8 Joint Venture treatment of Integration Joint Boards will require each partner to consolidate its interest in the Integration Joint Board into group accounts.

3.1.2.9 In cases where functions and resources are not delegated until 1 April 2016 consolidation in 2015/16 may not be necessary on the basis of materiality. Relevant disclosure notes will be required, irrespective of whether group accounts are presented.

Are there any other reporting requirements?

3.1.2.10 Yes; disclosure of the related party interest under IAS24 will be required.

3.2 Central returns

3.2.1 The Health Board (SFR) and the Local Authority (LRF3) currently submit returns to the Scottish Government relating to health and social care services. Proposals will be developed by the Scottish Government to revise the returns to reflect the integration arrangements. Information on the revised arrangements for the LFR3 will be issued by Scottish Government. Guidance on the SFR will continue to be provided in Unified Board Accounts Manual.

3.3 Whole of Government Accounts

3.3.1 The ONS classification of the Integration Joint Board will determine the requirements for submission for the Whole of Government Accounts. The provisional view by HM Treasury is that the Integration Joint Board is a local government public body. Formal classification will follow after the establishment of the first wave of Integration Joint Boards.

3.3.2 For Health Boards, the interest in the Integration Joint Board will be ignored by the Scottish Government in preparing Whole of Government Accounts (i.e. only the parent 'single entity' Health Board will be consolidated by the Scottish Government).