Board paper cover sheet - NHS Ayrshire and Arran.

NHS Board Meeting23 June 2010 Paper 5NHS Board meetingWednesday, 23 June 2010Subject: Statutory Annual Accounts 2009/10Purpose:Recommendation:Approval of statutory annual accountsTo adopt the statutory annual accounts andapprove the chairman, chief executive anddirector of finance to sign relevant forms ontheir behalf.1. Background1.1 Attached are the statutory annual accounts for 2009/10 which have been audited byKPMG LLP. The Directors’ Report includes key performance indicators withinsection 3 of the Operating and Financial Review.2. Operating cost statement2.1 Net operating costs rose by around £23 million from £656.7 million in 2008/09 to£679.6 million in 2009/10. The general allocation uplift for 2009/10 was £17 milliontherefore this funded most of this spending increase, however in addition there wasan increase of £3.7 million in general dental services which are directly funded bythe Scottish Government Health Department (SGHD). Certain earmarked fundingalso increased in 2009/10 with an increase of over £700,000 in funding to tacklealcohol misuse and a new allocation of £500,000 for specialist children’s services.2.2 Note 4 to the accounts shows the £532 million of hospital and community healthspend by provider grouping. Treatment in board area increased by around £12million from last year. Resource transfer to local authorities increased by £1 millionto £23 million while support finance increased by £0.6 million from last year. Thisreflects the fact that some £1.3 million of the funding given to Ayrshire & ArranHealth Board to address alcohol misuse is given to local authorities.2.3 Expenditure on family health services increased by around £9 million from theprevious year. There was a £3 million increase in pharmaceutical services andprimary medical services costs increased by £1.8 million compared to 2008/09. Thecost increase for pharmaceutical services was limited because of a nationalagreement on Category M drugs and the Pharmaceutical Pricing RegulatoryScheme (PPRS) and as a result SGHD reduced the Board’s allocation by £6.7million during 2008/09 for Category M savings and a further £1.6 million in 2009/10Page 1 of 136

NHS Board Meeting23 June 2010 Paper 5for PPRS. General dental services expenditure has risen by £3.7 million which maybe due to free check ups.3. Balance sheet3.1 Despite the completion of the £19 million Girvan Community Hospital, fixed assetshave reduced in value from £327 million at 31 March 2009 to £316.5 million at 31March 2010. A revaluation of the whole estate at 31 March 2010 saw a significantdownward movement due to the current economic climate, mostly adjusted throughthe revaluation reserve.3.2 Payments due to primary care contractors for family health services andprescriptions, which are paid around one month in arrears, result in a £17 millioncreditor at the year end. Total creditors due within one year amount to £61 million,which is about £6 million less than last year due to the Agenda for Change accrualbeing much lower. Because no debtor is shown for SGHD funding to coverpayments due to primary care contractors etc there are negative net currentassets/liabilities shown on the balance sheet. In addition, creditors due after morethan one year include £27.5 million related to Private Finance Initiative (PFI)hospitals.3.3 Note 17 to the accounts shows provisions and there is an increase of over £1 millionrelated to injury benefits and the clinical negligence increase is over £8 million dueto a number of high value cases. The impact of the latter is largely offset throughrecovery from Clinical Negligence and Other Risks Indemnity Scheme (CNORIS)and there is a corresponding debtor of £14.4 million in Note 13 to the accounts.3.4 Equal pay claims are shown as a contingent liability in Note 19 to the accounts asany liability cannot be quantified.4. Signing of statements4.1 The chief executive is required to sign the Directors’ Report, Statement ofAccountable Officer’s Responsibilities and Statement on Internal Control. Thedirector of finance and chairman would sign the Statement of Health BoardMembers’ Responsibilities in respect of the accounts.4.2 The signatures of the director of finance and chief executive are required on thebalance sheet and SFR 19.0 (patients’ private funds).5. Audit5.1 KPMG LLP (our external auditor) has completed its audit of the annual accounts andhas reported to the Audit Committee that the accounts are true and fair and that theywill issue a “clean” audit certificate.5.2 The audit fee for 2009/10 audit was £266,980. This is an increase of over 7% andreflects additional audit work around implementation of International FinancialReporting Standards (IFRS).Page 2 of 136

NHS Board Meeting23 June 2010 Paper 56. Conclusion6.1 The NHS Board has achieved all financial targets in 2009/10, whilst achievingsignificant improvements in clinical areas such as waiting times. The Board is askedto approve the signing of the statutory annual accounts for 2009/10.Derek Lindsay, Executive Director of Finance15 June 2010Page 3 of 136

NHS Board Meeting23 June 2010 Paper 5Ayrshire and Arran Health BoardAnnual Report and Accounts for the year to 31 March 2010Page 4 of 136

NHS Board Meeting23 June 2010 Paper 5ANNUAL ACCOUNTS AND NOTES FOR YEAR ENDED 31 MARCH 2010DIRECTORS’ REPORTDIRECTORS’ REPORTThe directors present their report and the audited financial statements for the yearended 31 March 20101. Naming ConventionAyrshire and Arran NHS Board is the common name for Ayrshire and ArranHealth Board.2. Principal activities and review of the business and future developmentsThe information that fulfils the requirements of the business review, principalactivities and future developments can be found in the Operating and FinancialReview, which is incorporated in this report by reference.3. Date of IssueFinancial statements were approved and authorised for issue by the HealthBoard on 23 June 20104. International Financial Reporting StandardsThese financial statements have been prepared, for the first time, underInternational Financial Reporting Standards (IFRS) as adopted by theEuropean Union and as interpreted or adapted for the public sector context asset out in Note 1 Accounting Policies. Financial Statements were previouslyprepared under UK Generally Accepted Accounting Principles (UK GAAP).The effect of the transition from UK GAAP to IFRS, with an effective date of 1April 2008, is set out in Note 25 First Time Adoption of IFRS and Note 26Restated Balance Sheet.5. Accounting conventionAnnual Accounts and Notes have been prepared under the historical costconvention modified by the revaluation of property, plant and equipment,intangible assets, inventories, available-for-sale financial assets and financialassets and liabilities at fair value through profit and loss. The accounts havebeen prepared under a direction issued by Scottish Ministers, which isreproduced as an appendix to these accountsThe statement of the accounting policies which have been adopted is shown atNote 1.6. Appointment of auditorsThe Public Finance and Accountability (Scotland) Act 2000 places personalPage 5 of 136

NHS Board Meeting23 June 2010 Paper 5responsibility on the Auditor General for Scotland to decide who is to undertakethe audit of each health body in Scotland. For the financial years 2006/07 to2010/11 the Auditor General appointed KPMG LLP to undertake the audit ofAyrshire and Arran Health Board. The general duties of the auditors of healthbodies, including their statutory duties, are set out in the Code of Audit Practiceissued by Audit Scotland and approved by the Auditor General.7. Board membershipUnder the terms of the Scottish Health Plan, the Health Board is a board ofgovernance whose membership will be conditioned by the functions of theHealth Board. Members of Health Boards are selected on the basis of theirposition or the particular expertise which enables them to contribute to thedecision making process at a strategic level.The Health Board has collective responsibility for the performance of the localNHS system as a whole, and reflects the partnership approach, which isessential to improving health and health care.Professor W Stevely, ChairmanMr J Callaghan, Non-Executive DirectorMr M Cheyne, Non- Executive DirectorMrs K Darwent, Non-Executive DirectorDr C Davidson, Director of Public HealthMr J Dever, Non-Executive DirectorMr C Duncan, Non-Executive DirectorCouncillor D Filson, Non-Executive DirectorDr A Gunning, Director of Policy, Planning and PerformanceDr W Hatton, Chief ExecutiveMr W S Hislop, Non-Executive DirectorCouncillor H Hunter, Non-Executive Director (w.e.f. 1 March 2010)Mr D Lindsay, Director of FinanceMs C Lisle, Director of Organisational and Human Resources Development(until 19 April 2009)Dr R Masterton, Medical DirectorDr H McCallum, Non-Executive DirectorMrs F McQueen, Director of NursingMrs R Miller, Vice ChairMs E O’Connell, Non-Executive DirectorCouncillor D O’Neill, Non-Executive DirectorDr D Price, Non-Executive DirectorCouncillor R Reid, Non-Executive Director (until 28 February 2010)Ms G Watson, Non-Executive DirectorThe board members’ responsibilities in relation to the accounts are set out in astatement following this report8. Board Members’ and Senior Managers’ InterestsDetails of any interests of board members, senior managers and other seniorstaff in contracts or potential contractors with the Health Board as required byIAS 24 are disclosed in note 29.Page 6 of 136

NHS Board Meeting23 June 2010 Paper 5SUMMARY OF MEMBERS’ INTERESTSJUNE 2010NHS AYRSHIRE & ARRANBoard Member Declared Interest DetailsProf WilliamStevely(Chairman)Mr JohnCallaghan(Non-ExecutiveMember)Mr Martin Cheyne(Non-ExecutiveMember)Skills Development ScotlandThe Scottish Agricultural CollegeThe Open UniversityNHS Ayrshire & ArranScottish Workforce & GovernanceCommitteeThe Society of Chiropodists &PodiatristsHealth Professions CouncilScottish Partnership ForumScottish GovernmentGlasgow Caledonian UniversityAyrshire Chamber of Commerceand IndustryLloyds TSB FoundationAyrshire Council on AlcoholScottish GovernmentGlasgow Caledonian UniversityAyrshire Council on AlcoholNon-Executive DirectorNon-Executive DirectorMember of CouncilLead Partnership Facilitator /Chair of Staff SideMemberMember / Member of EmployeeRelations Committee /Convenor of StaffRepresentatives / Member ofScottish ForumRegistered MemberMemberNon-Executive DirectorChair / Chair of Court / Memberof CourtChief ExecutiveVice ChairChair / Member of ManagementBoardChair of Health & WellbeingPortfolio Audit Committee /Member of the Education &Lifelong Learning Portfolio AuditCommitteeRolling contract with NHS1 year rolling Service LevelAgreement with NHSPage 7 of 136

NHS Board Meeting23 June 2010 Paper 5Mrs KirstyDarwent(Non-ExecutiveMember)Dr Carol Davidson(Director of PublicHealth)Mr John Dever(Non-ExecutiveMember)Mr Colin Duncan(Non-ExecutiveMember)Cllr Drew Filson(Non-ExecutiveMember)Scottish Institute of HumanRelationsThe Family Consultation CentreBreastfeeding NetworkMidwifery Committee; Nursing &Midwifery CommitteeAssociation of Family TherapyScottish Institute of HumanRelationsBaby Milk ActionBritish Medical AssociationN/AAccounts Commission forScotlandAyr Choral UnionSouth Ayrshire Care and RepairUniversity of Aberdeen –Business Committee of theGeneral CouncilScottish National PartyEast Ayrshire CouncilThe Lochdoon (Public House)Scottish National PartyCourse Co-ordinator for familytherapy projectOwner of organisationService provided on ownpremisesBreastfeeding trainer andsupporterWorker within a localBreastfeeding Support GroupService Level Agreement withNHS from 2008-2011MemberConvenor of South and Westbranch / Executive Member ofthe AFT Scottish Affairs TaskGroupMember of Family TherapyProject (part of SIHR) and theScottish Institute of HumanRelationsMemberMemberMemberMemberVice-ChairConvenerSecretary, Ayr branch /Secretary, South AyrshireLiaison CommitteeCouncillorProprietorMemberPage 8 of 136

NHS Board Meeting23 June 2010 Paper 5Dr Allan Gunning(ExecutiveDirector of Policy,Planning &Performance)Dr Wai-yin Hatton(Chief Executive)Mr Stuart Hislop(Chair – AreaClinical Forum)Cllr Hugh Hunter(Non-ExecutiveMember)Doon Valley Hill Walking ClubAspire 2getherBritish SwimmingAyrshire Sportsability (ASA)Ayrshire Chamber of Commerceand IndustryKilmarnock CollegeChartered Institute of Personneland DevelopmentFischer’s ServicesAyrshire SportsabilityHealth and HeritageManagement Consultancy/AlfHatton & AssociatesHislop Health LtdNHS Ayrshire & ArranBritish Dental AssociationBritish Medical AssociationBritish Association of Oral &Maxillofacial SurgeryRoyal Society of MedicineBritish Association of Head andNeck OncologistsSouth Ayrshire CouncilSouth Ayrshire CouncilChairmanDirectorNon-Executive DirectorChair of ManagementCommitteeDirector on the BoardDirector on the BoardMember of Psychology FacultyCousin-in-law is ManagingDirectorNHS Ayrshire and Arran is amember of ASA Trust, henceco-host of annual “Come andTry” eventMy husband is the DirectorHealth and HeritageManagement consultancy couldbid for work within NHSAyrshire and ArranDirectorConsultant - Oral &Maxillofacial SurgeonMemberMemberFellowMemberMemberElected MemberElection expenses as declaredto Returning Officer following2007 Local Authority elections.Page 9 of 136

NHS Board Meeting23 June 2010 Paper 5Mr Derek Lindsay(Director ofFinance)Dr RobertMasterton(ExecutiveMedical Director)Dr HuntlyMcCallum(Chair –Community HealthPartnershipsAdvisoryCommittee)Ayrshire Medical Support LtdConsultancyBritish Medical AssociationAyrshire Medical Support LtdStevenston Medical PracticeAyrshire Doctors on CallAyrshire & Arran CommunityHealth PartnershipNorth Ayrshire Medical SocietyScottish General PractitionersCommitteeArea Medical CommitteeGP Sub-CommitteeLocal Medical CommitteeBritish Medical AssociationRoyal College of GeneralPractitionersMedical and Dental DefenceUnion of ScotlandWest Kilbride Golf ClubSeamill Ski ClubSeamill Leisure ClubAdrossan Academicals RugbyClubLargs Sailing Club3TFMLease of MRI Scanner until2010 /NHS A&A lease land to AMSHold shares in AMS on behalfof NHS A&A EndowmentTrusteesConsultantMemberLease of MRI scanner until2010 /NHS A&A lease land to AMSDirector and hold shares inAMS on behalf of NHS A&AEndowment TrusteesPrincipal and partnerGPClinical LeadChairMemberMemberMemberMemberMemberMemberMemberMember & Junior SupportConvenorTreasurerMemberMedical ServicesMember‘Docslot’ presenterPage 10 of 136

NHS Board Meeting23 June 2010 Paper 5Mrs FionaMcQueen(Executive NurseDirector)Mrs Rita Miller(Vice Chair)Ms ElaineO’Connell(Non-ExecutiveMember)Cllr David O’Neill(Non-ExecutiveMember)Dr David Price(Non-ExecutiveMember)N/AScottish Labour Party – Ayr,Carrick & CumnockCo-op Party member – AyrshireBranchShelterOxfamNational Trust for ScotlandT&G UniteSouth Ayrshire Women’s AidKeith J Tuck, SolicitorsNorth Ayrshire CouncilTrinity Church TrustLabour PartyCo-op PartyNorth Ayrshire CouncilNorth Ayrshire CouncilDavid Price ConsultingNorth Ayrshire CouncilMember / Constituency Vice-Chair / Member, Scottish PolicyForumMember / Ayrshire Delegate toParty Council / Member ofScottish CouncilSupporterSupporterMemberMemberDirector / Chair of ManagementCommitteeSolicitorElected Member (Leader)TrusteeMemberMemberNorth Ayrshire Ventures Ltd /North Ayrshire Ventures TrustPaid by Irvine Labour Party forNorth Ayrshire Council Electionin May 2007Sole employeeWife employed by SocialServices Dept.Page 11 of 136

NHS Board Meeting23 June 2010 Paper 5Cllr Robin Reid(Non-ExecutiveMember)Ms Gillian Watson(Non-ExecutiveMember)R Reid & CoSouth Ayrshire CouncilInstitute of Financial AccountantsAberdeen & NE Scotland FamilyHistory SocietyScottish Conservative PartyGiltech LtdOwnerCouncillorFellowMemberMemberDirectorAll Directors appointed by the Cabinet Secretary (shown in the remuneration report)are also Trustees of the Ayrshire and Arran Endowments. The Register of Members’Interests is maintained at Eglinton House, Ailsa Hospital, Ayr and is available for thepublic to view on request.9. Pension liabilitiesThe accounting policy note for pensions is provided in Note 1 and disclosure ofthe costs is shown within Note 26 and the remuneration report.10. Remuneration for non- audit workNo remuneration was paid to external auditors in respect of any non audit workcarried out on behalf of Ayrshire and Arran Health Board.11. Related party transactionsDuring the year, Ayrshire and Arran Health Board had transactions with otherNHS bodies which are shown in Note 4 to the AccountsDr McCallum, a non-executive director of Ayrshire and Arran Health Board, is ageneral practitioner in an Ardrossan GP practice. Total amounts payable tothis practice during the year under the General Medical Services contract,including quality outcome framework payments, were £586,766 of which£36,908 is outstanding at the year end.Ayrshire Medical Support Limited (AMS) is considered to be a related party asdefined by International Accounting Standards (IAS) 24 “related partydisclosures”. During the year ended 31 March 2010 the company sold MRIimaging services and training facilities to Ayrshire and Arran Health Board witha value of £532,115. The company also purchased services and facilities fromAyrshire and Arran Health Board amounting to £20,000. At 31 March 2010amounts due from AMS were £5,000 and £21,940 was due to AMSTwo executive directors of the Health Board are directors of AMS in theircapacity as endowment trustees, but neither they nor any party related to themreceived or are due to receive any direct or indirect benefit or payments fromAMS in their capacity as directors of the company.Mrs Kirsty Darwent is a worker within the local breastfeeding support group ofPage 12 of 136

NHS Board Meeting23 June 2010 Paper 5the Breastfeeding Network. During the year, the Breastfeeding Networkreceived income from Ayrshire and Arran Health Board of £166,320.12. Payment policyAyrshire and Arran Health Board is committed to supporting The ScottishGovernment in helping businesses during the current economic situation bypaying bills more quickly. The intention is to achieve payment of all undisputedinvoices within 10 working days, across all public bodies.The target has been communicated to all non-departmental public bodies, whoare working towards the accelerated payment target of 10 working days.Prior to this, the Health Board did endeavour to comply with the principles ofThe Better Payment Practice Code (http://www.payontime.co.uk/) byprocessing suppliers’ invoices for payment without unnecessary delay and bysettling them in a timely manner.In 2009/10 average credit taken was 15 days from date invoice received.(2008/09 = 29 days from invoice date). In 2009/10 the Health Board paid 89%by value and 89% by volume of non NHS suppliers within 30 days of theinvoice being received. Based on the date of invoices being received, 71% byvalue and 70% by volume were paid within 10 days.13. Corporate governanceThe Health Board meets regularly during the year to progress the business ofthe Health Board. The following standing committees deal with more detailedgovernance issues:Clinical Governance CommitteeThe Clinical Governance Committee ensures that clinical governancemechanisms are in place and effective throughout the local NHS system. Thecommittee met on seven occasions during 2009/10.The membership of the Clinical Governance Committee comprises:-Dr David Price (Chair)Ms Elaine O’ConnellMr Stuart Hislop (Chair, Area Clinical Forum)Mrs Kirsty DarwentMr John Dever (until 1 October 2010)Ms Gillian Watson (from 1 October 2010)Councillor David O’NeillAudit CommitteeThe committee met four times during 2009/10 to consider reports received frominternal audit (PricewaterhouseCoopers LLP) and external audit (KPMG LLP).The committee monitors corporate governance, probity and issues aroundinternal control.The membership of the Audit committee comprises:-Mrs Kirsty Darwent (Chair)Page 13 of 136

NHS Board Meeting23 June 2010 Paper 5Mr John DeverDr David PriceCouncillor David O’NeillMs Elaine O’ConnellStaff Governance CommitteeThe committee (which meets at least quarterly) monitors compliance with staffgovernance standards and a sub-committee is the Remuneration Committee.The membership of the Staff Governance Committee comprises:-Mr Colin Duncan (Chair)Ms Elaine O’Connell (Vice Chair)Mr John CallaghanMr Martin CheyneCouncillor Drew FilsonCouncillor Robin Reid (until February 2010)Ms Gillian Watson (until August 2009)Mr John Dever (from September 2009)Health and Performance Governance CommitteeThe committee met seven times during 2009/10. The committee monitorshealth and performance against the HEAT targets and is sighted on otherperformance indicators which may not be formally reported through thismechanism.The membership of the Health and Performance Governance Committeecomprises:-Mr Martin Cheyne (Chair)Mrs Kirsty DarwentMr John CallaghanMr Colin DuncanCouncillor Drew FilsonCouncillor Robin Reid14. Disclosure of information to auditorsThe directors who held office at the date of approval of this directors’ reportconfirm that, so far as they are each aware, there is no relevant auditinformation of which the Health Board’s auditors are unaware; and eachdirector has taken all the steps that he/she ought reasonably to have taken asa director to make himself/herself aware of any relevant audit information andto establish that the Health Board’s auditors are aware of that information.15. Human resourcesAs an equal opportunities employer, the Health Board welcomes applicationsfor employment from disabled persons and actively seeks to provide anenvironment where they and any employees who become disabled cancontinue to contribute to the work of the Health Board.The Health Board provides employees with information on matters of concernto them as employees through a two monthly Team Brief and more regularPage 14 of 136

NHS Board Meeting23 June 2010 Paper 5Stop Press updates and consults employees or their representatives throughthe Area Partnership Forum so their views are taken into account in decisionsaffecting their interests.16. Events after the end of the reporting periodThere have been no important events affecting the Health Board since the yearend.17. Financial instrumentsInformation in respect of the financial risk management objectives and policiesof the Health Board and it’s exposure to price risk, credit risk, liquidity risk andcash flow risk is disclosed in Note 27.Page 15 of 136

NHS Board Meeting23 June 2010 Paper 5OPERATING AND FINANCIAL REVIEWThe operating and financial review has been prepared in accordance with thegovernment Financial Reporting Manual and complies with best practice.1. Principal Activities and Review of the YearThe Board was established in 1974 under the National Health Service(Scotland) Act, 1974 and is responsible for commissioning healthcare servicesfor the residents of Ayrshire and Arran, a total population of 368,000.Health Boards form a local health system, with single governing boardsresponsible for improving the health of their local populations and delivering thehealthcare they require. The overall purpose of the unified NHS Board is toensure the efficient, effective and accountable governance of the local NHSsystem and to provide strategic leadership and direction for the system as awholeThe role of the unified NHS Board is to:- improve and protect the health of the local people;- improve health services for local people;- focus clearly on health outcomes and people’s experience oftheir local NHS system;- promote integrated health and community planning by workingclosely with other local organisations; and- provide a single focus of accountability for the performance ofthe local NHS systemThe functions of the unified NHS Board comprise:- strategy development- resource allocations- implementation of the Local Delivery Plan- performance managementProposals for new Community Health Partnership (CHP) committees wereapproved by the Health Board meeting on 25 June 2008. The new structureincludes a CHP Committee, CHP Forum and CHP Officer Locality Group foreach of the three council areas. The Board meeting on 7 February 2010received a progress report on each of the three CHPs.Acute servicesAt the Board meeting on 4 October 2006 the Board approved plans toreconfigure acute services and these were submitted to the Scottish ExecutiveHealth Department to seek approval for the plans. The Minister for Health andCommunity Care wrote on 15 December 2006 approving the plans and makingsome specific requirements of NHS Ayrshire and Arran. The Minister alsomade provision in the NHS Scotland capital plan for an additional £30 millionabove the normal capital allocation to NHS Ayrshire and Arran.On 6 June 2007, following the election of an SNP government at the May 2007elections, the Cabinet Secretary for Health and Wellbeing announced herreversal of the previous administration’s decisions regarding accident andPage 16 of 136

NHS Board Meeting23 June 2010 Paper 5emergency services at Ayr Hospital. The Cabinet Secretary required NHSAyrshire and Arran to produce revised proposals that would enable A&Eservices to continue at both Ayr and Crosshouse Hospitals. These proposalswere to be subject to independent scrutiny from a Panel.Costed options were submitted to the Independent Scrutiny Panel inSeptember 2007 and at the Board meeting on 23 January 2008 the Boardconsidered reports from the Independent Scrutiny Panel as well as otherevidence. A recommendation was submitted to the Cabinet Secretary whichmet the requirement to retain A&E services at both Ayr and CrosshouseHospitals and this was approved by the Cabinet Secretary on 27 February2008. This will require significant capital spend on the accident andemergency departments at both Ayr and Crosshouse Hospitals and thecreation of combined assessment units at both sites. During 2008/09 an InitialAgreement for this capital spend was submitted to Scottish Government HealthDepartment and has been approved. The Outline Business Case will besubmitted to the October 2010 Board meeting.Mental HealthIn January 2008 the Board considered and approved planned communityinvestments in mental health services. An additional £2.8 million was investedin 2008/09 in mental health services. A “Mind Your Health” option appraisalwas undertaken in 2008 around the future location of acute mental health inpatientservices and a consultation exercise was undertaken. The outcomefrom this was reported to the NHS Board meeting on19 November 2008 with the preferred option being the move of most adult inpatientservices to a new build facility at the Ayrshire Central Hospital site at acapital cost of around £50 million. This has been approved by the CabinetSecretary and an Initial Agreement for the capital spend was submitted with theOutline Business Case due to come to the August 2010 Board meeting.Capital SchemesAs planned, capital expenditure totalling £36.148 million has been incurred inthe year. The following are the main capital spend areas (over £0.5 million)during 2009/10.£000Girvan Community Hospital 11,723Ayrshire Central Hospital – kitchen 2,447Ayrshire Central Hospital – outpatients etc 2,931North Ayrshire Community Hospital 2,000Ailsa Hospital - former laundry 861Patna Clinic 1,912Theatre Sterile Supplies Unit 620Sexual Health at Ayrshire Central Hospital 1,479The Ayr Hospital - endoscopy unit 951Breast screening expansion 500Electro medical equipment 3,630Information management and technology 1,491Furniture and equipment 1,507Estates and maintenance 5,350Page 17 of 136

NHS Board Meeting23 June 2010 Paper 5ActivityMonth 12 - Interyear Comparison - 2009/2010 - CumulativeMARCH2008/09 2009/10 Increase/(Decrease)Emergency/Urgent Care Inpatient 4,194 3,549 (645) (15.4%)Assessment/Intermediate Treatment Inpatient 28,316 28,985 669 2.4%Assessment/Intermediate Treatment Day Case 8,361 8,137 (224) (2.7%)Assessment/Intermediate Treatment Inpatient and Day Case 36,677 37,122 445 1.2%Medical Specialties Inpatient 3,489 4,078 589 16.9%Medical Specialties Day Case 2,713 2,261 (452) (16.7%)Medical Specialties Inpatient and Day Case 6,202 6,339 137 2.2%Care of the Elderly Inpatient 4,794 4,670 (124) (2.6%)Improving Balance of Care/LTCM Inpatient 1,873 1,759 (114) (6.1%)Improving Balance of Care/LTCM Day Case 600 164 (436) (72.7%)Improving Balance of Care/LTCM Inpatient and Day Case 2,473 1,923 (550) (22.2%)Ambulatory CareInpatient 3,087 3,063 (24) (0.8%)Ambulatory Care Day Case 7,023 7,821 798 11.4%Ambulatory Care Inpatient and Day Case 10,110 10,884 774 7.7%Planned Care Inpatient 12,292 12,982 690 5.6%Planned Care Day Case 11,791 11,835 44 0.4%Planned Care Inpatient and Day Case 24,083 24,817 734 3.0%Children's, Women's & Sexual Health Services Inpatient 11,615 12,025 410 3.5%Children's, Women's & Sexual Health Services Day Case 4,682 4,467 (215) (4.6%)Children's, Women's & Sexual Health Services Inpatient and Day Case 16,297 16,492 195 1.2%Emergency/Urgent Care OPD New 105,946 108,4782,532 2.4%Total Inpatient 69,660 71,111 1,451 2.1%Total Day Case 35,170 34,685 (485) (1.4%)Counter Fraud ServiceThe National Counter Fraud Service has calculated an estimated and potentiallevel of fraud for calendar year 2009 in relation to Ayrshire and Arran patientswrongly claiming exemption from dental charges, ophthalmic charges orprescription fee charges. These are based on extrapolation of a small sampleand are shown in the table below:Estimated Fraud Potential Fraud£ £Dental Fees 573,317 954,576Ophthalmic Fees 95,250 85,900Pharmacy Fees 506,989 316,506DentalThe levels of fraud/error and potential fraud/error both show increases in 2009compared to 2008. In the case of the level of fraud/error, the increase is due toincreases in the levels of fraud/error in all but one exception category.OphthalmicThe level of fraud/error in 2009 is almost double the level estimated from thePage 18 of 136

NHS Board Meeting23 June 2010 Paper 5previous year’s exercise, however the level of potential fraud/error in 2009 isless than half the level in 2008.PharmacyThe levels of fraud/error and potential fraud/error show a large reduction overthose estimated in the previous year’s exercise. This can be attributed to areduction in the rates across a majority of the exemption categories.Page 19 of 136

NHS Board Meeting23 June 2010 Paper 52. Financial performance and positionLimit asset bySGHDActualOutturnVariance(Over)/Under£’000 £’000 £’0001 Revenue Resource limit 635,043 627,948 7,0952 Capital Resource Limit 36,148 36,147 13 Cash Requirement 692,000 691,065 935MEMORANDUM FOR IN YEAR OUTTURN £’000Brought forward surplus from previous financial year 10,012*Excess against in year Revenue Resource Limit (2,917)Cumulative savings against revenue resource limit 7,095*This figure is brought forward figure under UK GAAP.The revenue resource underspend of £7 million is fully committed for use in2010/11. The most significant users are shown below:-£000Decontamination/HAI 63518 Week RTT Programme 500Oral Health Strategy 118Coronary Heart Disease/Stroke 200Falls Programme Manager 100Long Term Conditions Collaborative 91Local Alcohol Plan 530Drugs Misuse 130Smoking Cessation 280Sexual Health 173Human Papillomavirus (HPV) 108Hepatitis C 500Child Health Weight Initiative 177Nutrition of Pregnant Women 269Keep Well 530Dental Priority Groups 200Integrated Resource Framework 128e-health 135Healthcare Environmental Inspection 245Total 5,049Page 20 of 136

NHS Board Meeting23 June 2010 Paper 5Balance sheetUnder the government accounting arrangements, Health Boards must showliabilities for future years in their accounts without showing funding anticipatedfrom the Scottish Government Health Directorate (SGHD). This has resulted innet current liabilities on the balance sheet. The balance sheet reflects liabilitiesfalling due in future years that are expected to be met by the receipt of fundingfrom the SGHD. Accordingly the accounts have been prepared on the goingconcern basis.Public Finance Initiative/Public Private PartnershipsAyrshire Maternity Unit (AMU)The AMU is situated within the grounds of Crosshouse Hospital, Kilmarnockand provides obstetric in-patient, neonatal, day case and specialist out-patientfacilities for women and babies of Ayrshire and Arran. In previous years thishas been treated as an off balance sheet item under UK GAPP. The capitalvalue of the project was £19.5 million, which is now on balance sheet underIFRS. The contract with Ayrshire Hospitals Limited (AHL) commenced on 1July 2006 and runs for 30 years to 30 June 2036. At the end of the contractperiod the building will transfer free of charge to the NHS Board from the PFIProject Company.East Ayrshire Community Hospital (EACH)EACH is situated in Cumnock and provides in-patient service to frail elderly,elderly with mental illness and GP acute, day facilities to frail elderly and elderlymentally ill and out-patient services to the local area. The assets have a netbook value of £12.764 million on the balance sheet as at 31 March 2010. Thecontract with HBG Construction Scotland Limited commenced in August 2000and runs for 25 years to August 2025. At the end of the contract term theNHS Board has the option to acquire the building at a market valuation pricefrom the PFI Project Company.Page 21 of 136

NHS Board Meeting23 June 2010 Paper 53. Performance against Key Non Financial TargetsAyrshire and Arran Health Board is monitored by the Scottish Governmentagainst a number of national targets known as the ‘HEAT Targets’. Each HealthBoard routinely reports performance against trajectories set in a Local DeliveryPlan (LDP). The LDP is effectively a contract between the Scottish Governmentand the Health Board. Trajectories were set against the key targets in the LDPfor financial year 2009/10. Outcomes are discussed at an Annual Reviewmeeting held between the Scottish Government and NHS Ayrshire and ArranHealth Board.Performance SummaryHEAT 2009/10 has 40 key performance indicators in total. The performancehas been summarised in the table below, detailing a description of:• Indicator;• Unit;• Baseline performance;• Latest performance and performance score; and• Target performance.A number of the indicators under the Health Improvement section are onlymeasured every few years, therefore the latest performance figure may be outof date.It should be noted that the following indicators have been updated to reflectperformance using more up to date local, but unvalidated data and thereforemay be subject to change.These are indicated with a “*” in the table below.• H3.1: Child healthy weight interventions• H4.1: Alcohol Brief Interventions• H5.1: Suicide Prevention• H6.1: Smoking Cessation• H7.1: Breastfeeding at 6-8 weeks• H8.1: Inequalities Targeted Cardiovascular Health Checks• A10a-d: 18 week RTT• T4.1: Psychiatric readmissions• T12.1: Reduction in emergency bed days (65+)Performance scores are shown in the table below. The key is as follows:GREENAMBERREDCurrently better than trajectory (plan)Currently within 5% of trajectory (plan)Currently outwith the acceptable control limit (5% from plan)Page 22 of 136

HEAT indicators 2009/10NHS Board Meeting23 June 2010 Paper 5Baseline Latest Performance Target PerformanceID Indicator Units Date Value Date Actual Planned Score Date TargetH2.1 Dental Registrations % of 3-5 year olds Mar-07 70.87% Sep-09 89.99% 83.5% GREEN Jun-10 85.0%H3.1 Child healthy weightinterventions*Number of interventionsMar-09 17 Mar-10 119 117 GREEN Mar-11 420H4.1 Alcohol Brief Interventions* Number of interventions Dec-08 349 Mar-10 4990 4500 GREEN Mar-11 6,197H5.1 Suicide Prevention* % frontline staff trained Dec-08 12.11% Mar-10 35.00% 39.00% RED Dec-10 50%H6.1 Smoking Cessation* Cumulative number ofcessationsMar-07 239 Feb-10 2,903 4834 RED Dec-10 6201H7.1 Breastfeeding at 6-8weeks*H8.1 Inequalities TargetedCardiovascular HealthChecks*% babies exclusivebreastfed at 6-8 weeksCumulative number ofhealth checks deliveredMar-07 21.68% Dec-09 18.00% 19.8% RED Mar-11 23.0%April-09 366 Mar-10 2953 2060 GREEN Mar-10 2060E4.1 Day case rates % of Procedures Dec-06 72.26% Aug-09 79.49% 80.28% AMBER Mar-11 82%E4.2 Emergency Inpatient ALOS Days Mar-07 4.11 Sep-09 3.92 4.0 GREEN Mar-11 3.84E4.3 Review to New OutpatientAttendancesRatio Mar-07 2.51 Sep-09 2.3 2.4 GREEN Mar-11 2.3E4.4 New Outpatient DNAs % of Outpatients Mar-07 10.91% Sep-09 10.78% 10% RED Mar-11 9.80%E5.1 Financial Performance £000s Mar-10 7,075 7,000 GREEN Mar-10 7,000E6.1 Cash Efficiencies £000s Mar-10 22,218 22,078 GREEN Mar-11 33,612E7.1 Online Triage % of referrals Sep-08 0 Mar-10 35.54% 65% RED Mar-10 65%Page 23 of 136

NHS Board Meeting23 June 2010 Paper 5Baseline Latest Performance Target PerformanceID Indicator Units Date Value Date Actual Planned Score Date TargetE8.1 Energy Consumption GJ Mar-08 285352 Mar-09 289073 n/a n/a Mar-10 274052E9.1 CHI Utilisation % of radiology requests Apr-09 97.35% Mar-10 99.65% 97% GREEN Apr-10 97%E10.1 eKSF % of AfC Staff Apr-09 0.19% Mar-10 11.26% 30% RED Mar-11 80%A8.1 48 Hour Access – GPPractice Team% of patients Mar-09 90.23% Mar-09 90.2% 90% GREEN Mar-11 100%A8.2 Advance Booking – GP % of patients Mar-09 74.1% Mar-09 74.1% 90% RED Mar-11 100%A9.1 Suspicion of CancerReferrals (62 days)% of suspiciousreferralsJun-08 91.3% Sep-09 95.1% 95% GREEN Mar-10 95%A9.2 All Cancer Treatment (31days)% of cancer referrals Jun-09 76.0% Sep-09 75.9% 76.9% AMBER Mar-10 80%A10aA10bA10cA10d18 week RTT: AdmittedPerformance*18 week RTT: AdmittedCompleteness*18 week RTT: NonadmittedPerformance*18 week RTT: NonadmittedCompleteness*% of patients Apr-09 51.25% Mar-10 71.04% 80% RED Dec-10 90%% of clock stops Apr-09 43.02% Mar-10 74.74% 70% GREEN Dec-10 100%% of patients Apr-09 90.25% Mar-10 66.70% 85% RED Dec-10 95%% of clock stops Apr-09 46.81% Mar-10 39.76% 70% RED Dec-10 100%A10.2 New Outpatients: Max 12weeksA10.3 Inpatient/Daycase : Max 12weeksA11.1 Faster Access to Treatmentfor Drug MisusersPatients Waiting over12 weeksPatients Waiting over12 weeksNot availableApr-09 0 Mar-10 0 0 GREEN Mar-10 0Apr-09 396 Mar-10 20 0 RED Mar-10 0Page 24 of 136

NHS Board Meeting23 June 2010 Paper 5Baseline Latest Performance Target PerformanceID Indicator Units Date Value Date Actual Planned Score Date TargetA12.1 Faster Access to SpecialistCAMHSNot availableT2.1 CGRM standards Score Mar-07 6 Mar-07 6 n/a n/a Mar-11 12T3.1 Anti-depressant prescribing DDDs per capita Jun-06 33.47 Dec-09 41.7 38.9 RED Mar-10 38.5T4.1 Psychiatric readmissions* Readmissions/year Dec-04 344 Dec-08 262 282 GREEN Dec-09 282T6.1 Long Term Conditions Rate per 100k pop/yr Mar-07 2004.64 Mar-09 2187.15 1978 RED Mar-11 1828T7.1 Healthcare experience Not availableT8.1 Older people cared for athome% of 65+ with careneedsMar-03 31.65% Mar-08 40.12% 37.00% GREEN Mar-10 38%T9.1 Dementia Patients on register Mar-07 2190 Mar-09 2246 2420 RED Mar-11 3091T10.1 Rate of Attendance at A&E Rate per 100k pop/yr Mar-08 2615.4 Mar-10 2691.63 2519 RED Mar-11 2478T11.1 MRSA/MSSA Reduction Infections per year Mar-06 154 Dec-09 132 115 RED Mar-10 107.1T11.2 C.Diff Reduction Infections per occupiedbed days (65+)/yrMar-08 1.32 Dec-09 1.15 1.2 GREEN Mar-11 0.93T12.1 Reduction in emergencybed days (65+)*Rate per 1,000 pop(65+)/yrMar-05 3480.6 Dec-09 3018.5 3132.53 GREEN Mar-11 3132.53Page 25 of 136

NHS Board Meeting23 June 2010 Paper 5HEAT 2009/10 had 40 key performance indicators in total. Of the 40 keyindicators, 16 were showing as Red, 2 Amber and the remaining 17 wereGreen. The performance has been summarised in the table below.The indicators A11.1: ‘Faster Access for Drug Misusers’, A12.1: ‘FasterAccess to Specialist CAMHS’ and T7.1: ‘Healthcare Experience’ have no dataavailable for reporting purposes. Furthermore, the indicator T2.1: ‘CGRMStandards’ is not shown below as no data update is yet available. SimilarlyE8.1: ‘Energy Consumption’ is not included in the list below as a planned levelfor 2009/10 was not available for comparison purposes.The following indicators scored as RED (outwith 5% of target)H5.1 Suicide Prevention TrainingH6.1 Smoking CessationH7.1 Breastfeeding at 6-8 weeksE4.4 New Outpatient DNAsE7.1 Online TriageE10.1 eKSFA8.2 Advance Booking - GPA10a 18 weeks RTT: Admitted PerformanceA10c 18 weeks RTT: Non-admitted PerformanceA10d 18 weeks RTT: Non-admitted CompletenessA10.3 Inpatient/Daycase : Max 12 weeksT3.1 Anti-depressant PrescribingT6.1 Long Term ConditionsT9.1 DementiaT10.1 Rate of Attendance at A&ET11.1 MRSA/MSSA ReductionThe following indicators scored as AMBER (within 5% of target)E4.1 Day Case RatesA9.2 All Cancer Treatment (31 days)The following indicators scored as GREEN (achieved or exceedingtarget)H2.1 Dental RegistrationsH3.1 Child Healthy Weight InterventionsH4.1 Alcohol Brief InterventionsH8.1 Inequalities Targeted Cardiovascular Health ChecksE4.2 Emergency Inpatient ALOSE4.3 Review to New Outpatient AttendancesE5.1 Financial PerformanceE6.1 Cash EfficienciesE9.1 CHI UtilisationA8.1 48 Hour Access – GP Practice TeamA9.1 Suspicion of Cancer Referrals (62 days)A10b 18 weeks RTT: Admitted CompletenessA10.2 New Outpatients: Max 12 weeksT4.1 Psychiatric readmissionsT8.1 Older people cared for at homeT11.2 C.Diff ReductionT12.1 Reduction in emergency bed days (65+)Page 26 of 136

NHS Board Meeting23 June 2010 Paper 5The Board has a Health and Performance Governance committee whose remitincludes providing assurance to the Board that systems and procedures are in placeto monitor, manage and improve overall performance.A10.KPM3 : Inpatients & Day Cases: Max 12 weeksLatest data are showing a ‘Red’ with 20 patients waiting more than 12 weeks inMarch 2010 against a plan of zero people waiting over 12 weeks. These were twentyorthopaedic patients who waited more than 12 weeks.The orthopaedic service has continued to experience significant challenges. Asignificant shortfall in orthopaedic medical staffing occurred over a two week periodin March and despite all efforts to address this through movement of other staff,engaging locums etc., staffing levels fell below that which was considered to be asafe level of ward staffing and elective inpatient surgery was suspended. Thisresulted in the cancellation of patients some of whom could not be re-accommodatedin Ayrshire or the private sector prior to the end of March. All efforts were beingmade to redress this situation in April.T3.1: Antidepressant PrescribingThe Guideline for treatment of depression in primary care is being reviewed andexpected to be re-launched later this year.A further internal review of primary care mental health teams (PCMHTs) is underway,which aims to provide a rapid access high volume service for people withmild/moderate depression, through more efficient screening and the use of new SelfHelp Support workers, together with the safe transfer of people with more complexneeds to CMHTs where high intensity psychological therapies will be made available.T6.1: Long Term Conditions and T10.1: Rate of Attendance at A&EGeneral practices in Ayrshire & Arran continue to identify patients at risk ofemergency hospital admission and as multidisciplinary/organisational teams aredeveloping anticipatory care plans and self management plans through an enhancedservice. Recent analysis of all patients demonstrated that over a 2 year period therehas been almost a 40% reduction in the number of admissions for SPARRA (Scottishpatients at risk of readmission and admission) patients and a 41% reduction in thetotal number of bed days.From June 2010 we will commence development of anticipatory care planning withnursing homes. Evidence from the national Long Term Conditions Collaborative hasshown some board areas achieving 40% reductions in emergency admissions fromnursing homes.Three tele-healthcare projects with respective local authorities, community hospitalsand primary/community care teams are proposed which will focus on chronicobstructive pulmonary disease (COPD), Heart Failure and complex high risk patientsawaiting discharge from hospital.T9.KPM1: DementiaPage 27 of 136

NHS Board Meeting23 June 2010 Paper 5An intensive period of data checking and case searching is planned for all GPpractices in Ayrshire. Positive results have been demonstrated from a review of pilotpractices in Arran. All GPs have been communicated with about this work and amore detailed report on overall findings will be made available by July 2010. Theanticipated outcome of the workplan being taken forward over the course of the nextyear, which itself is based on careful planning and preparation to maximise effort, isreflected in the revised trajectory set for the period April 2010 to March 2011.T11.KPM1 : MRSA/MSSA bacterium: 30% ReductionA new Staphylococcus aureus Bacteraemia (SAB) HEAT Target has been introducedfor 2010/11. An Action Plan detailing the measures being taken by NHS Ayrshire andArran to reduce the numbers of SABs was submitted to the SGHD HealthcareAcquired Infection (HAI) Policy Team on the 31 March 2010. Actions contained inthe Plan include a spread plan for HAI related care bundles; detailed specific renalaction plan; implementation of revised surveillance methodology; and PeripheralVascular Catheter audit. It should be noted that the SGHD HAI Policy Unit requestunverified SAB data from the Infection Control Team on a monthly basis.Page 28 of 136

NHS Board Meeting23 June 2010 Paper 5REMUNERATION REPORTBOARD MEMBERS’ AND SENIOR EMPLOYEES’ REMUNERATIONThe Health Board has a Remuneration Committee which is a sub-committee of theStaff Governance Committee. Membership is wholly non-executive as follows:-Professor W StevelyCouncillor D O’ NeillMrs R MillerMr J CallaghanThe committee met four times during 2009/10. The committee is responsible fordetermining and regularly reviewing the Health Board’s pay policy, subject toconstraints imposed by national conditions and guidance. The committee alsoagrees the individual in-year objectives of the Board’s executive directors. TheRemuneration Committee is required to approve the annual performanceassessment of executive directors in June each year.RemunerationRemuneration of board members and senior employees is determined in line withdirections issued by the Scottish Government. All posts at this level are subject torigorous job evaluation arrangements and the pay scales applied reflect theoutcomes of these processes. All extant policy guidance issued by the SGHD hasbeen appropriately applied and agreed by the Remuneration Committee.Performance AppraisalPerformance appraisals for executive members are carried out in line with theguidance from the Scottish Government and overseen by the RemunerationCommittee. Annual pay rises for executive directors are dependent on achievingspecified levels of performance.Payments to past senior managersNo payments were made to past senior managers during 2009/10.The following tables provide a breakdown of executive and non-executive directors’remuneration in 2008/09 and 2009/10 and have been audited.Page 29 of 136

NHS Board Meeting23 June 2010 Paper 5Ayrshire and Arran Health BoardRemuneration ReportFOR THE YEAR ENDED 31 MARCH 2009Salary(Bands of£5,000)RealIncreasesin pensionat age 60(Bands of£2,500)TotalPensionAccruedat age 60at 31March(Bands of£5,000)CashEquivalentTransferValue(CETV) atMarch2008CashEquivalentTransferValue(CETV) atMarch2009Realincreasein CETV inyearBenefits inKind£'000 £'000 £'000 £'000 £'000 £'000 £'000Remuneration of:Executive MembersChief Executive: W Hatton 145-150 * * * * * 0.0Director of Public Health: C Davidson 165-170 0-2.5 35-40 576 753 45 0.0Director of Finance: D Lindsay 110-115 0-2.5 15-20 219 296 31 2.8Director of Policy,Planning and Performance: A Gunning 125-130 0-2.5 35-40 567 766 56 0.0Medical Director: R Masterton 235-240 2.5-5.0 45-50 714 1019 127 1.9Nurse Director: F McQueen 100-105 2.5-5.0 25-30 385 525 82 2.8Director of Organisational & HR Development: C Lisle 90-95 0-2.5 20-25 282 397 77 0.0Non Executive MembersChair: W Stevely 25-30 0 0 0 0 0M Cheyne 10-15 0 0 0 0 0D O'Neill 5-10 0 0 0 0 0R Miller 10-15 0 0 0 0 0C Duncan 10-15 0 0 0 0 0E O'Connell 5-10 0 0 0 0 0D Price 10-15 0 0 0 0 0K Darwent 10-15 0 0 0 0 0Dr H McCallum(from 1 March 2009) *** 0 0 0 0 0W Hislop 5-10 0 0 0 0 0AG McHattie(until 28 February 2009) *** 0 0 0 0 0D Filson 5-10 0 0 0 0 0R Reid 5-10 0 0 0 0 0G Watson 5-10 0 0 0 0 0J Dever 5-10 0 0 0 0 0J Callaghan 5-10 0 0 0 0 00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.0*consent to disclosure withheld***Remuneration Waived2,743 3,756 418 7.5Page 30 of 136

NHS Board Meeting23 June 2010 Paper 5Ayrshire and Arran Health BoardRemuneration ReportFOR THE YEAR ENDED 31 MARCH 2010Salary(Bands of£5,000)RealIncreasesin pensionat age 60(Bands of£2,500)TotalPensionAccruedat age 60at 31March(Bands of£5,000)CashEquivalentTransferValue(CETV) atMarch2009CashEquivalentTransferValue(CETV) atMarch2010Realincreasein CETV inyearBenefits inKind£'000 £'000 £'000 £'000 £'000 £'000 £'000Remuneration of:Executive MembersChief Executive: W Hatton 150-155 * * * * * 0.0Director of Public Health: C Davidson 175-180 2.5-5 40-45 774 875 55 0.0Director of Finance: D Lindsay 115-120 0-2.5 20-25 305 346 22 0.0Director of Policy,Planning and Performance: A Gunning 130-135 0-2.5 40-45 788 856 28 0.0Medical Director: R Masterton 255-260 0-2.5 45-50 1046 1134 32 1.9Nurse Director: F McQueen 105-110 0-2.5 30-35 540 590 18 2.7Director of Organisational & HR Development: C Lisle (until 190410) 0 0 0 0 0 0 0.0Non Executive MembersChair: W Stevely 30-35 0 0 0 0 0M Cheyne 15-20 0 0 0 0 0D O'Neill 5-10 0 0 0 0 0R Miller 15-20 0 0 0 0 0C Duncan 10-15 0 0 0 0 0E O'Connell 5-10 0 0 0 0 0D Price 20-25 0 0 0 0 0K Darwent 10-15 0 0 0 0 0Dr H McCallum 5-10 0 0 0 0 0W Hislop 5-10 0 0 0 0 0D Filson 5-10 0 0 0 0 0R Reid (until 28 February 2010) 5-10 0 0 0 0 0G Watson 5-10 0 0 0 0 0J Dever 5-10 0 0 0 0 0J Callaghan (employee director) 50-55 0 0 0 0 0H Hunter (from 1 March 2010) 0 0 0 0 0 00.00.00.00.00.00.00.00.00.00.00.00.00.00.02.20.0*consent to disclosure withheld3,453 3,801 155 6.8NOTE:The opening CETV for March 2009 is different from the closing balance in the accounts for 31 March 2009. This is because the CETV calculator is obtained from thecivil service pensions and is updated for the NHS pension scheme for factors advised by the Government Actuary's Department (GAD)The employee directors salary includes £40,000 - £45,000 in respect of non Board duties.Signed……………………………….................................... Date..................................Chief Executive as Accountable OfficerPage 31 of 136

NHS Board Meeting23 June 2010 Paper 5AYRSHIRE & ARRAN HEALTH BOARDANNUAL ACCOUNTS 2009/10STATEMENT OF THE CHIEF EXECUTIVE’S RESPONSIBILITIES AS THEACCOUNTABLE OFFICER OF THE HEALTH BOARDUnder Section 15 of the Public Finance and Accountability (Scotland) Act, 2000,The Principal Accountable Officer (PAO) of the Scottish Executive hasappointed me as Accountable Officer of Ayrshire & Arran Health Board.This designation carries with it, responsibility for:• the propriety and regularity of financial transactions under my control;• for the economical, efficient and effective use of resources placed at theBoard’s disposal; and• safeguarding the assets of the board.In preparing the accounts I am required to comply with the requirements of thegovernment’s Financial Reporting Manual and in particular to:• observe the accounts direction issued by Scottish Ministers including therelevant accounting and disclosure requirements and apply suitableaccounting policies on a consistent basis;• make judgements and estimates on a reasonable basis;• state whether applicable accounting standards as set out in thegovernment Financial Reporting Manual have been followed and discloseand explain any material departures; and• prepare the accounts on a going concern basisI am responsible for ensuring proper records are maintained and that theAccounts are prepared under the principles and in the format directed byScottish Ministers. To the best of my knowledge and belief, I have properlydischarged my responsibilities as accountable officer as intimated in theDepartmental Accountable Officers letter to me of the 25 th July 2000.Signed ……………………………… Date ………………………………Chief ExecutiveAYRSHIRE & ARRAN HEALTH BOARDPage 32 of 136

NHS Board Meeting23 June 2010 Paper 5ANNUAL ACCOUNTS 2009/10STATEMENT OF HEALTH BOARD MEMBERS’ RESPONSIBILITIES IN RESPECTOF THE ACCOUNTSUnder the National Health Service (Scotland) Act 1978, the Health Board is requiredto prepare accounts in accordance with the directions of Scottish Ministers whichrequire that those accounts give a true and fair view of the state of affairs of theHealth Board as at 31 March 2010 and of its operating costs for the year then ended.In preparing these accounts the Directors are required to:• Apply on a consistent basis the accounting policies and standards approvedfor the NHSScotland by Scottish Ministers.• Make judgements and estimates that are reasonable and prudent.• State where applicable accounting standards have not been followed wherethe effect of the departure is material.• Prepare the accounts on the going concern basis unless it is inappropriate topresume that the Board will continue to operate.The Health Board members are responsible for ensuring that proper accountingrecords are maintained which disclose with reasonable accuracy at any time thefinancial position of the Board and enable them to ensure that the accounts complywith the National Health Service (Scotland) Act 1978 and the requirements of theScottish Government Health Department. They are also responsible for safeguardingthe assets of the Board and hence taking reasonable steps for the prevention offraud and other irregularities.The NHS Board members confirm they have discharged the above responsibilitiesduring the financial year and in preparing the accounts.Director of FinanceChairmanDatePage 33 of 136

NHS Board Meeting23 June 2010 Paper 5STATEMENT ON INTERNAL CONTROLScope of ResponsibilityAs Accountable Officer, I have responsibility for maintaining a sound system ofinternal control that supports the achievement of the organisation’s policies, aims andobjectives, set by Scottish Ministers, whilst safeguarding the public funds and assetsfor which I am personally responsible, in accordance with the responsibilitiesassigned to me.Each of the Board’s four governance committees own corporate risks relevant to theirremit and receive biannual reports on these. Eight risks were scored as high risk onthe Corporate Risk Register at March 2010, however following review by theDirectors’ Team, the following four are most significant:-• Failure to implement NHS QIS clinical governance and risk managementstandards• Not achieving current waiting times guarantees within orthopaedics• Unsafe staffing levels in accident & emergency departments• Achieving the HEAT sickness absence target of 4%In autumn 2009 NHS Ayrshire and Arran submitted written evidence to NHS QISagainst their clinical governance and risk management standards. This was followedin January 2010 by a two day visit by the inspection team. The outcome is that NHSAyrshire and Arran has moved from an assessment of 6 to an improved level of 8.Section 3 of the Operating and Financial Review shows the performance against keynon-financial targets. HEAT target A10a shows “red” because at 31 March 2010,NHS Ayrshire and Arran had 20 orthopaedic patients waiting over 12 weeks forinpatient/day case treatment. In 2009/10 over £2.5 million was spent on the privatesector to treat orthopaedic patients as well as £581,000 on internal waiting listinitiatives. A Lean review of orthopaedic processes has identified significantproductivity improvement opportunities and it is proposed to increase internalcapacity in 2010/11. An option appraisal will also be completed since both electiveand emergency orthopaedics are currently provided on both Ayr and Crosshousesites.When the SNP government came into office in May 2007, they reversed the approvalof the previous administration to move from two to one full accident & emergency sitefor Ayrshire and Arran. As a result over £500,000 has been invested in additionalmedical staffing, however levels of consultant staffing in the accident & emergencydepartments has been a problem despite considerable expenditure on medicallocums each year.Monitoring of sickness absence is done by senior management on a monthly basisand many staff have attended “Promoting Attendance” training. Significantimprovement in sickness absence rates were seen during 2009/10 with the ratereducing from 5.47% in 2008/09 to 4.93% in 2009/10. This still is above the standardaimed for of 4%.Page 34 of 136

NHS Board Meeting23 June 2010 Paper 5The Scottish Public Finance Manual (SPFM) is issued by the Scottish Ministers toprovide guidance to the Scottish Government and other relevant bodies on theproper handling and reporting of public funds. It sets out the relevant statutory,parliamentary and administrative requirements, emphasises the need for economy,efficiency and effectiveness, and promotes good practice and high standards orpropriety.Purpose of the System of Internal ControlThe system of internal control is designed to manage rather than eliminate the risk offailure to achieve the organisation’s aims and objectives; it can therefore only providereasonable and not absolute assurance of effectiveness.The system of internal control is based on an ongoing process designed to identifyand prioritise the principal risks to the achievement of the organisation’s aims andobjectives, to evaluate the nature and extent of those risks and to manage themefficiently, effectively and economically.The process within the organisation accords with guidance from the ScottishMinisters in the SPFM and supplementary NHS guidance and has been in place forthe year up to the date of approval of the annual report and accounts.Risk and Control FrameworkAll NHS Scotland bodies are subject to the requirements of the Scottish PublicFinance Manual (SPFM) and must operate a risk management strategy inaccordance with relevant guidance issued by Scottish Ministers. The generalprinciples for a successful risk management strategy are set out in the SPFM.An updated risk management strategy was approved at the October 2009 Boardmeeting. During the year a new risk register information system, (Datix) wasimplemented and supported by training for staff and the risk management annualreport for 2009/10 was considered by Board members at their meeting on 9 June2010.More generally, the organisation is committed to a process of continuousdevelopment and improvement: developing systems in response to any relevantreviews and developments in best practice in this area. In particular, in the periodcovering the year to 31 March 2010 and up to the signing of the accounts theorganisation has:• led a financial services Consortium and host six other Boards (which requireda SAS 70 report to be produced)• completed our review of primary care services• continued implementation of our mental health strategyReview of EffectivenessAs Accountable Officer, I also have responsibility for reviewing the effectiveness ofthe system of internal control.Page 35 of 136

NHS Board Meeting23 June 2010 Paper 5My review of the effectiveness of the system of internal control is informed by:• the executive directors within the organisation who have responsibility for thedevelopment and maintenance of the internal control framework;• the work of the internal auditors , who submit to the organisation's AuditCommittee regular reports which include their independent and objectiveopinion on the adequacy and effectiveness of the organisation's systems ofinternal control together with recommendations for improvement;• and comments made by the external auditors in their management letters andother reports.The Audit Committee meets regularly and receives reports from both internal andexternal auditors. Recommendations receive appropriate management responses.Internal Audit (PricewaterhouseCoopers LLP) and external audit (KPMG LLP) reportregularly to the Audit Committee and the minutes are presented to the NHS Board bythe chair of the Audit Committee. Relevant governance committees receive reportson actions agreed to progress external reports such as those produced by AuditScotland.Appropriate action is in place to address weaknesses identified and to ensure thecontinuous improvement of the system. This includes actions to identify efficiencysavings in all areas and production of an Efficiency & Productivity plan.Other than those set out above, there were no significant control weaknesses. norfailure to achieve the standards set out in the guidance on the Statement on InternalControl.Signed ………………………………………….Chief ExecutiveDate ……………….Page 36 of 136

NHS Board Meeting23 June 2010 Paper 5Independent auditors’ report to the members of Ayrshire and Arran Health Board, the Auditor General forScotland and the Scottish ParliamentWe have audited the financial statements of Ayrshire and Arran Health Board for the year ended 31 March 2010under the National Health Service (Scotland) Act 1978. These comprise the Operating Cost Statement, theBalance Sheet, the Cash Flow Statement, the Statement of Changes in Taxpayers’ Equity, and the related notes.These financial statements have been prepared under the accounting policies set out within them. We have alsoaudited the information in the Remuneration Report that is described in that report as having been audited.This report is made solely to Ayrshire and Arran Health Board and to the Auditor General for Scotland inaccordance with sections 21 and 22 of the Public Finance and Accountability (Scotland) Act 2000. Our audit workhas been undertaken so that we might state to those two parties those matters we are required to state to them inan auditors’ report and for no other purpose. In accordance with the Code of Audit Practice approved by theAuditor General for Scotland, this report is also made to the Scottish Parliament, as a body. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other than Ayrshire and Arran HealthBoard and the Auditor General for Scotland, for this report, or the opinions we have formed.Respective responsibilities of the board, Chief Executive and auditorThe board and Chief Executive are responsible for preparing the Annual Report, which includes theRemuneration Report, and the financial statements in accordance with the National Health Service (Scotland) Act1978 and directions made thereunder by the Scottish Ministers. The Chief Executive is also responsible forensuring the regularity of expenditure and income. These responsibilities are set out in the Statement of the ChiefExecutive’s Responsibilities as the Accountable Officer of the Health Board.Our responsibility is to audit the financial statements and the part of the Remuneration Report to be audited inaccordance with relevant legal and regulatory requirements and with International Standards on Auditing (UK andIreland) as required by the Code of Audit Practice approved by the Auditor General for Scotland.We report to you our opinion as to whether the financial statements give a true and fair view and whether thefinancial statements and the part of the Remuneration Report to be audited have been properly prepared inaccordance with the National Health Service (Scotland) Act 1978 and directions made thereunder by the ScottishMinisters. We report to you whether, in our opinion, the information which comprises the Operating and FinancialReview and Directors’ Report, included in the Annual Report, is consistent with the financial statements. We alsoreport whether in all material respects the expenditure and income shown in the financial statements wereincurred or applied in accordance with any applicable enactments and guidance issued by the Scottish Ministers.In addition, we report to you if, in our opinion, the body has not kept proper accounting records, if we have notreceived all the information and explanations we require for our audit, or if information specified by relevantauthorities regarding remuneration and other transactions is not disclosed.We review whether the Statement on Internal Control reflects the Board’s compliance with the ScottishGovernment Health Directorate’s guidance, and we report if, in our opinion, it does not. We are not required toconsider whether this statement covers all risks and controls, or form an opinion on the effectiveness of thebody’s corporate governance procedures or its risk and control procedures.We read the other information contained in the Annual Report and consider whether it is consistent with theaudited financial statements. This other information comprises only the part of the Remuneration Report that isnot audited. We consider the implications for our report if we become aware of any apparent misstatements ormaterial inconsistencies with the financial statements. Our responsibilities do not extend to any other information.Basis of audit opinionWe conducted our audit in accordance with the Public Finance and Accountability (Scotland) Act 2000 andInternational Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board as required by theCode of Audit Practice approved by the Auditor General for Scotland. An audit includes examination, on a testbasis, of evidence relevant to the amounts, disclosures and regularity of expenditure and income included in thefinancial statements and the part of the Remuneration Report to be audited. It also includes an assessment of thesignificant estimates and judgements made by the board and Chief Executive in the preparation of the financialstatements, and of whether the accounting policies are most appropriate to the body’s circumstances, consistentlyapplied and adequately disclosed.Page 37 of 136

NHS Board Meeting23 June 2010 Paper 5Independent auditors’ report to the members of Ayrshire and Arran Health Board, the Auditor General forScotland and the Scottish Parliament (continued)We planned and performed our audit so as to obtain all the information and explanations which we considerednecessary in order to provide us with sufficient evidence to give reasonable assurance that the financialstatements and the part of the Remuneration Report to be audited are free from material misstatement, whethercaused by fraud or error, and that in all material respects the expenditure and income shown in the financialstatements were incurred or applied in accordance with any applicable enactments and guidance issued by theScottish Ministers. In forming our opinion we also evaluated the overall adequacy of the presentation ofinformation in the financial statements and the part of the Remuneration Report to be audited.OpinionsFinancial statementsIn our opinion• the financial statements give a true and fair view, in accordance with the National Health Service (Scotland)Act 1978 and directions made thereunder by the Scottish Ministers, of the state of affairs of the Board as at31 March 2010 and of its net operating cost position, changes in taxpayers’ equity and cash flows for the yearthen ended;• the financial statements and the part of the Remuneration Report to be audited have been properly preparedin accordance with the National Health Service (Scotland) Act 1978 and directions made thereunder by theScottish Ministers; and• information which comprises the Operating and Financial Review and Directors’ Report, included in theAnnual Report, is consistent with the financial statements.RegularityIn our opinion in all material respects the expenditure and income shown in the financial statements were incurredor applied in accordance with any applicable enactments and guidance issued by the Scottish Ministers.DJ WattFor and on behalf of KPMG LLP, Statutory AuditorChartered Accountants191 West George StreetGlasgowG2 2LJ[date]Page 38 of 136

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NHS Board Meeting23 June 2010 Paper 5Note 1NHS AYRSHIRE AND ARRANACCOUNTING POLICIES1. AuthorityIn accordance with the accounts direction issued by Scottish Ministers undersection 19(4) of the Public Finance and Accountability (Scotland) Act 2000appended, these Accounts have been prepared in accordance with theGovernment Financial Reporting Manual (FReM) issued by HM Treasury,which follows International Financial Reporting Standards as adopted by theEuropean Union (IFRSs as adopted by the EU), IFRIC Interpretations and theCompanies Act 2006 to the extent that they are meaningful and appropriate tothe public sector. They have been applied consistently in dealing with itemsconsidered material in relation to the accounts.The preparation of financial statements in conformity with IFRS requires theuse of certain critical accounting estimates. It also requires management toexercise its judgement in the process of applying the accounting policies. Theareas involving a higher degree of judgement or complexity, or areas whereassumptions and estimates are significant to the financial statements, aredisclosed in section 29 below.2. First time adoption of International Financial Reporting StandardsThese financial statements have been prepared under International FinancialReporting Standards for the first time and the comparatives have beenrestated from UK Generally Accepted Accounting Policy (UK GAAP) whererequired. The reconciliation to IFRS from the previous UK GAAP accounts issummarised at Note 30.New Financial Instruments Standards FRS 25, FRS 26 and FRS 29 asinterpreted and adapted by the Government Financial Reporting Manual(FReM) were adopted under UK GAAP in 2008-09. Prior year comparativesfor 2007-08 were restated to reflect these standards. These standards areidentical to their equivalent IFRS standards, IAS 32, IAS 39 and IFRS 7.3. Going ConcernThe accounts are prepared on the going concern basis, which provides thatthe entity will continue in operational existence for the foreseeable future.4. Accounting ConventionThe Accounts are prepared on a historical cost basis, as modified by therevaluation of property, plant and equipment, intangible assets, inventories,available-for-sale financial assets and financial assets and liabilities at fairvalue.5. FundingMost of the expenditure of the Health Board as Commissioner is met fromfunds advanced by the Scottish Government within an approved revenueresource limit. Cash drawn down to fund expenditure within this approvedrevenue resource limit is credited to the general fund.Page 44 of 136

NHS Board Meeting23 June 2010 Paper 5All other income receivable by the Board that is not classed as funding isrecognised in the year in which it is receivable.Where income is received for a specific activity which is to be delivered in thefollowing financial year, that income is deferred.Income from the sale of non-current assets is recognised only when allmaterial conditions of sale have been met, and is measured as the sums dueunder the sale contract.Non discretionary funding outwith the RRL is allocated to match actualexpenditure incurred for the provision of specific pharmaceutical, dental orophthalmic services identified by the Scottish Government. Non discretionaryexpenditure is disclosed in the accounts and deducted from operating costs,charged against the RRL in the Statement of Resource Outturn.Funding for the acquisition of fixed assets received from the ScottishGovernment is credited to the general fund when cash is drawn down.Expenditure on goods and services is recognised when and to the extent thatthey have been received, and is measured at the fair value of those goods andservices. Expenditure is recognised in the operating cost statement exceptwhere it results in the creation of a non-current asset such as property, plantand equipment.6. Property, plant and equipmentThe treatment of fixed assets in the accounts (capitalisation, valuation,depreciation, particulars concerning donated assets) is in accordance with theNHS Capital Accounting Manual.Title to properties included in the accounts is held by Scottish Ministers.6.1 RecognitionProperty, Plant and Equipment is capitalised where: it is held for use indelivering services or for administrative purposes; it is probable that futureeconomic benefits will flow to, or service potential be provided to, the Board; itis expected to be used for more than one financial year; and the cost of theitem can be measured reliably.All assets falling into the following categories are capitalised:1) Property, plant and equipment assets which are capable of beingused for a period which could exceed one year, and have a costequal to or greater than £5,000.2) In cases where a new hospital would face an exceptional write off ofitems of equipment costing individually less than £5,000, the Boardhas the option to capitalise initial revenue equipment costs with astandard life of 10 years.3) Assets of lesser value may be capitalised where they form part of agroup of similar assets purchased at approximately the same timePage 45 of 136

NHS Board Meeting23 June 2010 Paper 5and cost over £20,000 in total, or where they are part of the initialcosts of equipping a new development and total over £20,000.Where a large asset, for example a building, includes a number ofcomponents with significantly different asset lives e.g. plant and equipment,then these components are treated as separate assets and depreciated overtheir own useful economic lives.6.2 MeasurementValuation:All property, plant and equipment assets are measured initially at cost, representingthe costs directly attributable to acquiring or constructing the asset and bringing it tothe location and condition necessary for it to be capable of operating in the mannerintended by management.All assets are measured subsequently at fair value as follows:Specialised NHS Land, buildings, equipment, installations and fittings are stated atdepreciated replacement cost, as a proxy for fair value as specified in the FReM.Those buildings which qualify as specialist operational assets, and therefore fall to beassessed using the Depreciated Replacement Cost, (DRC) approach, have beenvalued on a replacement basis; ie the valuation approach assumes that the existingasset will be replaced by an asset of similar design to the original and constructedusing similar materials, except those hospitals built circa 1900, which in accordancewith the Board’s instructions have been valued on a modern equivalent asset basis(as allowed under RICS standards covering “The Depreciated Replacement CostMethod of Valuation for Financial Reporting”.Non specialised land and buildings, such as offices, are stated at fairvalue.Valuations of all land and building assets are reassessed by valuers under a 5-year programme of annual professional valuations including valuer’s views on valueadding / non value adding elements in the annual capital programme. The valuationsare carried out in accordance with the Royal Institution of Chartered Surveyors(RICS) Appraisal and Valuation Manual insofar as these terms are consistent withthe agreed requirements of the Scottish Government.Non specialised equipment, installations and fittings are valued at fair value. Boardsvalue such assets using the most appropriate valuation methodology available (forexample, appropriate indices). A depreciated historical cost basis is used as a proxyfor fair value in respect of such assets which have short useful lives or low values (orboth).Assets under construction are valued at current cost. This is calculated by theexpenditure incurred to which an appropriate index is applied to arrive at currentvalue. These are also subject to impairment review.To meet the underlying objectives established by the Scottish Government thefollowing accepted variations of the RICS Appraisal and Valuation Manual have beenrequired:Page 46 of 136

NHS Board Meeting23 June 2010 Paper 5Specialised operational assets are valued on a modified replacement cost basis totake account of modern substitute building materials and locality factors only.Subsequent expenditure:Subsequent expenditure is capitalised into an asset’s carrying value when it isprobable the future economic benefits associated with the item will flow to the Boardand the cost can be measured reliably. Where subsequent expenditure does notmeet these criteria the expenditure is charged to the operating cost statement. If partof an asset is replaced, then the part it replaces is de-recognised, regardless ofwhether or not it has been depreciated separately.Revaluations and Impairment:Increases in asset values arising from revaluations are recognised in the revaluationreserve, except where, and to the extent that, they reverse an impairment previouslyrecognised in the operating cost statement, in which case they are recognised asincome. Movements on revaluation are considered for individual assets rather thangroups or land/buildings together.Decreases in asset values and impairments are charged to the revaluation reserve tothe extent that there is an available balance for the asset concerned, and thereafterare charged to the operating cost statement.6.3 DepreciationItems of Property, Plant and Equipment are depreciated to their estimated residualvalue over their remaining useful economic lives in a manner consistent with theconsumption of economic or service delivery benefits.Depreciation is charged on each main class of tangible asset as follows:1) Freehold land is considered to have an infinite life and is not depreciated.2) Assets in the course of construction are not depreciated until the asset isbrought into use or reverts to the Board, respectively.3) Property, Plant and Equipment which has been reclassified as ‘Held for Sale’ceases to be depreciated upon the reclassification.4) Buildings, installations and fittings are depreciated on current value over theestimated remaining life of the asset, as advised by the appointed valuer.They are assessed in the context of the maximum useful lives for buildingelements.5) Equipment is depreciated over the estimated life of the asset.6) Property, plant and equipment held under finance leases is depreciatedover the shorter of the lease term and the estimated useful life.Depreciation is charged on a straight line basis.The following asset lives have been used:Asset Category/ComponentUseful Life(years)Buildings 24-45Moveable Engineering Plant/Long Life Medical 15EquipmentFurniture and Medium Life Medical Equipment 10Information Technology 5Page 47 of 136

NHS Board Meeting23 June 2010 Paper 5Vehicles and Soft Furnishings 5Office, Short Life Medical and Other Equipment 57. Intangible Assets7.1 RecognitionIntangible assets are non-monetary assets without physical substance which arecapable of being sold separately from the rest of the Board’s business or which arisefrom contractual or other legal rights. They are recognised only where it is probablethat future economic benefits will flow to, or service potential be provided to, theBoard and where the cost of the asset can be measured reliably.Intangible assets that meet the recognition criteria are capitalised when they arecapable of being used in a Board’s activities for more than one year and they have acost of at least £5,000. The main classes of intangible assets recognised are:Carbon Emissions (Intangible Assets):A cap and trade scheme gives rise to an asset for allowances held, a governmentgrant and a liability for the obligation to deliver allowances equal to emissions thathave been made.Intangible Assets, such as EU Greenhouse Gas Emission Allowances intended to beheld for use on a continuing basis whether allocated by government or purchased areclassified as intangible assets. Allowances that are issued for less than their fairvalue are measured initially at their fair value.When allowances are issued for less than their fair value, the difference between theamount paid and fair value is revaluation and charged to the government grantreserve. The government grant reserve is charged with the same proportion of theamount of the revaluation, which the amount of the grant bears to the acquisition costof the asset.A provision is recognised for the obligation to deliver allowances equal to emissionsthat have been made. It is measured at the best estimate of the expenditure requiredto settle the present obligation at the balance sheet date. This will usually be thepresent market price of the number of allowances required to cover emissions madeup to the balance sheet date.7.2 MeasurementValuation:Intangible assets are recognised initially at cost, comprising all directly attributablecosts needed to create, produce and prepare the asset to the point that it is capableof operating in the manner intended by management.Subsequently intangible assets are measured at fair value. Where an active(homogeneous) market exists, intangible assets are carried at fair value. Where noactive market exists, the intangible asset is revalued, using indices or some suitablemodel, to the lower of depreciated replacement cost or value in use where the assetis income generating. Where there is no value in use, the intangible asset is valuedusing depreciated replacement cost. These measures are a proxy for fair value.Page 48 of 136

NHS Board Meeting23 June 2010 Paper 5Revaluation and impairment:Increases in asset values arising from revaluations are recognised in the revaluationreserve, except where, and to the extent that, they reverse an impairment previouslyrecognised in the operating cost statement, in which case they are recognised inincome.Decreases in asset values and impairments are charged to the revaluation reserve tothe extent that there is an available balance for the asset concerned, and thereafterare charged to the operating cost statement.Intangible assets held for sale are reclassified to ‘non-current assets held for sale’measured at the lower of their carrying amount or ‘fair value less costs to sell’.7.3 AmortisationIntangible assets are amortised to their estimated residual value over their remaininguseful economic lives in a manner consistent with the consumption of economic orservice delivery benefits.Amortisation is charged to the operating cost statement on each main class ofintangible assets as follows:Internally generated intangible assets. Amortised on a systematic basis over theperiod expected to benefit from the project. Software. Amortised over their expecteduseful life. Software licences. Amortised over the shorter term of the licence andtheir useful economic lives. Other intangible assets. Amortised over their expecteduseful life. Intangible assets which has been reclassified as ‘Held for Sale’ ceases tobe amortised upon the reclassification.Amortisation is charged on a straight line basis.The following asset lives have been used:Asset Category/ComponentUseful Life(years)Buildings 24-45Moveable Engineering Plant/Long Life Medical 15EquipmentFurniture and Medium Life Medical Equipment 10Information Technology 5Vehicles and Soft Furnishings 5Office, Short Life Medical and Other Equipment 58. Non-current assets held for saleNon-current assets intended for disposal are reclassified as ‘Held for Sale’ once all ofthe following criteria are met:• the asset is available for immediate sale in its present condition subjectonly to terms which are usual and customary for such sales;• the sale must be highly probable i.e.:• management are committed to a plan to sell the asset;Page 49 of 136

NHS Board Meeting23 June 2010 Paper 5• an active programme has begun to find a buyer and complete thesale;• the asset is being actively marketed at a reasonable price;• the sale is expected to be completed within 12 months of the date ofclassification as ‘Held for Sale’; andthe actions needed to complete the plan indicate it is unlikely that the plan will bedropped or significant changes made to it.Following reclassification, the assets are measured at the lower of their existingcarrying amount and their ‘fair value less costs to sell’. Depreciation ceases to becharged and the assets are not revalued, except where the ‘fair value less costs tosell’ falls below the carrying amount. Assets are de-recognised when all material salecontract conditions have been met.Property, plant and equipment which is to be scrapped or demolished does notqualify for recognition as ‘Held for Sale’ and instead is retained as an operationalasset and the asset’s economic life is adjusted. The asset is de-recognised whenscrapping or demolition occurs.9. Donated AssetsNon-current assets that are donated or purchased using donated funds are includedin the Balance Sheet initially at the current full replacement cost of the asset. Thevalue of donated assets is credited to the Donated Asset Reserve. Where a donationcovers only part of the total cost of the asset concerned, only that part element isincluded in the Donated Asset Reserve.The accounting treatment, including the method of valuation, follows the rules in theNHS Capital Accounting Manual. Gains and losses on revaluations are also taken tothe donated asset reserve and, each year, an amount equal to the depreciationcharge on the asset is released from the donated asset reserve to the operating coststatement. Similarly, any impairment on donated assets charged to the operatingcost statement is matched by a transfer from the donated asset reserve. On sale ofdonated assets, the net book value of the donated asset is transferred from thedonated asset reserve to the General Fund.10. Sale of Property, plant and equipment, intangible assets and non-currentassets held for saleDisposal of non-current assets is accounted for as a reduction to the value of assetsequal to the net book value of the assets disposed. When set against any salesproceeds, the resulting gain or loss on disposal will be recorded in the OperatingCost Statement. Non-current assets held for sale will include assets transferred fromother categories and will reflect any resultant changes in valuation.11. LeasingFinance leasesWhere substantially all risks and rewards of ownership of a leased asset are borneby the Board, the asset is recorded as Property, Plant and Equipment and acorresponding liability is recorded. The value at which both are recognised is thelower of the fair value of the asset or the present value of the minimum leasepayments, discounted using the interest rate implicit in the lease. The implicit interestrate is that which produces a constant periodic rate of interest on the outstandingPage 50 of 136