Ex-managers reported over a £46m hole in hospitals trust finances

NEW LEADERSHIP PROMISE THAT ISSUES WILL BE ADDRESSED

TWO former senior NHS bosses have been reported to regulators after a £46 million hole was found in accounts of Leicester’s hospitals.

John Adler, former chief executive at University Hospitals of Leicester (UHL) NHS Trust and its ex-chief financial officer Paul Traynor have been referred to the Care Quality Commission (CQC) under its fit and proper person process.

The move comes after a National Audit Office (NAO) report said there had been an “unprecedented” failure by the trust to provide true and fair accounts.

NHS England launched an investigation into the trust last year after it retrospectively altered its 2018-19 accounts to add £46.2 million to its deficit for the year.

It had declared it had outspent its income by £84.1 million but had to increase that to £130.3 million.

NHS England said: “The former chief executive and former chief financial officer of University Hospitals of Leicester have both been referred to the CQC under the fit and proper person process and, in the case of the ex-chief financial officer, to the accounting professional body”.

A CQC spokesman said it had received a referral which it is “currently considering”.

A spokesman said: “We are unable to disclose further details at this time.”

The trust was placed in financial special measures in July 2020 “as part of a reset of expectations of financial discipline and performance”.

In his recent report, NAO comptroller and auditor general Gareth Davies said UHL auditor, Grant Thornton, had last year made him aware “of significant issues that are indicative of management override of control at that trust”.

Mr Davies said: “The draft financial statements UHL submitted for audit included prior year adjustments of £46 million.

“UHL’s auditor subsequently identified further significant techni cal accounting issues in the trust’s accounting records for 2019-20.

“These include but are not limited to: non or inaccurate recognition of expenditure and payables; disagreement over the classification of a significant lease agreement; material errors in the valuation of the property estate; and inappropriate recognition of income.

“The auditor also noted adjustments appear to have been made in the 2018-19 financial statements at the request of UHL’s management to achieve a certain outcome rather than to represent accurately the economic reality of transactions into which UHL entered.

“The auditor’s findings relate to accounting judgements and manual intervention associated with the previous senior leadership regime at UHL and continued failures in the management and control of accounting records.”

He noted that, at the date of his report, UHL’s management were not prepared to sign the draft 2019-20 accounts as true and fair and the auditor was of the view that the accounts were not true and fair.

Mr Davies said: “The position at UHL is, to my knowledge, unprecedented. An NHS trust has failed to comply with the Secretary of State’s direction to prepare true and fair accounts and to maintain appropriate accounting records.”

Attempts have been made to contact Mr Adler, who took sick leave in March last year before retiring last summer.

We have also attempted to contact Mr Traynor, who quit his £195,000 UHL post in October 2019 and is now finance director of the Open University.

Neither has so far responded. UHL’s trust board of trustees was due to discuss the situation today but has released Grant Thornton’s report.

The auditor said: “We reported significant errors in the trust’s 2017/18 and 2018/19 financial statements.

“The trust has proposed a series of prior period adjustments to correct these errors.

“These issues have also impacted on the quality of the 2019/20 financial statements presented for audit.”

Grant Thornton said there were “aggressive accounting policies it did not consider appropriate”.

The auditor said its attempts to challenge UHL management were not welcomed and resulted in a private report being taken to the trust’s audit committee in July 2019 about whether it should be replaced with another firm.

Grant Thornton said: “During the 2019/20 audit we have been provided with anecdotal evidence that management may have deliberately misreported the trust’s financial position and of potential collusion with other NHS commissioners. During our appointment as auditors we have become increasingly concerned with the governance and culture at the trust.

“We consider the financial pressure on the trust and a lack of challenge of management has resulted in inadequate governance.

“We also consider the trust has prioritised the delivery of the control total rather than accurate financial reporting.

“We consider urgent action is needed to strengthen the governance arrangements of trust.”

Trust chairman Karamjit Singh said: “The trust board takes this very seriously and although the Auditor General refers to the ‘accounting judgments and manual intervention associated with the previous senior leadership regime’, I am absolutely clear the responsibility for exposing and addressing these issues sits with me and my board colleagues.

“The board were not prepared to adopt the accounts because they did not reflect a true and fair record despite the exhaustive efforts made by our external auditor.

“As the board for a major public body we have a responsibility to taxpayers to show we can operate with effective governance and control.

“Our job is to get to the bottom of this and we are unflinching in our determination to correct what has happened and put in place meas to make sure it cannot happen again.”

New chief financial officer Simon Lazarus said: “Since joining the trust I have received nothing but support and encouragement from colleagues on the board to complete the hard work of getting to the bottom of the trust’s financial position.

“Due to the scale and complexity of the task this work is still ongoing but a huge amount of progress has already been made.

“Further work is planned to enable the trust to file restated audited accounts for 2019/20 and audited accounts for 2020/21 by August.

“I have also been able to strengthen the finance team and improve the financial governance processes of the trust”.

Acting chief executive Rebecca Brown said: “In the midst of all the other challenges we face this is clearly unwelcome but the board’s decision not to adopt the accounts because we cannot state they are true and fair is the right thing to do.

“This is a painful but necessary process and I am grateful to our external auditors and the new senior finance team for the many hundreds of hours’ work that they have already put into creating a set of accounts we can stand by.

“There is still more work to do but I’m confident we will get to an agreed position in the not too distant future.”