Date: Tuesday 14 March 2023
Sponsor: Andrew Sanderson, Director General, Finance, Commercial and Corporate Services
Presenter: Andrew Sanderson
Purpose of the paper
The purpose of the paper is to give an overview of the UK Health Security Agency’s (UKHSA) finances as at month 10 financial year 2022 to 2023 (end of January 2023). At the time of submitting, the month 11 (end of February 2023) figures were being finalised.
Recommendation
The Advisory Board is asked to note UKHSA’s financial position.
Summary of in-year 2022 to 2023 financial performance
At end of January 2023.
The table below shows resource and capital departmental expenditure limits, split by the 3 parts of:
- core agency costs
- coronavirus (COVID-19)
- vaccines and countermeasures, including the Covid Vaccine Unit (CVU)
It shows year-to-date budget and spending for April to January, and budget and forecast outturn for the full year.
Table 1: resource departmental expenditure limits (RDEL) and capital departmental expenditure limits (CDEL)
Figures shown reflect millions (£’m)
| Budget (year to date) | Actual (year to date) | Variance (year to date) | Budget (full year) | Outturn (full year) | Variance (full year) | |
|---|---|---|---|---|---|---|
| Core RDEL | 368 | 344 | 24 (6%) | 463 | 416 | 47 (10%) |
| COVID RDEL | 1,493 | 1,111 | 382 (26%) | 2,086 | 1,608 | 478 (23%) |
| UKHSA RDEL | 1,861 | 1,455 | 406 (22%) | 2,549 | 2,024 | 525 (21%) |
| Core CDEL | 69 | 65 | 4 (5%) | 136 | 97 | 38 (28%) |
| COVID CDEL | (88) | (62) | (26 (29%)) | (140) | (136) | (4 (3%)) |
| UKHSA CDEL | (19) | 3 | (22 (117%)) | (4) | (38) | 34 (789%) |
| UKHSA total (excluding CVU and VCR) RDEL plus CDEL | 1,842 | 1,458 | 384 (21%) | 2,544 | 1,986 | 559 (22%) |
| CVU* | 2 | 487 | (484 (N/A)) | 5 | 1,022 | (1,017 (N/A)) |
| Vaccines and countermeasures response (VCR) | 497 | 497 | 0 (0%) | 629 | 629 | 0 (0%) |
| UKHSA total (including CVU and VCR) | 2,341 | 2,442 | (101 (4%)) | 3,179 | 3,637 | (458 (14%)) |
*CVU programme budgets and transfer of balances has yet to be finalised.
Core resource budget
The agency’s core resource budget is shown net of external income. We are on track to generate £160 million of income, which has increased due to higher than expected Dysport royalties from increased worldwide sales in the previous 2 quarters. The trajectory on core spending has continued to be below plan, and this has been reflected in forecast underspends being reported from November.
The current forecast is dependent on recruitment campaigns, which have continued with surge capacity delivered by 3 agencies supporting UKHSA People teams. However, there is a risk that further underspends will emerge based on current run rates.
Core capital budget
Capital spend was £65 million in the first 10 months. The month 10 position showed a full-year forecast underspend of £38 million (28%) and is dependent on spending £32 million in the final 2 months. £6 million of capital spend relating to Rosalind Franklin Laboratory has been reclassified as resource in-year as polymerase chain reaction (PCR) testing there ceased in mid-January and options for the site are considered. Re-accelerating £12 million in-year spend on Science Hub has been approved in order to help make faster progress in 2023 to 2024.
COVID-19 resource budget
So far this year, we have released £375 million of COVID-19 testing budget and handed this back to the Department of Health and Social Care (DHSC) to help with wider pressures in the health group. This budget was released from the emerging underspend for the year due to lower cost and demand drivers than in the original assumptions for our testing programmes. As of January, these demand drivers have continued to decrease resulting in a further year-to-date reduction of £382 million against the revised budget.
As of January, we were forecasting an underspend of £478 million by year end. Lateral flow device (LFD) testing demand has continued to fall, with circa 100 million units removed from the forecast as expected winter pressures have not materialised and asymptomatic testing has not restarted. In addition, the decision to stop processing PCR tests at the Rosalind Franklin Laboratory from mid-January has presented further savings to be realised in quarter 4.
COVID-19 capital budget
The budget and forecast capital spend on COVID-19 is negative due to accounting treatment, as testing supplies which were purchased last financial year are used in 2022 to 2023. Currently we are forecasting a £4 million pressure as LFD demand has continued to fall and supplies are not consumed as expected.
CVU
From 1 October 2022, the responsibility for purchasing COVID-19 vaccines has transferred into UKHSA as the CVU. To date, an admin budget transfer of £5 million has been agreed. DHSC are finalising the transfer of balances to UKHSA to begin reporting from month 11.
Vaccines and countermeasures
This budget is ring-fenced by DHSC and managed on the basis that UKHSA should neither gain nor lose; therefore, the budget is shown as equalling the expenditure.
Other financial issues
2021 to 2022 accounts
The National Audit Office (NAO) issued a disclaimed audit opinion in respect of the UKHSA’s 2021 to 2022 Annual Report and Accounts (ARA). This meant they did not have sufficient, appropriate evidence to form a judgement on the accounts.
The NAO’s decision was driven by concern about:
- high-level governance arrangements (in particular, the fact that non-executives had not been appointed in 2021 to 2022 to allow the Advisory Board and Audit and Risk Committee to be established)
- the opening financial transfers into UKHSA (for example, UKHSA inherited pre-existing audit qualifications on inventory)
- financial controls within UKHSA (especially relating to UKHSA’s new finance system, which was implemented at the same time as the agency became operational)
While it was no surprise to have a modified audit opinion, and UKHSA had reported since late 2021 that this was inevitable given inherited challenges, a disclaimed audit is rare and serious.
The Chief Executive wrote to the chair of the Public Accounts Committee (PAC) on 23 January 2023, and the PAC will scrutinise this as part of their hearing on the DHSC’s accounts on 20 March, which the Chief Executive and Chair of the Advisory Board will attend.
We have drawn up an action plan to address the issues that have resulted in the disclaimer. The plan covers a wide variety of areas including systems, finance and business processes, workforce and payroll data, and accounts preparation. The action plan is governed by a new Finance and Control Improvement Board and will be overseen by the Audit and Risk Committee. There is close work with the NAO on planning the 2022 to 2023 accounts.
Future funding
There have been continuing discussions with DHSC Ministers and officials about UKHSA’s future budget, and it is likely that those will lead to decisions shortly. In the meantime, business planning is being conducted across UKHSA to enable the effective allocation of internal budgets once overall funding is known before the start of the new financial year.
Andrew Sanderson
Director General, Finance, Commercial and Corporate Services
March 2023
