DHSC group accounting manual 2024 to 2025 consultation exercise

Question 1

Overview

Accepted Answer

All bodies within the Department of Health and Social Care accounting boundary (DHSC group bodies) must publish annual reports and accounts (ARAs). Clear and transparent reporting helps the entity, as well as the users of the entity’s annual report and accounts, understand and scrutinise the year’s operations and outcomes.

DHSC and NHS England have powers to direct the form in which the annual report and accounts should be prepared, the information that should be included and the methods and principles that should be followed in their preparation.

In determining the form and content of the accounts we must, by statute, aim to ensure the accounts present a true and fair view.

In order to achieve this, DHSC issues a group-wide annual report and accounting manual every year, the group accounting manual (GAM), containing the requirements DHSC group bodies need to follow when preparing their ARAs.

The NHS foundation trust annual reporting manual (FT ARM) establishes the annual reporting requirements for NHS foundation trusts. The FT ARM contains the formal accounts direction but foundation trusts will follow the GAM for accounts requirements.

The GAM requires DHSC group bodies to follow the requirements of International Financial Reporting Standards (IFRS), as adopted by the United Kingdom, interpreted and adapted by HM Treasury’s financial reporting manual (FReM).

Therefore, the GAM only includes detailed accounting guidance where DHSC group bodies are:

required to depart from IFRS or the FReM
required to make specific disclosures in addition to IFRS and the FReM, or
faced with particular circumstances that IFRS or the FReM do not address

Updates to the GAM follow the same principle and, on that basis, are required where IFRS or the FReM have changed, or when DHSC group bodies are required to make specific extra disclosures.

Some content for the 2024 to 2025 GAM is not yet available, such as HM Treasury discount rates. The draft GAM indicates where this is the case, and the manual will be revised later in the year once this content is known. An additional guidance document published alongside subsequent updates of the 2024 to 2025 GAM will signpost the changes made within the manual.

2024 to 2025 consultation

This consultation relates to the draft GAM for the 2024 to 2025 financial year. The documents being consulted upon can be found on the DHSC group accounting manual collection page.

The 2024 to 2025 GAM will be published later in 2024, once we have considered consultation responses and further refined the guidance offered in the GAM.

Post-consultation changes will be made in collaboration with the relevant sector finance leads. The publication of the GAM is subject to approval by the Financial Reporting Advisory Board (FRAB).

Principal changes proposed in the draft GAM

There is one significant change to the reporting requirements built into the GAM relating to the incorporation of a contextualised version of HM Treasury’s phased approach to adopting Task Force on Climate-related Financial Disclosures (TCFD) recommendations.

Other minor changes to the GAM include:

removal of transition guidance relating to the application of IFRS 16 to private finance initiative (PFI) liabilities
a further update to wider reporting requirements around sustainability matters in the performance analysis with the inclusion of a requirement to provide a summary of progress regarding the delivery of green plans, where there is a requirement for the entity to have a green plan

This document summarises the changes introduced in the draft 2024 to 2025 GAM.

Question 2

Applying the TCFD recommendations in the GAM

Accepted Answer

The December 2023 update to the 2023 to 2024 FReM contains annual report disclosure requirements through the HM Treasury TCFD-aligned disclosure application guidance. The TCFD recommendations are being incorporated into the FReM on a phased basis over 3 years from the 2023 to 2024 financial year and the department is looking to reflect this approach in the GAM, with appropriate contextualisation of its applicability to the health sector.

As this is a consultation relating to the 2024 to 2025 GAM this consultation will seek the views of respondents regarding the proposed guidance drafted for the GAM concerning disclosures relating to both phases 1 and 2 of the HM Treasury’s TCFD-aligned disclosure application guidance. Phase 1 carries the annual reporting requirements for the 2023 to 2024 financial year and phase 2 the additional reporting requirements for the 2024 to 2025 financial year.

Respondents should note that the guidance drafted in the GAM is not only subject to change based on responses to this consultation, but also subject to any material revisions made to HM Treasury’s guidance for phase 2, which is currently out for consultation as a phase 2 exposure draft closing on 26 February 2024.

Phase 1 of HM Treasury’s TCFD-aligned disclosure application guidance:

addresses the scope and nature of the requirements in applying the TCFD application guidance
introduces the recommended disclosures under the governance pillar
references the optional inclusion of emissions reporting (scope 1, 2 and 3 emissions) where currently collated as part of current departmental reporting based on sustainability reporting guidance requirements
designs a compliance statement to enable the entity to detail the extent to which the guidance has been complied with in their annual report

Phase 2 of the application guidance, as currently detailed per the HM Treasury’s exposure draft on the matter:

provides some additional detail around the concepts and principles contained within chapter 1 which establishes the scope and nature of the TCFD requirements for public sector application
introduces the recommended disclosures under the metrics and targets and risk management pillars

In developing its approach to incorporation of the TCFD-aligned disclosure application guidance within the GAM, the department has reflected on the fact that the HM Treasury application guidance does not automatically apply to NHS bodies. Consequently, the department has revised requirements around certain aspects of the HM Treasury application guidance to better reflect the context of the health sector. In particular:

the GAM does not require NHS bodies to disclose or develop processes to disclose scope 1, 2 and 3 emissions reporting under the metrics and target pillar. As emissions estimates for the NHS in England will be provided by NHS England, it is considered that undue costs and effort would be involved in each local body establishing a duplicative process for the purpose of this disclosure
the GAM does not require a compliance statement, but provides suggested introductory text in making the disclosures while maintaining the Companies Act approach of requiring the entity to explain why the specific disclosures are not provided
where other external reports provide relevant detail for compiling the TCFD recommended disclosures in ARAs, the information should not be duplicated in annual reports, but cross referenced to, giving appropriate links to access the external report

Otherwise the department maintains the approach taken within the HM Treasury application guidance by:

maintaining the comply or explain basis to the provision of each recommended disclosure - notwithstanding the removal of the requirement under the metric and target pillar relating to the emissions reporting disclosure described above
maintaining the requirement of the organisation to comply or explain against the phased TCFD disclosure requirements where the organisation has more than 500 full time equivalent employees averaged across the reporting period or has total operating income exceeding £500 million
welcoming voluntary adoption of the phased TCFD disclosure requirements for entities not meeting the employee or operating income thresholds
referencing the need to consider the wider TCFD implementation guidance (pdf, 2.4mb) alongside the HM Treasury TCFD-aligned disclosure application guidance content summarised in the GAM

Accordingly, the GAM has incorporated summarised detail relating to the TCFD recommended disclosures and supporting guidance provided in HM Treasury’s TCFD application guidance as part of an expansion to the section of the GAM covering minimum reporting requirements as part of a performance analysis as introduced under paragraph 3.38 and detailed in a new annex to the GAM, chapter 3 annex 5.

Subsequent to this consultation the phase 1 detail incorporated into the 2024 to 2025 GAM will be backdated into the 2023 to 2024 GAM as part of the April 2024 updates to the 2023 to 2024 GAM.

Consultation questions on applying the TCFD recommendations in the GAM

Do you have any comments on the move to incorporate TCFD recommended disclosures into the GAM to align with the FRAB endorsed approach HM Treasury is taking elsewhere in central government?

Do you have any comments on the guidance provided in the GAM relating to the scope of application surrounding the TCFD disclosure requirements?

Do you have any comments on the guidance provided in the GAM relating to the recommended disclosures under the governance pillar?

Do you have any comments on the guidance provided in the GAM relating to the recommended disclosures under the metrics and target pillar?

Do you have any comments on the guidance provided in the GAM relating to the recommended disclosures under the risk management pillar?

Do you have any other comments regarding the TCFD guidance in the GAM?

Question 3

Measurement of public private partnership (PPP) and private finance initiative (PFI) liabilities using IFRS 16

Accepted Answer

FRAB previously concluded that with the implementation of IFRS 16 across the public sector, the approach to measuring such liabilities as detailed in chapter 10 of the FReM was required to transition from an approach reflecting the previous leasing standard IAS 17, to one reflecting the principles of IFRS 16. It remains the case that the accounting for PFI liabilities will be based on the guidance in the FReM (which is in turn based on the lease accounting standard principles) rather than a direct application of the standard itself.

During the 2023 to 2024 financial year the department and HM Treasury have both updated their respective manuals, issued additional application guidance and the department has provided revised model solutions for entities to employ as part of their transition to measuring PFI liabilities on an IFRS 16 basis. It is therefore expected that no further updates are required to the GAM for this matter in either the 2023 to 2024 or 2024 to 2025 GAM, except to remove the transitional provisions from the GAM which are no longer relevant.

Consultation question on the use of IFRS 16 to measure PFI liabilities

Do you have any further comments regarding the guidance provided in the GAM relating to the measurement of PFI liabilities on an IFRS 16 basis?

Question 4

Other changes to the GAM

Accepted Answer

There are no other planned material updates to the 2024 to 2025 GAM.

There are no IFRS updates effective for the 2024 to 2025 financial year that require further contextualisation in the GAM.

Minor changes made to the 2024 to 2025 GAM include:

a further reporting update included in the 2024 to 2025 GAM, requiring an entity which must have a green plan in place to provide a summary of progress against delivery of their green plan as part of the performance analysis. This is included in the sustainability reporting bullet point beneath paragraph 3.38 of the GAM
the quarter 4 public dividend capital (PDC) policy for the 2023 to 2024 GAM is not currently anticipated to change significantly from the policy finalised for the 2022 to 2023 GAM. As such, the policy finalised for 2022 to 2023 is reflected in the 2024 to 2025 GAM. As is referenced in the GAM, entities should note that any changes to the cash regime and dividend policy will be communicated as a quarter 4 update to the GAM in the additional guidance document
while the GAM has been rolled over to present 2024 to 2025 dates and content where available, certain elements of guidance, such as HM Treasury discount rates, will be provided later in 2024, and will form additional guidance updates to the 2024 to 2025 GAM

Consultation question on other changes made to the GAM

Do you have any other general comments on the draft group accounting manual?

Question 5

Summary of consultation questions

Accepted Answer