You might well ask, why would you have an external accountant appointed to look after the PCN accounts? After all, the PCN DES does not seem to require it. [see box]

To look at this we ought to separate out PCNs into two categories, those that are Limited Companies, and those that are not – refereed to as Unincorporated Entities.

Let’s start with the latter: Unincorporated Entities  - those PCNs that work together will little more formal documentation than their Network Agreement. What benefits does an external accountant bring?

Meaningful accounts

A set of accounts is not a random jumble of figures – it tells a story. The profit and loss account identifies the profitability of the PCN, and the allocation of the surplus to the member practices. But the construction of these accounts has to follow UK Generally Accepted Accounting Practice (UKGAAP), for example, you can’t just defer your unspent monies because you want to, you have to follow the rules – otherwise you will not be reporting the right numbers.

The surplus has to be allocated between members and each member practice has to report their share in their own accounts. Failing to do so will end up with problems with HMRC.

In practice, we see all kinds of profit and loss accounts, some only prepared in house, some simply deferring all the surplus with no understanding of the rules. We see some where the accounts are prepared by the same outsourced team that run the PCN finances which is a bit like marking your own homework.

The balance sheet identifies not only the assets and liabilities of the PCN, but also the allocation of those assets between the member practices. When a practice leaves a PCN (as they do) they are entitled to their share of those assets, just as when a practice joins a PCN (as the do) they should be asked to contribute funding to match the other PCN members, just the same as a partner joining or leaving a practice.

Network DES administrative provisions relating to payment

10.2.1. Payments under the Network Contract DES are to be treated for accounting and superannuation purposes as gross income of the PCN’s Core Network Practices, in the financial year. Where payments are made to the Nominated Payee, how the income is apportioned for accounting and superannuation purposes will depend on the arrangements for the distribution of payments between the Core Network Practices, as set out in the Network Agreement. Core Network Practices are responsible for ensuring that their arrangements are appropriate.

10.2.2. Payments made in accordance with this Network Contract DES Specification may be changed when there is any change to a PCN, including, but not limited to, where there is a change to the Core Network Practices members. 10.2.3. A PCN (and its Core Network Practices) is required to adhere to current financial probity standards that are in place across the NHS, ensuring that the deployment of resources would stand up to wider scrutiny as an efficient and effective use of NHS funding. 10.2.4. The commissioner will be responsible for post payment verification.

Turning to the PCNs working as Limited Companies, in many respects the role is easier to define, Limited Companies have to prepare accounts and file accounts under the obligations in the Companies Acts. But these formats are fixed and inflexible, what an experienced PCN accountant will be able to do is to append for the members use only accounts that are useful and meaningful. The PCN accountant will also be able to ensure that the obligations under the Companies Acts and the timings of those obligations are not missed.

Bookkeeping and accounting

PCN accounts are now complex, keeping track on the ARRS claims, planning to maximise the claims available are more challenging than ever. There are a number of useful tools to manage this from spreadsheets (eg Excel) to accounting programs (eg Xero). These days, the role of the external accountant is more than the annual catch-up, it is an ongoing dialogue and part of that should be to be setting up an accounting system that meets the skills of the PCN finance team and the needs of the PCN. Budgeting and reporting are now common features of these accounting programs and the PCN accountant is ideally placed to help.

Fraud detection

Most accounting students will remember the phrase from legal cases of accountants  - a watchdog and not a bloodhound. In other words the accountant is not responsible for the detection of fraud, but will be aware of the areas of suspicion. Sadly, we have identified the misappropriation of funds in PCNs where individuals have benefited their own pockets at the expense or the PCN.

Having an external accountant provides not only that external oversite, but will also be able to advise on the internal controls necessary to minimise the risk of fraud.

Accountant or auditor?

I was recently asked by a PCN whether the advice from their ICB that their PCN accounts need to be externally verified/audited, is correct. It is not. The terms accounting and auditing are sometimes misunderstood. An audit is an independent and systematic examination of the books and records of an organisation, and an opinion on whether the accounts give a true and fair view. An audit more in depth than the preparation of accounts which follow UKGAAP in any event, and for most PCNs that is enough. In fact I am not aware of any PCNs that have chosen to have an audit as the costs of the verification outweigh the benefit.

Is your PCN accountant qualified?

You might be surprised to learn that accountancy is an unregulated activity in the UK. Anyone can call themselves an accountant (unlike doctor, solicitor etc) but you cannot call yourself a chartered accountant unless you are a member of the Institute of Chartered Accountants or the Association of Chartered Certified Accountants.

So, if you want an external accountant that can give you the benefits that a properly qualified PCN accountant can bring to your PCN – ask for their qualification. These are associate chartered accountant (ACA) or fellow chartered accountant (FCA) for chartered accountants or associate of chartered certified accountant (ACCA) or fellow chartered and certified accountants (FCCA) for chartered certified accountants.

By Laurence Slavin of Ramsay Brown Chartered Accountants, specialists in the Healthcare sector and looking after more than 100 PCNs UK-wide. He can be contacted at [email protected]