UK Health Security Agency’s financial controls remain unacceptably weak, say MPs

The Department of Health and Social Care (DHSC) and the UK Health Security Agency (UKHSA) are getting the basics unacceptably wrong in their financial management and accountability for public spending – for the second year running. In a report published today, the Public Accounts Committee (PAC) finds that weaknesses in UKHSA's financial controls mean it remains impossible to establish if taxpayers' money has been spent to the purposes intended by Parliament.

The PAC urgently recommended in 2023 that UKHSA ensure robust financial controls and processes were put in place with a clear plan for its accounts. The Government agreed with this recommendation, but UKHSA's financial accounting remains fundamentally weak and unable to be properly audited. This is due both to spillover effects from the state of last year's accounts, and to government mistakenly failing to tell auditors in time about changes made to forecasts for COVID vaccine demand, underpinning several significant sums in UKHSA's accounts.

The report also finds that £2.6bn was paid out to claimants in 2022-23 for clinical negligence by government, which has no effective plan to minimise these costs. Each claim is a tragedy for the people involved, and the report calls on government to reduce clinical harm. Cash payments were made for negligence in maternity and neonatal services worth £1.1bn that year, equivalent to an eye-watering third of the NHS' total budget for these services.  The cost of clinical negligence to the NHS in England relative to the population served is significantly higher than those of similar health and social care systems. In 2018-19, it was higher than the combined equivalent costs in the health systems of Australia, Canada, New Zealand, and Sweden.

The PAC is also disappointed that, four years after the pandemic began, government still does not have a plan for stockpiling inventory, including PPE, for future pandemics. The Committee previously recommended government should work out what items and quantity of PPE it needs to hold as a stockpile, and develop and implement a clear, cost-effective plan for such a stockpile in preparation. The Government has not done so, meaning it risks disposing of items that could form part of the nation's strategic stockpile for future crises.

Dame Meg Hillier MP, Chair of the Committee, said: “The proper safeguarding and robust accounting of how taxpayers' money is spent is not an optional extra. The fact that UKHSA's accounts have been unable to be properly audited for two years in a row – a very rare occurrence for a public body – is deeply concerning.

“But our report also raises wider issues speaking to the DHSC's grip on spending, and illustrate ongoing and tragic failures experienced by people using the health service. The Government is spending billions on clinical negligence claims. An effective plan to reduce these costs would be an effective plan to reduce clinical harms, but such a plan does not yet exist.”

Conclusions and recommendations

1. It is unacceptable that UKHSA's fundamental weakness in its basic financial reporting continues to result in its accounts being disclaimed for the second consecutive year. The C&AG concluded that the breadth and the significance of the issues in UKHSA's financial statements meant that he was unable to obtain sufficient appropriate audit evidence to provide opinions as to whether UKHSA's accounts gave a true and fair view and if UKHSA had applied public money to the purposes intended by Parliament. UKHSA and the Department repeatedly used the fact that UKHSA is a relatively new organisation, along with its operational priority of delivering public health protection, as the reasons for them not getting fundamental accounting right. Maintaining strong financial controls and managing public money in a way that does not result in qualified or disclaimed accounts are fundamental requirements of all public sector entities. They must not be treated as secondary to an operational remit, regardless of the age or maturity of the organisation. Despite the introduction of a Finance Control and Improvement Plan, financial accounting remains fundamentally weak.

Recommendation 1: UKHSA must urgently ensure that its improvement plan delivers an effective system of financial control, including a “right first time” culture and governance over business critical models, in order to produce unqualified accounts.

The Department's continued failure to deliver its accounts to an earlier timetable hampers effective and timely accountability of taxpayers' money. Weaknesses in basic financial accounting at UKHSA, together with delays in the completion of local NHS audits, and a lack of resilience in the local audit market, meant the Department could not publish its 2022-23 group accounts until 25 January 2024, 10 months after the financial year-end. The Department set a deadline of 30 June 2023 for the completion of the financial audits of 212 NHS providers and 148 NHS commissioners. Almost a quarter (23%) of NHS providers and more than a fifth (21%) of NHS commissioners missed the 30 June 2023 deadline. By the end of October 2023, 4.2% of NHS provider and 9.5% of NHS commissioner audits were still ongoing. Timely production of accounts is essential to understanding public finances and supporting accountability. The Department's plans to return to a pre-summer recess timetable are becoming less and less ambitious. It has committed to advancing its timetable by one month each year, one month per year slower than when we examined its 2021-22 accounts. This would mean it would take until 2029 to achieve a pre-summer recess publication of its accounts, compared to the 2025-26 financial year it previously committed to.

Recommendation 2: The Department must return to publishing its accounts to a pre-summer recess deadline and set out a timetable to achieve this. To do this, the Department must:

• support and hold to account group bodies to ensure timely accounts production;
• work effectively with the auditors of local NHS bodies to ensure audit deadlines are met; and
• work across government, to build resilience in the local audit system.

3. We are concerned that the Department has still not put in place adequate oversight to ensure strong financial management and reporting across its group which are fundamental to the effective delivery of its policy and operational work. The Department is responsible for ensuring there is an adequate and robust system of financial control across its Group and the organisations that form part of this. Yet its accounts have been qualified for the last four years owing to a variety of reasons relating to basic financial controls, the accuracy of financial statements and whether money has been spent in the way that Parliament intended. As an executive agency UKHSA is formally part of the Department, and the Department says that it has provided it with additional support and oversight, but UKHSA's accounts have nonetheless been disclaimed for a second consecutive year. The Department also pushed additional responsibility on to this new and struggling organisation when it transferred responsibility for the Covid Vaccine Unit to UKHSA in October 2022. We are not convinced by the Department's assertion that it has little control over the issues relating to the audit of local NHS bodies that have repeatedly resulted in its accounts being delayed, nor that it does not have the levers needed to address them. We have previously recognised that over the last few years the Department has had to produce its accounts in exceptional circumstances, but these issues cannot be allowed to continue post-pandemic.

Recommendation 3: The Department urgently needs to grip and address the problems with financial management across its Departmental Group and set out a clear plan to improve financial management and oversight of its Group bodies.

4. We are concerned that the Department is spending £2.6 billion on clinical negligence payments without an effective plan to minimise future costs of the scheme. Incidences of clinical negligence continue to result in significant cost to the taxpayer, particularly in maternity settings. The Department has made provisions in its accounts worth over £21 billion to cover the potential costs of known clinical negligence events, one of the largest financial liabilities across government. The Department made cash payments relating to clinical negligence arising from maternity and neonatal services worth £1.1 billion in 2022-23, equivalent to an eye-watering one third of the NHS' total maternity and neonatal services budget. Each claim is a tragedy for the people involved. Yet the Department does not know whether the number of clinical negligence claims across the NHS as a whole are increasing or decreasing. The NHS does not benchmark well on clinical negligence compared to many similar health systems, and the Department and the NHS recognise that huge improvements need to be made.

Recommendation 4: The Department must reduce clinical harm. By summer 2024, the Department should set out the key reasons for patient harm and the actions it will take to address these, ensuring that its plans will reduce health disparities, ensure better patient outcomes, and reduce the costs for taxpayers.

5. We are disappointed that the Department lacks adequate controls over its inventory and, four years after the COVID-19 pandemic began, still does not have a plan for stockpiling for future pandemics. The Department does not know how much inventory it currently holds as it did not undertake inventory counting procedures for its 2022-23 accounts. The Department plans to dispose of COVID-19 inventory that it considers unusable or excess to requirements, including nearly all of its Personal Protective Equipment (PPE) stock. The Department procured £13.6 billion of PPE to respond to the COVID-19 pandemic. Since 2020, the Department has reduced the value of this (‘written off') by £9.9 billion, which is over 70% of the price it paid. By accelerating its disposal programme, the Department has saved £130 million in storage costs. However, the absence of stocktakes means it has not verified the volume and condition of stock that it is disposing of. Additionally, the Department has not actioned our previous recommendations – that it should work out what items and quantity of PPE it needs to hold as a stockpile, and to develop and implement a clear, cost-effective plan for such a stockpile – to prepare for future pandemics. This means it risks disposing of items that could form part of the nation's strategic stockpile for future pandemics.

Recommendation 5a): The Department must, within six months, set out the lessons learnt from its COVID-19 procurement processes, including reporting:

• the overall losses arising from procuring, storing, and disposing of over-priced, unusable, and excess inventories; and
• the outcome of its work on procurement fraud and associated recoveries. 

b): The Department must, within the next six months, develop, and implement, a clear and cost-effective plan, including adequate controls, for stockpiling items required to plan for a future pandemic. This should not be delayed until after the end of the COVID-19 inquiry.

6. NHS England again made payments to suspended GPs who were not eligible to receive them and has failed to adequately recover these overpayments. NHS England has made overpayments worth £1.3 million to suspended medical practitioners since 2017-18, just £33,000 of which it has recovered. For the second consecutive year the C&AG qualified his regularity opinion on NHS England's accounts as a result of NHS England making these ineligible payments, which are contrary to statutory regulations. NHS England has failed to establish a system of control to ensure suspension payments were only paid to medical practitioners who met the qualifying criteria, and that these payments were stopped as soon as people were no longer eligible for them. Given the control failings that led to these overpayments were initially identified during the 2021-22 audit, this continued lack of appropriate safeguards over taxpayers' money is unacceptable. NHS England has committed to reviewing all suspension payments and will be implementing a new national system to review and process suspension payments, replacing the existing regional system.

Recommendation 6a): NHS England must ensure the planned changes to its control framework are implemented by summer 2024 to avoid further loss of money that should be used for patient care.  

b): NHS England must ensure that amounts that have been overpaid are in recovery by the summer of 2024.