March 2009

Title: Establishing a sub-committee of the Capital Investment Committee

Agenda item: 8 (e) (iv) Paper L4

Executive Summary: A review has been undertaken of the Capital Business Case Approval Process within NHS London. NHS London is required to review and ultimately approve a range of capital business cases where Trust or PCT expenditure plans exceed delegated approval limits. In some cases, further approvals from DH or HMT are also required. The recommendations for final actions were approved by EMT on 23rd February.

The Board is asked to approve the specific recommendation for a change in the role of the Capital Management Group to make it a sub-committee of the Capital Investment Committee.

Action requested: For agreement Was legal advice received?

No

Equality Impact Assessment complete?

No Risk assessment undertaken?

No

Name of author:Title: Date:

Lynda AtkinsIndependent ConsultantFebruary 2009

Director name:Director title:

Paul BaumannDirector of Finance & Investment

Capital Approvals – Process Review

A review has been undertaken of the capital expenditure business case approval process within NHS London. NHS London is required to review (generally iteratively) and ultimately approve a range of capital business cases where Trust or PCT expenditure plans exceed delegated approval limits. The review recommendations were approved by EMT on 23rd February 2009. One recommendation, however, to amend the terms of reference of the Capital Management Committee requires Board approval.

Background

A range of problems have been encountered with the current capital business case appraisal and approval process. These include the fact that capital approvals committees do not always operate effectively.

The Capital Management Group (CMG) does not have delegated approval powers, with small cases (sub-£10m) having to go to EMT for approval even though there are four directors on CMG. The EMT agenda is very full and it is unlikely to be able to accommodate the significant number of business cases in the pipeline for the next few months, as polyclinic plans develop. Attendance at CMG is sporadic, with deputies frequently attending and no presence at all from some directorates on occasions, probably because the CMG duplicates the work later done by the EMT.

Recommendation

It is recommended that the CMG/CIC structure of committees for capital approvals is revised. This has proven unwieldy in the past, and the CMG in many respects is a proxy for the EMT. A revised system should comprise:

1. Revised terms of reference for CMG, making it a sub-committee of the CIC, so that cases with a capital value of less than £12m may be approved by the group. £12m is the level above which SHA approval is mandatory for all organisations. Below this, some Trusts and PCTs (depending on performance and turnover levels) have delegated authority to approve their own capital cases. Suggested ToR are at Appendix A. This group would meet monthly to:

Approve capital business cases with a capital value of £12m or less

Review the ‘pipeline’ of cases, and ensure that the workload of business case appraisals is managed – that resources to review cases are available when they are needed or that external expectations on approvals are managed.

share intelligence on issues affecting business case approvals (eg currently, the introduction of standards for polyclinics)

endorse cases with a value above £12m for submission to the CIC

NHSL Mar 09 L4Page 2 of 6

This would have the effect of reducing the burden on EMT, whilst ensuring that capital approvals for smaller schemes are properly reviewed by a group which includes at least four executive directors. The clarification of the role of this group should also improve attendance at CMG and ‘buy in’ to the process as reasons for attendance/participation will be clear.

2. Approvals above £12m will remain with the CIC. This will ensure that NHS London continues to meet good governance criteria in business case approvals.

Lynda Atkins

Under the Rainbow Ltd

Strategic Investment Advisor

March 2009

NHSL Mar 09 L4Page 3 of 6

Appendix A

Capital Investment Committee

Terms of Reference for the Capital Management Group

Constitution

The NHS London Board (the Board) hereby resolves to establish a sub-committee of the Capital Investment Committee to be known as the Capital Management Group. The committee has no executive powers other than those delegated in these terms of reference.

Membership

Director of Finance and Investment (Chair of CMG)Provider Agency Chief Executive Director of Strategy & System ManagementDirector of Commissioner Performance Head of Strategic Investment

Exceptionally, and with the agreement of the Chair of the CMG, members of the group may send a deputy to meetings of the Group.

Attendance

The Chief Executive, other executive directors, and representatives of external stakeholders may be invited to attend, particularly when the committee is discussing areas of risk or operation that are the responsibility of that director or organisation.

The Chair shall nominate a member of the Finance & Investment Directorate to act as secretary to the committee

Quorum

This shall be three members (who may deputise) including an executive director.

Frequency

As required, but note less than nine times per year.

NHSL Mar 09 L4Page 4 of 6

Agenda and Papers

Meetings of the committee will be called by the committee chair. The agenda will be drafted by the secretary and approved by the committee chair prior to circulation.

Notification of the meeting, location, time and agenda will be forwarded to committee members, and others called to attend, four days before the meeting. Supporting papers will also be sent out at this time. If draft minutes from the previous meeting have not been circulated in advance then they will be forwarded to committee members at the same time as the agenda.

Minutes of the Meeting

The secretary will minute proceedings and resolutions of all meetings of the committee, including recording names of those present and in attendance.

Authority

The committee is authorised by the Board to investigate any activity within its terms of reference. It is authorised to seek information it requires from any employee and all employees are directed to co-operate with any request made by the committee. The committee is authorised to obtain outside legal advice or other professional advice and to secure the attendance of outsiders with relevant experience if it considers this necessary.

Duties

The duties of the sub-committee can be categorised as follows:

o to ensure the effective operation of the capital approvals process within NHS London; this will include regular reviews of current and forthcoming cases to manage the NHS London workload effectively.

o to consider proposals for investment and divestment above the delegated financial limits of NHS Trusts and PCTs;

o to approve capital business cases with a value of up to £12m;

o to make recommendations to the Capital Investment Committee regarding proposals of a value above £12m.

NHSL Mar 09 L4Page 5 of 6

o to review the capital approvals process periodically and make recommendations for its refinement.

Sources of Information

The committee will receive and consider other sources of information from trust and PCTs and NHS London staff.

Reporting

Notes of the meetings of the committee shall be submitted to each Capital Investment Committee meeting and copied to the Executive Management Team. The Chair of the sub-committee shall draw to the attention of the committee any issues that require disclosure to the Board, or require executive action.

Terms of reference approved by the NHS London Board []

NHSL Mar 09 L4Page 6 of 6