Assessing non-foundation trusts

The Audit Commission provides an assessment for each non-foundation trust based on external auditors' local evaluation (ALE) made during statutory audits during the year. This ALE assessment focuses on the following themes:

• Financial reporting
• Financial management
• Financial standing
• Internal control
• Value for money (economy, efficiency and effectiveness)

Using criteria published by the Audit Commission, the auditors give each trust a score for its performance for each theme, on the following scale:

4: Well above minimum requirements - performing strongly
3: Consistently above minimum requirements - performing well
2: Only at minimum requirements - adequate performance
1: Below minimum requirements - inadequate performance

The Healthcare Commission then aggregates each trust's scores for all five themes into a single use of resources score, using rules that we have agreed with the Audit Commission. This overall score is on a four-point scale of "Excellent", "Good", "Fair", or "Weak".

Achieving break-even: this is one of the level 2 assurances in the financial standing theme. A trust that fails to achieve break-even for the year will be given a score of 1 for the financial standing theme, which will result in an overall score of "Weak" for use of resources.

More about the Audit Commission and the Auditors Local Evaluation (opens new window)

Assessing foundation trusts

NHS foundation trusts are set up under a different financial regime than other NHS organisations. They have different responsibilities and financial requirements, including not being required to break even in the year or to comply with the three-year break-even duty that is mandatory for non-foundation trusts.

For all trusts that had foundation status at or before 31 March 2008, the assessment of their use of resources was based on financial risk ratings compiled by Monitor, the independent regulator of foundation trusts.

Monitor collects data from foundation trusts annually, quarterly and/or monthly. It uses this information to determine a risk rating to identify the level of monitoring required for each foundation trust. The risk rating has three components: finance, governance and mandatory services.

The finance component looks at four criteria: achievement of plan, underlying performance, financial efficiency, and liquidity. It provides the basis for our score for use of resources for each foundation trust. We translate the financial component of the risk rating into a use of resources score using rules devised by the Healthcare Commission and agreed with Monitor.