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HDL (2005)31

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NHSSCOTLAND: GUIDANCE ON CHARGING FOR NON-PATIENT CATERING AND THE PRODUCTION OF CATERING TRADING ACCOUNTS

Purpose

1. This document provides guidance on charging for non-patient catering and on the production of trading accounts for catering activities. This HDL replaces NHS Circular 1978 (GEN) 6.

Background

2. The guidance has been developed as a result of the recommendations in the Audit Scotland Report published in November 2003, Catering for Patients, one of which was that NHS Circular 1978 (GEN) 6 be withdrawn and replaced with guidance that states that non-patient catering activities should at least break even or NHS bodies should have a clear, written policy on the level and costs of subsidisation.

Action

3. Directors of Finance and Catering Managers should have arrangements in place to produce trading accounts for catering activities by 2006-07.

4. Chief Executives, Directors of Finance and Catering Managers are requested to circulate copies of this HDL to all staff with catering responsibilities.

Yours sincerely

PETER COLLINGS

Director of Performance Management & Finance

11 July 2005

______________________________

Addresses

For action

Chief Executives, NHS Boards, Special Health Boards, and NHS National Services Scotland Directors of Finance, NHS Boards, Special Health Boards, and NHS National Services Scotland Catering Managers, NHS Boards, Special Health Boards, and NHS National Services Scotland For information

Scottish Partnership Forum

______________________________

Enquiries to:

Ross Scott

Directorate of Performance Management and Finance Health Department Basement Rear St Andrew's House EDINBURGH EH1 3DG Tel: 0131-244 2363 Fax: 0131-244 2371 Email: [email protected] _______________________

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1.

INTRODUCTION

1. This guidance has been developed as a result of the Audit Scotland Report, Catering

for Patients, published in November 2003, which recommended that the Scottish Executive

should withdraw the circular, NHS 1978 (GEN) 6, and replace it with guidance which states that non-patient catering activities should at least break even or that NHS bodies should have a clear, written policy on the level and costs of subsidisation. The guidance defines non-patient catering, advises on the differing levels of charging for NHS staff and visitors, and outlines the factors which should be taken into account in the preparation of trading accounts.

BACKGROUND

2. Following the publication of Catering for Patients, a sub-group of the Facilities Management Advisory Board was formed with an agreed remit to:

• establish what catering accounts are in place across NHSScotland;

• establish if accounts distinguish between the cost of supplying patient and non-patient meals;

• establish what overheads are included in the cost of supplying non-patient meals;

• cost the 20 standard items across NHSScotland;

• develop a model trading account for catering; and

• produce guidance for NHSScotland to replace circular NHS 1978 (GEN) 6.

NON-PATIENT CATERING

3. Non-patient catering, is defined as catering provided in NHS facilities for NHS staff and visitors.

CHARGES FOR NHS STAFF AND VISITORS

4. As a general rule, the charge for catering items purchased by visitors should have a surcharge of at least 50% on the price paid by NHS staff, with the exception of items such as confectionery, canned drinks and products marked with a selling price.

TRADING ACCOUNTS

5. The production of trading accounts, both forecast and outturn, for catering activities is the joint responsibility of Catering Managers and Directors of Finance. Trading accounts should be produced ideally in 2005-06 but certainly by 2006-07. Annex A lists the Relevant Costs involved in the provision of non-patient catering which should be included in trading accounts and also lists the Sunk Costs which should not be included. Annex B suggests a means of separating patient and non-patient costs in relation to staffing and the division of labour.

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2.

7. NHS Boards should agree catering income for the forthcoming year with catering

departments, and trading accounts must be able to demonstrate to NHS Boards whether non-patient catering:

• is breaking even against forecast of projected budget for patient and non-patient catering;

• is projecting a budget that includes anticipated wage increases;

• is contributing to sunk costs; or

• is subsidised, and, if subsidised, provide clear justification for subsidisation.

8. Trading accounts should be provided for each facility as production by NHS Board or Division could lead to cross-subsidisation. While it is acknowledged that certain smaller facilities will not break even in the provision of non-patient catering, the reasons behind these instances should be justified and explained.

9. All catering departments should have an auditable process for the production of trading accounts and have appropriate resources, equipment and training in place to operate them.

10. Waste management and monitoring procedures should be in place to ensure waste is kept to a minimum.

PREPARATION OF TRADING ACCOUNTS

11. In preparing trading accounts the following conventions should be observed:

11.1 Income should include:

• cash receipts from dining room cash tills;

• value of official meal vouchers;

• balance of value at selling price of meals supplied on part payment or at a reduced rate (e.g. school/work placements);

• cash receipts from vending machines which are inclusive in the catering budget;

• hospitality recharges;

• invoices on external catering; and

• other, as included in the catering budget. 11.2 Income should exclude:

• income generated by the public pound, i.e. catering services provided by shared services at a no-profit gain (e.g. meals to patients in community); and

• income generated which is not part of the catering budget. 11.3 Provisions:

• all catering departments should have a system in place to split actual provision costs between patient and non-patient catering.

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3. 11.4 Staffing:

• staff costs, which are associated with the provision of non-patient catering, must be included in the trading account. The splitting of staff costs must be in line with auditable information process, as, for example, in the method outlined in

Annex B. 11.5 Overheads:

• overheads/indirect pay costs that are directly related to the provision of non-patient catering, must be included in trading accounts. Examples of headings are

• listed in Annex A;

• overheads should be allocated against patient and non-patient catering where possible; and

• research has shown that overheads average at 6% of total catering expenditure. It is recommended that remaining unallocated overhead costs should be split equally between patient and non-patient catering.

FREQUENCY OF REPORTS

12. Examples of trading accounts, which might be used as part of catering departments’ management system, as required by NHS Boards, are provided at Annexes C1 to C7. These include summaries and breakdowns of patient and non-patient catering expenditure against budgets and cover conventional cooking and the use of cook-chill products. The information provided in such trading accounts would form part of the national benchmarking figures collated annually by the Property and Environment Forum Executive, Facilities Management Advisory Board, Catering Group.

Scottish Executive Health Department July 2005

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ANNEX A

RELEVANT COSTS

The following relevant costs should be included in the production of trading accounts:

Direct Catering Staff (Meals Production) Catering Staff (Dining Room)

Dish/Potwash Staff

Catering Supervision Clerical Services Catering Management Provisions

Indirect/Overheads Transport Services Consumables Disposable Items

Hardware & Crockery

Equipment Purchase (under £5,000)

Equipment Repair (vending, beverage machines) Equipment Rental

Printing & Stationery Training & Travel

Uniforms

IT Licences Tele Rental

Professional Fees

Equipment Capital Charges Cleaning Materials & Tools

Dishwashing

SUNK COSTS

The following sunk costs, i.e. costs that require to be paid whether or not non-patient catering is in operation, should NOT be included in the production of trading accounts: Equipment & Maintenance

Heat, Light & Power Rates

Land & Building Charges Financial services

Personnel Services

Estates Services Management Domestic Services Management Transport Management

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ANNEX B

STAFFING and the DIVISION OF LABOUR COSTS

The following example is suggested as one way of separating patient and non-patient costs, although administrators may use other methods as long as these are auditable:

1. Identify total hours allowed for the provision of service to patient and non-patient catering – for this example 2,100 hours.

2. Identify hours which can clearly be allocated to each heading:

Patient Catering Hours Non-patient Catering Hours

Plated meals staff 850 Dining room staff 400 Diet cook/cook 250 Servery 250 Share of washing up 200

Total 1100 Total 850

3. Take the total of these hours away from the number of hours allowed to provide the service to arrive at the number of unallocated hours:

Budget 2,100 hours minus Patient 1100 hours Non-patient 850 hours Total 1,950 hours Unallocated – 150 hours.

4. Split the 150 unallocated hours equally the patient and non-patient headings as follows to give the division of labour between patient and non-patient catering activity.

Patient Catering Hours Non-patient Catering Hours

Allocated 1100 Allocated 850 Unallocated 75 Unallocated 75

Total 1175 Total 925

5. Calculate division of labour between patient and non-patient catering activity as a percentage of the hours identified to provide the catering service to patients and non-patients:

Total Hours Identified 2,100 100% Patient Catering 1,175 56%

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ANNEX C

This Annex comprises samples of trading accounts for patient and non-patient catering, covering both conventionally cooked and the use of cook chill meals, and summary accounts.

Annex C1 – Summarises Annexes C2 (Patient Catering) and C3 (Non-Patient Catering) for ‘X’ Division

Annex C2 – Summarises Patient Catering for ‘X’ Division covering Facilities ‘A’ and ‘B’

Annex C3 – Summarises Non-Patient Catering for ‘X’ Division covering Facilities ‘A’, ‘B’, ‘C’ and ‘D’

Annex C4 – Illustrates a layout for a facility (Facility ‘Y’) for Patient Catering by conventional cooking

Annex C5 – Illustrates a layout for a facility (Facility ‘Y’) for Non-Patient Catering by conventional cooking

Annex C6 – Illustrates a layout for a facility (Facility ‘Y’) for Patient Catering by provision of cook chill products

Annex C7 – Illustrates a layout for a facility (Facility ‘Y’) for Non-Patient Catering by provision of cook chill products

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ANNEX C1 X DIVISION CATERING SUMMARY PERIOD ENDING EXPENDITURE ANNUAL YEAR TO DATE YEAR TO DATE YEAR TO

DATE CURRENT MTH CURRENT MTH CURRENT MTH FUNDED YTD CURRENT

BUDGET BUDGET EXPEND VARIANCE BUDGET EXPEND VARIANCE ESTAB AVE MTH

PAY £ £ £ £ £ £ £ WTE WTE WTE

PATIENT CATERING 62,000

NON-PATIENT CATERING 1,114,700

TOTAL PAY EXPENDITURE 1,176,700

NON-PAY

PATIENT CATERING 491,000

NON-PATIENT CATERING 649,400

TOTAL NON-PAY EXPENDITURE 1,140,400

TOTAL EXPENDITURE 2,317,100

INCOME

NON-PATIENT CATERING (1,764,100)

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ANNEX C2

X DIVISION

CATERING SUMMARY - PATIENT CATERING

PERIOD ENDING EXPENDITURE ANNUAL YEAR TO DATE YEAR TO DATE YEAR TO DATE CURRENT MTH CURRENT MTH CURRENT

MTH FUNDED YTD CURRENT

FACILITY A - PATIENT CATERING 38,000 FACILITY B - PATIENT CATERING 24,000 TOTAL PAY 62,000 NON-PAY FACILITY A - PATIENT CATERING 291,000 FACILITY B - PATIENT CATERING 200,000 TOTAL NON-PAY 491,000 TOTAL EXPENDITURE 553,000

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ANNEX C3

X DIVISION

CATERING SUMMARY - NON-PATIENT

CATERING PERIOD ENDING EXPENDITURE EXPENDITURE ANNUAL YEAR TO DATE YEAR TO DATE YEAR TO DATE CURRENT MTH CURRENT MTH CURRENT

FACILITY A- NON-PATIENT CATERING 631,700 FACILITY B - NON-PATIENT CATERING 430,000 FACILITY C - NON-PATIENT CATERING 30,000 FACILITY D - NON-PATIENT CATERING 23,000

TOTAL PAY EXPENDITURE 1,114,700

NON-PAY

FACILITY A- NON-PATIENT CATERING 386,900 FACILITY B - NON-PATIENT CATERING 250,000

FACILITY C - NON-PATIENT CATERING 7,000

FACILITY D - NON-PATIENT CATERING 5,500

TOTAL NON-PAY EXPENDITURE 649,400

TOTAL PAY & NON-PAY EXPENDITURE 1,764,100

INCOME

FACILITY A- NON-PATIENT CATERING (1,018,600) FACILITY B - NON-PATIENT CATERING (680,000) FACILITY C - NON-PATIENT CATERING (37,000) FACILITY D - NON-PATIENT CATERING (28,500)

TOTAL INCOME (1,764,100)

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ANNEX C4

FACILITY Y

TO ACCOMMODATE THE PROVISION OF PATIENT CATERING BY CONVENTIONAL COOKING ETC (EXCLUDING COOK-CHILL )

PERIOD ENDING EXPENDITURE ANNUAL YEAR TO DATE YEAR TO DATE YEAR TO DATE CURRENT MTH CURRENT MTH CURRENT

CATERING MANAGER 50,000

CATERING SUPERVISOR 45,000

CLERICAL STAFF 26,000

CATERING STAFF ( MEALS PRODUCTION ) 100,000 CATERING ASSTS ( DISH/POT WASH ) 38,000

TOTAL PAY EXPENDITURE 259,000

NON-PAY PROVISIONS 200,000 CONSUMABLES 6,000 DISPOSABLE ITEMS HARDWARE 1,000 CROCKERY 8,000 CLEANING MATERIALS 10,000 EQUIPMENT PURCHASE 10,000

EQUIPMENT SERVICE CONTRACTS 3,000

EQIPMENT REPAIR 2,000

EQUIPMENT RENTAL

PRINTING & STATIONERY 21,000

TRAINING 3,000 TRAVEL 2,000 UNIFORMS 1,500 PROFESSIONAL FEES 1,000 I.T. LICENCES 3,000 TELE RENTAL 200 TRANSPORT

EQUIPMENT CAPITAL CHARGES 7,000

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ANNEX C5

FACILITY Y

TO ACCOMMODATE THE PROVISION OF NON-PATIENT CATERING BY

CONVENTIONAL COOKING ETC (

EXCLUDING COOK-CHILL ) PERIOD ENDING EXPENDITURE ANNUAL YEAR TO DATE YEAR TO DATE YEAR TO DATE CURRENT MTH CURRENT MTH CURRENT

PAY £ £ £ £ £ £ £ WTE WT E WTE CATERING MANAGER 60,000 CATERING SUPERVISOR 87,300 CLERICAL STAFF 38,000

CATERING STAFF ( MEALS PRODUCTION ) 100,000

CATERING ASSTS ( DINING ROOM ) 470,000

CATERING ASSTS ( DISH/POT WASH ) 30,000

EQIPMENT REPAIR 2,000

EQUIPMENT RENTAL

TRAINING 3,000 TRAVEL 2,000 UNIFORMS 1,500 PROFESSIONAL FEES 1,000 I.T. LICENCES 3,000 TELE RENTAL 200 TRANSPORT

TOTAL PAY & NON-PAY 1,067,000

INCOME

DINING ROOM SALES (1,037,000)

VENDING MACHINES (20,000)

HOSPITALITY (10,000)

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ANNEX C6

FACILITY Y

TO ACCOMMODATE THE PROVISION OF COOK

CHILL PATIENT CATERING

PERIOD ENDING ANNUAL YEAR TO DATE YEAR TO DATE YEAR TO DATE CURRENT MTH CURRENT

MTH CURRENT MTH FUNDED YTD CURRENT

PAY BUDGET BUDGET EXPEND VARIANCE BUDGET EXPEND VARIANCE ESTAB AVE MTH

£ £ £ £ £ £ £ WTE WTE WTE

CATERING MANAGER

CATERING SUPERVISOR

CLERICAL STAFF

NON-PAY

PROVISIONS 8,000

CPU PATIENT MEALS CHARGES - PROVISIONS 145,000

CPU PATIENT MEALS CHARGES - OVERHEADS 138,000

EQUIPMENT CAPITAL CHARGES

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ANNEX C7

FACILITY Y

TO ACCOMMODATE THE PROVISION OF COOK CHILL NON-PATIENT CATERING

PERIOD ENDING ANNUAL YEAR TO DATE YEAR TO DATE YEAR TO DATE CURRENT MTH CURRENT MTH CURRENT

PAY BUDGET BUDGET EXPEND VARIANCE BUDGET EXPEND VARIANCE ESTAB AVE MTH

£ £ £ £ £ £ £ WTE WTE WTE

CATERING MANAGER 25,400

CATERING SUPERVISOR 87,300

CLERICAL STAFF 19,000

CATERING ASSTS ( DINING ROOM ) 470,000

EQUIPMENT REPAIR 1,000

EQUIPMENT RENTAL

TRAINING 1,000 TRAVEL 1,000 UNIFORMS 500 PROFESSIONAL FEES 500 I.T. LICENCES 1,000 TELE RENTAL 200 TRANSPORT CPU PATIENT MEALS CHARGES - PROVISIONS 150,000

CPU PATIENT MEALS CHARGES - OVERHEADS 147,200

TOTAL NON-PAY EPENDITURE 386,900

TOTAL PAY & NON-PAY EXPENDITURE 1,018,600

INCOME

DINING ROOM SALES (985,600)

VENDING MACHINES (20,000)

HOSPITALITY (13,000)