Overview
From financial year 2001 to 2003 the NSE made substantial progress in managing its finances. It raised its income for residential care, increased its revenues from fundraising activities and improved its annual surpluses/(deficits) as follows:

This did not carry on into 2004. The NSE disclosed a deficit of £133,000 for this year.  So what changed in just 12 months? The main issue was in the residential care area, where income increased by £628,000 but costs increased at a much greater rate - staff costs by £1,228,000 in isolation, and other costs rose also.  Many other costs increased too, e.g. property upkeep, research and education/training.

These are worryingly large numbers. There are two basic financial yardsticks that should be adhered to but are not. Firstly, the residential care unit should be at least break-even (given that it's on that basis the NSE sets its charges to the local authorities providing the care residents). A deficit of £1.4Million fails to achieve that. Secondly, overheads and support costs must be clearly identified and charged against the business unit to which they relate. For example, property maintenance costs exceeded £1Million and was all charged to the care unit; the cost of administration and management staff is (presumably) substantial, yet its cost is not specified and nor is the cost centre(s) to which it has been charged. In the absence of other information, there is a presumption it too has been charged against the largest natural cost centre; that of residential care. No wonder residential care appears to be loss-making!

Overall we can say the NSE made a small loss in 2004 and that it was much worse than 2003. An analysis of which areas contributed to the result is not practicable.

Specific points
Care staff numbers/costs.
Although the number of care residents fell from 239 to 229 during the year, the number of care staff rose, from 383 to 406, an increase of 4%. The cost of those staff rose from £9,579K to £10,616K, an increase of 11%. The average cost per carer was a little over £26,000.

Highly paid staff
The number of higher-paid staff (earnings > £50K) increased from 3 in 2003 to 7 in 2004.

Staff pension scheme.
Was £7.2M underfunded at March 2004. Its assets were worth £13M and liabilities £20.5M. This is a huge percentage disparity. The NSE has chosen to throw more money at the problem by increasing their contributions to the scheme by 33%. This is certainly an area the the NSE would welcome a large cash injection.

Administration and support costs.
There is little information as to the nature, extent and apportionment of these across the NSE's operating units. For example, per Note 11, 'Admin. staff' increased from 25 to 28 (12%) - sense presume this included the management, but cannot be sure. There are also communication, subsidiary operating and 'other' costs. In note 9 to the accounts, the NSE charged only £50K to 'Management & Admin. staff costs' - this appears low for the 28 staff noted above.

Why is this relevant? Simply because the NSE is evolving and may be charging its overhead costs against out-of-date cost centres. Primarilly this would be the residential care unit, now less significant than 2, 3 or 4 years ago. If this is so, charging substantially all overhead cost to residential care would obviously create a large loss there and apparently good results in other divisions. The usual financial check for this is to look at the revenue side and establish if the revenues are adequate for the purpose.

Residential care revenues.
Averaged £50K per resident in 2004, a 30% increase from the £35K just two years previously. Per other sense Webpages, this should be more than adequate to provide a high standard of residential care. Accordingly there should not be a loss in the residential care division.

Site development costs.
'Planning professional fees' totalled £180,000 to 31 March 2004. There may be additional components within 'Legal and professional' and there are certainly internal costs such as staff costs reported elsewhere (probably 'Other' in the residential care section.