FAQ URGENT – Treatment of Public Dividend Capital in NHS Trust Accounts 200607 PDC balances cannot be reduced in NHS trust accounts unless (a) PDC has been repaid by a cash transaction in the period; or (b) PDC has been cancelled by formal write-off (sanctioned by Treasury). To date, the impairment fundsflow mechanism has required NHS trusts to raise a creditor with DH and reduce PDC balances in recognition of the obligation to repay PDC to DH once cash has flowed. The transaction was dr PDC, cr creditors (DH). (This situation arose only where additional income has been recognised, a dr/cr relationship with a PCT has been established, and balances exist at the year-end that will be cleared by cash flows in the following year). This arrangement is unsatisfactory as it results in trust and DH accounts showing different reported values – technically the trust balance is incorrect as PDC cannot be reduced other than but cash repayment or formal cancellation (but see below). For 2006-07 therefore, NHS trusts must not reduce their PDC balances as at 31 March 07 in respect of impairments fundsflows. Where such a transaction has already been put through the ledger, it should be reversed, simply by eliminating the DH creditor and restoring the PDC balance. Disclosure: NHS trusts that would otherwise have reduced PDC balances in advance of cash flows must include a narrative note to the balance sheet. The note should explain that the trust expects to repay £x of PDC in 20xx-20xx in respect of funding for impairments for which cash has not yet been received.