Annual Report and Accounts - The Great Western Hospital

Great Western Hospitals NHS Foundation Trust
Accounts for the year ended 31 March 2012
28 Financial instruments and related disclosures
The key risks that the Trust has identified relating to its financial instruments are as follows:-
28.1 Financial risk
Because of the continuing service provider relationship that the Trust has with Primary Care Trusts (PCTs) and the way those
PCTs are financed, the Trust is not exposed to the degree of financial risk faced by business entities. Also financial instruments
play a much more limited role in creating or changing risk than would be typical of listed companies, to which the financial
reporting standards mainly apply. The Trust has limited powers to borrow or invest surplus funds and financial assets and
liabilities are generated by day-to-day operational activities rather than being held to change the risks facing the Trust in
undertaking its activities.
The Trust’s treasury management operations are carried out by the finance department, within parameters defined formally within
the Trust’s standing financial instructions and policies agreed by the board of directors. Trust treasury activity is subject to
review by the Finance & Investment Committee.
28.2 Currency risk
The Trust is principally a domestic organisation with the great majority of transactions, assets and liabilities being in the UK and
Sterling based. The Trust has no overseas operations. The Trust therefore has low exposure to currency rate fluctuations.
28.3 Credit risk
The majority of the Trust's income comes from contracts with other public sector bodies, resulting in a low exposure to credit
risk. The maximum exposures as at 31 March 2012 are in receivables from customers, as disclosed in note 17 to the accounts.
The Trust mitigates its exposure to credit risk through regular review of debtor balances and by calculating a bad debt provision
at the period end.
The following shows the age of such financial assets that are past due and for which no provision for bad or doubtful debts has
been raised:
31 March 31 March
2012 2011
£000 £000
By up to three months 2,835 2,020
By three to six months 237 413
By more than six months 2,417 1,536
5,489 3,969
The Trust has not raised bad or doubtful debt provisions against these amounts as they are considered to be recoverable based
on previous trading history.
The increase in the amounts is primarily due to an increase in income from the Injury Recovery Scheme for both GWH and
Wiltshire Community Health Services (£1,321k) and Non-NHS Debtors (£272k)
28.4 Liquidity risk
The NHS Trust's net operating costs are incurred under annual service agreements with local PCTs, which are financed from
resources voted annually by Parliament. The Trust also largely finances its capital expenditure from funds obtained within its
prudential borrowing limit. The Trust is not, therefore, exposed to significant liquidity risks. It should also be noted that the Trust
has a Working Capital Facility of £14 million available within its terms of authorisation as an NHS Foundation Trust which
reduces its liquidity risk still further.
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