Annual Report and Accounts 2012/13 - Royal Devon & Exeter Hospital

25. Related party transactions (continued)
ROYAL DEVON AND EXETER NHS FOUNDATION TRUST - ANNUAL ACCOUNTS 2012/13
NOTES TO THE ACCOUNTS
The Royal Devon and Exeter NHS Foundation Trust is the Corporate Trustee of the Royal Devon and Exeter NHS Foundation Trust General Charity
("Charity"), registered charity number 1061384, registered office Bowmoor House, Barrack Road, Exeter, EX2 5DW. The Trust has received during the
year £57,000 (2011/12 - £57,000) revenue income and £320,000 (2011/12 - £123,000) capital contributions from the Charity. At 31 March 2013 the Trust
was due £219,000 (2012 - £119,000) from the Charity. The Charity's most recent audited accounts were for the year ended 31 March 2012. The Charity
reported a reduction in reserves of £123,000 and held aggregated reserves of £1,684,000.
During the year the Royal Devon and Exeter NHS Foundation Trust has had a significant number of material transactions with the Department of Health
("DoH") , and with other entities for which the DoH is regarded as the parent of those entities. Income from activity - by source (note 3.1) and the operating
expense (note 5) provides details of revenue transactions with those entities. Below are considered to be the significant material transactions.
Income Expenditure Receivables Payables
£000 £000 £000 £000
2012/13
Bristol Primary Care Trust 36,592 - 1,543 -
Department of Health (excludes PDC dividend) 13,033 10 1,060 11
NHS Devon Primary Care Trust 247,303 1,284 6,422 362
Northern Devon Healthcare NHS Trust 9,423 1,882 2,469 775
Somerset Primary Care Trust 6,587 2 - 3
South West Strategic Health Authority 14,044 52 27 -
Torbay Primary Care Trust 5,004 - 39 -
2011/12
Bristol Primary Care Trust 21,028 - 906 -
Department of Health (excludes PDC dividend) 11,135 - 264 -
NHS Devon Primary Care Trust 249,123 2,297 1,940 (21)
Northern Devon Healthcare NHS Trust 9,201 1,183 2,426 227
Somerset Primary Care Trust 7,276 40 (29) 39
South West Strategic Health Authority 14,271 14 2 -
Torbay Primary Care Trust 5,308 3 168 -
26. Financial instruments
A financial instrument is a contract that gives rise to both a financial asset in one entity and a financial liability or equity instrument in another entity. IFRS
7, Financial Instruments: Disclosures, requires disclosure of the role that financial instruments have had during the period in creating or changing the risks
an entity faces in undertaking its activities. The financial assets and liabilities of the Trust are generated by day to day operational activities rather than
being held to change the risks facing the Trust in undertaking its activities.
Credit risk
Credit risk arises when the Trust is exposed to the risk that a party is unable to meet its obligation to the Trust in respect of financial assets due.
Financial assets mainly comprise monies due from primary care trusts for services rendered by the Trust in fulfilment of service agreements, and cash
balances held on deposit. It is considered that financial assets due from primary care trusts pose low credit risk as these entities are funded by HM
Government.
A significant proportion of the Trust's cash balances are held on deposit with the Government Banking Service, and as such the credit risk on these
balances is considered to be negligible. Cash balances are regularly transferred to a commercial bank, from deposit with the Government Banking Service,
in order to make payments. Whilst lodged with the commercial bank said deposits pose a credit risk if the commercial bank were to become insolvent
during the period from receipt of monies to subsequent payment of suppliers. However, as payments are structured to minimise the period of credit risk
exposure, the Trust considers that it has reduced the credit risk to an acceptable level.
Liquidity risk
Liquidity risk arises if the Trust is unable to meet its obligations arising from financial liabilities. The Trust's financial liabilities mainly arise from net
operating costs, which are mainly incurred under legally binding annual service agreements with local primary care trusts, and liabilities incurred through
expenditure on capital projects. Other liquidity risks are loans repayable to the Foundation Trust Financing Facility.
Income from contracted activities with primary care trusts is based upon a nationally set tariff, which under Payment by Results is paid to the Trust in
twelve monthly instalments throughout the year; any performance in excess of agreed targets is paid in accordance with the terms of the relevant contract.
Payment by instalments allows the Trust to accurately forecast cash inflows and through the preparation and review of cash flow forecasts, as well as the
controls in place governing the authorisation of expenditure, ensures that the Trust maintains sufficient funds to meet obligations as they fall due.
Market risk
Market risk arises when the Trust is exposed to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in
market prices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk.
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