Annual Report and Accounts 2012/13 - Royal Bournemouth Hospital

Financial Accounts26 Post statement of financialposition eventsThere are no post Statement of FinancialPosition events to report within theseaccounts.27 Financial risk managementThe Foundation Trust can borrow withinthe limits set by Monitor’s PrudentialBorrowing Code. The Foundation Trust’sposition against its prudential borrowinglimit is disclosed in Note 23.All other financial instruments are held forthe sole purpose of managing the cashflow of the Foundation Trust on a dayto-daybasis or arise from the operatingactivities of the Foundation Trust. Themanagement of risks around thesefinancial instruments therefore relatesprimarily to the Foundation Trust’s overallarrangements for managing risks inrelation to its financial position.Market riskInterest rate riskThe Foundation Trust has no other loansto repay, (other than the capitalisedfinance lease obligations which have fixedinterest rates) therefore any interest ratefluctuations will only affect its ability toearn additional interest on its short-terminvestments.The Foundation Trust earned interest of£391,000 during 2012/13, therefore if theinterest rate should change by 0.5%, thenthis would affect the amount earned byapproximately £261,000.Currency riskThe Foundation Trust has minimal risk ofcurrency fluctuations. Most transactionsare in sterling, although there are somepurchases of goods from Ireland whereprices are based on the Euro and allpayments are made in sterling.Other riskThe inflation rate on NHS service levelagreements is based on the NHS fundedinflation and therefore there is a small riskof budgetary financial pressure.The majority of pay award inflation isbased on the national agreed rate forAgenda for Change bands and althoughfunding through the Payment by Results(PbR) tariff will not cover all the cost(assumed additional cost improvementsavings within the Foundation Trust), thisrepresents a small risk.Credit riskDebtor ControlThe Foundation Trust has a treasuryfunction which includes a creditcontroller. It actively progresses debtsand uses an external company to supportit on selective older debts.The majority of the FoundationTrust’s payables are short term and itparticipates in the national NHS payablesreconciliations at 31 December and 31March each year. This helps to identifyany major NHS receivable queries.Provision for doubtful debtsThe Foundation Trust reviews Non NHSreceivables that are in excess of threemonths old as at 31 March and hasprovided £213,000. A further £79,000has been provided for in relation to theNHS Injury Scheme in accordance withscheme guidance.The Foundation Trust has also reviewedany significant NHS receivables andhave provided for doubtful debt to atotal of £527,000. This represents eitherits maximum or probable risk in specificareas and reflects the uncertainty of thefinancial climate of the healthcare market.Liquidity riskLoansThe Foundation Trust has no loans torepay.CreditorsThe Foundation Trust has a surplus in thecurrent financial year and on the retainedearnings reserve. The Foundation Trusthas a cash and investment balance of£54.2m and an authorised borrowing limitof £45.6m. Therefore it is at minimal riskto its payables.46Annual Report and Accounts 2012/13