Managing Finance In The Public Sector

Published Date: 02 Nov 2017

In this assignment I would like to discuss the different organisation in the public sector and to assess the accountability of public sector managers in relation to finance. I will try to look into financial information reported for different public sector organisations and to evaluate its uses for decision-making and control. Understanding the above topics will be a helpful tool for me to develop the skills and technique to analyse and control finance in the public sector environment. Furthermore, in order to broaden my knowledge in terms of finance in the public sector, it is necessary also to determine the process by which projects are put out to tender and to analyse methods on public sector tenders’ evaluation and to have know-how in terms of selecting suitable suppliers.

I will begin by exploring the meaning of public sector and by pointing out how does the public sector differ from the private sector. Public sector means basically those organizations owned and operated by the government. Agencies supervised by the government like ministerial institutions belong to so-called public sector. Health care, police services, prison services, local and central government management and all their departments or other ministerial institutions are called public sector. When a private individual make reference to the public sector, they are usually talking about a public authority or public body.

How do you differentiate a public sector from the private sector as regards the way they operate? Take for example in terms of profit. People working in the public sector typically extend services to the public and they don’t have to be competing with any other institution for profit. On the other hand, people in the private sectors keep a certain goal of overtaking their competitors to be able to maximize their profit. In the aspect of management, there is a larger chain of command and control in most public sectors while corporate setting is mostly engaged in the private sectors in its operation. As regards policy decisions, public sector focuses strongly its activities as indicated by the law. For private sectors, the rules established by the shareholders and corporate owners govern their corporate activities. Finally, who are the beneficiaries of the services being offered? For the public sector, it is the general public who benefits from the services to be had while for the private sector, it is most commonly the people who are making use of goods and services that they offer which in return they will have a profit at the end. It is good to be aware of the dissimilarity between the private sector and the public sector since your privacy rights will vary depending on the legislation that an organisation is governed under.

A state sector or a government sector whereby activities such as manufacture, ownership, trade, terms, delivery and allotment of merchandise and services are operated with and for the government or its citizens, whether national, regional or local/municipal is a public sector.

The chart below will show some examples of public sector in terms of the services being offer from conveying social security, conducting urban planning and arranging national security.

County Councils

District Councils

Divided

Education

Social services

Transport

Strategic planning

Fire services

Consumer protection

Refuse disposal

Smallholdings

Libraries

Local planning

Housing

Local highways

Building regulation

Environmental health

Refuse collection

Recreation

Cultural matters

The term public sectors in United Kingdom include local councils, police authorities, government agencies, National Health Service Trust (often called NHS Trust) and QUANGOS (quasi-autonomous non-governmental organisation). Such public sectors are officially termed as "non-departmental public body" or NDPB. The "International Organisation for Standardization", a non-ministerial government section accountable for forestry in Great Britain is a set of connections of the national standards institutes of countries and Forestry Commission. In all these public sectors, they have different structure.

At this point, I would like to focus more on one of these public sectors. I have chosen to discuss about the National Health Service Trust (or NHS Trust), in particular an NHS Hospital Trust.

An example of NHS trust is the NHS Hospital Trust which is also known as an acute trust. In the English National Health Service and in NHS Wales, the health services are provided by the NHS Hospital Trust. Providing high-quality healthcare services and effective money spending are primary concern for hospitals operating by acute trusts. And to better the quality of one’s services, acute trusts will try to find ways and means to develop itself.　

NHS workforce for acute trusts is larger for it employs a wide range of personnel. Becoming part of this workforce are doctors, nurses, pharmacists, midwives and health visitors. Other persons will include those doing jobs related to medicine, such as physiotherapists, podiatrists, radiographers, speech and language therapists, occupational therapists, psychologists, counsellors, and healthcare scientists.

Acute trusts also employ many other non-medical staff such as receptionists, porters, specialists in information technology, managers, engineers, caterers, cleaners, and domestic and security staff.

For further specialised care, some acute trust could be regional or could be national centres. Others seek to be affiliated to universities for training health professionals.

Acute trusts are community based as they render services in the community through health centres, clinics or in people's homes. The NHS primary care trust charges hospital trusts to provide such services..

To further understand how acute trusts operate it is necessary to know what a NHS primary care trust is. The diagram below shows that there are two important sections in NHS. These are the primary and secondary care. What is primary care? For most people primary care is the initial point of getting in touch with and is delivered by independent contractors like for example pharmacists, opticians, general practitioners and the like. Primary care trusts (PCTs) are in control of primary care. They have a major role of charging with the task of secondary care and providing community care services. Since they are local organisations, they have a better first-hand information and understanding of the needs of the members of their community needs. This can facilitate a better organisational response as regards provision of a more effective health and social care services. Furthermore, PCTs are central to the NHS structure and 80% of the NHS budget is controlled by them.

Secondary care, on the other hand, is known as acute healthcare. This can be comprised by either elective care or emergency care. In the elective care, the primary or community health professional such a GP makes referral for patients who would need a planned specialist medical care or surgery.

Description: http://www.nhs.uk/NHSEngland/thenhs/about/PublishingImages/NHSDiagram_v2-2.gif

Since launching of NHS in 1948, it has full-grown to turn out to be the world’s biggest publicly financed health service. Along with, it can be noted that NHS can be one of the most efficient, most assertive of the equality of all peoples and most comprehensive.

"High-quality healthcare should be accessible to all, in spite of wealth" has become a core principle that led to the creation of NHS. Anyone residing in UK can avail health service for free except for charges for some prescriptions and optical and dental services. Currently more than 62m people are being benefited by the NHS health care services. NHS includes the whole thing in terms of healthcare from minor cases like antenatal screening and routine treatments for coughs and colds to the more complicated one similar to open heart surgery, accident and emergency treatment and end-of-life care.

On the other hand, still if NHS services are funded centrally from national taxation, there is a separate management of the NHS services in England, Northern Ireland, Scotland and Wales. In recent years, some differences have risen between these systems. Yet they remain the same in having the full respect and keep on to be talked about as belonging to a solitary, united system.  

TASK 2

As it is noted before, coming from taxes are the only source of NHS in order to survive. All man, woman and child in the UK has made roughly a contribution amounting to £1,980 for the 2008/9 budget. At the launching of NHS in 1948, it had a budget of £437million (roughly £9billion at today’s value). It shows that in 2008/9 NHS has received over 10 times that amount (more than £100billion). Even taking to account inflation, over the full 60-year time the standard rise in spending is about 4% a year. However, in recent year’s investments levels have been double so as to subsidize most important modernisation programme. A number of 60% of the NHS budget is used for the salary of the staff; 20% goes for the payment of drugs and other supplies; the remaining 20% is divided between buildings, equipment and training costs, medical equipment, catering and cleaning. The total budget of about 80% is disseminated by local trusts corresponding mainly to health priorities in their localities.

In 2008/9, the total budget of Department of Health in England was £94bn of which NHS England accounted for £92.5bn. Please confer to the annual report made by the National Audit Office as regards the summarised consolidated accounts of the NHS.

Summary Financial Statements for Year Ended 31 March 2009

Summary Operating Cost Statement for the Year ended 31 March 2009

2008-09

Commissioning

£'000

2008-09

Provider

£'000

2008-09

Total

£'000

2007-08

Total

£'000

Gross Operating Costs

816,401

69,559

885,960

827,343

Less: Miscellaneous Income

(17,692)

(8,410)

(26,102)

(25,478)

Net Operating Cost for the Financial Year

798,709

61,149

859,858

801,865

Summary Statement of Recognised Gains and Losses

for the Year ended 31 March 2009

 

2008-09

£'000

2007-08

£'000

Fixed Asset impairment losses

(3,149)

0

Unrealised surplus/(deficit) on fixed asset revaluations/indexation

790

1,081

Increase in the donated asset reserve and government grant reserve due to receipt of donated and government granted assets

32

37

Gains and (Losses) recognised in the financial year

(2,327)

1,118

Summary Cash Flow Statement for the year ended 31 March 2009

2008-09

£'000

2007-08

£'000

Net Cash Outflow from Operating Activities

(858,814)

(799,816)

Servicing on Finance

0

0

Payments to acquire intangible assets

(99)

(88)

Payments to acquire tangible fixed assets

(2,753)

(2,604)

Payments to acquire fixed asset investments

0

0

Receipts from sale of tangible fixed assets

0

48

Net Cash Inflow/(Outflow) before financing

(861,666)

(802,460)

Financing:

Net Parliamentary Funding

861,573

802,434

Capital Grants received

31

38

Increase/(Decrease) in Cash

(62)

12

In general there will be a rise by 0.4% in reality in terms of NHS expenditure over the course of the Spending Review period as reported by the Department of Health Spending Review 2010. En route for understanding the Government’s commitment to guard health spending, there will be a 1.3% rise in the resource budget and a 17% cut in capital spending. The administration budget will be down by 33% and invest again to support the delivery of NHS services. Kindly refer to the table below. Resource DEL excludes depreciation.

NHS (Health)

£ billion

baseline 2010-11

2011-12

2012-13

2013-14

2014-15

Resource DEL (1)

98.7

101.5

104.0

106.9

109.8

Capital DEL

5.1

4.4

4.4

4.4

4.6

Total DEL

103.8

105.9

108.4

111.4

114.4

 

The health settlement will ensure that the NHS maintains the quality of services to patients. This includes increasing investment to £2 billion per year by 2014-15 through the NHS and local government. This will support social care breaking barriers between health and social care. Funding for reablement is beneficial in the sense that it helps people regain independence after going through a crisis thus cutting emergency readmission to hospital. This is means money saving for the health and social system. Creating a fund of up to £200 million a year for new cancer drugs, supporting fund for precedence hospital schemes including St. Helier, Royal Oldham and West Cumberland, expanding access to talking therapies and providing NHS health research spending based more on Spending Review are important points to consider for delivering quality NHS services.

There are some programmes intended by the previous government to implement. They have been announced but they have not been enforced in the NHS services. Here some of the examples of such programmes; expansion of free prescription for patients with long-term conditions and for cancer patients health care such as one to one nursing or one-week wait for cancer diagnostics and for this the government will review the Cancer Reform Strategy.

Over the next four years, NHS will release up to £20 billion of annual efficiency savings. This for the purpose of meeting the going-up costs of healthcare and escalating needs on its services. Since there are rising levels of demand and there are needs to support NHS improvements in quality and outcomes, all £20 billion will be reinvested. This would mean a constant improvement of productivity in the workforce. To achieve this for example, there is a need to apply best practice throughout the NHS in terms of managing long term conditions; avoiding inconsistencies in admissions and outpatient appointment; and introducing a 33% cut in the administration budget which includes a decrease in the figure of arm’s length bodies from 18 to a maximum of 10 by 2014.

Together with these efficiency improvements, the government is moving towards to introducing innovation as set out in the White Paper, "Equity and Excellence: Liberating the NHS". The proposals include creating a lasting maintainable NHS by removing bureaucracy and squander, having a patient-centred NHS is the main purpose and in doing so, they will place decision-making into the hands of patients and clinicians.

Task 3

The definition of "tender is an offer to do or perform an act which the party is offering; is bound to perform to the party to whom the offer is made."

In my chosen NHS organisation, it is extremely time consuming and almost always costly to do the process of submitting an application for NHS tenders. Knowing that a lot of effort was given to apply for NHS tender, it can be very disappointing if the tender application becomes unsuccessful in the process.

It is very important to understand well what the NHS requirement for the contact and to see the capacity of the business/company in coping up with any special demands of the tender.

There are many questions to be addressed to be able to identify if the business is suitable for tender application. The following are some guided questions: do you and the company acquire the necessary experience?; inside your business, are there people qualified or well experienced in the work?; with the NHS, have you had any previous experience?; even if not with the NHS, does your company have experience of the type of work required?; even if there is no assurance that you will win the tender, are you geared up to invest the resource in the tender process?; in order for you to accomplish the project in the time frame given, do you have the required time and manpower?; within the given time can you deliver the project?; do you truly understand what is expected from your company from the NHS tender?

If the company is confident that the said requirements can be fulfilled and is capable of meeting the necessary standard expected from the NHS tender, in that case the company may begin thinking of the next step of the process.

The Pre-Qualification Questionnaire is the next step of any NHS tender. In the Pre-Qualification Questionnaire, the company will be questioned as regards the company’s finances and suitability for the contract. Information asked may be as follows: details about your organisation, company or business; whichever health and safety policies you may have in place; labour force such as the abilities and qualifications held; the finances of your company; and the appropriate experience of the company relating to the work concerned in the NHS tender. It may not be necessary always to have NHS experience but to have at least some evidence of similar projects can provide information as to the capacity of the company for NHS tender.

There is a need to guarantee that the information provided as part of the Pre-Qualification Questionnaire is useful and applicable, and so as to all the information requested has been provided clearly. Be sure to make clarifications if there are matters not clear. Such is the process to assemble a shortlist; if you do not steps forward past this stage, subsequently your business hasn't met the appropriateness required by the particular tender.

By means of providing all the details and by doing the suitable research prior to finishing the Pre-Qualification Questionnaire, offers the company every possibility of moving forward within the tender process which is the invitation to tender stage. For a successful NHS tender, it is highly recommended that the company put in the foundation at this stage of the process.

Tendering Process

As a guide to potential suppliers the tendering process will generally consist of the following: advertising through the webpage - www.ted.europa.eu or www.supply2gov.uk. Through www.bsmhft.bravosolution.co.uk., tenders can also be accessible. Directives for registering interest are included in the advertisement.

Pre-qualification Questionnaire (PQQ)

At the advertisement stage the PQQ may be carried out. Or this may be perform independently once expressions of interest have been registered.  The purpose of this stage is to do a shortlisting exercise to recognize organisations that have the potential of meeting the Trust’s requirements. This shortlisting down will help identify the controllable figure of organisations for the tendering stage.  The number of "expressions of interest" received by the Trust may decide whether or not to push through with the PQQ stage.

It must be noted that the NHS possesses a National Supplier Information Database to prevent organisations from completing multiple questionnaires.  In www.sid4health.nhs.uk., details can be found. Remember the Trust will require for the organisation’s sid4health reference.  Failure of the company to register with sid4health does not mean its exclusion from tendering, however, the company will be required to fill out a detailed PQQ.

Invitation to Tender (ITT)

Organisations that have been shortlisted will be asked to submit tenders through the Trusts Tendering site www.bsmhft.bravosolution.co.uk.  All documents will be uploaded and downloaded electronically.  Clarification of ITT documents is allowed. However, information will be sent to all tendering organisations in the form of Q&A.

Tender Evaluation

The tender responses according to the needed criteria and as provided in the ITT documents will go through evaluation and scoring accordingly. Then there will awarding of contracts on the basis of the most economically advantageous.  The evaluations may pass through a number of steps. On this stage, to be able to teach a final decision, the company may be required for further clarification on its responses or its presentations. Throughout the evaluation and the award process, all organisations will be treated equally and fairly.

Contract Award

After the evaluation process is complete, organisations will be contacted and advised whether or not they have been successful.  An intention to reward statement for contracts will be advertised via the EU journal. Just before the official contract awarding, there will be a "10 calendar day standstill period" during which companies can request a debriefing as to why they were not successful.  The Trust welcomes requests for debriefings from unsuccessful or successful organisations regardless of whether the requirement is advertised via the EU Journal.

As regards design criteria and the scoring system for evaluation of tenders there is a process observed. Consider the following example about NHS desiring to make renovations on a certain area/section in the hospital. So how do tender evaluation criteria become part of the scenario? The tender evaluation criteria are the guidelines for the company to select the most suitable contractors to practice our designs. The score of 1 has been assigned as the least impressive performance. The maximum score of 10 will be awarded to the most efficient company. All criteria will be weighed equally. The one with the highest score will be the preferred company to construct the said renovation. Below is the list of the evaluation criteria.

Estimated Time of Construction/Delivery 

There are projects of the company which for example needs to be responded within a limited time frame. For a time-conscious company, the estimated time of construction/delivery is very important to confirm the project is completed punctually. Thus, the contractor company must have the ability to quickly yet efficiently complete the project. For the company which can successfully construct and deliver the project with a lesser time, the score will be awarded accordingly.

Contact Details

The company must convincingly have "a clear and working contact details." They can be easily contacted and required quick replies. The score will be allocated based on the contacts on the company website and how long it probably takes to reply any inquiries.

Experience

  If a contractor company has the experience as regards the project asked for, such company may have a definite advantage. Experiences are important so as to construct the project efficiently. Experiences may also give more confidence to the designer company. Experience can also ensure that the project will run smoothly as they can understand the design and specification properly. The competency and qualifications of the contractor will be assessed by using their company website. Therefore, the company who has experienced in this field is highly sought after.

Use of Specified Materials

The designer company prepares the list of materials to be used in the project. In constructing the project, the company must have to follow what has been prepared according to the list of materials. The designer company which has listed the use of specified materials and follows exactly what has been listed will be highly scored. Marks only will be awarded to the company that is able to meet all of the requirements.

Construction and Installation

The methods that will be used to construct the project are vital in ensuring that the renovation will fulfil its required properties. The renovation should be constructed according to the specifications provided by the designer company. The company that is able to use fewer materials yet assuring good performance as well as the quality of the renovation will be allocated higher marks.

Responsibility 

The design of the renovation must be considered precisely. Tender is strictly required that the design pertains to the company so as to acquire the exact picture of the renovation. Marks will be given to company that managed to construct the renovation with its specification.

Professionalism

It is most desirable that the tendering company practices professionalism and good organization. There is a need for the tender company’s contractors to communicate with the designers from the designer company professionally. Moreover, punctual attendance of meetings held by the designer company is required. High scores will be awarded to the company that can exhibit high levels of professionalism.

Enthusiasm

The builders who exert to complete the task given with maximum effort and enthusiasm will be highly admirable. Therefore, there must be enthusiasm and interest in the project in order to ensure the smooth performance and success of the project. It is considered valuable to welcome regular feedback or comment from the tenders. Suitable suggestions are highly appreciated and looked upon favourably.

Summary of tender evaluation criteria:

Evaluation Criteria

Awarded Points

Score

0 2 5 10

Estimated time of Construction/Delivery

>3 week

2-3 week

1-2 week

<1 week

/10

Contact Details

Not 

Addressed

Average Detailed, Reply

 (>2 days)

Good Detailed, Reply

 (1-2 days)

Clearly  Detailed, Reply (<24hrs)

/10

Experience

Not 

Addressed Experience

Not Relevant Some Relevant

Experience Extensive

Relevant Experience

/10

Use of Specified Materials

Not convincing

Acceptable

Good

Excellent

/10

Construction and Installation

Not 

Addressed

Low quality

Good Quality

High Quality

/10

Responsibility

Poor

Acceptable

Good

Excellent

/10

Professionalism

Poor

Acceptable

Good

Excellent

/10

Enthusiasm

Poor

Acceptable

Good

Excellent

/10