The Managing Finance In The Public Sector

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02 Nov 2017

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In this assignment I’m going to discuss the different organisation in the public sector; assess the accountability of public sector managers in relation to finance; financial information reported for different public sector organisations and evaluates its uses for decision-making and control. Knowing these provides me the skills and technique to analyse and control finance in public sector environment. Further more, to determine process by which projects are put out to tender; analyse how public sector tenders are evaluated and suitable suppliers selected. This topic will broaden my knowledge in terms of finance in public sector.

Before going further, let me give you what public sector is and the difference between the private sector? It is important to understand the difference between the private sector and public sector because your privacy rights will differ depending on the legislation that an organisation is governed under. Public sector it is basically composed of organisations which are owned and operated by the government. The public sector includes government agencies like ministerial. When a private individual talks about the public sector, they are usually referring to a public authority, or public body. Any ministerial institution which is associated with health care, police services, prison services, local and central government management, and all their departments, are also part of the public sector. Now, what’s the difference between the public and the private sector in terms of the way that they operate? Those who are in the public sector typically supply services to the public, and they are not competing with any other institution for profit. Private sectors, on the other hand, do have a goal of overtaking their competitors, and maximizing their profit. Most public sectors are managed under a larger chain of command and control, while private sectors mostly operate in a corporate setting. When it comes to policy decisions, the activities in the public sector have a goal of sticking to what is indicated by law, while the private sector is managed under the rules of shareholders and corporate owners. Finally, the beneficiary of the services offered by the public sector, is the general public, while for the private sector, it is mostly the consuming public who uses the goods and services that they offer in return for profit.

The public sector, sometimes referred to as the state sector or the government sector, is a part of the state that deals with either the production, ownership, sale, provision, delivery and allocation of goods and services by and for the government or its citizens, whether national, regional or local/municipal. Examples of public sector activity range from delivering social security, administering urban planning and organising 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

These are the services that the public sectors are offering.

In United Kingdom, public sectors include local councils, police authorities, government agencies, NHS Trust and QUANGOS (quasi-autonomous non-governmental organisation); In the United Kingdom the official term is "non-departmental public body" or NDPB. International Organisation for Standardization, which is a network of the national standards institutes of countries and Forestry Commission, which is a non-ministerial government department responsible for forestry in Great Britain. In these public sectors, they have different structure and I will give emphasis in my chosen public sector which is the NHS Trust.

An NHS hospital trust, also known as an acute trust is an NHS trust that provides secondary health services within the English National Health Service and in NHS Wales. Hospitals are managed by acute trusts. Acute trusts make sure that hospitals provide high-quality healthcare and that they spend their money efficiently. They also decide how a hospital will develop, so that services improve.

Acute trusts employ a large part of the NHS workforce, including nurses, doctors, pharmacists, midwives and health visitors. They also employ people doing jobs related to medicine, such as physiotherapists, radiographers, podiatrists, speech and language therapists, counselors, occupational therapists, psychologists and healthcare scientists.

There are many other non-medical staff employed by acute trusts, including receptionists, porters, cleaners, specialists in information technology, managers, engineers, caterers and domestic and security staff.

Some acute trusts are regional or national centres for more specialised care. Others are attached to universities and help to train health professionals.

Acute trusts can also provide services in the community, for example through health centres, clinics or in people's homes. Hospital trusts are commissioned to provide these services by NHS primary care trusts.

What is NHS primary care trust? As can be seen on the diagram the NHS is divided into two sections: primary and secondary care. Primary care is the first point of contact for most people and is delivered by a wide range of independent contractors, including GPs, dentists, pharmacists and optometrists. Primary care trusts (PCTs) are in charge of primary care and have a major role around commissioning secondary care, providing community care services. As they are local organisations, they understand what members of their community need, so they can make sure that the organisations providing health and social care services are working effectively. Further more, they are central to the NHS and control 80% of the NHS budget. Secondary care is known as acute healthcare and can be either elective care or emergency care. Elective care means planned specialist medical care or surgery, usually following referral from a primary or community health professional such as a GP.  

Since its launch in 1948, the NHS has grown to become the world’s largest publicly funded health service. It is also one of the most efficient, most egalitarian and most comprehensive.

The NHS was born out of a long-held ideal that good healthcare should be available to all, regardless of wealth. That principle remains at its core. With the exception of charges for some prescriptions and optical and dental services, the NHS remains free at the point of use for anyone who is resident in the UK. That is currently more than 62m people. It covers everything from antenatal screening and routine treatments for coughs and colds to open heart surgery, accident and emergency treatment and end-of-life care.

Although funded centrally from national taxation, NHS services in England, Northern Ireland, Scotland and Wales are managed separately. While some differences have emerged between these systems in recent years, they remain similar in most respects and continue to be talked about as belonging to a single, unified system.  

TASK 2

The money to pay for the NHS comes directly from taxation. The 2008/9 budget roughly equates to a contribution of £1,980 for every man, woman and child in the UK. When the NHS was launched in 1948 it had a budget of £437million (roughly £9billion at today’s value). In 2008/9 it received over 10 times that amount (more than £100billion). This equates to an average rise in spending over the full 60-year period of about 4% a year once inflation has been taken into account. However, in recent years investments levels have been double that to fund a major modernisation programme. Some 60% of the NHS budget is used to pay staff. A further 20% pays for drugs and other supplies, with the remaining 20% split between buildings, equipment and training costs on the one hand and medical equipment, catering and cleaning on the other. Nearly 80% of the total budget is distributed by local trusts in line with the particular health priorities in their areas.

The total budget of Department of Health in England in 2008/9 was £94bn of which NHS England accounted for £92.5bn. The National Audit Office reports annually on 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

According to the report of Department of Health Spending review 2010; in line with the Government’s commitment to protect health spending, overall NHS spending will increase by 0.4% in real terms over the course of the Spending Review period. This includes a 1.3% increase in the resource budget, and a 17% decrease in capital spending. The administration budget will be reduced by 33%, and reinvested to support the delivery of NHS services.

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

In this table, Resource DEL excludes depreciation

 

The settlement will allow the NHS to maintain the quality of services to patients. The health settlement also includes:

Additional investment to support social care, rising to £2 billion per year by 2014-15, through the NHS and local government, to break down the barriers between health and social care. This includes funding for reablement, which has shown dramatic benefits in helping people to regain their independence after a crisis and cutting emergency readmission to hospital. This will save money across the health and social care system;

Expanding access to talking therapies;

A new cancer drugs fund of up to £200 million a year;

Funding for priority hospital schemes, including St. Helier, Royal Oldham and West Cumberland; and

NHS health research spending growing in real terms over the Spending Review.

Some programmes announced by the previous Government but not yet implemented will not be taken forward at this stage, including:

Expanding free prescription entitlements to people with long-term conditions;

One to one nursing for cancer patients and a one-week wait for cancer diagnostics, however the Government will set out its review of the Cancer Reform Strategy this winter.

To meet the rising costs of healthcare and increasing demand on its services, the NHS will release up to £20 billion of annual efficiency savings over the next four years, all of which will be reinvested to meet rising levels of demand and to support improvements in quality and outcomes. This will include, for example:

Continuously improving workforce productivity;

Applying best practice throughout the NHS in the management of long term conditions;

Driving down inconsistencies in admissions and outpatient appointments; and

A 33% cut in the administration budget, including a reduction in the number of arm’s length bodies from 18 to a maximum of 10 by 2014.

Alongside these efficiency improvements, the Government is seeking to introduce reforms as set out in the White Paper, "Equity and Excellence: Liberating the NHS". The proposals will create a long term sustainable NHS by cutting bureaucracy and waste, putting decision-making into the hands of patients and clinicians and building a patient-centred NHS.

Task 3

A tender is an offer to do or perform an act which the party offering, is bound to perform to the party to whom the offer is made.

In my chosen organisation which is the NHS; the process to submit an application for NHS tenders is often costly and incredibly time intensive. If you are unsuccessful in your tender application it may be very disappointing given the effort required.

Before you decide to even start to tender for the NHS you should know what it is the NHS requires for the contact and identify whether your company or business can cope with any special demands or requirements of the tender. There are numerous of questions you need to address to ascertain your businesses suitability for the tender in question:

• Do you and the company possess the necessary experience?

• Are there people qualified in the work within your business?

• Have you had any prior experience with the NHS before?

• Even if not with the NHS, does your business have experience of the sort of work required?

• There is no guarantee that you will win the tender, are you prepared to invest the resource in the tender process?

• Do you have the required time and manpower to complete the project in the given time frame?

• Can you deliver the project inside the given time?

• Do you understand exactly what is expected from your company from the NHS tender?

Once you have established that your company can satisfy the requirements and deliver to the required standard expected from the NHS tender, and then you're able to start to think about the next stage of the process.

The next stage of any NHS tender is the Pre Qualification Questionnaire. In the Pre Qualification Questionnaire you will be asked a number of questions regarding your business, finances and suitability for the contract. The information requested might include:

• Details about your organisation, company or business

• Information on any health and safety policies you might have in place

• Information on your workforce such as the skills and qualifications held

• The finances of your company

• The appropriate experience of you company concerning the work involved in the NHS tender (NHS experience isn't always necessary but they would want to see at least some evidence of similar projects)

Ensure the information which you provide as part of the Pre Qualification Questionnaire is applicable, and you provide all the information requested. If there is anything that isn't clear, make sure you seek clarification. This is a method to draw up a shortlist; if you do not progress past this stage then your business hasn't met the suitability requirements of the particular tender.

If you have provided all the details and done the appropriate research before completing the Pre Qualification Questionnaire then you ought to have every chance of advancing within the tender process, on to the invitation to tender stage. It is imperative that you put in the groundwork at this stage of the process if you want to become successful with NHS tenders.

Tendering process

As a guide to potential suppliers the tendering process will generally consist of the following:

Advertisement via www.ted.europa.eu or www.supply2gov.uk

Tenders are also accessible via www.bsmhft.bravosolution.co.uk.  Instructions for registering interest are included in the advert.

Pre qualification questionnaire (PQQ)

This may be carried out at the advertisement stage or carried out separately once expressions of interest have been registered.  The intention at this stage is to carry out a shortlisting exercise to identify organisations that have the capability of meeting the Trust’s requirements and to shortlist down to a manageable number of organisations for the tendering stage.  If there is not a large number of "expressions of interest" received the Trust may decide not to carry out the PQQ stage.

N.B The NHS has a National Supplier Information Database in order to avoid organisations completing multiple questionnaires.  Details can be found on www.sid4health.nhs.uk.  The Trust will ask for the organisation’s sid4health reference.  Failure to register with sid4health will not exclude an organisation from tendering, although they may need to fill out a detailed PQQ to be considered.

Invitation to tender (ITT)

Shortlisted organisations will be asked to submit tenders via the Trusts Tendering site www.bsmhft.bravosolution.co.uk.  All documents will be uploaded and downloaded electronically.  Clarification of ITT documents is allowed although information will be sent to all tendering organisations on a Q&A basis.

Tender evaluation

Tender responses will be evaluated and scored as per the criteria laid down in the ITT documents, and contracts will be awarded on a most economically advantageous basis.  The evaluations may go through a number of stages which may require further clarification on organisation responses, or company presentations, before a final decision is reached.  All organisations will be treated equally and fairly throughout the evaluation and award process.

Contract award

Once the evaluation process is complete, organisations will be contacted and advised whether or not they have been successful.  For contracts advertised via the EU journal, an intention to award statement will be made, after which follows a "10 calendar day standstill period" during which companies can request a debriefing as to why they were not successful, before the official award is made.  Regardless of whether the requirement is advertised via the EU Journal, the Trust welcomes requests for debriefings from unsuccessful or successful organisations.

In terms of design criteria and the scoring system for evaluation of tenders here how it goes. For example the NHS wants to renovate a certain area/section in the hospital. So how is tender evaluation criteria gets in this scenario? First what is "tender evaluation criteria?" The tender evaluation criteria are the guidelines for 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 highest the score is will identify the preferred company to construct the said renovation. Here are the evaluation criteria:

Estimated time of Construction/Delivery 

As a time-conscious company, the project needs to be renovated in a limited time frame. The estimated time of construction/delivery is very important to confirm the project is completed punctually. Therefore, the contractor company needs to have the ability to quickly yet efficiently complete this task. The score will be awarded accordingly to the company which managed to use lesser time and yet successfully constructing and delivering the project.

Contact details

The company convincingly has 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

  A contractor company who has the experience in this project field has the definite advantage. Experiences are important in order to construct the project efficiently as it may give more confidence to the designer company. It also ensures that the project runs 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

Materials to construct the project have to follow according to the list of materials that have been prepared by the designer company. It is important to follow exactly the list of material that given by the designer company to be highly scored. Marks only will be awarded to the company that is able to meet all of requirements.

Construction and Installation

The methods that use to construct the project are vital in ensuring that renovation will fulfill its required properties. The renovation should be constructing according to the specifications that provided by the designer company. Marks will be allocated to the company that is able to use fewer materials without jeopardizing the performance as well as the quality of the renovation.

Responsibility 

The design of the renovation is considered precisely. Tender is strictly required to pertain to company’s design in order to obtain the exact picture of the renovation. Marks will be given to company that managed to construct the renovation in its specification.

Professionalism

Professionalism and the organization of the tendering company are mostly desirable. The tender company’s contractors need to communicate with the designers from the designer company professionally. Moreover, punctually attending meetings held by the designer company is required. Marks will be awarded to the company that can show high levels of professionalism.

Enthusiasm

Builders who strive to complete the task given with maximum effort and enthusiasm will be highly admirable. Therefore, enthusiastic and interest in the project are required to ensure that the project can be run smoothly and successfully. Besides that, regular feedback or comment from the tenders will be welcome and highly appreciated. Suggestions that are suitable will be looked upon favorably and considerably.

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



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