Managing Finance in Public Sector

Needs & Advantages of Public Sector Financial Management

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Managing finance is effective and efficient administration of funds in such a way to attain the purpose of company. It further involve planning, organizing, directing and controlling he financial activities like, procurement and use of funds in company. The main objective of managing finance is to assure best use of available funds. It further ensure optimum utilization of funds at least cost. Thereafter,managing finance assure constant and appropriate supply of funds to the business. Further, by managing the finance, public sector company can estimate capital needs of entity for different activities.

In this report, various aspects of managing finance in public sector will be studied. To facilitate the study, consideration is given on the leading health care sector,NHS. It is publicly funded national health care system for England founded in 1948 and headquartered in Whitehall, London. It provide wide range of services including primary care, in patient care, prolonged health-care, dentistry etc. It provide free services to vulnerable or low income group individual. The working of NHS is mainly dependent upon the funds through taxation and little amount being provided by National Insurance payments. In this report, learning will be shown regarding the varied organization in public sector. The financial information available will be analysed and evaluated for its use in decision making and control. Thereafter, various types of financial decisions that can be taken and techniques to support decision making will be identified. Further, the process through which projects are put out to tender will be explained.

Task 1

1.1 Analysing the different organization in the public sector

The public sector can be referred to as the state sector or the government sector, is a portion of the state that deals with the manufacturing, control, sale, precondition, transportation and allotment of goods and services by and for the government or its residents, whether national, regional or local/municipal. It is the income generating division which renders administrative services to the public and community. The public sector differs from nation to nation where it may involve,health care,education, roadways, railways, postal services, military and police etc.

The public sector have significant amount of difference with that of private one. It is further highlighted as follows:

The various types of public sector are described as follows:

Public company: They are company whose total ownership is with government. The main objective of these company is to serve the society along with assuring significant revenue to cover the cost. They further generate employment opportunity to wide audience and thus enhance their living standard.

Municipal undertaking: They are the kind of companies that are controlled by local government. They further provide varied services and generate revenue for local community. They render quality jobs for comm unity members.

Hospital trust: They are self administered entities which are within NHS. The hospital trust frame their budget and take routine decisions.

Police authorities: It is another public body which is liable for monitoring the functions of police force of the nation. Presently, in UK there are four police authorities which are further funded through annual grant by Home office.

Public and private partnership: It is cooperative arrangement among one or more public and private sector. It is used to finance, develop and start projects. The public and private partnership help in sharing of abilities and assets of each sector.

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1.2 Assessing the accountability of public sector mangers with regards to finance

The public sector managers play a vital role in assuring the effective and efficient management of government owned companies. The public sector managers check there is optimum utilization of available resources within the company. In this respect, the public sector company are operated through funds generated from public in the way of taxes. Therefore, citizens pay taxes on using public services. It is the duty of public managers to check proper taxes are paid on due date. The public sector finance executives manage the funds collected through taxes. The funding of public sector also depends upon the government grants. The public sector managers manage the funds generated from diverse sources and assure they are used in best possible way. They further prepare report to government or other responsible authority. Thereafter, they assess the non fiscal performance indicators. With this respect to this, the finance manager of NHS Trust prepare statement that reflect the total expenditure of entity.

Further, the finance manager also develop strategies and action plan for the long term financial objectives of the company. Thereafter, finance manager determine the way funds can be allocated to profitable venture in order to assure safety on investment and get regular return if possible. In case of need of extra funds,finance manager identify sources of funds that can be selected. however, it is duty of finance manager to check cost effective and less risk sources are only considered. They further control finance through different techniques like ratio analysis,profit control and financial anticipation etc. Most importantly, finance related issues are resolved by public sector managers in prompt way. The finance executives are also entitled to develop and publish reports for other entities. Therefore Care quality,audit commission report along with House of Parliament report is publicized by the public finance manager. The reports prepared by them and forwarded to particular body for the objective of disclosing present financial status of company.The care quality report highlight the quality of services offered by NHS. Thereafter, audit commission report is developed for yearly accounting examination.

1.3 Analysing financial information reported to different public sector organization

The financial information reported to varied public sector company is described as follows:

Information regarding source of public income: The main financial gain of government enterprise is directly in the form of taxes and duties. The different projects and activities of regional government is funded from the finances procured through taxes which are charged from company and private individuals. The NHS is needed to present information regarding total amount collected through taxes, its use in different areas etc. in form of financial statements.

Reported financial and non financial performance indicators: The financial performance indicators is effective method that state how effectively company use it financial and other assets from original way of business and yield revenue. They must be communicated in yearly financial report so that stakeholders of NHS can determine the financial position of the business. The financial performance can be shown through organization gain, sales, cash inflows and outflows, worth of assets. The financial data must be communicated so that capitalist can make wise judgment on whether to spend or not in NHS. While, non financial performance indicators depends upon the satisfaction of employee, customers, service quality, market share, and rate if creativity introduced in offering by entity. The information regarding non financial and financial indicators is communicated which assist in knowing the forthcoming fiscal performance of NHS.

Published reports for varied entities: The public sector company is needed to prepare annual report. It is broad report on the entity activities throughout preceding year. The financial information along with the list of board of directors, key person of company are detailed in annual report.

Financial statements: It is the formal record of the financial activities and standing of NHS. It further include balance sheet, income statement, cash flow details etc. They must be reliable as capitalist decision to make investment is depended upon the financial statements.

Quality commission report: Being a health care organization,it is very much important for NHS to provide best quality services to its customers. The care quality report specifies that company is maintaining the said quality standards or not.

Task 2

2.1 Analysis of financial information available and its use for decision making and control

In order to make best decision in the favor of company, there is wide range of information that is available toe NHS. The discussion of which is provided as follows:
Budgets: Budget is an estimate for certain time period in quantitative terms. It is a tool of comparison of actual versus expected performance. It helps NHS in fund allocation towards various business operation and helps NHS financial manager in taking decision. It may includes sales, cost and expenses, assets and liabilities, cash flows and revenues. Budget is summary of allocated money for a purpose. Budget helps NHS in forecasting sales and revenue. Budget helps NHS managers in making a business plan and build a task for every department to achieve the expectations.

Costing: costing is a sum total of fixed and variable cost incurred by business which provides a unit cost of selling price of product. Financial manager of NHS uses this information in process of decision making that what would be the selling price such that all cost can be covered like manufacturing cost, administrating cost, selling cost, marketing cost and promoting cost. Budgets also helps managers in guiding a department. Its a significant information to NHS as its a key of planning different activities in order to minimize the cost of product.

Accounting information: Budget is a summary of expenditure on product in order to know the unit price of the product. It helps in avoiding wasteful expenditures so that cost will be breakdown and this would assist in to minimizing cost overall. Managers of NHS can also form plans and policies to attain objective of lesser expenses. Budgets assist manager in growth and expansion of business and also stand in a scenario of cut throat competition.

Budgetary control information: NHS is already having information in his hand regarding annual performance of organisation and projected budgets. It is a crucial information for financial manager of NHS in order to analyse that expectations as per the budget are fulfilled by company or not. If it is not fulfilled as per the expectation than manager of NHS have to revise the budget.

Financial structure: The Financial information furnishes estimated supply and recognition of revenue which assist financial manager in making plans related to the methods to satisfy estimates. Budgets used in limiting the expenditure so that saving can be made and that capital can be invested for expansion or kept for using in economical crisis. Moreover this facts provided helps the manager in managing the actual performance with expected and also finding reasons of deviation.

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2.2 Assessing areas to be monitored and demonstrate how this can be attained.

The major area that require monitoring and control is budget. This is because it have impact on the entire functioning and operations of NHS. In case of over expenditure that budget, entity will have to cut down the expenses in other areas etc. Due to lack of funds, NHS will be forced to compromise on the quality of various medical equipments or salary of employees etc which will have direct impact on the overall performance of public sector body. Therefore, it can be stated that for smooth operation of organization and preventing it from deviating from actual objective, the monitoring and control plays vital role. Therefore, to supervise the financial accounting procedures etc, following aspects can be considered.

Budgetary process: Initially, the budgetary procedure is key function of NHS Trust in which monetary fund is developed by the financial executive of entity. It is developed to put control over the excess cost that may incurred due to expenditure on activities that were not part of budget. It is very crucial part for observation and supervision as it determines the point at which organization have to accomplish the set goals within stipulated time frame.

Monitoring variance: The succeeding measure after fixing budget. Here, the assessment of the existing record with the expected one that have been developed by enterprise while fixing budget. The possibility of variance are determined to debar them and bring forward uniformity in the operative performance of NHS.

Monitoring expenditure: In the course of starting any disbursement during the functional activities, NHS Trust's fiscal executives have to supervise the outlay incurred. The disbursement may be of the capital or revenue nature. They are supervised on a regular basis so as to employ control over the expenditure of entity which may result into further drop-off in the lucrativeness of the NHS.

Monitoring various income accumulation streams: During the accumulation of revenue by the NHS it is important to their sources are monitored. All the dependable sources are identified and revenue is created by exploiting them. It is important to monitor all the revenue collection streams so as to assure that as to be applied to determine that none of the sources is left out while obtaining finances from them which is the way of revenue to NHS Trust.

2.3 Analysing the different kinds of financial decisions to be developed and check techniques to assist decision

There are wide range of decision that are taken by NHS Trust to assure proper functioning of company. Since, it is inception that it is public sector company that can be impacted by political parties and varied community. The decision are also influenced by different factors. The example of major decision that are taken by NHS trust are investment into growth and diversification activities etc. Thereafter, purchase of expensive machines, medical equipments and technology are some decision that involve significant amount of funds. The financial decisions are further supported by various techniques which are explained as follows:

Cost benefit analysis: It is method which is reasoned to ascertain the advantage of pecuniary worth over cost. During financial decisions making, NHS Trust's use the cost benefit analysis. In this technique, if the profit surpass the worth of cost, then the decision is reasoned as executable and taken by the financial executive. It is assured that in no case, profits must not be less than the cost.

Investment appraisal techniques: It is effective technique that help in taking decisions related to expansion. NHS Trust execute investment appraisal techniques while planning to start other health-care facility under the reputation of trust in other location and spread out their market share. The decision is taken only after analysing that such expansion project are executable and gainful in coming time.

Financial ratio analysis: It is among the effective method that help in taking future financial decisions. It is followed by NHS during preparation of financial report to be bestowed to the stakeholders. With the help of this method, various ratio are analysed to study the performance of organization. This involve assessment of profitability, leverage, liquidity, activity and solvency ratio.

Task 3

3.1 Determining the process by which projects are put out to tender

Tender can be defined as offer to perform an function which offering party is duty bound to fulfill the promise to the party to which the offer is made. Tender can be refereed to request of written agreement to other person to meet the demands of issuing authority. In this respect, the NHS Trust, issue tender to the outside bodies regarding building of new hospital for the intention of enlargement. It may consider supply of materials like, cement, construction equipments for building new hospital. In addition to tender can be given for supply of medicinal drug, beds, stretchers or medical devices which are needed by the NHS Trust. In the context of the public sector companies, tenders are issued to the general public and the written agreement is done with the suitable individual who meet the responsibility with supreme potency and minimal cost. The requirements of tender are collected in terms of invitation. This invitation can be provided through emails, post, by courier of by hand. The newspapers also contain information about tender. The tender process used by NHS Trust is described as follows:

Identification of need: First of all, the requirement for issuance of tender is determined. Therefore tender is developed when company require reliable source of business. In case there are too many suppliers and there is confusion regarding which must be selected by entity tender can be used

Selecting supplier: Since its inception that tender is open invitation to the general public. To maintain the standards of NHS,entity only select the suppliers that provide best quality products at affordable price. Hence, competent suppliers that can take tender and meet the requirement with maximum efficiency within the provided time frame can be selected.

Preparation of Documents: The required documents are prepared by management of entity. In this the introduction, description of contract and submission of documentation is required.

Contract award: Just after the trust get tender application, they assess them and look forward for the best supplier. The assessment for choice the best bidder is done through different techniques and contract is granted to them.

Monitoring and controlling: After providing the tender, constant observation and control is done to guarantee top-quality outcome from the suppliers. It is performed by NHS Trust to debar any destructive results that could cause failure of company efforts and money. Further, use of poor quality input provided by the suppliers can destroy the image of NHS and thus, it is important to supervise the work of suppliers.

The bidder is required to give proper response to a tender by assessing various aspects related to finance, capacity and technical areas the detailed explanation of which is as follows:

Financial assessment: It is important assessment that checks that all cost are effectively covered in the prices offered. The financial assessment help bidder in checking that currency conversions are appropriate at that time. It further specify the conditions of payment. Thereafter, any additional cost must be ascertained in the bid such as insurance cost etc.

Technical assessment: This aspect is used when a elaborated specification was issued for a specific reason, then every particular must be closely checked to ensure it matches with the original. In case a functional specification is issued, then the checks should be restricted to assuring the equipment or service provided will fulfill the needs of the end-user. Therefore, changes or option offered must be evaluated individually, and in case to ascertain one is more cost effective than another.

Capacity assessment: It is another important aspect that help in checking all feature of the bidders’ capacity to execute accordant to the contract. This may consider profound scrutiny of financial viability, to find out if they can buy the essential raw materials, or if they are probable to seek fiscal assistance “up front”. Therefore, it is normal in few industries where the cost of raw materials is a size-able portion of the bid. In such cases, it will be essential to negotiate very term and condition precisely at the time of letting any contract.

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3.2 Assessing how public sector tenders are evaluated and suitable supplier is selected

In order to assure the selection of best supplier, there are various criteria and grading methods that are used by management of NHS Trust. The discussion of which is provided as follows:

Value for money: During the first stage, Value for money is most crucial factor affiliated to cost has been reasoned by NHS Trust prior to issuance tender to any individual or party. They examine the potency of contract in monetary terms and grade them accordingly. The main concern of NHS is to get value for the money paid to suppliers for various inputs. The worth can be assessed in terms of quality of inputs, extra benefits etc.

Necessity: After considering the value for money aspect, the focus is given on the needs of both the parties. The suppliers price demands are evaluated and then written agreement is issued to them. In this respect bids are given by the suppliers in which they are ready to sell the inputs to NHS trust. The individual with the minimal price demand and supreme service quality are favoured and selected by management of company.

Financial stability: The economic stability of the extrinsic party is analysed and grading is done accordance to it. The suppliers with the superior capacity to incur outgo and which is economically strong is preferred by entity. The financial stability is assessed so as to check the competence of party to execute the tender.

Monitoring: It is other factor which is reasoned in the course of issuing tender to whatsoever party. The constant monitoring is performed about the market standing of the party,progress in work etc. It further help in knowing the plan of action taken by them to execute the tender in the most effectual way.

Evaluation: Assessment is done of all the participants of tender who have demonstrated their curiosity in fetching tender. Their past public presentation is measured and assessed with the different suppliers and after getting complete assurance they are provided tender.

Feedback: Ultimately the cognition of customer is taken through the response from other sources. Their past performance capability and reputation is ascertained and if they are reasoned to be optimistic, then only they are desirable for obtaining tender.


From the above report, it can be stated that managing finance play important role in smooth functioning of public sector company. The different types of public sector are municipal undertaking , public company, hospital trust, police authorities, public and private partnership etc. From the report, it has been ascertained that financial information can be monitored through budgetary process,monitoring variance etc.


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