Financial Control and Budgeting in Health and Social Care

Financial control
and
Budgeting

Table of Contents
INTRODUCTION...........................................................................................................................3
Section 1...........................................................................................................................................3
Legal, financial and regulatory environment for health and social care....................................3
Critically evaluation of usage of various alternate funding options available to health and
social care sector.........................................................................................................................4
Agency theory in context to NHS and importance of budgeting and different ways of
communicating such procedure with stakeholders.....................................................................5
Section 2...........................................................................................................................................7
Impact of Financial constraints, cost and budgets on health and social care service managers,
their clients and other stakeholders.............................................................................................7
Particular Challenges of budgeting in public sector organisations...........................................10
Advantages and disadvantages of incremental and zero-based budgeting ..............................10
Section 3.........................................................................................................................................12
Calculation of break-even point and margin of safety..............................................................12
Assumptions in regard to Break-even model as per reality of today's business environmental
...................................................................................................................................................13
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Financial control and budgeting are procedures and policies being implemented by an
organisation to determine, allocate and use financial resources in adequate manner. Financial
control are said to be core in managing efficiency of activities which is carried out in reference to
organisational growth. Also budgeting is also a tool which is used to ascertain future
contingencies in order to eliminate occurrence of any further losses which could harm
organisational working environment. In this report, NHS will be focused in reference to Health
and social care segment which will be analysed by developing understanding of legal, financial
and regulatory frameworks of respective industry. Various alternate funding options will also be
discussed in detail and agency theory in context to NHS. Impact of financial constraints, costs
and budgets on health and social care services. Importance of zero base budgeting will also be
discussed later in this report.
Section 1
Legal, financial and regulatory environment for health and social care
Likewise other industries, Health care and social care industry has also significant legal,
financial and regulatory framework which is introduced in order to reduce malpractices and
promote healthy practices. In this reference NHS, following analysis can be done:
Legal Environment: For a Health and social care industry, it is important to have
foundational legal structure. It is recognised as determinant of health care department which is
associated with reduction of increasing infections, deadly diseases, viruses which are very
harmful for human health (Berry and et. al., 2019). A respective country needs adequate legal
powers in regulating widely usage of tobacco and other illegal products which are unhealthy in
long term use. Various tribunals, national and international courts have been established in order
to provide adequate judgement in regard to health care issues being faced by society. Other than
health care laws various other laws are also covered in order to maintain smooth working
conditions in such sector. For instance, NHS being national health services provider in UK, there
are wide range of laws being followed by NHS in order to maintain healthy environment in the
society. These laws include health and safety at work etc act 1974, humans right act 1998,
national health services act 2006, public health(control of diseases) act 1984, medicine for
human use amendment act regulations 2006, etc. Such huge numbers of laws are implemented in

very effective manner by the organisation so that no legal complications will arise further in
working environment of such institution.
Financial Environment: It is major part of an economy which needs to be regulated on
regular basis so that no errors will arise in reference to financial position of an organisation . In
health and social care organisations main focus is put over financial support to the patients
having ill health through insurances and other claims (Christopher and Onyema, 2018).
Therefore such practices are mandatory in order to promote healthy social care of public. Also
implementation of effective financial techniques such as preparation of budgets, cash inflows
and outflows, debts and assets needs to be managed in adequate manner. In reference to NHS,
there are approximately 5 to 6 principles which are adopted by organisation in order to manage
its relevant cost of operations. These principles are stakeholder engagement, data accuracy,
transparency, bank and cash control, internal control and audit.
Regulatory Environment: It is considered as a framework which needs to be adhered by
organisations on regard to taxes, laws, regulations and rules being provided by regulatory
authorities in a country. Such regulation covers wide range of factors in organisation such as
laws, finances, etc. Such frameworks could be local or international and also voluntary or
coercive in nature. As, NHS is managed by UK governing bodies, namely department of health
and social care(DHSC), it follows guideline in respect of health care service as provided by
government agencies in order to maintain smooth flow of working.
Critically evaluation of usage of various alternate funding options available to health and social
care sector
Private Finance Initiatives (PFI): It is a technique of financing public sector programs
with help of private sector organisation. Here, private companies are required to handle upfront
costs being produce by the such projects. PFIs are mainly used by UK which is also named as
public- private partnerships. Such techniques are intended to be time effective and risk
eliminating which is associated with the projects. It also amend relations between private and
public sector having long term advantages. In reference to NHS, there are various projects being
funded in this category. It is noticed that NHS hospital got heavy funding by private finance
initiative which is approximately £13bn which will be grossed to £80bn till end of project (NHS
hospital trusts to pay out further £55bn under PFI scheme, 2019). Even trusts are established in