Managing Financial Resources in HSC

This report discusses the principles of costing, business control systems, and regulatory requirements for managing financial resources in HSC. It explores diverse sources of income, factors influencing availability of financial resources, and types of budget expenditure in health and social care organizations.

Managing Financial Resources
in HSC

TABLE OF CONTENTS
TASK 1......................................................................................................................................3
Introduction................................................................................................................................3
Principle of costing and business control system...................................................................3
Information needed to manage financial resources................................................................4
Regulatory requirements for managing the financial resources.............................................5
Evaluation for managing financial resources in HSC............................................................5
Conclusion..................................................................................................................................6
TASK 2......................................................................................................................................6
Diverse sources of income that may be encountered in health and social care......................6
Factors that influence the availability of financial resources in health and social care
organizations..........................................................................................................................7
Different types of budget expenditure incurred in health and social care organizations.......7
Evaluating the way under which decisions about expenditure are made within a health or
social care organization..........................................................................................................8
TASK 3......................................................................................................................................8
Managing the budget shortfalls..............................................................................................8
Actions to be taken in the event of suspected fraud...............................................................9
Budget monitoring arrangements ........................................................................................10
TASK 4....................................................................................................................................10
Identifying the information required to make financial decision relating to health and social
care services.........................................................................................................................10
Analysing the relationship between health and social care service delivered, costs and
expenditures..........................................................................................................................11
Impact of financial consideration upon an individual..........................................................12
Suggest ways to improve the social and health care services..............................................12
REFERENCES.........................................................................................................................13

TASK 1
Introduction
Finance is the most important part of business without which it is not possible to run
the business activities as there are lot of daily expenses to be incurred which requires liquid
funds. It is respective of the fact whether business is related to product or service or is related
to the Health and Social Care. This report presents about the principles of costing, business
control systems and what sort of information required to manage the financial resources. It
also includes regulatory requirements and system for effectively managing the resources in
HSC.
Principle of costing and business control system
Principle of costing
It is important to gain and understand the concept and the principles of costing which
helps in executing the organization’s objectives effectively. There are six principles of
costing approved by NHS are stated below.
Stakeholder’s engagement: It mainly involves internal and external parties having
interest in the business. In HSC the main stakeholders are the carers, consultants, nursing
staff, operational staff and the public having some interest in the organization. Therefore,
engaging them in the defining and determining the costs will be appropriate.
Transparency: It explains the costing procedures clearly and understandable manner.
It involves properly recording all the activities incurred in patient care (Wright and et.al,
2017). It incudes data source documents, cause-effect relationship in between the resource
costs and activities. Transparency helps the HSC in preparing their financial statements in a
better way presenting the true and fair view of the financial performance of the business.
Materiality: It is mainly focussed on setting the benchmark which helps in making
sure that amount less than it is price insignificant. It should focus on the material cost and
activities having an influence over the organization and required to be taken into account.
Causality and objectivity: Under this principle, costing is done based on the
understanding of how the resources are being utilized while taking care of the patient and the
way for minimizing it. It focuses on effectively measuring the cost associated with the
operation.
Consistency: It puts pressure on the organization in using simple concepts every year
and should not change the procedure every year and should promote consistency as it helps in
better evaluation of outcomes and in comparing the result with the previous year as well.
Data accuracy: This principle emphasizes on the fact that the business organization is
required to provide accurate information to an individual.
Business control system
Management control system
It is the control system which helps the management in exercising control over the
organizations precious resources with the objective of fulfilling the organization’s goals and
targets (Lowe, 2019). It includes resources such as human resource, financial resources etc.

which are required to be controlled for the effective management of the organization’s
resources with the help of various management tools such as performance planning of the
employees, raw material allocation etc.
Procurement procedure
The procurement procedure is the mechanism with which the buyer purchases the
products in a systematic manner by following a certain way. It involves searching for the
supplier or bidding for acquiring that product. It includes the following steps:
 Evaluating the need of the business
 Searching for the supplier
 Fixing the price of the product in case of bidding/auctioning
 Closing the deal
Information needed to manage financial resources
For effectively managing the business activities, managing the financial resources is
very important. Following are the information which is required for managing the financial
resources.
Income statement
This statement depicts the profits and loss incurred over a period of time. It includes
the list of all expenses incurred in that period both operating and non-operating (Parnell,
Stone and Aravopoulou, 2018). Organization can use this statement to analyse the income
from various sources and expenditure as well.
Balance sheet
The management of the organization mainly utilizes the balance sheet for gathering
information about the assets owned by the organization during a financial year against the
liabilities it is holding. It will help in analysing the liquidity position which is very useful for
effectively running the business on a daily basis.
Cash flow statement
The cash flow statement will help in determining the cash flow from different sources,
which is, operating, investing and financing activities. It also assists the management in
identifying the changes in its working capital.
Report of external auditors
Based on the financial statements, external auditors prepare the financial report in
order to know the financial position of the business which helps in managing the financial
resources effectively.
Calculation of the cost of one resident per month
Amount in £
Average variable cost 600/month
Fixed cost 300000/year
Number of beds 65

Rent (Semi-annually) 250000/month
Fixed cost per month 25000
Average cost per month 600
Total cost 25600
Average cost per
resident
Rent per month/number of
beds
3846.15
Regulatory requirements for managing the financial resources
For managing the financial resources properly, the organizations are required to meet
some of the statutory requirements (Sirrs, 2016). For example, in case of CareTech Holdings
Plc, following are the regulations which are being followed.
Care Quality Commission (CQC)
It is a non-departmental public body, in England, which aims at regulating the heath
care services for ensuring the quality and safety in hospitals, care homes etc. It is mainly
sponsored by the Department of Health and Social Care. It inspects the health care sector to
make sure their policies and procedures are complied in accordance with the legislations and
the other statutory requirements.
Companies House
It assists the organization in making sure that consistency is maintained in the
financial years. Also, CareTech Holdings Plc has implemented audit committee which
reviews its money. It is an agency which is sponsored by Department for Business, Energy &
Industrial Strategy. It provides compnay house with the accurate and appropriate financial
report.
HM revenue and Customs
It is the UK tax authorities responsible for collection of the taxes, payment of some
state support and administration. The tax payable involves environmental tax, tax credit and
so on. HMRC also includes administartion of the regulatory regimes whcih takes into
consideration national minimum wage. It is the responsibility of the CareTech Holdings to
file tax return fairly and accurately and on time and make payment of all the taxes to which it
is liable.
Evaluation for managing financial resources in HSC
Managing the financial resources is the crucial task in HSC as it helps in providing
accurate information, for it, budget system is best. A detailed description is given below.
Zero-Based Budgeting
In this system, the budget is prepared from the zero base, completely new. Each
expense is justified for each department and then is added to the actual budget preparation
(Bondarenko and et.al, 2020). Budget is prepared considering the current and the up coming
needs irrespective of whether it is higher or lower than previous year budget. The problem of

of this method is that it is a time consuming process and requires highly professional and
skilled personnel for impementing it.
Impact on performance
It will help the organization in meeting the future changes as its not based on past data
and all the uncertainty is considered will help in improving the performance.
Top-Down Budgeting
In this, top level management prepares the budget for the whole organization and then
passes it to other for implementation. On the other hand, creating this budget only involves
top management who may not be able to get involved in the day to day business activities
whcih consequently leads to lack of awareness about certain specific expenses.
Impact on performance
It helps in saving time and resources for lower management which will lead to
improvement in the performance of the employees and the organization as a whole.
Conclusion
It can be concluded that for appropriately managing the financial resources it is
essential for the organization in gathering relevant information and implementing systems
that will be beneficial for the organization. Also, complying the regulatory requirements is
essential.
TASK 2
Diverse sources of income that may be encountered in health and social care
There are various sources that can be used in to raise funds for health and social care
by the management. Some of these ways are as follows:
Gifts and donations: There are several companies, NGO’s, trusts and government
organizations that provide monetary help to health and social care firms by providing with
gifts, charities and donations which further helps them in running their operations smoothly
and also improving the facilities to ensure more comfort to the patients and workers there.
Grants: Grants can be defined as a sum of payment offered by the government to
health and social care department as a means of charity which is not to be repaid by the health
and social care department.
Trading: Trading is an important source or health and social care organizations to
earn huge funds for their business (Nelson, 2018). Generally, these departments sell various
products to general public and other influential parties for a high price which helps them in
securing funding for their services.
Loans: The organizations also raise capital by availing loan from various financial
institutions, commercial banks and co-operative society for a long period of time. Generally,

these funds are allocated in exchange of collateral security which is provided by the health
and social care department to the financial institutions.
Debenture & Bonds: Debentures is also a favourable option preferred by these
organizations as a means to secure long term funds. However, the department has to pay a
fixed rate of interest and the principle amount is also to be repaid after a certain period of
time.
Share capital: The health and social care organization also has the choice to raise
huge amount of funds by issuing its shares to general public (Bhalla, 2017). Although, it is
the cheapest way for the firm to raise huge capital but it has a drawback that it reduces the
control of the owners within the company.
Factors that influence the availability of financial resources in health and social care
organizations
There are several factors available to raise finance by the health and social care
organizations but it is imperative to select the best resource on the basis of cost and
availability. Some of the crucial factors are as follows:
Government funding: The government’s fiscal policy has a huge impact on the
availability of funds for health and social care department (Holsapple and Joshi, 2016). It is
imperative for the government to provide tax benefits to the organizations that give funding
to health and social organization. It will help the health department in securing more funds.
Social deprivation index: The social deprivation index can be defined as the
prevention and reduction of culturally normal interaction between the individual and rest of
the society.The deprivation index helps in measuring the rate of deprivation in a particular
area. If that particular area is not economically developed than it will attract huge funding
from government to develop better quality of life for the public.
Private finance: Many companies provide private financing to health and social care
organizations in the form of gifts, grants, donations and charities as a part of their corporate
social responsibility or to improve its brand image in front of its customers (Jones, 2015).
Thus, private companies play a huge role in granting finance to the health and social care
organizations.

Different types of budget expenditure incurred in health and social care organizations.
Cost centre budget: The cost centre can be defined as the unit of business that doesn’t
produce direct profit but adds to the cost of operations of the business. The incurred cost is
then distributed between several production units of the business. It is the duty of
management to track all the expenditure to effectively handle the activities of business. The
cost centre is easy to operate and its main objective to ensure the cost control in business so
that the firm can earn more profit.
Project budgets: The project budgets are a tool used by managers to manage the
products effectively by distributing the projects under various units (Ward, Stevens, Brentnall
and Briddon, 2018). This tool helps the managers in managing the projects and the budget
associated with if efficiently and it also takes care that the actual expenditure does not exceed
the standard budget allocated for the project.
Outsourcing budgets: It is recommended for health and social care departments to
outsource the activities that do not contribute towards the core operations of their firm.
Outsourcing would help in accomplishing of the non-core activities effectively and efficiently
at a reduced price within the budget. Furthermore, it would also help the business managers
to focus on their core activities and achieving the desired goals and objectives systematically.
However, the management must take care that all the outsourced activities are done within a
set budget and that it does not exceed.
Evaluating the way under which decisions about expenditure are made within a health or
social care organization.
The decision about the expenditures within a health or social care is generally made
by the managers or top-level executives of the organization. It is imperative to have a budget
because it helps the organization in conducting its operations in a planned manner and also
within the financial boundaries of the business. The management can also keep a close check
to see whether the operations are conducted in the desired manner by comparing the standard
performance with actual performance. It also helps the managers in identifying the deviations
and then corrective action to ensure that the actual performance matches standard
performance and that all the activities are carried out smoothly in the health and social care
department.There are various challenges that are been faced by the organization in
controlling the expenses that includes the decision relating to bifarcating teh costs in an
appropriate manner and deciding for best alternatives to manage disbursements.

TASK 3
Managing the budget shortfalls
Preparing the budget
Cash
Budget for three
months ending
Dec 2018
October November December
Opening cash balance 15000 -11400 7600
Cash inflows
Government grants and
allocations 160000 165000 180000
Charity received from various
organizations 25000 40000 42000
(a) Total cash inflows plus
opening cash balance 200000 193600 229600
Cash outflows
Cash purchase 50000 62000 66000
Payment of credit purchase 22000 24000
Rent 59400 0 0
Labour 57000 61000 58000
Other Expenses 14000 11000 15000
Bank Loan repayment 10000 10000 10000
Furniture upgrade 21000 0 0
Semi-annual insurance 0 20000 0
(b) Total cash outflows 211400 186000 173000
(a) - (b) Closing cash balance -11400 7600 56600
A budget report is prepared for managing the funds of the organization. A shortfall in
the amount lead to the increase to the financial liability of the business. It can be temporary or
persistent which may be because of poor management of financial resources (Zietlow and
et.al, 2018). The budget shortfalls can be controlled or reduced using following processes.
Priorities: In Caretech residential care, the capital-intensive projects should be taken out after
conducting proper appraisal techniques and only the most important and profitable one
should be invested in.
Cash flow management: Effective management of the cash flow will help in ensuring that
expenditure should not exceed over the earnings and can also make use of reporting
software’s that will make analysis easy.

Problems while preparing cash budget are- dividing the expenses into monthly,
quarterly under various categories, managing the cash with respect to previous month etc. this
all steps makes it complicated.
Actions to be taken in the event of suspected fraud
Fraud and intentional errors are the major issues of the NPO where large amount of
money is infused by the public and government organization (Mueller, 2020). In case fraud is
detected in the care home following steps should be taken.
 Conduct investigation and identify the person responsible or involved in this fraud.
The investgation should involve all the relevant people who were involved in the
activity at that time. After proper investigation, report the case to the police for the
purpose of independent investigation and identify the culprit.
 Avoid overreacting, list out the things first, follow proper organization chain. Under
this, proper procedures which are being set out by the organziation should be
followed. This will help in gathering relevant information which will be helpful in
further investigation.
 Don’t consider fraud in a normal way and avoid under reacting as it will harm the
organization. The company should not avoid the fraud even if it is very small or
negligible. As this small event may lead to a huge fraud which might lead to losses for
teh bsuienss organizations.
 Set the manual for do’s and don’t after such fraud experience. The organziation can
introduce ceratin rules to be followed by its employees and communicate same to
them which will result into reducing the chances of fraud.
Budget monitoring arrangements
Internal auditing
It is an independent evaluation of the internal control of the organization (Raiborn and
et.al, 2017). It also evaluates the corporate governance and also analysis the strength and
weaknesses of the company so that actions can be taken before it is turned into risk. It is not
suitable for the small business firms as it are having less financial and operational activities.
Also, it is mainly done for internal purpose and not accepted by the external users. There are
chances that the outcome is prone to mistakes which may be the result of insufficient
knowledge of the audit staff.
External auditing
It is similar to internal auditing but the only difference is that it is conducted by the
independent accountant (Appelbaum, Kogan and Vasarhelyi, 2018). Such audits is done for
obtaining the certificate which is required by investors and lenders and other businesses as
well. The major drawback of external auditing is that the judgement is based on the certain
estimation which leads to inaccurate result and also it expresses opinion based on the
historical data which may be 1 year old. Many times, the evidence collected by the auditor is
persuasive in nature, that is, the final conclusion is left on the auditors rather than conclusive
in whcih conclusion is drawn with proepr authority. External audit does not provide any
information about the future viability of the business.
Variance analysis

It is analysis between the planned and the actual performance (Fahlevi and
Kurniawan, 2017). Then the difference is evaluated for identifying the reasons so that
corrective actions can be taken on time to reduce the variance. The major limitation of
variance analysis is that it is dependent upon the financial results which is released very late.
Also, if the budgeting is done very vaguely then will result into deviation of the actual from
the standards.
For example, an auditor will not check every transaction but will pick some random
sample and will examine those and draw conclusion based on it. While in variance analysis,
for instance, budgeted sales were 5000 units but the actual sales were 4600 units, this
variance of 400 units will be evaluated and reasons will find out. Both these monitoring
methods helps in solving financial problems in some way.
TASK 4
Identifying the information required to make financial decision relating to health and social
care services.
The management uses cost accounting as an effective tool to make business decisions
regarding the income and expenditure of business. It helps the business to identify the total
cost that will be incurred to run the operation smoothly. Also, the management needs to
collect huge data and use various accounting tools to make informed decisions. Some of these
tools are:
Management accounting: Management accounting is an important tool for the
business as it helps in providing accurate information regarding the firm’s operations and also
develops certain guidelines according to which the financial decisions must be taken (Goetzel
and et.al., 2018). It also provides information about the internal affairs of the company and
decisions that must be taken to improve the motivation of employees working in the
organization. Therefore, it provides all the necessary information required by a business
manager to make important decision in regards to the level of service that should be provided
to the users and to the funding firm.
Current and the projected demand for service: In order to manage its operations
successfully, it is important for the management to make sure that there is an adequate
demand for its products and services within the allocated resources. Correct forecast of
demand helps the health and social care department in effective management of its services.
Actual budget: It is the duty of management to create an adequate budget of the cost
and expenditure that will be incurred during the year. Also, the management must identify the
deviations by comparing actual budget with the standard budget and then take corrective
actions to improve the performance of its department.

It is necessary that the health and social care firm follow the concerned guidelines
provided as per the accounting standards and do not indulge themselves in any fraud or
illegal activities while preparing its financial statements or annual reports.
Analysing the relationship between health and social care service delivered, costs and
expenditures.
The service level of health and social care departments is dependent upon various
factors which can be defined as follows:
Transparency: The health and social care must provide accurate and fair information
as to how the firm is operating and it must disclose correct financial statements to its
stakeholders otherwise it can face legal trouble and also non-transparency will affect is
market value an brand image in front of its target audience.
Compliance: The management of health and social care department must follow all
the rules and regulations required by the legislature while conducting its operations in the
industry (Jones, 2015). Complying with all the government and legal policies will help the
organization to operate smoothly and freely in the market.
Accountability: In terms of accountability, the firm must make sure that it is using the
double entry system and other necessary accounting principles. It will help in measuring
correct and reliable data which is proved to be important for the organization as well as its
stakeholders like government, shareholders, investors, financial institutions and customers.
Pricing policies: The management needs to be very careful with the pricing policies
and for this purpose it must use cost accounting tool. The cost accounting helps in measuring
the per unit cost of product and further with the help of this the health and social care can add
its profit margin and determine the final price of the product or service.
Impact of financial consideration upon an individual
Financial consideration is the set of administrative functions which is associated with
the arrangement of the cash and credit so that Care Home has the means to fulfil its
objectives. A decision is made for investment putting focus on the staff continuous
development. Appraisals, more emphasis on recruitment of competent staff and the induction
process (Welp and et.al, 2020). The care home needs to implement these processes for which
will help in reducing the staff turnover, increasing the motivation level, enhances the quality
of services and care but it will incur certain cost. It has ceratin benefits to the organization but
along with it there are certain disadvantages as well. Implementing the above process will
cause or incr additional direct and indirect expenditure for the business. The service will be
tailored to the persons on an individual basis which leads to providing better and improved
services.

Suggest ways to improve the social and health care services
Following are recommended ways of improving the quality of social and health care
services:
 Payment by result, which is a government policy in which risk and responsibility is
transferred from the government to the healthcare providers. It motivates the service
providers for improving their quality of service (Ovretveit and et.al, 2017). This
ensures that all the required standards are complied with.
 Equity and excellence, has brought fundamental changes nationwide. It brought new
ideas and reforms which ahs helped in encouraging innovations, paying the providers
as per the performance, also in terms of encouraging paying for the vale of new drugs
companies produce and the secure payment system.
 Prioritising of work will help in setting out the task which are very important so that it
can be done first and no so important at last. For example, taking care of old people
first and getting the advertisement of the health care at last.
The changes made in respect to the suggestions given above will have a positive impact
on the care home. It results into effective management of the work in terms of importance to
avoid any critical situation, improving the performance of the staff which will lead to
increase in the quality of service along with obeying the statutory requirements.

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