Managing Public Service Sector Finance

Managing Public Service
Sector Finance

INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Describing the types of sources of finance available to public service organisations...........1
1.2 Critically analysing the allocation of public service funding in different public services....2
2.1 Analysing the role of audit and inspection in maintaining accountability............................3
2.2 Evaluating how public services are held accountable to the public......................................4
2.3 Analysing the effects of economic policy decisions on the UK economy............................4
TASK 2............................................................................................................................................5
3.1 Explaining how public service organisations can use financial information to achieve their
strategic and operational objectives.............................................................................................5
3.2 Analysing how published financial information can be used to evaluate the financial
performance of public service organisations...............................................................................6
4.1 Explaining how public service organisations report on and manage financial performance 7
4.2 Evaluate how efficiency and effectiveness are measured by public service organisations...8
4.3 Evaluate good practice methods of managing procurement and contracting of services in the
public sector.................................................................................................................................8
4.4 Evaluate the impact of the political environment on the funding of public service
organisations.................................................................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Public service sector is an industry which creates by the government of a nation and works
for the people of that nation. The services which are provided by public sector to people are
refereed as public service sector (Barlow, Roehrich and Wright, 2013). In the context of United
Kingdom, this nation is a developed country and there are ample services which are related to
public sector services. These services include health, education, transportation, defence and
many more. These services are usually classified into two categories which are national level
services and local level services. The main aim of this report is to review current methods of
financing in public sector and develop an understanding about the need for full accountability for
funding the public service organisations. For this purpose, in this report, two public service
organisations are selected. The first public service organisation which is selected is Department
of Transport UK, which is a national level organisation. Another organisation is Transport of
London which is a local level public sector organisation. Both of these organisations are
contrasting as the both operate to control transportation but operate at different levels.
In this report, two essays are combined. In first one, various sources of finance are analysed
which are available for selected public sector organisations and also the audit process of these
organisations is also reviewed. In second essay, uses of financial information are evaluated for
the purpose to measure financial performance of selected companies.
TASK 1
1.1 Describing the types of sources of finance available to public service organisations
Sources of finance are the sources from where public service organisations can procure
funds to operate effectively. The two public sector organisations which are selected for this
report uses various sources of finance which are divided into primary and alternative sources and
all these sources are analysed below:
Central taxation is the first source of finance which is available to both Department of
transport UK and Transport of London. Government of United Kingdom collects all the
revenues through the ways of taxation (Brown and Osborne, 2012). This taxation is charged from
public organisations and people of UK against their incomes, capital gains and properties. All
these taxes are considered as revenue for government. Public authorities then provide funds to all
the organisations according to their requirements and operations. By this way, central taxation
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gained by UK government is provided to both the organisations selected. This is the most
important source of fund as it is the primary source and half of the operations are funded from
this source only.
Local taxation is another source of funding which provide funds to only local authorities
which implies this source is only relevant to Transport of London and not to Department of
Transport UK. This taxation is procured from the local population of London against their gains.
The amount which is gained from this short is small as a small value of tax is charged in this
case.
Incomes are the source which is considered as important as these reflects the efficiency in
the operations of the organisations (Caouette and etal., 2011). Both the selected organisations
gain their incomes from tools, vehicle registration fees, driver’s license fees and other
miscellaneous taxes and fees. All these incomes act as a source of finance for selected public
service organisations.
Apart from above analysed primary sources of finance, there are few other alternative
sources as well which are used in the case where primary funds are not enough. These sources
are analysed below:
EU funding is the source in which finance are procured from the European Union. The
drawback of this source is that these funds are used by all states of Europe due which it is
difficult to procure these funds unless there is an emergency or operations of the department are
at stake.
Public Private Partnership (PPP) is also an alternative source which can be used by both
the organisations. These sources can be used by partnering with a private organisation by this
way loss and profits of the organisations will be distributed equally or by a pre determined share
(Common, Flynn and Mellon, 2016).
All the above sources of finance acts as a backbone for public service sector organisations
as they provide them funds by which operations are conducted.
1.2 Critically analysing the allocation of public service funding in different public services
Allocation of funding to public service sector is a complex task and a long term procedure.
These process acts differently for both the selected organisation. In the case of Department of
Transport UK, the procedure of allocating funding is processed by the budgetary cycle. The
Government of United Kingdom, analysis the requirements and growth of the department and
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then sets out a budget for this department. If the funding which are provided to this department is
not enough them they seek funds from private organisations by partnering to them. This
procedure helps tis organisation to fulfil all their monetary requirements but this process is a long
term which delays decisions of this department.
In case of Transport of London, this organisation procures funds from the funding
allocation process. In this process, all the services of London are allotted few funds which are
based upon historic and zero based budgeting. If the funds procured from this source are not
enough then this organisation has to rely upon incomes which they can generate from tolls and
taxes. The benefit of this funding process is that organisation can acquire all the funds required
for the operations but this process of funding does not count on the funds which are required for
the growth prospects.
2.1 Analysing the role of audit and inspection in maintaining accountability
The term “audit” refers to check the adherence of something. In context of public service
sector organisations, audit and inspection refers to the examination of financial statements of
such organisation and provide a true and fair judgement (Graham, 2018). The process of audit
includes analysing and evaluating the financial statements and all the accounts which can state
the spending of funds which public organisations procure from government. The process of audit
plays an important role in maintaining the accountability in such organisation. Both the selected
organisations that are Department of Transport UK and transport from London are eligible and
obligated to conduct an annual audit in which all their finances are checked. The monetary funds
which are provided to these organisations are originally the earned money of UK’s population
due to which it becomes necessary to protect it. In order to ensure that all the amount is lawfully
spend by these organisations and maintain accountability of these departments, the process of
audit is used.
For UK’s public sector organisations, the audit commission was set up in 1983 in order to
audit national and local authorities (Gregory, 2015). Broadly, there are four roles which audit
and inspection plays in maintaining the accountability in public bodies, these roles are analysed
as follows. Audit helps in inspecting the regularity and propriety in the public sector
organisations. The person who conducts the procedure of audit is known as auditor. Auditor
needs to be satisfied that the public service organisation is in the compliance of all the
regulations and follows control mechanisms. Another role of audit is to check the adherence of
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financial statement. Auditor checks each and every transaction of accounting statement of all the
incomes and expenditures and then provides a fair and true opinion.
The third role of audit is to check the value for money. Auditor inspects whether there are
effective arrangements to spend the money and there is no wastage of money. The fourth and last
role is financial resilience, under this role; auditor needs to be satisfied that all the risks which
public service organisation faces must be tackled with appropriate mitigation steps.
All the roles mentioned above ensure to maintain accountability in Department of
Transport UK and Transport of London.
2.2 Evaluating how public services are held accountable to the public
Accountability is the concept under which an organisation or an individual is questioned
about the acts which are done by them (Gruber and etal., 2015). In context of public services, the
process of accountability is quite complex and in order to ensure effective accountability, the
government of United Kingdom has created commissions who only works to held public service
organisations accountable. As it is known that public services work for the public, it is important
to held these organisations accountable. The procedure of bringing accountability is explained as
follows. For the selected organisations that is Department of Transport UK and Transport for
London, public can file compliant to tribunal. After the complaint is filed, the service personnel
who have the charge are invited for summon. After this, the compliant is analysed on the basis of
fairness and responsiveness; and then a judgement is granted. If the individual is still not
satisfied with the resolution and then seeking resolution from other means is also an option. The
person can take the inquiry to an officer of parliament and can appeal to general or special court
and then by using a mechanism of parliament, individual can seek the resolution.
2.3 Analysing the effects of economic policy decisions on the UK economy
Economic policy is the strategy of United Kingdom which they develop for their nation.
Economic policy decisions are the orders which every individual and organisations has to follow
(Haynes, 2015). These organisations include both private and public. These decisions which are
taken by the way of economic policy have both positive and negative outcomes. Positive effects
of economy policy decisions include the following. According to the current economic policy
decision of United Kingdom, the annual budget will have high funds for health and social care.
This decision will enhance the health facilities in this region and populations of UK will be
healthy. As far as, selected organisations which are Department of Transport UK and Transport
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for London are concerned, if the economy policy decides to cut the funds for transportation then
these organisations have to partner with private organisations and have to rely upon incomes.
These issues faced by transportation companies will in long run impact upon country’s GDP and
economic growth.
Along with the positive impacts analysed below, economic policy decisions also has various
negative impacts upon economic growth as well. According to the recent economic policy
decision, United Kingdom will no longer be the part of European Union. Due to this decision,
the economic policy of UK will be highly impacted. The public service organisations of
Department of Transport UK and Transport for London have the option to procure funds from
EU funding but due to the British exit, these organisations will no longer be allowed to acquire
finance from this source. This economic policy decision has negatively impacted these
organisations due to which operations of these departments are negatively influenced which in
long run impacts the economic growth of UK. Apart from the BEXIT, other economic policy
decisions such as interest rates, taxation and budgets also influences public service sector and has
the capability to slow down the economic growth and reduction in GDP.
TASK 2
3.1 Explaining how public service organisations can use financial information to achieve their
strategic and operational objectives
Financial information refers to the data which is gained from financial and managerial
statements. Sources of financial information include vouchers, receipts, trail balance, income
statement, balance sheet and many others (Jacobsen Hvitved and Andersen, 2014). This financial
information has the capability to assist an organisation in achieving strategic and operational
objectives. These uses of financial information are analysed below:
It is important to first analyse the strategic and operational objectives of selected
organisations so that, uses of financial information can be explored. The selected organisations
for this assay are Department of Transport UK and Transport for London. Both of these
organisations operate in the field of transportation and control the transportation system but on
different levels that is on national and local level respectively. The strategic aim of such
organisation is to procure high amount of funds from central taxation and local taxation. The
operational objective of these organisations is to work smoothly and make safer roads for
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population of United Kingdom so that accidents can be reduced. For the strategic objective of
acquiring higher funds, these organisations can use their budgets. Budgets are the forecasted
documents in which predicted incomes and expenses are recorded for a specific time period. The
selected organisation scan create budgets in which they can state that in a specific amount of
funds, they are planning to make several expenses which will help the UK’s economy to grow
and will also result in smooth functioning of transportation expenses. Another financial
information is to present last year’s cost accounting report from which it can represented that a
specific sum of amount is required in the organisation to operate and reduce the number of yearly
accidents. Other financial information which can be used are performance evaluation report,
income statement and investments strategy report.
In the case of operational objective which is to reduce the number of accidents and make
transportation in UK safer, the selected organisations can use capital resource management
report. In this report, assets possessed by an organisation are recorded along with their required
funds for maintenance. Using this financial report, funds can be procured and operational
objective can be achieved. Other financial reports which can be used for this objective are cost
accounting report and quality management report.
3.2 Analysing how published financial information can be used to evaluate the financial
performance of public service organisations
Published financial information refers to the annual report which is published at the end of
an accounting year. This financial information can be used to evaluate the financial performance
of public service organisations. Such organisations which are used in this essay are Department
of Transport UK and Transport for London; both of these organisations publish their annual
report and the ways by which performance of these organisations can be evaluated are identified
and discussed below:
The annual report published by these organisations has a balance sheet which is often
referred as statement of financial position. In this report, data regarding assets and liabilities is
recorded. Using this data, the effectiveness of paying the debts off can be analysed which is a
direct indicator of financial performance. Along with this, balance sheet also has the value of
shareholder’s value; this value is computed by deducting the liabilities of the organisations from
their assets. This shareholder value increases or decreases with the financial activities which can
help in understanding whether the financial activities of the company are enhancing or not.
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Income statement is another financial statement which can help analyse the performance of
public organisations. Usually, public organisations does not earn profit as it works for the
welfare of people but it is also considered that heavy losses indicates negative cash flow in
organisation. By reviewing the financial performance, an individual can analyse what is the
annual revenue gained by the organisation which can then compared to net profit or loss to gain
the insights for net profit margin (Liu and Tang, 2011).
Cash flow statement and notes of financial statements are other financial information
which are recorded in annual report of a public organisation. From the cash flow statement, an
individual can analyse whether the company is experiencing positive or negative cash flow
which can be an indicator of financial performance. Also cash flow statement also represents the
cash which the organisation has spent on their operating, investing and financing activities. By
this, it can be identified whether company is only involved in operations or any other activity as
well.
4.1 Explaining how public service organisations report on and manage financial performance
Public service organisations are the organisation which operate and serve for the society.
These organisations develop an annual budget and then at the end of the year they compare their
budgeted variables such as income and expenditures to actual variables and then a variance
report is prepared; this report indicates and reports the financial performance of the organisation.
Public service sector organisations selected in this essay are Department of Transport UK and
Transport for London. These two organisations can manage their financial performance from
various ways which are analysed below:
These organisations can manage their financial performance by optimally using the
resources so that wastage can be reduced and every resource can help in building profit. By this
way both operational and strategic objectives of the company can be fulfil. Another way of
managing the financial performance is internal audit. Both of the selected organisations are
obligated for an annual external audit. In order to ensure a positive audit opinion and manage
financial performance, it is important to conduct an internal audit. From this, company can
identify and explore their shirt comings.
Another way of managing the financial performance is to provide intensive training to the
employees. The most important issue which public service organisations face is the lack of
skilled employees. By providing training to these employees, operations will be effectively
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conducted and productivity will be enhanced which will result in managed financial performance
of the organisation (Lodge and Hood, 2012).
All the above methods and ways can help in managing the financial performance of the
public service sector organisations.
4.2 Evaluate how efficiency and effectiveness are measured by public service organisations
Optimum utilization of resources maximise the overall operational efficiency as well as
effectiveness and it will be measured through increase in the productivity or profitability.
Technical efficiency means a relationship between inputs and outputs on the border development
curve, but there is no economic sense in any sort of technical efficiency, and this deficiency is
captured by the allocation that requires a cost / benefit ratio. In terms of this analysis the
effectiveness indicates a relationship between outputs and outcomes. In this context the
comparison has to be made between the production and the result (Mendel, 2013). The results
arising from the implementation of a process (outcomes) are also determined by the outcomes
(outputs), as well as other external factors. Therefore, performance, demonstrating the
effectiveness with which resources have been used to achieve the objectives sought, is more
difficult to achieve than performance, because the latter is not affected by external factors.
Basically there are only two major factors which help in evaluating efficiency as well as
effectiveness of public sector organizations. In context of Transport of London and Department
of Transport, both are public sector companies which can measure their operational efficiency or
effectiveness which the help of input, output and outcomes.
4.3 Evaluate good practice methods of managing procurement and contracting of services in the
public sector
At some point in the life of the enterprises all organizations struggle with this type of
management. This is in the way the selection is carried out and the process preparation that will
ensure smooth running of the business. There are such good practices which public sector
organizations need to implement such as Department of transport and Transport of London for
national or local level respectively. These are mentioned below:
Establish a Council to oversee the supply chain: The aim of the Board of Governors is
to provide guidance and help align the supply chain strategy with the overall plan of the
organization. Membership of the council will include the supply chain organization leader as
well as chief executives, managers of business divisions and other prominent company members.
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Ideally the council will have monthly meetings. Yet even if it is not, its very presence would
mean that management of the supply chain has the approval and dedication of senior
management (Osborne, Radnor and Nasi, 2013). This practice helps the Transport of London and
Department of transport to procure or contracting their services in the public sector area.
Organizations already face enough barriers, so members of council helps the firms to grab
opportunities and perform through maximising its potential.
Make technology work for you: Too many organizations select technologies that they
believe will make them more effective, and they organize their workflows and processes around
the technology they chose. Actually, they should first examine the processes which need to be
changed, and then choose the technology that best suits those process needs. It might seem
simple, but I've seen more than a few firms buy first and work it out later. Maybe that's why the
supply chain organization in many businesses tends to be "feeding the machine" (such as an
enterprise resource planning system) with details, and they have trouble remembering the sort of
data they need to make sound strategies and management decisions. It is another practice which
is used to manage procurement and contrasting services in public sector organisation such as
Transportation of London and Department of Transportation.
4.4 Evaluate the impact of the political environment on the funding of public service organisations
There are various source of funding for Public sector organizations such as central tax, local
tax, income, EU funding etc. Political environment affect the most, in context of UK lawmakers,
analysts and policy-makers would need to balance the perceived advantage of continued
exposure to the Common market (e.g. through the European Economic Area or the' Swiss
Model') with full independence from EU legislation and budget contributions (Radnor and
Osborne, 2013). Governments would need to re-establish the capacity to re-negotiate their trade
agreements instead of the current EU bilateral trade arrangements. This is going to take some
time. In the last 40 years the United Kingdom has not signed a trade deal on its own and
administration will need to develop resources and capacity. When government or ruling party
change then it is high chances of modification in the government policies related to tax, interest
rate, exchange rate etc. Further it will affect the funding of public sector companies not only
national level but local too.
Department of Transport is national level public sector firm which affect by every
political change such as Brexit and other incidents. By far UK is the EU's biggest beneficiary of
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foreign investment. Nearly half of the FDI stock in the UK (46 per cent in 2013) comes from the
EU. Then the future of this would be uncertain (Warner, 2013). London's status as the largest
international financial hub in Europe is unlikely to change overnight. The depletion of EU
market access by single market access, it will have a major effect on the UK financial sector and
the tax revenues associated with it. Moreover, if any of the above issues materialize, critical mass
may slowly be lost in the industry, damaging its current status. Brexit would have an impact on
investment and trade decisions for industry with the UK. This means that devolved authorities
and local governments would need to reconsider their position to attract business locally and
nationally, but with short-term uncertainty as to whether complete substitution of EU funds
supporting the regions would be needed.
CONCLUSION
From the above report, it has been concluded that it is important for public service
organisations to manage their financial performance so that they effective operate and can fulfil
their objectives. It is has been summarised that taxation of population is the major source of
finance for such organisation and these funds can be raised by using alternatives sources as well.
The concept of audit is analysed in above essays, from which it has been summarised that audit
is required for public service organisations as they result in providing a fair opinion about the
performance of such organisations and also result in levying an accountability upon them.
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REFERENCES
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organizations. Routledge.
Caouette, J.B. and etal., 2011. Managing credit risk: The great challenge for global financial
markets (Vol. 401). John Wiley & Sons.
Common, R., Flynn, N. and Mellon, E., 2016. Managing public services: Competition and
decentralization. Elsevier.
Graham, A., 2018. Managing airports: An international perspective. Routledge.
Gregory, A., 2015. Planning and managing public relations campaigns: A strategic approach.
Kogan Page Publishers.
Gruber, M. etal., 2015. Managing by design.
Haynes, P., 2015. Managing complexity in the public services. Routledge.
Jacobsen, C.B., Hvitved, J. and Andersen, L.B., 2014. Command and motivation: How the
perception of external interventions relates to intrinsic motivation and public service
motivation. Public Administration. 92(4). pp.790-806.
Liu, B.C. and Tang, T.L.P., 2011. Does the love of money moderate the relationship between
public service motivation and job satisfaction? The case of Chinese professionals in the
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Lodge, M. and Hood, C., 2012. Into an age of multiple austerities? Public management and
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Mendel, T., 2013. Public service broadcasting: A comparative legal survey. Unesco.
Osborne, S.P., Radnor, Z. and Nasi, G., 2013. A new theory for public service management?
Toward a (public) service-dominant approach. The American Review of Public
Administration. 43(2). pp.135-158.
Radnor, Z. and Osborne, S.P., 2013. Lean: a failed theory for public services?. Public
management review. 15(2). pp.265-287.
Warner, M.E., 2013. Private finance for public goods: social impact bonds. Journal of economic
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