Evaluating Financial Control, Budgeting, and Stakeholder Interaction

This portfolio provides a comprehensive analysis of financial control within the health and social care sector, covering legal, regulatory, and fiscal environments. It evaluates funding options, explores the agency theory in the context of the NHS, and discusses stakeholder interactions. The impact of financial limitations, expenses, and budgets on health and social sector managers is critically examined, along with the challenges of budgeting in public sector organizations. The document also determines the pros and cons of incremental and zero-based budgeting, computes breakeven points and safety margins for specified years, and discusses assumptions related to the breakeven model. Desklib offers this assignment as a resource, providing students with valuable study tools and solved assignments.

Assessment Type
Portfolio of Tasks

Contents
INTRODUCTION......................................................................................................................4
TASK 1......................................................................................................................................4
a) Analyse critically the legal, regulatory and fiscal environment of health and social care.4
b) Evaluate critically the utilisation of funding options in the health and social care sector.5
c) In the framework of budgeting, elaborate the agency theory in the context of the NHS
and major ways of interacting with stakeholders...................................................................6
TASK 2......................................................................................................................................6
a) Discuss critically the impact of financial limitations, expenses, and budgets have a
significant impact on health and social sector managers.......................................................6
b) Explain the challenges of budgeting in the public sector organisations............................8
c) Determine the pros and cons of incremental and zero based budgeting............................9
TASK 3....................................................................................................................................12
a) Compute the breakeven point and safety margin for the years 2018 and 2019...............12
b) Discuss the assumption that can be taken in the breakeven model by pointing out the
reality of today’s business environment...............................................................................15
CONCLUSION........................................................................................................................15
REFERENCES.........................................................................................................................16

INTRODUCTION
Financial control is a process which involves policies, methods and procedures that
are sued by the organisation to keep a control on financial services. Every organisation is a
have limited resources and every resources have various uses. Budget helps in estimating the
revenue that the organisation will earn and expenses to be incurred during the year (Ayoobi
and et.al., 2021). The following report is divided into three parts. That includes financial,
legal and regulatory framework of social care and health. There are many options for
business funding such as Private Finance Initiatives (PFI), competitive, partnership,
outsourcing and tendering with respect to health care and social factors. A brief summary of
the agency theory is also included, which would be an agreement between one or more
people to execute services on behalf of a person. The public sector is confronted with a
number of budgeting issues. Budgeting can be done in a variety of ways, including zero-
based budgeting and incremental budgeting. The pros and downsides of zero-based and
incremental budgeting are discussed. Task three entails calculating the breakeven point and
margin of safety for the previous two years. At the end, different assumptions connected to
the breakeven model are included.
TASK 1
a) Analyse critically the legal, regulatory and fiscal environment of health and social care.
The services offered by the Ministry of Health in the United Kingdom are referred to
as health and social care. The legal environment is a set of written documents that comprises
the laws, laws and regulations, guidelines, and agreements in every economy. The financial
framework consists of rules and strategies for the fiscal reporting of a specific industry or
sector. The regulatory environment is concerned with the firm's legal framework as a whole.
The numerous frameworks in the area of health and social care can be elaborated as follows:
Legal environment of health and social care:
The Care Act of 2014 is the law that governs social care. There are several additional
legislations that come before this one, such as the National Assistance Act, 1948 and the
NHS Community Act, 1990. The nine acts were consolidated into a single statute known as
the Care Act, 2014. The care act has several functions, which can be summarised as follows:
 It ensures that people receive services before their care needs become critical, or it
allows them to postpone their demands (Budding, Faber and Vosselman, 2019).
 It aids in the gathering of information necessary to make critical choices about help
and treatment.
 It also offers a variety of high-quality and cost-effective services to choose from.

The provision of healthcare is a national responsibility, but social care is a local
responsibility. During the year 2015, the term social care 'percept' was established. It gives
local governments the capacity to boost the council tax by a certain amount. The HRA as
well as the four UK health authorities have created a framework. It's used in the United
Kingdom, Northern Ireland, Scotland, and Wales. The Care Act of 2014, section 111(6) and
(7), comprises all legal prerequisites and encourages the conduct of research.
The regulatory framework for the health and social care industry is as follows:
In order to comply with the rules of the health sector, a number of principles must be
observed. The health and facilities operations are overseen by a number of organisations
(Cagan, 2018). The following is a summary of the regulatory framework in the health and
social care sector:
 The United States Environmental Protection Agency (EPA) is responsible for
protecting the environment from different dangerous chemicals. RCRA, CWA, CAA
(clean air act), and FIFRA (Federal Insecticide, Fungicide, and Rodenticide Act) are
some of the integrated acts.
 The Joint Commission on Accreditation of Healthcare Organizations (JCAHO) is a
non-profit organisation that accredits It is primarily concerned with the patient's
health and safety.
Health and social care financial framework:
 The allocation, procurement, and use of monetary components of the health system
are all part of the funding of health and social care.
 WHO meets the financial needs of the health and social care sectors by providing
essential funds for all services.
b) Evaluate critically the utilisation of funding options in the health and social care sector.
To operate the system, every company needs money. Similarly, the healthcare professional
takes resources from a variety of sources. Other than the finances it already has; other
funding choices are extra sources or means of obtaining funds (Chapman, 2018). There are a
variety of funding alternatives, which can be summarised as follows:
 Private finance Institutions: These are organisations that are not government-owned or
regulated. The ownership of the shares is not allocated among the several authorities.
Credit availability, mitigating risk, and financial data accuracy are the primary
functions of these commercial institutions. Pershing Square Holdings, RSA Insurance,

London Stock Exchange Group, and Admiral Group are the major financial
institutions.
 Collaborations between agencies: It is an organisation that is not governed by the
government. This is the most adaptive, inclusive, and successful method for
maximising return on investment. It is an independent, multinational communications
business that was established to raise cash for the health and social care industry
(Cheng and et.al., 2019).
 Outsourcing: It is the practise of hiring a customer from outside a company to do
certain operational tasks. This type of funding is being used by organisations to cut
labour costs, which include salary, overhead, equipment, and technology. It
contributes to the enterprise's time and cost savings. There are numerous benefits.
c) In the framework of budgeting, elaborate the agency theory in the context of the NHS and
major ways of interacting with stakeholders.
The National Health Service (NHS) is a publicly funded healthcare system. The
national health service is abbreviated as NHB.
There are a variety of ways to communicate with stakeholders, which can be summarised as
follows:
 Project Summary Report: It is issued at a predetermined interval, perhaps weekly and
monthly. The plans established by top-level managers or higher officials are included
in this report. It also includes the general scope of the chosen project, such as the
project's problem, suggested remedies, and budgetary findings. Stakeholders gain
from having access to information about the company's strategic and financial plans.
 Email, e-newsletter and communication automation: It is a crucial tool for interacting
with stakeholders. It aids in quickly reaching out to stakeholders, and specific budgets
may be given to both external and internal users.
TASK 2
a) Discuss critically the impact of financial limitations, expenses, and budgets have a
significant impact on health and social sector managers.
Financial constraints: It is this feature that limits the quality of a variety of investment
possibilities (Douglas and Overmans, 2020). Financial limitations have a number of
advantages, including policy stability and financial sector reforms.

Managers Client Stakeholders
Financial constraints The highest level
managers are in charge
of all management
functions such as
planning, organising,
leading, and
controlling. The
highest level managers
are in charge of all
management functions
such as planning,
coordinating, leading,
and controlling. It is
vital to set boundaries
for expenditures or
expenses in the area of
health and social
services. If an
organisation does not
place a ceiling on
overheads, the expense
of health care will rise
unnecessarily.
The primary goal of
the health and social
care industry is to
please the public.
Clients benefit from
budgeting and various
financial statements.
When a company
restricts certain
actions, it benefits a
large number of
customers. The
savings made by the
company benefit a
variety of clients
indirectly (Galarraga
and et.al., 2020).
Stakeholders are those
who are interested in
the corporation and the
tasks it conducts. The
budgetary constraints
reflect the
organization's strategy
of maximising
resource utilisation
and diversifying its
applications in a
profitable manner.
Cost Medical,
psychological health,
and community health
are all included in the
cost of health. In 2019,
the United Kingdom
spent 10.2% of its
GDP on health. It must
properly allocate its
Cost accounting is a
way for determining a
company's overall cost
to its customers. The
client selects the
degree of assistance
they require from the
organisation.
The cost of operation
varies depending on
the complicated
techniques used by the
healthcare industry.
All cost must be
shown in the fiscal
accounts in order for
diverse providers to

resources so that the
health organization's
efficiency improves.
make investment
decisions.
Budget Managers create
financial budgets that
assist them understand
how much money is
spent on each activity
or assignment. It
assists management in
lowering the expense
of overspending
regions while
widening the range of
underspending areas.
Clients examine the
budget to see if the
firm is on track to
meet the strategic
goals of the company.
It represents the
customers degree of
financial stability.
The firm's major goal
is to involve
stakeholders in the
budgeting process.
Companies, the state,
and other financial
firms are all involved.
It gives the
organisation a loan
after analysing the past
year's budgeting (Goda
and Sawada, 2020).
b) Explain the challenges of budgeting in the public sector organisations.
The process of conceptualising, designing, and budgetary control in an organisation is
referred to as budgeting. It denotes a greater level of accountancy that represents future
actions and has a significant impact on an organization's cash flows. Budgeting has numerous
goals, which can be summarised as follows:
 It is critical to forecast future outcomes based on the organization's current
performance in order to keep the company solvent.
 Each business needs capital to run its operations, and the budgeting process aids in
determining the financial structure of the company. The percentage of equity and debt
used in the company can help determine the firm's true value. The focus of the
concern might alternatively be on lowering the cost of capital.
 The budgeting process aids in the integration of activities across departments and the
achievement of organisational goals (Ho, 2018).
Public organizations are those that are governed and overseen by the governments of a
particular country. The administration of a certain country owns the vast bulk of the stock.
The following are some of the issues that public sector organisations encounter when it
comes to budgeting:

 Manual Tasks: With the passage of time, numerous software applications have
emerged to assist with the input of massive volumes of data that are difficult to
manage. In the situation of public entities, the firm is unable to keep up with current
technological advances. To incorporate the data, businesses must hire a large number
of people, and all advanced computations must be performed manually. EPM, which
is a form of software that aids in forecasting, planning, and budgeting, is lacking. As a
result, public sector companies should adopt current software to reduce manual labour
and ensure that data is handled efficiently (Huang, Samali and Li, 2021).
 Conventional accounting approaches: Budgeting can be done in a variety of ways,
both modern and old. Traditional budgeting approaches are used by public sector
organisations, such as incremental budgeting, which does not produce a new budget
but only modifies existing adjustments. This problem ignores the precise amount of
rate of return, net cash flows, and profitability of the company.
 Budget process challenge: Static budgeting and multi-year financial plans in the
public sector result in a high level of financial and regulatory targets. The emergence
of structural deviations in organisations causes the enterprise's operations to be
misaligned. Budgets become out of balance due to the industry's unpredictable and
highly variable in nature, as well as fluctuations in resource consumption levels. To
address this problem, businesses should regularly revise their budgets by analysing
both internal and external elements.
 Inaccurate data and assumptions: Every accounting process necessitates data,
which is comprised of basic facts and figures. The accuracy of data is necessary for
budget implementation. Public organisations struggle to obtain correct data from
many departments, and compiling information from various departmental functions is
a major challenge (Kawatu and Kewo, 2019). Occasionally, the organisation would be
unable to fulfil the budgetary standards. Identifying the expense trend of each
organizational unit is a common activity that causes issues when combining the data
for budgeting purposes.
c) Determine the pros and cons of incremental and zero based budgeting.
Incremental Budgeting: It is a method of budgeting in which updated modifications
are factored into the current budgeted or actual outcomes. There are a number of benefits to
incremental budgeting, which are listed below:
Pros Cons

Simplicity: It is among the simplest
budgeting methods since it uses the budget
for the current period to anticipate the
budget for the future. It aids in the
budgeting process by saving time. This
method eliminates the need for difficult
calculations and allows you to prepare a
budget in a fraction of the time.
Changes are not taken into account: The
incremental budgeting method ignores
substantial changes and fails to account for
budget adjustments (Lauth, 2021).
Consistency and operational stability: The
changes in prior year's numbers ensure that
stability and predictability in a given time
period. It ensures that the organization's
many departments operate together on a
regular basis.
If incremental budgeting is applied, the
changes made to the budget are tracked after
it has been implemented. Because there is
little or no budget variance, it is a very
flexible process.
Budgets are generated on a yearly,
quarterly, or monthly basis, making it very
easy seeing the effects of changes. When a
budget is incremental, it becomes easy to
compare it to past budgets.
It is the job of top-level management to
maintain budgets; yet, there have been
instances where higher-level authorities
have failed to appropriately assign money
and keep budgets under control. In some
locations, this condition will lead to
overspending.
Zero – based budgeting: It is a contemporary budgeting technique that bases budgeting on
the effectiveness and need of different projects and strategies. This does not consider the
budgets that have already been set. Budgeters examine each programme and its associated
expenditures at the start of each budget cycle to ensure that the company's resources are used
efficiently. It can be used to calculate a variety of costs, including capital expenditures,
operational expenses, sales, marketing costs, and cost of products sold (Moins and et.al.,
2022). There are numerous advantages to creating this form of budget. It can be further
explained as follows:

 According to a cost-benefit analysis: This method examines each item of
manufactured products. It aids in the reduction or elimination of products that have a
high cost and are unable to deliver a high return on investment.
 It contains indicators that are more value-oriented, such as social support, cost of
ownership, and numerous opportunities.
 Account for inflation: when the price of actual goods in the economy rises in a
generalised way, the economy is in a state of inflation. The zero-based budgeting
method accounts for the inflation rate in its bookkeeping and assists in determining
the budget's real values (Pavlatos and Kostakis, 2021).
 Coordination and communication: The method aids in demonstrating increased
connectivity among various departments within the company, as well as enhanced
employee efficiency since it includes their thoughts and ideas in the organization's
decision-making.
 Decrease in the amount of operations that are redundant: The method of zero-based
budgeting aids in identifying actions that improve the organization's returns and
increase revenue.
 Keep track of financial flows: When an organisation adopts zero-based budgeting, it
can keep track of the amount of money that comes in and goes out. The business will
be able to determine whether it has positively or negatively cash flows. It contributes
to the organization's financial stability.
 Budget customization to meet changing needs: ZBD enables organisations to prepare
budgets in a modular fashion. It permits budgets to be changed. In any region, the
firm has the capability to adjust the quantity.
 Rationale of each spending: Zero-based budgeting aids in the identification of
preferences and the prioritisation of expenditures. This strategy is useful when
wanting to delegate authority.
There are a number of disadvantages to zero-based budgeting, which are listed below:
 Costly and costly: It includes a variety of new tools and operations in ZBD, which
necessitates more skill and practice. It increases the firm's additional costs, and time
constraints are also a major consideration when creating the ZBD budget (Salem, Itani
and El-Hajj, 2020).
 Subjectivity is included: When developing a zero-based budget, certain quality
indicators obstruct decision-making power, as well as the budgeter's individual
viewpoints hinder the budget.

 Savvy budgeters influence the process – There are a variety of budgeters who
manipulate the approach employed in the zero-based budgeting process, resulting in
incorrect justification of the budgets maintained.
 Unpredictable income: There are a few sources of revenue in any organisation that are
unpredictable and have a large impact on monthly income levels. Unexpected income
sources wreak havoc on the budget and reduce the firm's managerial efficiency.
TASK 3
a) Compute the breakeven point and safety margin for the years 2018 and 2019
The breakeven point is also known as a crucial point, an equilibrium point, or a point
when there's no profit or loss. It is the condition in which total revenue and total cost are
equal (Tompa and et.al., 2021). It reflects the number of items sold to cover fixed or variable
manufacturing costs.
Cost sheet
Particular s Amount Amount
Sales 49500000 49500000
Direct material 27500000
Direct labour 3300000
Prime cost. 30800000
Variable manufacturing overhead 4400000
Variable selling expenses 3300000
Variable administrative expenses 2200000 9900000
Contribution 8800000
Less : fixed cost
Fixed manufacturing 1100000
Fixed selling and distribution 1450000
Fixed administrative 675000 3225000
Profit 5575000

BEP for the year 2018: (in Amount)
BEP = fixed cost / PV ratio
= 3225000 / 17.77%
= 18148564.90
BEP (in unit) = Fixed cost / contribution per unit
= 3225000 / 40
= 80625 units
Profit volume ratio= contribution / sales *100
= 40 / 225 *100
= 17.77%
Margin of safety = profit / PV ratio (in amount)
= 5575000 / 17.77%
= 31373100.73
Margin of safety = Profit / contribution per unit
= 5575000 / 40
= 139375
In 2019:
Selling price = 225 +25%
= 281.25
Particular Amount Amount
Sales 61875000
Direct material 27500000
Direct labour 3300000
Prime cost. 30800000
Variable manufacturing
overhead
4400000
Variable selling expenses 3300000
Variable administrative
expenses
2200000 9900000

Contribution 21175000
Less : fixed cost
Fixed manufacturing 1100000
Fixed selling and distribution 1450000
Fixed administrative 675000
Fixed cost 1450000 4675000
Profit 16500000
BEP = fixed cost / PV ratio (in amount)
= 4675000 / 34.22%
= 13661601.40
BEP = Fixed cost / contribution per unit
= 4675000 / 151.25
= 30909.09 units
PV ratio = contribution / sales *100
= 21175000 / 61875000 *100
= 34.22%
Margin of safety = Profit / PV ratio
= 16500000 / 34.22%
= 48217416.71
Margin of safety = Profit / contribution per unit
= 16500000 / 151.25
= 109090
Based on the aforementioned calculations of breakeven point and margin of safety for
the years 2018 and 2019, it can be seen that BEP decreased in 2019, owing to higher washing
machine selling prices. Another cause for the lower BEP is a rise in the fixed cost of 1450000
dollars. As a result, Sams Limited was able to obtain the BEP in 2018.

b) Discuss the assumption that can be taken in the breakeven model by pointing out the
reality of today’s business environment.
There are numerous BEP analysis assumptions that can be described as follows:
 It divides the total expense into fixed cost and variable cost parts, but ignores the
semi-variable costs.
 The cost and income functions are both linear (Wang and et.al., 2020).
 A commodity's price remains stable over time.
CONCLUSION
It may be inferred from the above report, that any organisation need finances or
capital to operate. Many organisations make up the health and social sector, which provides
health care services to the public. Education, health, and social welfare are all part of the
social sector. There are a number of organisations that work to help the health-care system.
Several hypotheses have been proposed in order to provide the finest services to the country's
residents. The legal, financial, and regulatory frameworks of the health and social sectors are
investigated in order to gain a better understanding of the health industry as a whole.
Government financial institutions, agency alliances, and outsourcing are all options for
raising capital for a business. Different institutions give finances at a reasonable rate,
lowering the cost of capital and boosting the organization's total profitability. The approach
of marginal costing aids profit forecasting. It comprises the interpretation of the breakeven
point, which shows the amount to be sold in order to achieve a profit and loss position. The
margin of safety is the distance between the breakeven point and the safest level of activity in
the organisation.

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