Report: Financial Resource Management in Health and Social Care

This report delves into the critical role of financial resources in the health and social care (HSC) sector, emphasizing their importance for effective operations centered on people-focused services. It examines the application of costing principles, business control systems, and the information necessary for managing resources within institutions like St. Patrick’s Nursing Home. The report analyzes diverse income sources, factors affecting finance availability, and different types of budget expenditure, including a detailed cash flow forecast. It also explores regulatory requirements, such as the Health and Social Care Act 2012 and the role of bodies like Monitor and the Care Quality Commission. Finally, the report evaluates expenditure decisions, budget monitoring arrangements, and suggests measures for improvement, providing a comprehensive overview of financial management in the HSC context.

FINANCIAL RESOURCES
IN HSC

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Principles of costing and business control systems...............................................................1
1.2 Information needed to manage the resources........................................................................2
1.3 Regulatory requirements for managing resources.................................................................4
TASK 2............................................................................................................................................5
2.1 Diverse sources of income.....................................................................................................5
2.2 Factors influencing the availability of finance......................................................................6
2.3 Different types of budget expenditure...................................................................................7
TASK 3............................................................................................................................................9
TASK 4............................................................................................................................................9
1.4 Systems for managing financial resources............................................................................9
2.4 Evaluate the decisions about expenditure..............................................................................9
3.3 Budget monitoring arrangements........................................................................................10
4.1 Information needed for making financial decisions............................................................10
4.2 Analyse the relationship......................................................................................................11
4.3 Factors affecting the individual...........................................................................................11
4.4 Measures for improvement..................................................................................................12
CONCLUSION..............................................................................................................................12
References......................................................................................................................................13

INTRODUCTION
Financial resources play an important role in functioning of the business within health
and social care. Within this industry the services are centred on the people. However, for an
effective functioning of the operations it is essential that financial resources are to be managed in
best manner. The purpose of this report is to understand how systems are used to manage the
monetary resources in health and social care centres. It will describe the role of planning in the
management of budgets. It will also state how the budgets are monitored. At last, the report will
end in suggesting measures for bringing improvements in these organizations.
TASK 1
1.1 Principles of costing and business control systems
St Patrick’s Nursing Home is a rehabilitation centre and health care institution for the
patients. The principles of costing and business control systems under the organization can be
described in the following manner:
Costs - There are different types of costs used in the nursing home.
 Variable costs changes in direct proportion along with the change in output. For example
direct material costs (Brandon and Welch, 2009)
 Fixed costs remains the same always as it does not change when output increases or
decreases. For example rent, rates etc.
 Semi-variable costs – It includes element of both variables as well as fixed costs. For
example telephone expenses.
Cost benefit Analysis–It includes identifying the benefits associated with a course of
action and then cost related with the action is compared. The results of the technique are
displayed in form of payback period ( Cortes, 2009). This period is regarded as the time, the
method takes for benefits to repay the costs. St Patrick’s Nursing Home can use it different
conditions i.e. in hiring new employees, analysing an investment proposal etc.
Breakeven point - At this point within the business, company has no profit or no loss at
the given sales level.
1

Figure 1: Example of Break Even Point
(Source: Drake and Fabozzi, 2012)
Forecasting –St Patrick’s Nursing Home can also make use of forecasting technique to
determine the direction of the future trends. It will help the financial managers in allocating their
budgets for future course of period (Drake and Fabozzi, 2012).
1.2 Information needed to manage the resources
The financial resources within the nursing home can be managed on the basis of
following information:
 Business Costs – Organization will need costing information related to people, finance,
building, consumable items, administration etc. Different types of cost will identify the
nature of expenses for the operations. It is important that St Patrick’s must create an
appropriate cost structure for its operations (Sabău, 2013).
 Competition – Competition between the health and care institutions may reduce the
costs, improve the clinical outcomes and this will help the system in functioning more
efficiently. There is a high impact of competition factor on the cost and efficiency within
operations. Development of health care facilities in higher number will lead to generation
of many resources within the industry (Abraham, Deo and Irvine, 2008).
 Government policies – Government in UK wants that all NHS associated bodies should
deliver good financial results. There is a need to give patients more options and choices.
2

Doctors and nurses are developed in good numbers to meet the requirements of the
patients. However the nursing homes are required to abide by the policies that are set by
the authorities (Ball, Jayaraman and Shivakumar, 2012). It will facilitate better
management of resources.
Figure 2: Source of funding in NHS
(SOURCE: Daly, 2015)
 Sources of funding – In order to manage the operations, St Patrick’s will require some
stable sources of funding. The vast majority of NHS funding is obtained from central
UKtaxation. Funding can also be raised from patient charges, which are also known as
“co-payments”. Prescription charges can also be used for raising money (Bonaci, Matiş
and Strouhal, 2008). Car parking charges, patient telephone services etc. can also be used
for finance.
 Legal requirements – Monitor is an executive non-departmental public body of the
Department of Health (Bozcuk, 2012). It is acting the regulator for health services in UK.
The body is responsible for making the health sector work for the patients in an effectual
manner.
3

1.3 Regulatory requirements for managing resources
St Patrick’s nursing body can face different types of regulatory requirements in the
management of resources. These can be described as follows:
 The Health and Social Care Act, 2012 – This Act makes significant changes to the
whole system of the NHS. It is responsible for strengthening the role of Monitor as the
sector regulator. Under this act, a new organization named Health watch England has
been developed which is working for the welfare of the patients (Gibson, 2012). It also
makes provision about a National Health Service Commissioning Board and Clinical
Commissioning groups.
 Monitor -This body is acting as the sector regulatory for the health services within
England. It holds the responsibility for authorising, monitoring and regulating the
foundation trust of NHS. These trusts are regulated so that they can provide quality care
on sustainable basis (Maynard, 2013). Monitor also facilitate safety to patient choice and
provides protection to the patients with respect to anti-competitive behaviour which is
against their interests. For example in the year 2010, the body de-authorize the working
of Mid Staffordshire NHS Foundation Trust.
 Care Quality Commission – It is an independent regulating authority for health and
social care in UK. The commission is responsible for making sure that health care firms
are imparting safe, effective, compassionate and high quality care to the patients. Efforts
are also made to improve the services. For the purpose of control, CQC has developed
fundamental standards of quality and safety (Nobes, 2014). Performance rating is also
used by the commission so that users can select their own service providers.
 The Care Act, 2014 – The act is established to decide the statutory roles of the Chief
Inspector of Hospitals, The Chief Inspector of General Practice and The Chief Inspector
of Adult Social Care (Bhowmik and Saha, 2013). The health and adult social care
services providers are subjected to criminal sanctions if they supply or publish any false
or misleading information.
TASK 2
(A)
4

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Brought
Forward
40,000
Sales 200,00
0
300,00
0
300,00
0
300,00
0
250,00
0
260,00
0
300,00
0
260,00
0
300,00
0
325,00
0
265,00
0
265,00
0
Total Income 240,00
0
300,00
0
300,00
0
300,00
0
250,00
0
260,00
0
300,00
0
260,00
0
300,00
0
325,00
0
265,00
0
265,00
0
Purchases 150,00
0
140,00
0
135,00
0
135,00
0
140,00
0
130,00
0
135,00
0
145,00
0
140,00
0
140,00
0
145,00
0
145,00
0
Wages 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000
Rent &
Rates
56,000 56,000 56,000 56,000
Light &
Heat
55,000 55,000 55,000 55,000
Advertising 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000
Insurances 55,000 52,000
Equipment 50,000 10,000 10,000 10,000
Vehicles 20,000
Directors'
Salaries
22,000 22,000 22,000 22,000 22,000 22,000 22,000 22,000 22,000 22,000 22,000 22,000
Motor
Expenses
11,000 11,000 11,000 11,000 11,000 11,000 11,000 11,000 11,000 11,000 11,000 11,000
Sundry
Expenses
11,000 11,000 11,000 11,000 11,000 11,000 11,000 11,000 11,000 11,000 11,000 11,000
Total
Expenditure
432,00
0
251,00
0
291,00
0
302,00
0
293,00
0
296,00
0
292,00
0
246,00
0
296,00
0
297,00
0
246,00
0
301,00
0
Monthly
Deficit /
Surplus
-
192,00
0
49,000 9,000 -2,000 -
43,000
-
36,000
8,000 14,000 4,000 28,000 19,000 -
36,000
Accumulativ
e Deficit /
Surplus
-
192,00
0
-
143,00
0
-
134,00
0
-
136,00
0
-
179,00
0
-
215,00
0
-
207,00
0
-
193,00
0
-
189,00
0
-
161,00
0
-
142,00
0
-
178,00
0
(B)
2.1 Diverse sources of income
St Patrick’s nursing home can obtain finance from varied financial sources. These can be
described as follows:
Central Taxation UK – It is the source from which majority of income is derived for the
health and social care firms. The taxes paid by the residents of the country are utilized in form of
financial resources for these firms. The paid money is used for development and for improving
the health services in UK (Brigham and Ehrhardt, 2011). It is a stable source because taxes are to
be paid by people in regular manner.
5

Budget from government – Government also makes a budget for the NHS in England
every year. A specific amount is decided for use. At present the confined budget for the sector is
£116.4 billion. Every country in the European Union is free to decide how much to spend on the
NHS. It is the most trusted source of finance as it comes from the side of legal authorities.
Prescription charges – Another source of income is prescription charging. It is the most
widely used source for generating money (Broadbent and Cullen, 2012). In England, eligible
patients pay a prescription charge of £8.20 on meeting with a doctor. The charge is taken on the
drugs and medicines which are prescribed to the patients.
Other sources – Apart from the regular options, there are many other methods through
which finance can be arranged. Firm can establish charges for seeing overseas patients. Further
income can also be arranged through car parking fees and through telephonic services with the
patients.
2.2 Factors influencing the availability of finance
There can be many factors which can affect the financing for St Patricks. These can be
described as follows:
Government policies - The current long term economic plan reflects the values. It is the
responsibility of the government to pass on unaffordable levels of debt to the next generation.
There is a need to remove the deficit by using more sensible and balanced approaches. It will aid
in increasing the spending for the health and social care services (Ittelson, 2009). Hence all the
government policies are to be designed in a manner that they can give benefits to both service
providers as well as the users.
Agency objectives and policies – The Department of Health in UK enables the health care
firms to provide services according to the priorities. These departments are required to work in
coordination with the government. The Secretary of State for Health holds the major
responsibility for assuring that the entire industry work together to fulfil the needs of the patients.
Efforts are to be made to give them the best health care facilities (Siano, Kitchen and Confetto,
2010)
6

Figure 3: Changes in the private pay and public sector outsourcing in health care industry of UK
(Source: Nobes, 2014)
Private Financing – These kinds of financing can also affect the availability. It is the
money available from the private sources which are not public. An initiative named PFI (Private
Finance Initiative) has been used by the government for developing health care facilities. Under
this option, government make use of private sector for borrowing the funds for the progress.
Contracts and agreements are made to run all the facilities (White, 2006). Further money can
also be available from private banks which can give very high and long term loans to the users
2.3 Different types of budget expenditure
January February March April May June
Receipts
Cash from this month's sales 9600 9600 9600 15600 15600 15600
Cash from this month's sales 0 2400 2400 2400 3900 3900
total cash received 9600 12000 12000 18000 19500 19500
Payments
Premises -70000 0 0 0 0 0
Equipment -15000 0 0 0 0 0
Vehicle -12000 0 0 0 0 0
Salary -2500 -2500 -2500 -2500 -2500 -2500
Garment Purchases -5000 -5000 -5000 -7000 -7000 -7000
Drawings -1500 -1500 -1500 -1500 -1500 -1500
7

Advertising -1100 -1100 -1100 -1100 -1100 -1100
Other expenses 0 -2400 -2400 -2400 -2400 -2400
Total cash outflows during the
month -107100 -12500 -12500
-
14500
-
14500
-
14500
Net Cash -97500 -500 -500 3500 5000 5000
Opening Balance 130000 32500 32000 31500 35000 40000
Closing Balance 32500 32000 31500 35000 40000 45000
There is much expenditure which is to be paid in the operations of health care services.
These are as follows:
Staffing – The most significant expenditure is management of manpower. The firm is
required to bear the costs related to recruitment, staffing and training & development of the
people. Manpower is needed in different departments at different levels in the health and social
care. Further there is a requirement of skilled employees who can render their hard efforts in
fulfilling the needs of the patients (Banerjee, 2006). Recruiting highly efficient talents will also
need high costs. Hence a good amount of money is to be allocated to staffing expenses within the
budget
Fixed assets – In these kinds of services, there is a costs related to fixed asset also. Fixed
assets include land, building, treatment machines, etc. The service providers are also needed to
maintain a good infrastructure for the service users. This cost is difficult to maintain within the
operations.
Loan interest – It is the amount of interest charged on the borrowed amount. It is taken
as an expense within the budget (Helfert, 2004). It is charged on the loan taken from the banks. It
is important that this cost is to be recorded in appropriate manner.
Marketing – Another expenditure estimated in the budget is marketing. Promotion and
public relations are essential to create awareness among the users. This cost is unavoidable
within the business because it has to beard by the firms for gaining development.
Staff training - The medical staff within the health and social care industry requires a
very good level of training before coming on to the practical aspects of working. This kind of
training is done with good amount of investment also (Jury, 2012).
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TASK 3
ATTACHED
TASK 4
1.4 Systems for managing financial resources
Different types of systems for managing the financial resource can be implemented:
Open Accounts – It is a completely integrated and widely used system for management
of financial resources. It has the potential to remove the burden from the finance team within the
firm (Stomierowski and Lorette, 2011). It offers management information across various levels
within the company in accurate manner. It can reduce the costs and enhances the financial
visibility.
Caresys – It is highly coordinated software used specifically in the health care
organizations. The software is available for use in variety of forms. It allows the information to
be shared across various channels in most cost effective manner. It also reduces the time spent on
the administration activities (Stolowy and Lebas, 2006). The employees can deliver the health
care facilities with utmost care.
IFRS – International Financial Reporting Standards are identified as a common global
language for managing the business affairs. It helps in understanding and comparing the accounts
of the company across the international boundaries (himani and Bromwich, 2009). It implies the
rules which are to be followed by the company’s accountants while maintaining the books of
accounts.
2.4 Evaluate the decisions about expenditure
Following factors are considered while taking the decisions:
Funds availability – First of all availability of funds is checked within the firm. This
factor has a high impact on the taking of the decisions. Funds are to be allocated in appropriate
manner at all the levels. In the absence of the finance it is difficult to estimate what costs would
be incurred. Further it is important that funds are to be raised from stable sources (Daly, 2015).
Here cost benefit analysis can prove to be very effective.
9

Location – Another factor which is important in taking of decision is the location. The
place does matter in the rendering of the health and social care services. Location is to be eco-
friendly and free from environmental disturbances. Patients would prefer to come at the place
which is good from the point of view of environment (Prieto and Revilla, 2006).
Legal framework – As discussed earlier bodies such as Monitor, Care Quality
Commission and acts such as The Care Act, 2014 The Health and Social Care Act, 2012 etc
influence the activities of health and social care firms. The decisions are influenced from these
legal aspects.
Government policies - Government should focus on increasing the spending for the health
and social care services (Stansbury, 2012). In this regard, government policies are to be designed
in a manner that they can give benefits to both service providers as well as the users.
3.3 Budget monitoring arrangements
Following budget monitoring arrangements can be used for the control. These are as follows:
Internal Audit- Internal auditing is performed to scan the internal working condition of
an organization. It can be regarded as an independent, objective assurance and consulting action
which is taken to bring improvements and add value in the company’s operations. The control is
implemented by adopting a systematic and disciplined approach (Brandon and Welch, 2009). All
the risks related to budget implementation can be accessed through performing internal audit. It
has a very wide scope and can bring integrity in the accountancy procedures. Unethical practices
such as fraud and misrepresentation can be scanned very effectively through internal auditing.
External audit – This type of auditing is done in accordance with the specific laws and
rules. For example publication of the financial statements of a public limited company in front of
the general public at constant intervals is a kind of external audit. The information derived from
this audit is very useful for external stakeholders of the business. It includes government,
investors, general public etc ( Cortes, 2009). External audit is a reflector of company’s true and
fair financial position. It is mainly concerned with implementing internal controls in place in
order to manage the risks. Different types of stakeholders can take their respective financial
decisions on the basis of external audit.
10