Managing Financial Resources in Health and Social Care: CareTech PLC

This report provides a comprehensive analysis of financial resource management within CareTech PLC, a social care services provider in the United Kingdom. It delves into various aspects of financial management, including costing principles, business control systems, and regulatory requirements. The report explores CareTech's sources of income, factors influencing financial resource availability, and different types of budget expenditures. It also evaluates decision-making regarding expenditures, addresses the management of financial shortfalls and fraud prevention, and assesses budget monitoring arrangements. Furthermore, the report examines the information needed for financial decisions, the relationship between care services and costs, the impact of financial considerations on service users, and potential changes to improve care services. The report covers all the financial aspects of CareTech PLC.

RUNNING HEAD: Managing Financial Resources in Health and Social Care
FINANCIAL RESOURCE MANAGEMENT
CareTech PLC

Managing financial resources in health and social care 1
Contents
Introduction...........................................................................................................................................2
Task 1....................................................................................................................................................2
1.1 Costing principles and business control systems.........................................................................2
1.2 Information need to manage financial resources..........................................................................4
1.3 Regulatory Requirements............................................................................................................5
1.4 System evaluation for managing resources in CareTech PLC.....................................................6
Task 2....................................................................................................................................................6
2.1 Sources of Income.......................................................................................................................6
2.2 Factors that influence the availability of financial resources.......................................................7
2.3 Types of budget expenditures in CareTech PLC..........................................................................8
2.4 Evaluating the decisions made regarding expenditures................................................................9
Task 3..................................................................................................................................................10
3.1 Managing the Financial Shortfall...............................................................................................10
3.2 Actions to be taken against the occurrence of financial fraud....................................................11
3.3 Evaluating budget monitoring arrangements.............................................................................12
Task 4..................................................................................................................................................13
4.1 Information required for taking financial decisions...................................................................13
4.2 Relationship between care service provided and ‘cost and expenses’........................................14
4.3 Impact of financial consideration on a service user...................................................................15
4.4 Changes in the financial system to improve the care services of CareTech PLC.......................16
Conclusion...........................................................................................................................................16
References...........................................................................................................................................18

Managing financial resources in health and social care 2
Introduction
Care Tech Holdings PLC is a social care services provider operating in United Kingdom. The
company offers Adult Services which include Adult Learning Disabilities (ALD) and Mental
Health (MH) segments. It also provide Child Services that consist of Young People
Residential Services (YPR), Learning Services and Foster Care (FC). Care Tech offers
support to those people who have mental issues and illness (Caretech-uk.com. 2018). This
report contains a discussion based on financial aspects of the company. It explains the ways
in which Care Tech manages its budgets and various sources of funds. Costing principles and
business control system are also explained in the report. In the later part, various sources of
generating revenue, ways to improve the services and other aspect of finance are also
discussed.
Task 1
1.1 Costing principles and business control systems
According to the National Health Services, the approved costing guidance provides a set of
standards and principles that should be adopted by all the organizations operating in health
sector, including Care Tech also (Improvement.nhs.uk. 2018). These are as follows:
 Consistency: There should be consistency in the method of costing employed by the
organization. This will enable the management to calculate the correct cost of all the
activities according to the expense incurred by the organization.
 Accuracy of data: This principle deals with the level of accuracy in the data entered in
the costing system. Thus, it is vital that the data input must be accurate to the costing
process because inaccuracy will lead to the huge repercussions and the company may
have to face big challenges in maintaining accurate costing system.

Managing financial resources in health and social care 3
 Involvement of shareholders: The people who invest their money in a company are
known as the shareholders. In order to have an effective costing system, Care Tech
should take inputs from its shareholders and apply them in procedure.
 Materiality: This principle states that the prime cost should be included while
determining the overall cost of the organization. The process should follow the prime
cost and expenditure of the firm.
 Transparency: The review of each and every element of costing utilized by the
company, should be done in depth in order to establish transparency in the system.
Business activities should be carried in such a manner that every element can be
identified.
 Objectivity and Causality: The principle of causality implies that the organization
must be aware about the concept of cause and effect. Objectivity deals with setting of
the objectives by the company in order to achieve the same in an efficient manner
(Assets.publishing.service.gov.uk. 2012).
Apart from applying above principles, Care Tech should also install some business control
system so to assure the smooth functioning of the entity. The following control system are
recommended for Care Tech PLC:
 Personnel Control: Care Tech must employ an effective and efficient procedure for
sourcing good staff, training and retirement. It should avoid high turnover of staff and
for that the company must establish a control in the recruitment process and make a
security check on personnel.
 Payroll Control: This take care of the system which involves payment of employees’
remuneration. It also controls the authority which is responsible for making such
payments.

Managing financial resources in health and social care 4
 Framework of regulations: There should be a regulatory framework which helps in
regulating and controlling the activities of the business, integrate them and establish a
control within the organization.
 Forecasting: Care Tech must apply forecasting technique in its business in order to
know about the future contingencies, future performance and cost expenditure. The
data derived from making forecasts is highly beneficial for the company as it can help
in planning out the future strategies.
1.2 Information need to manage financial resources
Following information is required to maintain the financial resources:
Management Accounting
 Cost and price related data: It is very much needed to ascertain the price per unit and
to have an idea about the cost incurred on each unit of production.
 Budgets: preparation of budgets help in estimating the future cost and revenue of the
operations. The data derived from them is used in evaluating the firm’s performance
by comparing budgeted outcomes with the actual ones (Clowes and Scriven, 2015).
 Cost benefit and Variance analysis: cost benefit analysis helps in determining the
benefits earned by the business over the cost incurred by it. Variance analysis measure
the performance of the different segments against the predetermined targets (Nas,
2016).
Financial Accounting
 Income Statement: It contains the data related to the profit earned by the company
during a fiscal year. CareTech’s Annual report of year 2017 shows that company had
performed pretty well in 2017 as its revenue increase by 11.4% and dividend per
share rises by 5.6% (Caretech-uk.com. 2017).

Managing financial resources in health and social care 5
 Balance sheet: It gives an overview of total assets and liabilities of the company
including the value of shareholders’ equity. It shows the overall financial position of
the company (Ittelson, 2009).
 Cash flow statement: It represents the inflow and outflow of the cash in a business.
CareTech reported a cash inflow of £32.7 million from its operating activities in 2017
(Caretech-uk.com. 2017).
These information thereby helps in taking important decisions regarding management of
financial resources.
1.3 Regulatory Requirements
Care Tech being working in a health sector, needs to comply with the provisions mentioned
in the Health and Social Care Act 2012. These regulations help the company to perform its
functions effectively and efficiently. The following requirements are:
 Accountability
 Code of Practice
 Consumer protection
 Appropriate organization structure (Legislation.gov.uk. 2018).
Following are the regulatory authorities who monitors the activities of health care industry:
 NHS Litigation Authority
 Audit Commission
 Financial reporting council
 HMRC
 Care Quality Commission

Managing financial resources in health and social care 6
1.4 System evaluation for managing resources
To manage its financial resources, CareTech is required to be cost efficient and effective,
creating and implementing the systems consistently to reduce the cost and increase the
productivity. The systems developed by CareTech PLC are IT system, auditing, training and
payment system, financial accounting and budgeting system.
 IT system will stimulates easy processing, sharing and storage of files by various
departments of the company. Such as electronic payment system, SAGE accounting
software and so on.
 Budgeting will help in dealing with future contingencies and prevents the wastage of
resources (Weikart, Chen and Sermier, 2012).
 Audit system deals with the collection of data, scrutinise all internal financial
information and helps in preparing final reports (Loughran, 2010).
Task 2
2.1 Sources of Income
In a health care industry, there are various sources from which income is generated. These
include government funding and many more. In 2016, CareTech had generated most of its
revenue from its Adult services worth £90.1 million, Adult Learning Services made £79.4
million, Young people residential services generated £39.0 million, Children services made
£58.9 million and revenue from Foster care was worth £8.7 million (Caretech-uk.com. 2017).
In addition to the sale of services, CareTech has earned £28,854,000 from the sale of
property. Also some grant and funding was received by NHS and its agencies from the
government. Another source of income is the proceeds from issue of share worth £75,000.
The company issued 64,196,903 ordinary shares at 0.5p each (Caretech-uk.com. 2017).

Managing financial resources in health and social care 7
2.2 Factors that influence the availability of financial resources
Various internal and external factors affects the accessibility of finances in an organization
(Mason, 2015). For CareTech PLC, these factors are:
 Goodwill: The reputation or goodwill of the company plays an important role in
attracting the customers, investors and creditors (Aguilera-Caracuel, et. al, 2015).
Having a positive and good reputation will make it easy for CareTech to attract
equity as well as lenders such as banks.
 Policies of Government: modifications and changes in the government policies
may affect the availability of the financial resources of a company. The funding
made by government depends upon the policies made which can increase or
decrease the amount of fund allocated to the health care industries.
 Organization policies: each and every entity has different policies. CareTech has
also framed some polices, which it follows to meet the requirements of its
patients. The income of the organization totally depends upon the policies and
procedures made by it (Kumar and Sharma, 2000).
 Locations: The accessibility of finance is highly affected by the geographical
locations of an organization. The area in which a company is operating sets outs
its nature of services and it customers as well as the funding opportunities (Young,
et. al, 2015).
 Creditworthiness: This factor basically shows the ability of a firm to meet its
financial obligation quickly. Company having a good history of paying its
creditors on time will attract more lenders and more finances.
 Legal Form: The form of business ownership decides the type of funding an entity
will receive (Bruton, et. al, 2015). CareTech PLC being a health care company,
can raise huge funds by issuing shares and selling out its property and equipment.

Managing financial resources in health and social care 8
All the above factors affect the availability of financial resources to a great extent. However,
most of them can be easily controlled by the organization such as its reputation, policies and
creditworthiness. Thus, in order to have an easy access to finance, CareTech can control these
factors.
2.3 Types of budget expenditures in CareTech PLC
Budgets are basically an estimation of income and expenses for a certain period of time.
Company prepare budgets to have an idea about the expenditures which are going to be
incurred in future and to know about the future income (Daniels and Glorieux, 2015).
Generally, entities operating in health and social care industries spent most of their income on
purchasing medical goods and services, so it is very important for them to prepare budgets for
its operations, expenditures and for other aspects (Ding, Niu and Lichtenberg, 2014).
CareTech prepare various annual budgets which are been used by the company for measuring
its actual performance against the projected one. Different types of budgets prepared by the
entity are:
 Operational budget: It deals with the approximation of the finances that are been used
for the day to day operations of the business (Kull, et. al, 2014). It shows estimated
income and expenditure incurred by CareTech on monthly, quarterly or annual basis.
 Overhead budget: This budget shows the distribution of income among various
overheads of the company (Wagner, et. al, 2015).
 Resources budget: It defines the amount of resources required for the effective
operations of the business. It shows how income will be spent on acquiring such
resources.
 HR budget: Man power is the vital resource of CareTech PLC, hence human
resource budget is prepared to ensure that the best man power is employed. This

Managing financial resources in health and social care 9
budget reflects various costs such as training cost, recruitment and selection cost,
payroll and other related costs (Hofmann, Lux and Schultz, 2014).
 Marketing budget: This budget covers the cost of marketing, advertisement and
communication incurred by CareTech PLC.
2.4 Evaluating the decisions made regarding expenditures
Following analysis is done by CareTech for evaluating its decisions made in respect of the
expenditures incurred by the company:
 Cost-Benefit analysis: under this, cost related to a certain project is been measured
and compared against the benefits that will be earned by spending on the particular
project (Larkey, 2015). This analysis helps in determining both the cost and benefit
related to a project, on the basis of which organization takes decision regarding the
same.
 SWOT and PESTEL analysis: These two techniques critically scan the internal and
external environment of the entity and let the management know about the present
opportunity and threat to the entity. These analysis helps the organization in setting
priorities in respect of spending the money (Nekrasov and Melnyk, 2017). However,
conduct of such analysis may be costly and time consuming but they do provide a
basis for evaluating expenditure related decisions.
 Avoiding Emotionalism: It is that factor which is to be avoided by the company while
making decisions regarding expenditure. CareTech must set a limit to the expenses
against the projected returns in order to avoid the over spending (Carota and
Bogousslavsky, 2018). Expenditure must be based on the logics and facts and not on
emotions.

Managing financial resources in health and social care 10
 Prioritizing the activities: It is not necessary that all the activities are equally
important for the company. Therefore, CareTech must identify and prioritize its
activities for making better decisions related to its expenses.
Apart from the above methods, CareTech must also decide about the accountability and
reporting of the project. The company should make sure that the money is spent only on that
project to which it is allocated. This will eventually help CareTech in taking better decisions
regarding its expenditures.
Task 3
3.1 Managing the Financial Shortfall
When an organization lack the ability to pay for its financial liability or obligation, then the
situation is termed as financial shortfall. This situation can have severe consequences on the
company and may result in increasing cost (Furlong, et. al, 2017). However, there are many
ways in which CareTech can manage the financial shortfall, if it faces any. They are as
follows:
 Company can keep some of its funds as reserves, to be used in the situations of
shortfall.
 The entity is required to control its financial resources in order to avoid the situation
of financial shortfall. It must carefully invest in the projects to protect its funds.
 Promoting equity financing: One of the method, entity can seek into is to raise funds
from its shareholders or equity holders by selling out the additional shares.
 Prioritise: To manage the crisis, CareTech must evaluate and appraise every project in
order to know about its viability and profitability. It will help the company to lay
more emphasis on the projects which are more viable and which generates more
returns.

Managing financial resources in health and social care 11
 Virement: It is a process of transferring funds from one department to another. It is
used internally by the organization.
Above stated are some ways, in which CareTech PLC can raise the funds and overcome the
situation of financial crisis in the organization.
3.2 Actions to be taken against the occurrence of financial fraud
In books of Serious Fraud Office (SFO), fraud is defined as a criminal activity of false
representation or prejudice and abusing position for the purpose of personal and financial
gain (Arshad, et. al ,2015). This serious offence can be committed by the managers, staff
members or the business partner.
In health and social care industry, company reporting false financial information to HMRC or
refuse to disclose the actual annual financial report to the department, is considered as a
fraud. CareTech can take various steps to deal with such situation, if it suspects any kind of
fraudulent activity in the organization. Most importantly, it can establish a fraud management
control system that will detect and prevent the frauds. Further actions that can be taken are:
 Conducting an in-depth inquiry in order to confirm the existence of the fraud. The
inquiry or the investigation must involve all the relevant people who are involved in
the activities which causes the fraud. After the deep investigation, company should
collect all the facts and then report to the police about the case.
 It is a professional obligation of the staff to report about any fraud happened in the
organization. However, if any staff member is found involving in any kind of
fraudulent activity, then the company should escalate the matter to the top
management for further investigation.
 Another step, CareTech can take is to follow the policies made by the management in
regards of preventing the situation of fraud.