Section B - Financial Planning and management for public services Flashcards
(151 cards)
1
Q
Define stakeholders in the public sector
A
Individuals or groups that depend on an organisation to fulfil their own goals and on whom, in turn, the organisation depends
2
Q
What is the Power/ Interest matrix?
A
It is an approach to steakholder mapping that considers both the percieved power and interest of each group of stakeholders in order to evaluate the impact each stakeholder group may have on the organisations strategic planning.
3
Q
What are the 4 possible positions on the power / interest matrix?
A
- Minimal effort - Low interest, low power
- Keep informed - High interest, low power
- Keep satisfied - Low interest, high power
- Key players - High power, high interest `
4
Q
WHat are the 3 main uses of stakeholder mapping?
A
- Identifying key blockers and facilitators to a particular strategy
- Deciding whether it is possible or desireable to reposition certain stakeholders
- Assessing whether or not the organisation needs to try to assist particular stakeholders in maintaining their existing level of interest or power.
5
Q
Why is engagement with stakeholders important?
Give 3 reasons
A
- It helps stakeholders understand why things are happening
- Allows us to communicate information about changes
- It enables us to answer any questions directly
6
Q
Why is transparency important for local accountability?
Give 2 reasons
A
- It gives people the tools and information they need to enable them to play a bigger role in sociaty
- The availability of data can open new markets for local busines, voluntary and community sectors and social enterprises
7
Q
WHat is the main objective for finance professionals in the public sector?
A
To ensure service objectives can be delivered within the funds available.
8
Q
Why must financial strategy be aligned with objectives by the finance professionals?
5 reasons
A
- To ensure it is affordable in the short term
- To ensure it is sustainable in future years
- To ensure it balances the affordability of all competing activities
- To ensure it has strategic fit with central government
- To ensure it meets legal requirements of funding criteria
9
Q
Which 2 factyors make long term financial planning difficult?
A
- Economic cycles - Grants or awarded funds are niot usually confirmed until late in budgeting year
- Political cycles - Where politics influences funding decisions.[
10
Q
What is an example of effective asset utilisation in financial strategy?
A
Luton council invested in commercial hosuing and uses the income to support under preasure budgets. The income was higher than would have been recieved as interest.
11
Q
What is zero based budgeting?
A
An approach to budgeting that starts at 0 and assumes that no costs or activities should be included just because they figured in the current or previous periods. Everything included must be justified.
12
Q
What are the 2 difficulties of zero based budgeting?
A
- It initially appears to be a very resource hungry approach that requires time and adds complexity
- It is most effectivbe when the activities of the organisation are wholly or mainly discretionary
13
Q
Give an example of zero based budgeting being used in the public sector.
A
The state of Jersey used a ZBB approach to set out its Medium Term Financial Plan in 2013
14
Q
True/false: Local Government organisation have their auditor appointed to them by Public Sector Audit Appointments (PSAA)?
A
False. After financial year 17/18 local government organisations are responsible for their own appointment of auditors.
15
Q
Define risk
A
Risk is the effect of uncertainty on objectives, where effect is any deviation from the expected outcome - positive or negative
16
Q
WHat is effective risk management?
A
It enables organisations to safegurad their objectives and make the right decisions about taking opportunities and investing resources effectivly.
17
Q
Why is it important to get the risk appetite right for an organisation?
A
SO that controls can be designed and are not too costly or onerous that they prevent delivery of the organisations objectives.
18
Q
What risk appetite do public servive organisation have historically?
A
Risk averse
19
Q
What is risk appetite based on?
A
The level of unmitigated or residule risk that an organisation is prepared to tolerate. (the level at which no further action will be taken to reduce the risk).
20
Q
CIPFA’s “Leading in hard times” publication identified effective financial and risk management as one of teh 10 key actions for leaders to take in response to the climate of austerity. WHat was the key reccomendation of this?
A
That risk needs to be managed rather than avoided and consideration of risk should not stiffle innovation. Risk management is a tool for exploiting opportunities aswell as safeguarding against treats.
21
Q
In 2012 the National fraud athority published an Annual fraud indicator, what was the value of fraud and how much of this was in the public sector?
A
£73bn of which £20.3bn was public sector fraud.
22
Q
WHat is the CFO’s responsibility in preventing fraud?
A
Ensuring that systems are in place to prevent and detect fraud.
23
Q
WHat are CIPFA’s 5 principals for counter fraud? ie steps to counter fraud
A
- Acknowledge the responsibility of the governing body for countering fraud and corruption
- Identify the fraud and corruption risks
- Develop an appropriate counter fraud and corruption strategy
- Provide resources to implement the strategy
- Take action in response to fraud and corruption
24
Q
What are the 5 roles of the CFO in safeguarding public money?
A
- Implement and maintain a framework of financial controls and procedures for managing financial risks
- Determine accounting processes and oversee financial management procedures that enable the organisation to budget and manage its resources
- Ensure robust systems of risk management and internal control
- Ensure financial control is exercised consistently
- Implement appropriate measures to protect its assets from fraud and loss
25
Define leadership
There are many definitions of leadership, one is: Leadership is a process of social influence in which one person can enlist the aid and support of others in the accomplishment of a common task.
26
What are the differences between a leader and a manager when it comes to creating an agenda?
Leaders - Establish direction: Vision for the future, Develop strategies for change to achieve goals
Management - Plan and budget: Decide action pland, timetables and allocate resources
27
What are the differences between a leader and a manager when it comes to developing people?
Leaders - Align people: Communicate vision and strategy, influence creation of teams which accept validity of goals
Managers - Organise and staff: Decide structure and allocate staff, develop policies, proceedures and monitoring
28
What are the differences between a leader and a manager when it comes to execution?
Leaders - Motivating and inspiring: Energise people to overcome obsticles, satsify human needs
Managers - Controlling and problemsolving: Monitor results against plan and take corrective action.
29
What are the differences between a leader and a manager when it comes to outcomes?
Leader - Focuses on change: Produces positive and sometimes dramatic change
Manager - Focuses on consistency: Produces order, consistency amd predictability
30
What are the 6 charactaristics of a leader?
1. Innvoates
2. Develops
3. Focuses on people
4. inspires trust
5. has an eye on the horizon
6. Does the right thing
31
What are the 6 charactaristics of a manager>
1. Administers
2. Maintains
3. Focuses on systems and structures
4. Relies on controls
5. Keeps an eye on the bottom line
6. Does things right
32
What are 6 responsibilities/roles of the CFO?
1. Establishing a strong framework financial management
2. Ensure strategic planning and decision making are supported by sound analysis.
3. Applying strong internal controls in financial management, risk management and asset control
4. Implementing systems of internal control such as financial instructions, operating manuals and codes of practice.
5. Implementing fraud detection and prevention measures.
6. Supporting internal audit arrangements.
33
True/false: The CFO of a local authority has a legal duty to act in the interest of local taxpayers?
True.
34
What does section 114 of the local government finance act require of the CFO?
To report to all the authorities memeber if there is or is likley to be an unblanced budget. This would include situations where reserves have become seriously depleated and the authority will not have resoruces to meet its expenditure in a financial year.
35
What are the 2 main roles of the CFO in simple terms?
1. Stewardship and probity in the use of resources
2. Extracting the most value from the use of these resources.
36
What are the 4 main factors a CFO has to consider when maintaining relationships?
1. Having a close working relationship with the CEO, board and elected members to ensure that financial impacts of any key decisions are considered and are a key part of discussion
2. Lead on engagement with stakeholders where financial decisions affect key services.
3. Ensure appropriate oversight of major projects with significant financial implications
4. Develop a good relationship with relevant auditors and inspectors through establishing systems of internal control and being open and transparent.
37
What are 6 personality traits a CFO should have?
1. Robust and resilient leadership
2. Flexible leadership style
3. Able to network and build robust relationships
4. Address and deal effectively with difficult situations and challenge effectively
5. Balance conflicting pressures and needs
6. Innovate to add value and be a good communicator.
38
What are the 4 ways in which the finance role will have to develop and seek to be in the coming years?
1. An innovator - Explore ways in whcih we can get more from the public purse.
2. A business partner - Helping influence strategy and buiness decisions outcomes and collaborating with other leaders to deliver their policies
3. A steward - Safeguarding increasingly scarece resources maintaining good governance and giving reliable account
4. A provider and commissioner - Maintaing robust financial operations and processes.
39
As part of a new appraoch to the finance function, business partnering means finance professionals should provide financial advice in 5 ways. What are these?
Finance professionals must support services with financial advice such as:
* In depth, value added analysis of financial results and business driven reporting
* In sight and expertise in the financial, regulatory, tax and capital implications of new activities.
* transactions and other business development initiatives
* Advisory capabilities in the impact of new financial regulations and changing funding arrangements
* Input into the strategy of the business
40
In order to deliver value for money services, what 4 aspects of the organisation must be efficient and effective?
1. People
2. Syetems
3. Processes
4. Service delivery
41
In order to deliver value for money, how can we ensure EFFECTIVNESS from people?
| 3 factors
1. Have the right people in the right jobs
2. Long term development and training
3. Focus on analytics and customer needs
42
In order to deliver value for money, how can we ensure EFFICIENCY from people?
| 5 factors
1. No duplication of work
2. Low cost location
3. Shared service centres
4. Outsourcing
5. FOcus on transactional operations
43
In order to deliver value for money, how can we ensure EFFECTIVNESS from systems?
3 ways
1. Cloud computing
2. Full utilisation of systems
3. Creating "one version" of the truth
44
In order to deliver value for money, how can we ensure EFFICIENCY from people?
3 ways
1. Single system reporting
2. Reduction of manual spreadsheets
3. Common chart of accounts
45
In order to deliver value for money, how can we ensure EFFECTIVNESS from processes?
1. Enhance flexibility
2. Reduce complexity
46
In order to deliver value for money, how can we ensure EFFICIENCY from processes?
1. Increase automation of back office processes
2. Rapid response to external change
3. Standardised processes that are well understoof
47
In order to deliver value for money, how can we ensure EFFECTIVNESS from service delivery?
1. Detailed analysis aligned to real KPI's
2. Business support
3. Self-service portals for customers
48
In order to deliver value for money, how can we ensure EFFICIENCY from service delivery
1. Faster analysis and reporting
2. Less complexity and more clarity
3. Reduced costs
49
How can benchmarking be useful for a finance function?
It can help establish whether the finance team offers good value for money, by comparing with other similar organisations.
50
What is the difference between values and ethics?
Values are beliefs held by an individual or a group in whicg they have an emotional investment
Ethics is a system of moral values around what consistiutes right and wrong and that guides our behaviour.
51
What is business partnering as a model of service delivery?
It is about how finance's role contributes to the business rather than pursuing a narrow departmental agenda.
52
What are the 3 models of a finance team?
1. Centrailsed finance team
2. Decentrailised finance team
3. Business partnering
53
What are often the main focuses of a centralised finance team?
1. Preparing budgets
2. Producing financial management information
3. Maintaining financial records
54
What are often the main focuses of a decentralised finance team?
1. Usually closly involved in day to day business if their team
2. Support with team budgets
3. Produce financial reports for their team
55
What is the advantage of a centralised finance team?
They usually have a good grasp of the overall financial position of the organisation and how the individual parts are contributing as a whole.
56
What is the disadvantage of a centralised finance team?
They can become detached form the needs of the organisations sub parts
57
What is the advantage of decentralised finance team?
May develop a better understanding of their teams operation and therefore may become more expert in that field.
58
What is the disadvantage of a decentralised finance team?
They may become detached from the overall objectives of the organisation, the overall financial position of the organisation or how their teams contribute to those objectives.
59
What is the aim of business partnering?
To gain the best of both worlds of a centralised and decentralised finance function and support sound financial decisions and and good financial management.
60
How does business partnering function?
## Footnote
`
Usually maintains a central finance team but within that develops finance professionals to have the skills to understand the different parts of the organisation, its complexity, needs and desires. These skilled professionals can then act as advisors on particular departmental issues whilst still maintaing a good understanding of teh organisation as a whole.
61
What are 2 problems with business partnering?
1. Some argue the term "Partnering" suggests taht finance is outside of the business proper rather than an integral part of it.
2. Non-commercial organisations may resist it because the term "business" may be interperated as profit seeking and therefore oppose their culture.
62
What 5 questions can we ask to assess the effectivness of finance as business partners?
1. Is finance represented on important committees and working groups?
2. What discretionary spending powers and investment budget does finance have?
3. Do "shadow" finance teams exist in other parts of the organisation?
4. What decisions does finance need to sign off?
5. Does the finance team have the key skills needed to deliver?
63
What are the 3 main skills of a successful business partner?
1. Technical / professional skills
2. Behavioural / smart skills - Communication, engagement and active listening, relationship building ect.
3. Strategic and commercial acumen - understanding the economics of a business ect.
64
What are 6 possible benefits of business partnering?
1. Finance adds more value to the organisation
2. Finance is an integral part of decision making
3. Teams get professional; insight from finance
4. Teams understand their finances better
5. Teams achieve better value for monet
6. There is better and quicker decision making
65
How is the finance function expected to change in the coming years?
The traditional transactional role for finance may soon be gone and focus will move to value added activities such as analysing data to provide insights that balance risk with increased delivery of strategic objectives.
66
What are the 2 broad groups of reasons for why business partnering may fail?
1. External factors - external to the finance function
2. Internal factors - Internal to the finance function
67
What are the 5 mian external factors which could lead to the failure of business partnering?
1. Senior leadership support
2. Organisational structures
3. Support for change
4. Change management
5. Relationships
68
What are the challenges with senior leadership support when implementing business partnering and what are potential solutions?
1. Lack of buy in from senior leadership
2. Organisation is unaware of what changes mean.
Solutions:
1. Clear communication of working methods and benefits
2. Leaders demonstrating support for the model across the organisation.
69
What are the challenges with organisational structures when implementing business partnering and what are potential solutions?
1. Dispersed departments
2. Embeded culture is resistent to change
Solutions:
1. Maintaining matric management to keep the financial strategy in view
2. Communication of benefits.
70
What are the challenges with support for change when implementing business partnering and what are potential solutions?
1. Insuffiecient resources for the change
2. Lack of ownership by those who need to adapt to the change
Solutions:
1. Project plan with visible leadership and ownership
2. Appropriate resources allocated
71
What are the challengers with change management when implementing bsuiness partnering and what are potenial solutions?
1. Indentifying and involving stakeholders
2. Achieving ownership
Solutions:
1. Communicate progress with implementation
2. Celebrate success
3. Maintain motivation through good project managemnt
72
What are the challenges with relationships when implementing business partnering and what are the potential solutions?
1. Devloping trust
2. Physical barriers (location)
Solutions
1. Establish trust between finance business partner and department
2. Spend at least some time in the department
73
What are the 6 main internal factors that could lead to failure of business partnering?
1. Definition of role
2. Information systems
3. Maintaining appropriate relationships
4. Bureaucracy and tradition
5. Consistency of role
6. Cultural, political and commercial awareness
74
What are the challenges with definition of role when implementing business partnering and what are the potential solutions?
1. Lack of clarity of the role and respoonsibility of the finance business partener
Solution:
1. Agreed responsibilities
2. Communicated tp all parties
3. Open communication to identify knowledge gaps
75
What are the challenges with information systems when implementing business partnering and what are the potential solutions?
1. Providing accurate and timely management information
2. Only having a single version of the truth
Solutions:
1. Investment in robust IT system
2. Avoiding use of spreadsheets outside of system
3. Developing robust and useful reporting from the single system
76
What are the challenges with maintaining appropriate relationships when implementing business partnering and what are the potential solutions?
1. Balancing need to add value and maintain professional standards
2. Finance business partner can become too focused on the needs of the team and lose sight of corporate and ethical responsibilities.
Solution:
1. Clear decision making protocol
2. Clear organisational goals and values and an organisational perspective on relative priorities.
3. Management teams retaining professional accountability to the CFO
77
What are the challenges with bureaucracy and tradition when implementing business partnering and what are the potential solutions?
1. Accepting that changes to formats of reporting to meet the needs of the organisation may be required.
Solutions:
1. Finance continually review and challenge the reporting framework to ensure fit for purpose
78
What are the challenges with Consistecy of role when implementing business partnering and what are the potential solutions?
1. Maintaining an appropriate and consistent level of service
Solutions:
1. Regular meetings between finance business parter and department
2. Clear documentation of role and service level
3. Appropriate senior management supervision to monitor quality of business partnering provision
79
What is the challenge with cultural, political and commercial awareness when implementing business partnering and what are the potential solutions?
1. Accountants not understanding the importance of political pressure or commercial decisions.
Solutions:
1. Training of finance business partners in the political landscaoe and teh objectives and key outcomes for the organisation as a whole
80
What are the 3 main activities of treasury management?
1. The management of the organisations cash flows, banking, money market and capital market transactions
1. The effective control of the risks associated with those activities
2. The optimum performance associated with those risks
81
What is the purpose of a transformation programme?
To invest in future infrastucture which ia likely to be smaller but more efficient and effective in the delivery of services
82
In terms of investment finance, what are 2 commonly used measures of risk?
1. Probability of default - Not getting your money back
2. Price volatility - standard deviation of a financial assets value
83
What does CIPFA's code of practice for treasury management state on the balancing of risk and return?
In balancing risk against return, local authorities should be more concerned to avoid risk than to maximise returns and ensure that priority is given to security and liquidity when investing funds.
84
What is an example of the need to balance risk with the need for a certain level of return in treasury management?
Local authority pension funds and their need to obtain a certain retrun to match pension liability growth and avoid having to increase contributions from the councils general fund.
85
What is a risk appetite statement?
A clear statement, which is explicit about the level of risk an organisation is prepared to tolerate.
86
What 5 reccomendations does CIPFA make on risk appetite statement?
1. The statement should be compatiable with any general statement of financial risk appetite in the authority's overall risk policy or risk register.
2. Preperation of the statement should take into account the materiality of teh treasury risks for the authority.
3. It should flow naturally from the statement of the objectives of treasury management.
4. The authorities risk appetite may change over time and in times of greater financial difficulty, the authority may want a lower level of risk.
5. As the statements are subjective, the authority may want to position itself reletive to other authorities. Ie Not highly exposed to risk so can accept higher risk portfolio than other authorities.
87
What is the premise of the whole portfolio strategic approach to treasury management?
That although risks related to individual investments are important, at the strategic level, it is important to consider, assess and understand risks across the whole portfolio.
88
The treasury management code gives what 4 indicators which local authorities are required to have regard for?
1. Upper limits on the proportion of net debt compared to gross debt
2. Upper limits on fixed as well as variable rate exposeure
3. Upper and lower limits to the maturity structure of its borrowing
4. Upper limits to the total principal sums invested for more than 264 days.
89
What is the prudential code?
A framework for local authority investment in capital projects.
90
What are the 3 objectives of the prudential code?
1. To ensure that capital expenditure plans are affordable
2. To ensure all external borrowing and other long term liabilities are within prudent and sustainable levels
3. To ensure treasury management decisions are taken in accordance with professional good practice
91
What is the objective of prudential indicators?
To support and record local decision making in a manner that is publically accountable
92
What are the 3 prudential indicators?
1. Authorised limit for external debt - must not be breach without council approval
2. Operational boundary for external debt - Represents most likely levelk of borrowing for most of the year, it may occassionally be breached due to unforseen events.
3. Actual external debt - Balance sheet closing balance for gross borrowing and other long term liabilities.
93
What is the fundamental objective of the prudential code in treasury management?
To ensure that the total capital investment of the authority remains within sustainable limits and in particular to consider its impact on the bottom line and therefore council tax rates.
94
What are 6 prudential indicators of affordability looking ahead for a 3 year period?
1. Authorised limit for external debt
2. Operational boundary for external debt
3. Estimates of capital expenditure
4. Estimates of capital financing requirements
5. Estimates of the ratio of financing costs to net revenue
6. Estimates of incremental impact of capital investment decisions on council tax
95
What are 4 prudential indicators of affrodablility at year end?
1. Actual ratio of financing costs to net revenue
2. Actual capital expenditure
3. Actual capital financing requirement
4. Actual external debt
96
When setting prudential indicators which 6 factors should the local authority have regard for?
1. Affordability - implications for council tax and council housing rents
2. Prudence and sustainability - implications for external borrowing
3. Value for money - option appraisal
4. Stewardship of assets - Asset management planning
5. Service objectives - Strategic planning for the authority
6. Practicality - Acheivability of the forward plan.
97
According to the local government act 2003, under what reason may a local authority borrow or invest?
For any purpose relevant to its functions or for the purpose of teh prudent management of its financial affairs. Borrowing to purly invest is unlawful.
98
True/false: Local authorities are constrained by law in the types of investments or investment instruments they may use.
false. Although they are subject to guidance from central government.
99
Give 2 examples of how ethical concerns coincide with sound investment practices.
1. Companies engaing in unsustainable environmental practices may be poor investments due to the risk of fines, future regulations restricting their activity or exhaustion of natural resources
2. Corrupt practices such as complicity with human rights abuses or exploitation are likely to have negative financial consequences in the medium to long term as the business model is unlikely to be sustainable as sociatal conditions improve.
100
Why may charities choose to invest in a narrower range of investments?
Because their objectives justify the restrictions.
101
What 3 situations may a charity invest in a narrow range of invetments?
1. Where investment in a particular type of business would present a practical conflict with the aims of the charity.
2. Investments that may hamper its work, such as making potential beneficiaries unwilling to be helped because of the source of the charities money.
3. If investments are inappropriate on moral grounds provided this would not involve a risk of significant financial detriment.
102
Why are borrowing decions a part of capital finance strategy?
As borrowing cannot be used to finance revenue activities under law. However this does not apply to central government.
103
What are the 4 main options for FUNDING capital expenditure?
1. Application of capital receipts
2. A direct charge to the revenue account
3. Application of a capital grant
4. Securing an upfont contribution from another party towards the cost of a project
104
What is Capital Financing Requirement?
The total capital expenditure incurred by the authority
105
What is Minimum revenue provison?
The means by which council tax payers fund capital expenditure that has been financed by borrowing or credit arrangements.
106
What are the 5 main souces of borrowing for Local Authorities?
1. Public Works Loan Board
2. Bank Loans
3. Inter Authority Loans
4. Debt markets - bonds
5. Uk municipal bonds agency
107
How does the PWLB fund its loans to local authorities?
1. They on-lend the proceeds of UK government bonds to local government.
108
What is the maturity on loans from the PWLB?
From 1-50 years in 6 month increments
109
What are the 3 options for repayment of PWLB loans?
1. Maturity - all principal is paid on the last day of the loan
2. Equal instalments of principal - the principal amortises on a straight line basis, so the total payment (interest and principal) decreases towards the end.
3. Annuity - Like a mortga , the interest and principal payments combine to form an equal amount at each semi annual payment date, with a ratio of interest to principal decreasing.
110
What are the 3 disadvantages of using the PWLB as a source of borrowing?
1. A comparativly high price
2. The limited range of structures
3. No abaility to borrow on an index linked basis
111
WHat is the main disadvantage of borrowing from banks?
1. The contracts are more complex than from PWLB and ofetn require external lawers to review.
2. They are more difficult to price as for example LOBO contracts allow the lender to periodically impose a new interest rate.
112
What is the disadvantage of Inter authority loans?
There is limited scope for very long term loans as most authorities do not want to tie up their money for so long.
113
What are the 5 main short term budgeting methods?
1. Incremental budgeting
2. Zero-based budgeting
3. Activity based budgeting
4. Rolling budgets
5. Planning, programming and budgeting system (PPBS) -
114
What are the 5 main short term budgeting methods?
1. Incremental budgeting
2. Zero-based budgeting
3. Activity based budgeting
4. Rolling budgets
5. Planning, programming and budgeting system (PPBS) -
115
What are the benefits of annual budgeting for a private sector organisation?
1. Helps control spending by monitoring and reporting where money is being spent.
2. Helps identify profitable activities
3. Helps identify non-profitable activities
4. Helps identify areas of growth or weakness.
116
Why do public sector organisations set annual budgets?
It is required by law
117
What are the 4 legal requirements for local authorities in setting budgets?
1. Set an annual budget
2. Have it approved by its relevant governing body by a given date
3. Set it as a balanced budget - Affordable spending over an agreed time period through grants, use of reserves and other income.
4. Maintain minimum reserve balances to cope with unexpected events
118
Give 4 reasons why incremental budgeting is suitable for local authorities?
1. Central gov restrictions apply in increasing local taxation income
2. Central gov grants are usually paid annually
3. There are restrictions on other income sources such as fees and charges. Eg. planning application fees set nationally
4. A range of statutory services must be delivered so there is good knowledge of demand and changes year to year are minimal.
119
What are 3 areguments for using Zero based budgeting in the public sector?
1. It encourages critical evaluation of which services must be delivered
2. It encourages hard thinking about which traditional services may no longer be required or can be delivered in a different way that costs less
3. It encourages rethinking the real cost of services and being innovative about how to pay for them
120
What is the purpose of the Medium Term Financial Strategy?
To support business planning through identification of key budgets and the assumptions for change in future years.
121
What is the other important key role does the MTFS play aside from forecasting financial flows?
Integrating and harmonising financial and other corporate strategies.
122
What is the charactaristic of a good MTFS?
It should not just give provisional budget figures but should seek to give insight into longer term business trends.
123
What are the 2 key assumptions in a MTFS?
1. Sources of income - central gov grant, council tax, business rates fees & charges ect
2. Key spening assumptions - Pay award, non-pay inflation, known futire committments and liabilities
124
What are 3 benefits of devloping a Medium Term Financial strategy?
1. Clear framework of planned expenditure to support decisions made already and to inform future decisions
2. Transparent tracking of adjustments year on year
3. Increased predictability of funds available, which can force clarity around criteria for spending.
125
What are 2 problems with MTFS?
1. Gigures included for later years might be considered as entitlement to budgets by managers
2. Assumptions made may turn out to be wrong because of unexpected changes in service demand, economy ect.
126
What 3 things does a good MTFS rely on?
1. Skill and knowledge of the financial managers developing it
2. Reliable information from the organisations teams
3. Realistic forecasting
127
What is a project budget?
It is a budget linked to a specific activity or outcome that is time limited rather than an ongoing activity.
128
What are 4 advantages of a project budget?
1. Incentive to identify all likely costs at the outset of the project to secure the correct funding
2. Monitoring can be done by the project team at intervals that suits the project rather than monthly monitoring.
3. It is easier for the project team to monitor and demonstrate the compliance with an conditions attached to funding
4. manager can identify if projects are under or over performing as over or under spends are no hidden away in a net figure
129
What are 4 disadvantages of project budgets?
1. Spending progress on projects may not get recorded to management in the same routine way as regular monitoring
2. Temptation to spend all allocated project budget even if it is not all required.
3. Additional report writing and time consuming management ,eetings may be needed to recieve budget reports
4. Relectance of project managers to report underspends may result in unnessesary service cust elsewhere.
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What is a pooled budget?
A budget that is shared between and usually contributed to, by more than one organisation.
131
What are the 4 types of pooled budgets?
1. Aligned budget arrangement
2. Lead body arrangement
3. Joint commissioning arrangements
4. Joint venture arrangements
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What is an aligned budget arrangement?
Budgets remain with the individual organisation but there is a joint board which agrees joint objectives
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What is a lead body arrangement?
One organisation takes on a lead body role and administers a total budget on behalf of the other organisations to achieve jointly agreed objectives.
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What is a joint commissioning arrangement?
Individual organisations come together to commission a thrid party to provide a service.
135
WHat is the aim of pooled budgeting?
To deliver more efficient and effective services that better meet citizens needs.
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What is teh difference between an aligned budget and a pooled budget?
An aligned budget is when 2 or more partner work together to jointly consider their budgets and align their activities to deliver agreed aims.
A pooled budget is when 2 or more organisations contribute to a single fund to achieve specific aims and goals.
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What are 4 shared risks in pooled budgets?
1. The level of contribution to the pooled budget does not meet the level of expenditure.
2. Partners are unable to agree on how to deal with overspend
3. Partners cannot meet their contributions due to income reductions in their seperate organisations
4. Change of partners objectives and responsibilities.
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What are 2 individual risks for each partner of a pooled budget?
1. Failure to achieve aims, efficiencies.
2. Arrangements are not sufficient to help respond to changes in circumstances and new events
139
What 8 factors must a local authority consider when deciding whether to deliver a service under contract or through grant?
1. Legal power
2. Value for money
3. Legal risks
4. Complexity of service
5. Subsidy control
6. Breach - CConsequences of a grant/contrat breach
7. VAT liability
8. state of the market
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What is payment by results?
It is a specific type of contract, with funding attached to contractual delivery of aggreed targets for the project / contract. It is mostly used to provide grants to the third sector.
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What is the purpose of payment by results?
It allows public sector organisations to pay for services on the basis of outcomes delivered rather than outputs.
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What is an example of Payment by results?
Social impact bonds. The commissioners contract with the investors and only pay the investors if certain outcomes are achieved. eg. Peterborough SIB will only pay investors if there is a 7.5% decrease in reconvictions ofshort sentence prisoners.
143
What are the 6 responses to volatile funding?
1. Good financial governance
2. Manage the risks
3. Long term agreements
4. Diverse sources of income
5. Seek funding opportunities
6. Managing reserves
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What are 4 examples of what good financial governance looks like for manging volatile funding?
1. Regular reporting to the governing body
2. Actions have been taken to address key risks
3. The CFO is a key member of the leadership team
4. Leadership foster an open environment of open challenge to financial assumptions and performance.
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What are 4 ways to manage funding volatility risks?
1. Identify the risky sources of income
2. Assess how likely they are to cease to exist and what the impact would be.
3. Mitigate the impcat of risks through contingency planning
4. Monitoring and reporting on compliance with funding conditions
146
What are porters 5 forces for competetive advantage theory?
1. Threat of entry
2. Threat of substitutes
3. Power of buyers
4. Power of suppliers
5. Extent of rivalry between competitors
147
What are the 3 core issues of managing demand for public sector organisations?
1. Matching resources to demand within restricted resources
2. While resources are not expanding, demand for services tends to increase (demand growth outstrips resource growth)
3. Policy may deliberatly restriuct managements coping tactics. Eg. maximum limits on waiting times.
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What are 4 constraints around managing demand in the public sector?
1. Current and future funding levels
2. Statutory services such as childrens and elderly care
3. Performance levels required eg. NHS waiting times
4. Legislation regaring ability to charge and its limitations
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What are the 4 main types of demand?
1. Excess demand - unneccessary provision
2. Avoidable or preventable demand - where services tackle syptoms rather than root cause
3. Failure demand - Previous failure by service to resolve an issue.
4. Co-dependent demand - Public services unintentionally promote dependency.
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What are the 4 key strategies to managing demand for services?
1. Customer insight - using tools such as user panels analysis of data to understand how and why people use public services
2. Early intervention - moving up-stream in interventions to avoid more costly reactive interventions
3. Behaviour change - Understanding and targeting behavioural drivers
4. Building resilience - Moving away from using cost and output as performance metrics to redcuce waste and eliminate excess provision. Involving users in design and delivery of services.
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What are the 6 elements of the demand management framework?
1. Community leadership - Recognise that demand is political and find the right local narative.
2. Building insight - Create methods to get closer to communities
3. Changing behavior - Leverage emerging data on outcomes and behavior and build trust to change behavior
4. Changing the system - Think whole system, whole place and work collaboratively accross agencies and sectors
5. Creating shared value - Manage demand and growth strategies independently.
6. Building community resilience - Engage community in design and delivery of services.
