Managing Financial Resources in Health and Social Care Programme Edexcel BTEC Levels 4 - Assignment Example

Managing Financial Resources in Health and Social Care Programme Edexcel BTEC Levels 4 and 5 Higher Nationals in Health and Social Care Table of Contents Introduction 3 Task 1 4 1.1. An Explanation of Costing Principles and Home Control Systems that may be adopted in CareTech Holding PLC 4 1.2 Information Needed to Manage Financial Resources in CareTech Holding PLC 5 1.3 Regulatory Requirements Need To Be Satisfied While Managing Financial Resources in CareTech Holding PLC 6 1.4 Evaluation of the Systems for Managing Financial Resources in CareTech Holding PLC 6 Task 2 7 2.1 Brief Overview of the Diverse Sources of Income Available To CareTech PLC in 2013 7 2.2 Brief Analysis of the Factors that may Influence the Availability of Financial Resources in CareTech PLC 8 2.3 Review of Different Types of Budget Expenditure in CareTech PLC 9 2.4 Evaluation of How Decisions about Expenditure Could Be Made In Caretech PLC 9 Task 3 11 3.1 Managing the Situation of Financial Shortfall in CareTech PLC 11 3.2 Actions to be taken if Occurrence of Financial Fraud Is Suspected 11 3.3 Evaluation of Budget Monitoring Arrangements in CareTech PLC 12 Task 4 15 4.1 Information Required To Make Financial Decisions Relating To CareTech PLC 15 4.2 Analysis of the Relationship between Care Service Delivered and ‘Costs and Expenditure’ 16 4.3 Evaluation of How Financial Considerations Impact Upon a Service User 16 4.4 Ways to Improve the Care Service Provided By CareTech PLC through Changes to Financial Systems and Processes 17 Conclusion 18 References 19 Introduction Caretech Holdings PLC is a British non-profit organisation, which is specialised in providing quality care services to both children and elderly people. Presently, CareTech accomodates over 1300 children and adults who are suffereing from either physical and/or mental disabilities. CareTech has numerous public resource units that offer quality care opportunities to individuals with disability, for acquiring skills that will help them to live independently in the society. The paper intends to propose costing principles and control systems to be adopted in the organisation along with evaluating the information and regulatory requirements for managing its financial resources. The paper also provides an understanding about the diverse source of income and types of budget expenditure at CareTech. Certain measures have been proposed accoridngly, which are expected to help the home in managing the problem of financial shortfall. Information required for making the financial decisions at CareTech will therefore be identified along with an evaluation on how financial considerations may influence the service users of CareTech. Accordingly, ceratin methods will be provided in the paper that will help the company in enhancing its services promoting changed in its financial systems and processes. Task 1 1.1. An Explanation of Costing Principles and Home Control Systems that may be adopted in CareTech Holding PLC The term ‘costing’ is fundamentally described as a system for calculating production costs or other expenses incurred when functioning a particular home. With this concern, the various principles of costing include ‘transparency’, ‘stakeholder engagement’, ‘data accuracy’, ‘causality & objectivity’, ‘consistency’ and ‘materiality’. Likewise, there exist diverse types of cost that may be incurred by the home, which shall include fixed costs, variable costs, direct costs and indirect costs. It can be duly considered in this regard that the principle of transparency and data accuracy are the most appropriate costing principles to be adopted by CareTech. Strict abidance to these principles shall help CareTech to be adequately transparent in its financial functioning based on auditable purposes. This is because in health along with social care sector, maintaining transparency with the customers as well as the stakeholders is quite important for gaining long-term success (Monitor, 2013). These costing principles shall also impose considerable effects on the Home Control System (BCS) of CareTech, which is generally used by the management of an organisation to ensure that the resources are procured and utilised effectively for the purposes of the home. Notably, budgeting can be regarded as one of the imperative tools in BCS, as it helps an organisation in creating effective action plans, which further ensures the successful attainment of various planned activities. Therefore, budgeting can be adopted by CareTech, as it will help the home in allocating the resources effectively and increasing its returns (IBS Center for Management Research, 2012). 1.2 Information Needed to Manage Financial Resources in CareTech Holding PLC Obtaining information regarding the external along with the internal home environment is quite important for a home to manage its financial resources. Correspondingly, external information needed to be acquired by CareTech includes relevant data about the governmental policies, legal home requirements and information concerning competitive factors. Similarly, one of the vital internal information, which needs to be obtained by the home to manage its financial resources include cash flow statement. This might aid the home in balancing the amount of cash generated and incurred by the home. In addition, information regarding profit and loss statement is also required by the home to manage its financial resources, as it may provide information about the income earned and expenses incurred on a given fiscal year. Apart from these, information about the overall assets along with liabilities derived from the balance sheet may also help CareTech to manage its financial resources. Observably, CareTech used cost-benefit analysis, pricing data and budget information methods to manage its financial resources, which comply with the above stated requirements for information in managing financial resources effectively (National Audit Office, 2008). 1.3 Regulatory Requirements Need To Be Satisfied While Managing Financial Resources in CareTech Holding PLC There are certain regulatory requirements, which need consideration by CareTech, to reward it with enhanced efficiency while managing its financial resources. One of the regulatory requirements, which require to be satisfied by CareTech while managing its financial resources is following the code of practice developed by Health and Social Care Act 2012. This particular regulatory requirement would certainly ensure that its healthcare providers are focused to deliver the best quality services to the patients in a transparent and responsible manner. Under this regulation, CareTech has already taken measures to set the price for its healthcare services and provide integrated care to the patients. In addition, organising for periodic audit commission is another regulatory requirement to be met by the home while managing its financial resources. It would be vital to mention in this regard that CareTech needs to present its financial statements to the Financial Reporting Council for audit commissioning. Accordingly, the home also needs to abide by the regulatory norms proscribed by NHS Litigation Authority (NHS LA), which is recognised as an authoritative body in the UK, responsible for settling the claims of the patients (Crown, 2012). 1.4 Evaluation of the Systems for Managing Financial Resources in CareTech Holding PLC There are certain systems framed by the governmental regulators and Directors of CareTech for managing the financial resources of the home. One of these systems includes preparing a budget plan and accordingly, outlining the set of actions wherein the cost estimates and indirect costs are included. After preparing the plan, it is implemented and monitored continually to manage the financial resources at CareTech. It has been apparently observed that the home uses financial reporting and accounting systems to manage its financial resources. In this case, the home uses both internal along with external audits to organise its financial factors based upon the requirements of maintaining the accountability of its resources. Moreover, CareTech uses a firm based financial accounting system based on its cash inflow and outflow, which further helps it in managing financial resources effectively. In addition, CareTech has to follow the payment system, which includes line-item budget wherein a fixed amount is allocated to the health care providers for a specific period (Management Sciences for Health, 1999). Task 2 2.1 Brief Overview of the Diverse Sources of Income Available To CareTech PLC in 2013 CareTech holds a diversified structure due to which, diverse income sources have been apparently viewed to be accessible for the home in the year 2013. One of the main income sources available to CareTech in the year 2013 was the income earned by providing a versatile range of healthcare services to the patients. These services included adult learning disability services, services relating to the design of mental health programs, residential services provided to young individuals and the services of foster care. These services provided by CareTech falls under its core care giving activities through which, huge income could be generated in the year 2013. CareTech’s non-core home activities also acted as another key income source for the home, in the year 2013, wherein it received income by leasing its properties and obtaining rent services. Interest obtained from CareTech’s bank deposit was also a huge source of income in the year 2013. As CareTech’s financial stability position was quite good, it could be observed that its long-term assets got re-valued, which acted as a potential income source. In addition, grants received by CareTech through various charitable institutions were one of the diverse income sources available to the home in the year 2013 (1CareTech Holdings PLC, 2013). 2.2 Brief Analysis of the Factors that may Influence the Availability of Financial Resources in CareTech PLC It is worth mentioning that certain important factors such as organisational objectives, home ownership, governmental policies, location, economic situation, size and services provide by CareTech, may affect its home functions and influence the accessibility of financial resources at large. In this regard, organisational objectives and home ownership factors generally determine the direction in which the home is moving, resulting in indirectly influencing the availability of financial resources. Likewise, if there lay any kind of change in the governmental policies, the financial resources of CareTech are likely to get influenced quite strongly. Specially mentioning, the geographical location of CareTech might highly influence the accessibility of financial resources, as it determines the services required by the customers along with the availability of skilled staff members, who contribute towards generating greater revenue. In addition, the economic condition of the nation, wherein the home is functioning might influence the availability of financial resources within CareTech. Similarly, the size of CareTech’s home along with the services provided by the home may also influence the availability of financial resources by a considerable extent (2CareTech Holdings PLC, 2013). 2.3 Review of Different Types of Budget Expenditure in CareTech PLC Budgeting is considered as the method of formulating a plan relating to the cost of operations and capital of an organisation. Preparing an effective budget plan is quite important, as it helps an organisation to meet its strategic objectives at large. Master budget is a budgeting process, which is often used by healthcare organisations such as CareTech, involving aspects like operational budget, cash flow budget and capital budget. It can be apparently noted in this similar context that CareTech’s operational budget helps in determining the overall expenses, which the home incurs while providing services to individual patients. The operational budget of CareTech includes administrative costs and product overheads that are incurred while providing services to the patients. Cash flow budget of CareTech also helps in reviewing the inflow as well as outflow of cash within on a daily basis. This particular mechanism of budgeting expenditure is used by CareTech to determine the gap if any, persisting between the income and the expenditure levels. Similarly, capital budget helps in outlining the overall receipts and expenses of CareTech on capital projects. Capital budget also helps the home in managing its capital assets, such as investments and infrastructures that enhances the overall financial health of CareTech (2CareTech Holdings PLC, 2013; Penner, 2004). 2.4 Evaluation of How Decisions about Expenditure Could Be Made In Caretech PLC There are various factors that CareTech requires considering while making decisions regarding expenditures, as this is likely to have a direct influence on the home’s long-term success. CareTech can make expenditure decisions after analysing the external environment of its home. External environment can be analysed through PEST analysis, which will certainly help the home in identifying political, economic, social as well as technological conditions prevailing within the diverse regions wherein it operates. CareTech must also focus on its home priorities and simultaneously on excluding emotionalism while making decisions, as this might facilitate the home to mitigate the issue of overspending. Maintaining an optimum balance between the core and non-core home activities of CareTech will certainly help the home in making decisions effectively regarding expenses incurred in various home areas. It would be vital to mention in this context that both short and long-term home plan must be included in the decision making process of budget expenditure of CareTech. Eventually, the financial risk of CareTech’s home also must be analysed, which will result in its smooth decision-making (Downey, 2007). Task 3 3.1 Managing the Situation of Financial Shortfall in CareTech PLC Financial shortfall is a situation in which an organisation is found to lack sufficient fund or capital to meet its home requirements. If CareTech undergoes through a problem of financial shortfall, it is often considered that the top-level management of the home must focus on coordinating its core along with non-core home activities in an effective manner in order to manage the problem of financial shortfall. CareTech, in this situation must focus on shifting its focus of expanding the volume of services towards providing quality and valuable services to the patients. Eventually, the services provided by CareTech will be recognised by the people in the UK who will then refer their respective family members and peers to avail the services provided by the home. This in turn will increase overall revenue of CareTech and help the home to manage its financial shortfalls efficiently. The budgetary plan of the home must also be revised immediately wherein the funds allocated in different departments need to be reduced apart from the service department and accordingly, the allocated funds must be used effectively to manage the financial shortfall (Healey & Marchese, 2012). 3.2 Actions to be taken if Occurrence of Financial Fraud Is Suspected Red Flags of Fraud The red triangle determines the red flag of financial fraud in an organisation, which includes pressures, opportunities and rationalisations. These red flags pose substantial threat for an organisation, wherein it is considered that individuals, due to certain pressures are often driven towards conducting financial fraud. Opportunity is considered as another red flag of fraud, wherein individuals, under the impression of the nature of home in the organisation, attempt to undertake fraudulent practices to fulfil their personal needs. Accordingly, rationalisation is identified as a fraud of red flag in which individuals, who are usually dissatisfied with their job, tend to undertake fraudulent practices and provide justifications to such attempts (Duffus, 2013). Actions to Take in the Event of Fraud Thus, it is considered that appropriate actions must be taken by the responsible organisational members, if any sort of fraudulent activity is suspected. This strategy may include fraud prevention activities, detection activities, activities of deterrence and responsive measures. For fraud prevention, I will thus develop an ethical culture in the organisation, which will induce more responsibility to the individual staff. Likewise, for fraud deterrence, certain legislative rules will be framed and accordingly, staff members within any organisation will be penalised, if found to practice fraudulent acts. Finally, for fraud response, corporate governance based rules along with policies will certainly be taken into concern along with following the above-discussed aspects (CIMA, 2008). 3.3 Evaluation of Budget Monitoring Arrangements in CareTech PLC Budget monitoring arrangements are a part of financial management cycle in healthcare organisations. It can be apparently observed in this similar concern that the arrangements relating to budget monitoring in CareTech typically involves the process of budget creation and budget monitoring. These particular functions have been used by CareTech in its budgeting monitoring arrangement procedure through which it is able to allocate its capital and operational budgets in an effective manner. Notably, CareTech focuses on monitoring the budget and strives hard to meet the planned objectives (Susana, 2003). Figure 1: Demostration Of Budget Monitoring Arrangements (Elizabeth Hamilton Foley, 2008) The figure above demostrates the budget monitoring arrangements at CareTech whrein initially the budget is planned effectively based upon the strategic plan. The next process is establishing an accounting system to ensure that the budget is constrolled accurately. Consequently, CareTech uses budget reporting that provides an understanding regarding the budgetary asprcts with proper reference to the financial statements. Ultimately, an evaluation or monitoring process is undertaken that helps in determining the corrective steps in the budget planning process of CareTech (Elizabeth Hamilton Foley, 2008). Task 4 4.1 Information Required To Make Financial Decisions Relating To CareTech PLC Obtaining appropriate information is quite important for CareTech to make effective financial decisions, as these decisions highly influence the day-to-day home functions of the home. Therefore, CareTech requires information related to the operational and financial activities of its home, which would help the home to make appropriate and fruitful financial decisions. Information relating to the clients’ capability of availing the service along with the revenue obtained from each segment of CareTech is also important in making financial decisions. It is worth mentioning that both cash inflow along with outflow within the home and the liquidity position related information need to be obtained by the home when managing its capital, making effective financial decisions. CareTech functions in four segments that entail adult learning disability, mental health, residential and foster care division. Thus, the information of revenue generated from these segments along with the data of underlying earnings before interest, taxes, depreciation and amortization (EBITDA) will also be required by the home while making all-inclusive financial decisions (3CareTech Holdings PLC, 2013). It is worth mentioning that by acquiring the above discussed information, CareTech would not only be able to make effective financial decisions, but would also sustain in this competitive landscape as compared to others operating in the similar industry. 4.2 Analysis of the Relationship between Care Service Delivered and ‘Costs and Expenditure’ Service delivery in health and social care sector is directly related to the costs and expenditure being incurred by the UK government. This is because the budget being allocated by the UK government in health and social care sector determines the quality of service being delivered by the providers in healthcare facilities. To be mentioned in this regard, healthcare related costs as well as expenditures in the UK can be segregated into three particular categories including public expenditure, private expenditure and household expenditure. It can be apparently observed in this regard that the UK follows a systematic approach of maintaining costs and expenditures in healthcare context for setting appropriate budgets. This has been quite similar with CareTech wherein the home is identified to meet the desired service delivery of patients effectively as per the service requirements. This, in turn has apparently helped CareTech in enhancing the quality and reducing the expenditures being incurred while offering the service. Thus, it can be asserted that there exists a strong association between service delivered in healthcare sector and costs and expenditures incurred by the home (Propper, 2001). 4.3 Evaluation of How Financial Considerations Impact Upon a Service User Financial considerations play an imperative role in influencing the decisions made by the patients, i.e. the service users pertaining to their treatment and service availability. It has been apparently observed in this similar context that almost 11% of the people in the UK, who belong to poor family background, lack proper ability to avail any kind of service from varied healthcare centres due to poverty (Gotsadze & et. al., 2005). There are three key financial considerations that directly influence the funding of care costs in residential care centres and nursing homes, which may include capital, income and expenditure (Surrey Care Association, 2011). It is worth mentioning that financial considerations of a healthcare organisation, such as CareTech, takes into account the overall capital required for providing services to the users, which again affects the patients while availing the services. An organisation, due to certain financial constraints, might delegate an employee to perform roles of lower level for reducing costs of providing services, which can be observed as related to the financial consideration of income in CareTech. Likewise, due to the expenditure related financial considerations, CareTech might opt to reduce the quality level of services provided to the users because of which, they might get impacted negatively (Kuntz & Scholtes, 2008). 4.4 Ways to Improve the Care Service Provided By CareTech PLC through Changes to Financial Systems and Processes The services provided by CareTech to its patients in various segments are quite effective in terms of quality. However, in order to further improve its care services, CareTech must change its financial system and processes. One of such changes can be providing better compensation packages to the service providers by offering incentives. This scheme in turn will encourage them to enhance their performances, resulting in enhancing the aspect of service quality at large. In addition, prospective payment system must be introduced in the organisation wherein insurance-based compensations would be provided to the healthcare units based on fixed prices. This scheme in turn will motivate the service providers in CareTech to improve and provide the services effectively as per patients’ requirements (Agency for Healthcare Research and Quality, 2001). Conclusion CareTech PLC is a reputed care giving organisation operating in the UK, which is known for providing specialised care services to children and elderly people in the society. From the above-mentioned study, it can be concluded that the costing principles and the BCS is used effectively by CareTech to manage its financial resources. It was also revealed from the study that budget planning plays a significant role in making decisions related to budget expenditure. Notably, the budget monitoring arrangements used by CareTech can further help it in managing its financial shortfall, as it is quite important for health and social care organisations to monitor its budget performances. In addition, it can be affirmed that the services provided by CareTech must be further improved by effectively managing its financial resources and changing the entire financial system along with its processes. References Agency for Healthcare Research and Quality, 2001. Improving the Health and Health Care of Older Americans. A Report of the AHRQ Task Force on Aging. 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