Financial Management: Greater Manchester Fire and Rescue Authority - Essay Example

? Table of Contents Introduction 2 Proposed 5% Budget Cut will Impact the Following 4 Capital Expense 4 Operating Expense 5 Three Area that will be Impacted by the Budget Cuts 6 New Fire and Rescue Stations 6 Continuation of Coverage Reduction as Determined by Risk Management 6 Replacement of Ageing Rescue and Fire Fighting Equipment 7 Risk Mitigations of Areas that will be Exposed as a Result of the Budget Cuts 7 Response Time 7 Equipment Breakdown 8 Volunteers may Cause more harm than good 8 Conclusion 9 Bibliography 12 Financial Management I. Introduction The Greater Manchester Fire and Rescue Authority funds come from various sources that include the National Non-Domestic Rates (Business Rate) that provides fifty four percent of its operation. Precept levied on the 10 Greater Manchester District Authorities contributes thirty three percent to the Greater Manchester Fire and Rescue Authority’s fund while Government Grants provide ten percent of its fund. Rents, Charges, Interests and others make up three percent of its funding (Smith, 2008). Of the total fund generated from various sources: seventy percent is spent on Salaries and Wages; twelve percent is provisioned for the employer contribution to the pension fund; another twelve percent is spent on operating expenses and six percent is for Capital Financing Charges (Smith, 2008). Fiscal governance coverage is in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom (SORP Committee, 2010). CIPFA Code of Practice dictates that in cases of conflict the legislative requirements shall apply in financial governance (Chartered Institute of Public Finance & Accountancy, 2010). National non-domestic rates account for approximately eighteen percent of the total local authority income (Information Centre Scotish Parliament, 1999). Therefore, only about 9 percent of the National non-domestic rate income of the local authority finances the Fire and Rescue efforts of local governments. While every district including the two cities of Manchester and Salford only contributes a total of 3.3 percent each to the operational expense of the Fire and Rescue Authority (Smith, 2008). Risk mitigation includes the following: disaster recovery, contingency plan, emergency response, business continuity. Fire and Rescue only covers emergency response. From a financial point of view to invest more than eleven percent for emergency response alone may not maximize the value of money considering the other area of risk mitigation that would include disaster recovery, contingency planning and business continuity. However, risk and security challenges have become increasingly complex because as we plan for protection and face a multitude of threats in a rapidly changing environment, we must expect the unexpected, while staying within our budgets (Purpura, 2008). There is an underlying importance in emergency response that is to prevent the emergency escalating into a disaster, then to a catastrophe, then to a tragedy (Alexander, 2002). The key has always been prevention and in this case the prevention of an emergency to escalate into another level. One of the key performance indicators of the Greater Manchester Fire and Rescue Authority is its response time to the emergency which is pegged at six minutes and thirty five seconds (Greenstreet Berman Ltd, 2009). Thus, the underlying factor that impacts response time has always been the presence of substations found in strategic locations within the jurisdiction. If budget cut happens then the most affected area is the presence (closure) of fire stations. Several recommendations are also contemplated in this paper and shall be discussed in detail in the succeeding sections. The propositions are designed to ensure that no further cuts will be forced unto the Greater Manchester Fire and Rescue Authority. It is the objective of this paper to provide a framework that will pave the way for financial independence to be achieved by the Greater Manchester Fire and Rescue Authority. II. Proposed 5% Budget Cut will Impact the following a. Capital Expense Capital Expense includes the investment on lands and building that will be converted into fire station to increase the presence of the Greater Manchester Fire and Rescue Authority in communities. The increase in the volume of traffic over the years contributed to the deterioration of the response time of the Greater Manchester Fire and Rescue Authority in responding to emergencies. Traffic routes at any time of the day are normally occupied by vehicles going about their normal business that makes it difficult for emergency vehicles to navigate the streets to their destination especially during the day. The policy to construct fire stations at strategic locations throughout the Greater Manchester area will considerably reduce the response time of the fire and rescue authorities. Not only would traffic be avoided, the distance covered by emergency vehicles will greatly reduce the response time. Emergency verification can be done through line of site and retooling and replenishment of supplies can be done without wasting valuable time. Any new fire stations require equipment and manpower thus an increase in the number of fire stations to be maintained translate to an increase in operational budget. Provisions for depreciation with regards to the buildings and appliances or equipment would not likely augment any actual expenditures but the maintenance of these buildings and equipment involve actually payment to vendors or suppliers. Fire stations equally mean additional salaries and wages for the people manning the stations. The suspension of the purchase and construction of any new fire station and the closing of a few would translate to a substantial savings that may be congruent with the five percent contemplated by the local council. However, careful study with regards to the emergency frequency and potential risk in the area should be considered in determining which fire station can be closed without affecting the overall efficacy of the Fire and Rescue Authority in Greater Manchester. b. Operating Expense The reduction of fire stations as indicated above will reduce the operating expense with the reduction of manpower. Monthly provisions for pensions, salaries and wages including provisions of their other benefits will be reduced juxtaposed with the reduction of manpower. Reduction in the number of buildings and equipment will translate to actual savings due to the reduction of expenses in the maintenance and up keep of these assets. To attain operational and financial independence that would equally lead to the cessation of any future budget cut in the future, it is the recommendation of this paper to revisit the operating charter of the Greater Manchester Fire and Rescue Authority. The changes would include the formation of a cross functional group that would be engaged in training civilians in emergency situations where the organization will be compensated. The strategy will have several advantages—the first being that the civilian community will not be treated simply as a victim but rather a partner in responding and preventing emergency situations. The second advantage is that the civilians themselves if properly trained can be an effective first responder that can either pave the way for a seamless response to emergency or prevent a more disastrous incident. On the financial side, the payment that will be collected from the organization where the training and seminars will be held which in turn can form part of the revenue of the Greater Manchester Fire and Rescue Authority. The revenue can be used to open new fire stations, purchase new equipment and hire more fire fighters. The strategy will likewise make the community share the burden of paying for their own safety and efforts in mitigating risk that are present in their area. From an organizational point of view, the fire fighters will have an additional responsibility aside from improving their skills through continuous training, conducting drills, testing and maintaining their own equipment, they will also be involved in training the community. Educating the community could reduce the number of incidents and emergencies in the Greater Manchester which is the primary aim of the Fire and Rescue Authority. III. Three areas that will be impacted by the Budget Cuts Should the recommendations in Section II.b be considered, the following will be impacted in the interim. a. New Fire and Rescue Stations There will definitely be no new Fire and Rescue Stations that will be constructed until the benefits of the proposition contained in Section II.b has been implemented. This will translate to the status quo with regards to the response time. b. Continuation of coverage reduction as determined by risk management The continuation of coverage reduction as determined by risk management hopefully will not be impacted if the risk management assessment is correct. Risk management should be able to determine the possibility of fire from occurring in the identified area that is a candidate of the coverage reduction. The number of calls generated in the area should not be the only factor to be considered. Other areas to be considered in the risk assessment should include the age of the buildings, the demography of the population that would determine any predisposition to emergency situations and other analogous criteria. c. Replacement of ageing rescue and fire fighting equipment The most dangerous to all concerned is the retention of appliances or equipment that is beyond their useful or recommended life. Not only will this pose a danger to the rescuer or fire fighter himself but the person he is trying to save will also be at risk. Standard identification of ageing and non-serviceable appliance or equipment should be in place to prevent fatalities or serious injuries. IV. Risk Mitigations of areas that will be exposed as a result of the budget cuts a. Response time To mitigate any risk exposed by the expanded response time due to the budget cut, the following risk mitigation strategies should be furnished and implemented. Volunteers should be trained as first responders in areas where there is reduced coverage. The extensive training should include all skills necessary to save the lives of the volunteer and victims at the very least. Compensation and other remuneration of the volunteers should be handled and shouldered by the local community. a. Equipment breakdown Equipment breakdown should not be taken lightly since lives are at stake especially for those who find themselves using risky equipment. The first step is to implement a classification methodology that will identify equipment which may be irreparable or beyond its usable life. Equipment that may have been found to be unusable should be sold for scraps and the revenue should be refunded or reverted to the Greater Manchester Fire and Rescue Authority. Equipment found to be serviceable should be listed and a maintenance matrix including test schedules should be drawn up. Engaging the repair and service provider is much cheaper for the capital expenditures than purchasing new equipment all together. A replacement schedule or cycle should be revisited and made more realistic in light of the budget cuts that will have to be implemented. b. Volunteers may cause more harm than good Engaging the services of volunteers who are or may not be trained in the intricacies of rescue and fire fighting discipline may cause more harm than good. This is due to the fact that the volunteers may lack the commitment and dedication of real firemen in the field. While this may have a ring of truth in it, the volunteer firemen can be considered invested in the whole idea for the simple reason that he is not only protecting himself but the volunteer will have an active participation in the defence of his own community. In order to mitigate the possible dangers of having little knowledge for a big job, an increase in the training coverage should be considered. Proficiency exam should also be administered to ensure that the knowledge had taken root and the skills have been retained in the sinews of every fibre of the volunteers being. V. Conclusion In reaction to a proposed budget cut, the national officer of the Fire Brigades Union, David Green in October, 2010 said “You are not just cutting into the fat you are cutting into the bone”. Union warns that a twenty five percent cut could see ten thousand people losing their jobs since more than four-fifths of the fire service budget goes on staff costs (BBC news, 2010). Budget cuts not only affect the morale of the fire fighters, it also affects the coverage and eventually the response time of the rescue and fire fighters. Budget cuts in Rescue and Fire Fighting capabilities of the local government translate to the closure of one to several fire stations. Fire station closure would mean that the existing fire station has to cover more grounds which would increase their response time due to the distance they have to cover. In emergency situation where a few seconds mean life and death, budget cuts would also translate to more victim mortalities. For the five percent budget cut contemplated in this paper, it is recommended to suspend the opening of new fire stations. It is also necessary to suspend the purchase of new appliances or fire fighting and rescue equipment either to replace existing old equipment due to obsolescence or to modernize the fire fighting and rescue capabilities. It is likewise recommended to limit the participants to training and skills upgrade to improve the skills and knowledge of the men and women of the Rescue and Fire Fighting Authority. To minimize the impact of the longer response time of the Rescue and Fire Fighting Authority, this paper recommends the creation of community volunteers that would be the first responder to a fire which is within their locality. However, all the qualified volunteers should first be extensively trained in several key disciplines to ensure that they will not exacerbate the emergency situation. Their compensation and insurance requirements can be shouldered by the city council or by the community themselves. Other requirements such as appliances or any other fire fighting equipment can be financed by private enterprises headquartered within the locality or community. To mitigate the risk posed by old equipment that should have been replaced by brand new ones, maintenance and continued testing of the old equipment to ensure their efficacy should be conducted. As for the limited participants to training for skills upgrade, the fire fighters who went to training should transfer or cascade what they have learned to the other fire fighters. Their proficiency should include imparting the new techniques in a level that would enable them to issue complete certification as they cascade their knowledge to their fellow fire fighters. A radical proposition to prevent further budget cuts and to gain more independence from council budgetary constraints, this paper likewise recommends that the Rescue and Fire Fighting Authority conduct more community training and consulting. The community based training and consulting will be a source of revenue for the Rescue and Fire Fighting Authority. The expected impact of the community based training and consulting would hopefully reduce the incidents of accident because of the increased knowledge within the community. Another proposition that should be considered is the reinvestment of the pension fund to low risk but high yield investment ventures. One such venture is to make the investment fund available for loans to rescuer and firemen that will be paid with interest by those who loaned. A mechanism to ensure that defaults are prevented or defaults will not result to a loss or strain to the pension fund shall be put in place. The proposition recommended in this paper should also be under the auspices of strict financial control and governance. Although the enterprise that will be undertaken by Fire and Rescue Authority will be commercial in nature their capitalization is still considered government. Bibliography Alexander, D. (2002). Principles of Emergency Planning and Management. Harpenden, England: Terra Publishing. BBC news. (2010, October 13). Spending Review: Morale low as firefighters ponders cuts. Retrieved February 13, 2011, from BBC News.UK: http://www.bbc.co.uk/news/uk-11425682 Chartered Institute of Public Finance & Accountancy. (2010). IFRS-based code of practice on Local Authority Accounting. Retrieved February 3, 2011, from Chartered Institute of Public Finance and Accountancy: http://www.cipfa.org.uk/pt/cipfalasaac/ifrs.cfm Greenstreet Berman Ltd. (2009). Review of Fire and Rescue Services response times. London: Department for Communities and Local Government. Information Centre Scotish Parliament. (1999). Non-Domestic Rates. Scotland: The Scotish Parliament. Purpura, P. (2008). An introduction to Security and Loss Prevention. London: Elsevier Inc. Smith, D. (2008). Greater Manchester Fire and Rescue Authority Financial Statements. Wigan: Greater Machester Fire and Rescue Authority. SORP Committee. (2010, February 1). Statement of Recommended Practice. Retrieved 3 2011, February, from Office of the Scottish Charity Regulator: http://www.oscr.org.uk/SORPCommittee.stm Read More