Operational Boundaries and Authorized Limit Proposals of Herefordshire and Worchester Fire Rescue Services - Case Study Example

Operational Boundaries and Authorized Limit Proposals of Herefordshire and Worchester Fire Rescue Services Submitted by [Client’s Name] Submitted to [Professor’s Nmae] [Subject] [Date] Table of Content Operational Boundaries and Authorized Limits........................................ Budgetary Derivations............................................................................. Hereford & Worcester Fire and Rescue Authority.................................... Comparison with GMFRS........................................................................ Risk Factors.............................................................................................. Conclusion............................................................................................... Organizations that do not produce their own money, particularly those which operate within certain funds need to be able to come up with a good financial strategy in order to efficiently manage the funds. Effective management of these funds are not only necessary for the day-to-day operations of the organization but also because the organization has no other way to acquire funds but wait for the next period where funds are disbursed and distributed. For this reason and more, fire and rescue service agencies require an effective and working budget strategy and allocation of funds and resources in order for them to have sufficient, if not abundant funds by the end of the year. This paper will discuss the financial strategy employed by Hereford & Worcester FRA and evaluate whether such approach is effective under circumstantial evidences. Operational Boundaries and Authorized Limits Operational boundaries and authorized limits are important for any fire and rescue agencies. This is because both operational boundaries and authorized limits define the range, capacity, and capability of the agency to perform their function and operate in any given year. While the operational boundary of an FRS details the major sources of funds and the overall expenditures for the year, the authorized limits determine the ceiling and the floor of the funds required by the FRS to operate efficiently. The operational boundaries of a Fire and Rescue Service (FRS) is set by evaluating the available funds from last year, adding the available funds for spending for the present year, and subtracting the statutory minimum revenue provision, the voluntary addition to the statutory MRP, and the use of revenue balances. The authorized limit on the other hand is calculated as the operational boundary plus a 5% variation on the operational budget to allow headroom for expenses. This 5% variation determines whether the FRS is provided to account for inflation, unexpected expenses, and other uncalculated risk factors. Budgetary Derivations For Hereford & Worcester FRA, the operational boundary for 2008-2009 is at £29.31 million which is calculated based on the operational boundary of 2007-2008. In order to get the authority limit for 2008-2009, it is necessary to calculate ±5% deviation from the operational boundary. A ±5% deviation from this value is from £27.84 million to £30.78 million, or a margin of £1.47 million. This means that the safety margin for the expenses of the company in a given year should not exceed 1.47 million. Hereford & Worcester Fire and Rescue Authority It is quite interesting why Hereford & Worcester FRA was unable to manage its expenses within the limits of its operational financial boundaries. An organization as large and as comprehensive such Hereford & Worcester FRA must be able to have a flexible financial plan that would resist even the slight changes in the financial requirement of the organization. Non-profit organizations such as fire and rescue services must be able to effectively budget its funds for the year in order to efficiently perform its duties and functions all year round. In order to understand why this occurred, it is necessary to analyse the organization-sensitive risk factors which needs to be balanced and satisfied in order for the organization to create a balanced, efficient, and effective fire and rescue authority. Hereford & Worcester Fire and Rescue Authority (FRA) operate with 27 fire stations distributed in two counties. The FRS has over 300 operational staff, more than 350 fire fighters and officers, 25 fire control staff, and 142 support staff under its wings. This FRS hosts one of the 29 National Urban Search and Rescue units. According to its website, the FRS attends to over 9,000 emergency calls a year which can be distributed to fires (including grass fires), road traffic collisions, and flood strikes among others. The service has 22 Sabre fire engines and eight front lines Scandia 4 series appliance distributed on the 27 fire stations as a part of the modernization of the fire authority. It appears that Hereford & Worcester FRA was unable to budget its funds because of the unexpected and unanticipated inflation rates which increased the cost of its operations, machineries, and consumables. Comparison with GMFRS While this collection of fire fighting equipments and capabilities are impressive, it is nowhere near the capability of the Greater Manhattan Fire and Rescue services. The scope of operation and the extent of the function of Hereford & Worcester FRA are wide and large but not as large and as complicated as the scope of operation and the extent of function of GMFRS. But viewed from the standard of an FRS operating on a local scale, the capability of Hereford & Worcester is already astounding considering the modern equipments it own and the number of emergency calls it responds in a year. Risk Factors Present day fire and rescue service is no longer confined to its traditional function which is typically confined to saving people and properties during fire and other related emergency situations. FRS departments are more integrated with the community and their functions are no longer limited to saving lives and properties. Majority of the FRS handles office and organizational management issues arising from day-to-day operations of the organizations and these activities often affect the financial stability of the organization. For Hereford & Worcester FRA, the six risk factors of its operations include (a) mobilization of units; (b) management and distribution of responsibilities.; (c) definition of the strategic direction of the organization; (d) setting of annual budget; (e) creation, definition, and modification of service performance and integrated risk management plans; and (f) documentation of policy development, monitoring and control of reporting, and implementation and review of decision making. Mobilization of units refers to the ability of the FRA to efficiently deploy its human and material resources during emergencies or as required by the scope of their functions. Management and distribution of responsibilities on the other hand refers to how the organization distributes responsibilities within its confines to ensure that its goals and duties are carried out. Definition of strategic decision serves as the backbone of all the functions of the FRA since all its movements and decisions will be defined by the factors that it identified and placed in its strategic goals. Having the strategic goals, it is now becomes necessary for Hereford & Worcester FRA to determine its annual budget and operational boundary so as to outline its capabilities and address the needs of its community in a given period. As the organization operates, it is able to identify and determine the best methods to perform its task as well as how to manage risks. Effective risk management plans means significant cut on the expenditures of the organization. Lastly, when all factors are taken into consideration, the ability of the organization to document processes and manage decisions will determine the future trends of its operations. Discussion of Risk Factors The primary role of the FRS is to be able to attend to the emergency needs of its immediate community and this often translates to the efficiency of the organization in the deployment of its units. The units of an FRS refers to the volunteers, fire fighters, operations and deployment staff, equipments and machineries, and the consumables required by the organization in its operations. Proper deployment refers to the mobilization of all personnel, vehicle, equipments and consumables required in a particular operation. Efficient deployment refers to the ability of the organization to deploy only the units that are useful in any particular operation. With an efficient mobilization of units, the FRS will be able to perform its task without incurring any unnecessary expenses on its tab. In the case of Hereford & Worcester FRA, operations and rescue activities consumes £28.96 million of the £29 million budget. There can be a lot of things that can be deduced from this financial data. For one thing, the expense incurred by the FRS on operations and rescue activities alone is beyond the lower authorized limit which means that there is something wrong with the process of budgeting of the organization. With most of the budget gone through the operations and rescue, other important aspects of its operations like management, maintenance, and other non-operating activities can be neglected. It can also be that the FRS has its major flaws during the planning stage for its budget which did not enable it to see the changes in its financial structure which resulted in the deficit. Efficient distribution of units can only be achieved if the responsibilities within the organization is outlined and is clear to all the concerned. A clear definition of responsibilities eliminates unnecessary deployment since everyone knows the scope and limits of their functions. For example, two responding units in a minor emergency that would only require a single unit is an unnecessary expense and this could have occurred because of the unclear definition of responsibilities between and among unit heads or departments. A clear definition of responsibilities must be apparent to all levels within the organization so that the chain of command would not be redundant, causing an excessive expense for the organization as reflected in its financial statement. Without the transparency and integration of responsibilities, expenses are readily incurred and acquired. The responsibility of each individual and department of the organization relies heavily on the strategic direction of the FRS. Consequently, the operational budget of the FRS also relies heavily on the strategic direction of the organization (Hankin et al 1998) as any movements and decisions made by the company would need to be evaluated based on a pre-determined plan. Although Hereford & Worcester FRA has defined its strategic direction, there are some slight issues on its planning and implementation aspect of management since the organization (a) wasn’t able to achieve its target operational boundary and (b) it wasn’t able to anticipate the changes in its financial structure. Without a good planning of the future financial scenario, Hereford & Worcester FRA was unable to work well with its budget, resulting to a risky financial position during its operations. The organization should have been able to identify risks at an earlier stage had it noticed the signs of its inefficiencies based on previous performance. The inability of the organization to create service performance plan and risk management plan places the organization in a precarious position where only a deft financial management was able to deflect the potentially destructive scenario from eating it up. The financial reports show that the organization has spent much on its operations and rescue in the previous years. As an organization with a fail-proof risk management plan, it should have been able to identify the trend in its expenditures and should have prepared enough budgets to anticipate its growing expense. Moreover, the creation of service performance should have allowed the organization to streamline its provisions of services in a way that it would not incur unnecessary expense on the part of the organization. Service performance plans allow the organization to evaluate its service and correct it even before actual losses are incurred. The constant and consistent service planning eliminates the un-productivity and inefficiencies in its operations. Hereford & Worcester FRA could have done this by outlining the communication level within its organizational structure in such a way that overlap would not occur. By clearly defining the responsibility of each individual and department units of the organization and by creating service performance and risk management plans, Hereford & Worcester FRA could have avoided unnecessary expenses brought about by redundant and often incoherent approach of its operation. Lastly, the inability of the organization to see through previous trends of its financial performance can be blamed partly on its lack of proper documentation of decisions and performance reports. Documentation is very important in managing an organization. An organization with a comprehensive record of its decisions, past performance, and previous financial positions will gain insights on how it will perform under certain conditions. Apparently, changes in the financial structure of the organization is something that could have been easily predicted had the organization kept tab of everything going on with the company and not just the requirements set by its internal and external auditors. By keeping tabs of decisions and by evaluating its performance based on the strategic goals it has set, the organization has a better chance of anticipating future budgets or planning for present expenses. Conclusion Clearly, The FRS failed to effectively manage its funds based on the financial reports obtained and analysis performed. The Fire and Rescue Service has failed to maintain its operation within its required budget which resulted in a net overdraft. Technically, the FRS must be able to allocate funds and resources allotted to it for the year appropriately. This means that any subsequent increases in the expense as well as the inflation must be taken into account during the planning period. However, the balance sheet reports otherwise. The 2008-2009 operational boundary of Hereford & Worcester FRA as calculated is at £29.31 million. This fund is derived mainly from the General Fund Balance for the year, General Fund Balance brought forward, and General Fund Balance carried forward. Other sources of funds were derived from surplus on income and expenditure account for the year and from actuarial gains on pension funds assets and liabilities. Even with this much budget for its main activities, Hereford & Worcester FRA experienced a net overspending of £0.112 million due to higher than the budget national pay awards. In the general sense, the failure of the organization to operate within its operational boundaries can be related to the six risk factors identified earlier. Because the organization failed to address one or two of these six risk factors, it was no longer able to stop the effects of its inefficiencies brought in the long run. Ideally, such perceived changes in the financial structure of the organization must be integrated in any budget plans to avoid unnecessary cut-backs in the long run. Moreover, such expected alteration in the financial structure must be given enough provision in the upcoming budget statement in order to allow the organization to operate at its optimum without losing its pace or its stride. The FRS was able to detect that this change will occur within the year but apparently, it has failed to make the right estimate to deflect the effects of such change through proper budgeting. As a result, Herford & Worcester operated within the budget but is nearly the authorized limit. In order for Hereford & Worcester to work within its operational boundaries, it needs to be able to collect various data and information relating to its financial performance – whether the financial figures it can obtain from its auditors, the clarity of its previous decisions, the efficiencies of its reporting system, etc. By working with all the areas identified where there is a lack, the FRS would be able to manage, minimize, or possibly eradicate the issues it has on its financial performance. Reference Adams, J. R. and Barndt, S. E."Behavioural Implications of the Project Life Cycle," in Project Management Handbook, ed. Cleland, D. I. and King, W. R. (Van Nostrand Reinhold. New York, 1983), pp. 222-244 Bardach, E. The Implementation Game (MIT Press. Cambridge, Mass., 1977) Hankin, J. Siedner, A. & Zietlow, J. (1998). Financial Management for Non-profit Organization. Wiley. Pinto, J. K. "Project Implementation: A Determination of Its Critical Success Factors, Moderators, and Their Relative Importance Across the Project Life" Unpub- lished doctoral dissertation, University of Pittsburgh, 1986 Seigel, J. & Shim, J. (2000). Financial Management. Barron’s Educational Series. Slevin, D. P. and Pinto, J. K. "The Project Implementation Profile: New Tool for Project Managers." Project Management Journal, Vol. 18 (1986), pp. 57-71 Read More