Financing Greater Manchester Fire & Rescue Service - Essay Example

Running head: FINANCIAL MANAGEMENT Financial Management (Name) (Tutor’s Name) (Course) 15th January, 2011 Financial Management Greater Manchester Fire & Rescue Service, GMFRS is one of the largest Fire and Rescue Service existing in the United Kingdom. Since it operates under the county of Manchester, its finances and controls are managed by the county officials. It covers a large area transcending more than 500 squared miles. Within this area are diverse cultures composing a population of 2.5 million, 1 million household properties and several built-up and business buildings. The service has about 3000 employees serving in different disciplines within the organization. Due to its scope of operations, the annual budget of GMFRS is approximated to be 118 million pounds (Greater Manchester Fire & Rescue Service n.d.). In the United Kingdom, all fire and rescue services including that of Manchester offer their services to the community for free although there are some of their services that require charges. In the cases of emergency services to the victims are free. The funds for fire rescue services are from two main sources. The two sources are budgetary allocations from central administration and local authority tax collected from areas within the county’s jurisdictions. The majority of these finances are from the central government. The rest comes from other sources including taxes within the council area, individuals and other organizations interested in fire prevention and rescue. The amount collected by local governments is referred to as fire precept. The other amount which comes from the central government is referred to as grant settlement. These are the allocations from central government. The amount of grant settlement varies depending on negotiation, demands and size of fire rescue services (Audit Commission 2009). Therefore, the budget of Fire Rescue Services like that of Manchester depends a lot on the policies of the central government. A shift in the central government budget would mean that the service’s budget will also adjust accordingly (McGuirk 2011). This document seeks to identify and analyze the ultimate impact of budget cut from the central government. Greater Manchester Fire and Rescue Service have a budget cut of 25%. This is due to the prevailing economic climate. The noteworthy cuts from central government contribute to this. This will translate to a loss of 18 million pounds which infers that there is a need to re-evaluate the manner in which response to emergencies is executed and how preventive measures aimed at curbing emergencies are organized (Active Navigation n.d.). The budget is constrained by a number of factors which include the levels of forecasted expenditure, available income and the past records. In the event that there is a significant under spending then, cutting the budget will not have much impact on the Service’s operations. For the organization to remain upbeat with the budget cuts proposed by the central government, it must respond by putting in place mechanisms of curbing budget deficit. After the general elections of May 2010, the coalition government in the United Kingdom has formulated an austerity plan aimed at reversing public deficit in the next five years to come. It is inevitable that the fiscal contraction will eventually result in massive job loss in major public sectors whose budgets are directly linked to that of central government. Greater Manchester Fire and Emergency Service is no exception (Cecil 2010). The service through the county office has to layoff the excess staff so as to cut on cost. The scale of reduction in budgetary allocation is likely to go down beyond any of the earlier challenges that the Authority has undergone in the past. This is because a reduction of nearly 15 million pounds is expected to be achieved in the next four years. However the ultimate figure is going to depend on the manner in which arising issues are dealt with by the government. The members of the authority are therefore advised to make radical reviews in policy formulation and implementation. These reviews are then going to form a basis of sequential options to the release of sustainable and balanced budget (Bushee & Noe 2000). The new proposals should also meet the statutory duties bestowed upon the authority. These reviews are also going to form a firm foundation extensive program which would result in essential changes on the way in which service support would be organized and delivered. Operational resources should also be modified so as to fit the new risk model. Since it is difficult to confidently predict the efficacy of United Kingdom economy recovery plan, the county fire department must the seek alternatives of surviving at the turbulent times. Because of these uncertainties, it is going to be a prudent idea to put in place mechanisms of buffering the authority’s financial woes. Since fire protection is an essential service within the county, the restructuring process must bear in mind key areas. It should not interfere with core areas which are likely to hamper emergency services delivery. In the next few paragraphs, I am going to outline the specific sectors where change must be effected so that the looming budget cut will not adversely affect services delivery. The majority of these sectors are those which showed an under spending in the past budgets. The anxiety over how emergency budget would interfere with the Service is a topic which has drawn a series of mixed reactions. Many people fear that the essential services are going to be curtailed. In this proposal, I intend to make sure that the service responds to budget cut while at the same time offering essential services to Manchester businesses and residents. The budgetary adjustments to be made in line with the budget cut are directly related to the historic records. With close reference to the previous budget, adjustments are going to be made on areas where notable under spending and over spending were realized. This eliminates any detrimental effect on the services delivery. Caution must be exercised in this move to ensure that critical areas of handling emergencies are not affected. There is a need to review employees in terms of both budget and numbers. With the intervention of Strategic Career Management Group, a lean team which will eventually make economic sense to the organization must be formulated. Human resource department takes the precedence in the review process because of its weight in risk to the Authority. Moreover, employees form the largest section of expenditure in the Greater Manchester Fire Rescue Service. The very initial move of developing a lean work force is suspension of recruitment plans in the year 2011 until a reasonable budget allocation is received (Keeling 2010). The vacant positions should be held for sometime while at the same time the retirees continue to exit from the company. In the long run expenditure of employees is going to be reduced (Keeling 2010). The financial records reveal that there is an overspending of about 0.116 million pounds on premises. This implies that money used in the previous budget in capital and recurrent expenditures went beyond the projected value. As the organization brace itself for smaller budget this year it is also important to review the management of premises. This will include the yearly maintenance fees and refuse collection charges. The costs of electricity and gas show that there is an under spending of about 0.156 million pounds. With the financial restrictions accruing from budget cut, it would be prudent to formulate means of cutting gas related costs. This can be achieved through renegotiation of contract agreements with the providers of these services. The projected annual stands at 0.347 and 0.515 million pounds for gas and electricity respectively. Almost a total of 0.267 million pounds is going to be under spend in the next fiscal year. Articulate savings are likely to be realized if the master plan postulated by the policy Committee is going to be implemented. There is also an urgent need to review water rates so as to cut expenses. Current analysis reveals that it is possible to save water related rates by 0.041 million pounds (Smith 2010). Another area of focus to be reviewed in restructuring of the budget is in supplies and services sector. The expenditure related to contracts and tenders should be reviewed because a substantial proportion of fiscal budget has been allocated to this fort head. The contracts with other corporate bodies like Microsoft and Smart License need renegotiation to allow for adjustment in line with the proposed budget cut. Of particular importance in this fort head is the consultancy fee which can be adjusted without much effect on the quality. Although medical services allocation were under spent by 0.023 million pounds, there is a need to optimize this budgetary gains in the next allocation. Outsourced services like contracts for occupational health with PMI are a vital avenue of enhancing savings. Smoke alarms form a critical part of fire prevention. Consequently, its impact on eventual performance should be carefully considered such that there will be financial gains and performance equally. There is an expected rise in smoke alarm requirements according to the ambitious expansion plan. This is a move aimed at fostering the Authority’s mission of ensuring fire safety in residential, commercial and industrial buildings. The financial restrictions threatened by the central government should not be allowed to derail the mission and objectives of the Greater Manchester Fire Rescue Authority. It is projected that the cost of smoke alarms is going to be lowered by an approximate of 0.05 million pounds. This matches the threats of the coalition government. Smoke alarm expenditure encompasses both tasks executed by Home Fire Risk Assessment scheme and Operational crews whose funding is done jointly by the Authority and partners. It is worth noting that the efficacy of smoke detectors could be hampered by the forthcoming winter. Consequently huge investments of smoke alarms may not be optimum. The Authority is now faced by an uphill task of replacing smoke detectors while at the same time staying within the frontiers of central government. The other strategy which will ensure a workable budget despite government restrictions is in the procurement of staff uniform. The Authority failed to use the allocated amount in an excess of 0.144 million pounds. This implies that a further reduction of uniforms requirements through recruitment freezing will go a long way in ensuring that the constrained budget is not overburdened. A deliberate move to curtail the rolling out of new out fit will ensure a saving of up to 0.2 million in the entire budget. This implies that costs connected to outfits like maintenance and laundry will be reduced as well. In a bid to minimize costs while at the same time meeting the preset goals, the Authority should focus on the under spend realized in support services in the previous budget. The expenditure review for years to come should be characterized by reduction in support services fees. To achieve this, renegotiation of rates with Audit Commission is going to make sure that savings of about 0.030 million dollars. Another area of expenditure which can be adjusted to accommodate the projected government budget cut is financing of Fire fighters’ Pension Fund. The Pensions Fund is used to compensate most of pension associated expenses. This includes payouts to the retired fire-fighters and dependants. Since the fund is contributed to by employees, government and local authorities, the withdrawal of Authority’s support will not affect the welfare of retirees. Therefore, I would propose a further suspension of the local Authority’s support to the fund until the government reverses its budget cut. The move to adjust budget requirements in line with the coalition government’s decision to cut budget should not only focus on reducing expenditure but also increasing the income. One way in which income can be raised is entering in to partnership with financiers like banks and well wishers (McCaffery & Mutty 1999 p. 19). This mitigates the undesirable outcomes of the coalition government’s move that will not prevail. Another source of income is the disposal of obsolete items. Although it is a one time cash inflow source, it will serve as one of the timely buffer against challenges of budget cut. Such items like old cars, depilated pumping systems generate a good amount of money on disposal. The new government is promising severe financial restriction that will have a detrimental impact on Fire Rescue Services. After three months since taking over the leadership of the coalition government the cabinet has embarked on the reconstruction process aimed at streamlining the economic status. The challenge is that the coalition government took over during recession. Some opinions are likely to develop to be a mountain task for the Fire and Rescue Service. It is expected that the Fire rescue Service is going to have lesser reduction in budgetary allocation than other public sectors. If the cut of about 25 % is implemented, the results will vary from one county to the other depending on service structure. Since the non-salary expenditure is below 20 %, and then the reduction in the number of firefighters will not be avoided. This has made most services suspend their recruitment activities. The decision as to whether this is going to avoid redundancies is dependent on the rates of cutting. The reduction by a rate of 6 per cent a year means that the natural wastage is going to cover most of staff shrinkage (Greater Manchester Fire & Rescue Service, n.d.). The prevailing uncertainty means that services are likely to end up under or over-reacting thus creating tension among the staff who are already threatened by pay freeze. Staff members are already under attack in their pensions and threats to alterations in trade union legislation. The Public Sector Pensions Commission is deliberating on the issue. The pension subject seeks to destabilize industrial operations for the engagement that remains unsettled for years. After close to six years of fall outs, the future is certainly bleak. The shrinking in other public allocations has changed the tune. The withdrawal of Building Schools for the Future project is defiantly hindering the introduction of sprinkler systems in educational institutions. To add to that, the stoppage of a significant infrastructure project is bound to undermine the construction sector that has been dented by a shrink in the property market. Nationally, every government unit is examining its options regarding the issue. The Departments of Communities and Local Government that has long been sidelined, has undergone through a hemorrhaging of crucial staff and a withering downturn. Consequently, this has deferred the wrap up time for some vital activities and advice to the FRS. A cut a quarter of the allocations is heartbreaking for the determined forces. The incentive for change is in the woods. In conclusion, the impact of budget cut by the coalition government should not be allowed to interfere with fire rescue services. If the proposals put across in this document are adhered to, then the service delivery will not be affected. Engaging alternative sources of finances will go a long way in enhancement of services delivery. However, all stakeholders must acknowledge that the impact of the global economy and that of the United Kingdom are not completely avoidable. References Active Navigation n.d., Greater Manchester Fire & Rescue Service: Preventing, Protecting and Responding, Active Navigation, viewed 16 January 2011, . Audit Commission 2009, Greater Manchester Fire and Rescue Service - Use of Resources, Audit Commission, viewed 16 January 2011, . Bushee, B J & Noe, CF, 2000, ‘Corporate Disclosure Practices, Institutional Investors, and Stock Return Volatility’, Journal of Accounting Research, Vol. 38, pp. 171-202. Cecil, N 2010, Big Budget Cuts ‘Will Jeopardize Public Services’, London Evening Standard, viewed 16 January 2011, Greater Manchester Fire & Rescue Service, n.d. Local Transparency - Spends over £500, Greater Manchester Fire & Rescue Service, viewed 16 January 2011, . Keeling, N 2010, Fire Brigade to Shed 150 Jobs as Cuts Bite, Manchester Evening News, viewed 17 January 2011, . Keeling, N 2010, Fire Stations ‘Could Face Axe’ In Budget Shock, Manchester evening News, viewed 15 January 2011, < http://menmedia.co.uk/manchestereveningnews/news/s/ 1400365_fire_stations_could_face_axe_in_budget_shock >. McCaffery, J & Mutty, J E, 1999, ‘The Hidden Process of Budgeting: Execution’, Journal of Public Budgeting, Accounting and Financial Management, Summer 1999. McGuirk, S 2011, Local Government Financial Settlement Announced, Greater Manchester Fire And Rescue Service, viewed 16 January 2011,. Smith, D. 2010, Local Government Finance Formula Grant Distribution: Consultation Paper, Greater Manchester Fire Rescue Service, viewed 16 January 2011, . Read More