Greater Manchester Fire and Rescue Service: Budget Proposal 2011 - Case Study Example

Table of Content Introduction Overview Proposed budget cut areas Risk area and the subsequent ways to mitigate risk Recommendations Conclusion References Introduction Greater Manchester Fire and Rescue Service which is a fire and rescue operator based in UK is looking towards reducing the expenses by 5% on certain areas like staff, equipment and premises. Greater Manchester Fire and Rescue Service needs to weigh the benefit and cost involved due to their steps and needs to identify the risk associated with the same. The paper thereby looks into different areas where Greater Manchester Fire and Rescue Service can reduce the expenses and the risk that could arise from them. It also considers the ways that Greater Manchester Fire and Rescue Service can take to reduce the risk in the future. Overview Financial planning holds an important position for every organization and sound financial process helps to ensure that the goals of the organization are easily achievable. (Wang, 2010) Having a sound policy helps to ensure that the strategies don’t backfire and helps to improve the overall planning. Sound financial planning helps to achieve the following (Brigha & Houston, 2009) Proper financial planning ensures that the long term investments are easily made as it ensures sufficient funds throughout the business life cycle. Proper planning helps to ensures that the assets which are no longer required are disposed of at the correct prices. It will facilitate in the disposal of fire fighter engines, places and equipment which are not required. Proper planning ensures that the risk associated with the staff reduces as the nature of job carried out in fire and rescue services is risky With economies reviving from the global downturn Greater Manchester Fire and Rescue Service is looking towards adhering to the government requirements of reducing the expenses by 5%. Greater Manchester Fire and Rescue Service has identified certain areas which they look to work on and ensure that with efficient planning and efficiency are able to reduce the expenses by 5%. Proposed budget cut areas Greater Manchester Fire and Rescue Service have proposed certain areas where they are looking towards reducing the expenses which will help them ensure that their operations don’t get affected. Some of the areas identified by Greater Manchester Fire and Rescue Service are as follows Staff: Greater Manchester Fire and Rescue Service employ over 1,960 employees for a population of 2.5 million. Their employees are distributed over 41 destinations which they operate. The financial statement highlights that Greater Manchester Fire and Rescue Service has 1911 full time fire fighters and 39 part-time (Annual report, 2010, p. 9). Greater Manchester Fire and Rescue Service thereby looks towards reducing the employees by closing down certain areas where they operate as the same destination can be dealt from other fire stations in the nearby areas (Performance Plan, 2010) Greater Manchester Fire and Rescue Service spends around 68% of their budget on employees. As the expense on employees forms a large percentage of the total budget so a proposed cut of 5% will greatly benefit Greater Manchester Fire and Rescue Service as the money can be used elsewhere. The areas where Greater Manchester Fire and Rescue Service look towards reducing the staff expenses and the likely impact it will have on the working of Greater Manchester Fire and Rescue Service is provided below How Impact Reduce Impact 1. Reduce the number of full time fire fighters after ascertaining the minimum employees required and having a buffer along with it Chances of resistance through strikes and lock outs Developing strategies which are more flexible and remunerates employees on the basis of hour worked Guide the employees and make them understand the reason for such a decision by preparing them for it from the beginning 2. Reduce the unnecessary training camps and facilities which could be done without Have an effect on motivation as employees might fight it difficult to deal with additional pressure Work from the senior management who take the extra step to prepare the employes for the task in hand Look for trained and learned employees so that the expenses on training can be reduced 3. Outsource or hire temporary workers Lack of skills and the desire to work as employees don’t feel part of the organization Enter into agreement with local agencies to provide the necessary training to the outsource workers so that the work load gets shifted The policies of Greater Manchester Fire and Rescue Service will provide rich dividends in the long run and ensure that the process becomes more effective. The above policies with the following changes in the management process will render the entire operation of Greater Manchester Fire and Rescue Service more effective Having a system in process which ensures smooth installation and monitoring of the entire process. Having an attendance standard to improve the emergency response time Having the above will ensure that absenteeism comes down at the same time it will help to improve the efficiency of the entire operation. Greater Manchester Fire and Rescue Service while looking to make the proposed cut should evaluate all the risk and take every step to ensure that the risk don’t act as a hindrance in the path to cut expenses. Equipment: Greater Manchester Fire and Rescue Service has purchased a lot of equipment to ensure that they are able to deliver proper service towards the community. The financial statement highlights the capital expenditure to be £4.533 million. Out of the total expenditure incurred on capital mostly expenditure has been made on purchasing new equipment which facilitate in fire operations (Annual Report, 2010). Greater Manchester Fire and Rescue Service looks to spend the expenditure on equipment in the following areas Equipment & Supplies Communications Information System Transport The financial statement highlights that Greater Manchester Fire and Rescue Service has spent a large proportion of their budgeted income on the first three items. This has been due to the changes that the organization has witnessed. Also the future planning highlights large amount of investment going in this direction along with a majority of expenses being directed towards travelling by purchase of new vehicles. Greater Manchester Fire and Rescue Service thereby needs to look at areas it can curtail its expenditure on so that it is able to abide by the proposed cut and make the necessary changes in the manner business is conducted. How Impact Reduce Impact 1. Look towards modernization of the equipment by purchasing newer technology Increase the cost associated with technology, employees who are trained to use those and premises as new facilities have to be developed to store them It will improve efficiency which will result in better services which is quicker and will help in future operations 2. Look towards acquiring new equipment through lease so that the expenditure gets spread Increases the risk of damage to the assets which might increase the burden of the additional equipment used Ensure proper insurance to reduce the chances of the equipment damaging 3. Look towards private partnership which will help to imbibe in fresh blood within the organization Lead towards diversion of interest as the public sector looks towards profit which might affect the operation Conflicts of interests Ensure that a mechanism is developed which looks into the stakeholder interest at the same time ensure that the private parties don’t have to suffer Greater Manchester Fire and Rescue Service by having stock system management in place which will ensure that they stock has a minimum level and a policy to maintain stock at that level. Greater Manchester Fire and Rescue Service thereby can look towards ways to improve the lease financing agreement to ensure that the cost associated with the same comes down. Greater Manchester Fire and Rescue Service by having a system in place can look towards a system which helps to reduce cost through the proposed budget. Premises: Greater Manchester Fire and Rescue Service looks towards purchasing premises in a financial manner so that it has little impact on the daily budgets. There has been a large decrease in the amount of money spent on premises as it has gone down by 50%. Having premises will help Greater Manchester Fire and Rescue Service over a long period of time as it will ensure that the operations are carried out easily. Greater Manchester Fire and Rescue Service has to look towards the following ways to reduce the expenditure on premises How Impact Reduce Impact 1. Shut down centers which are less operative and can be served from nearby centers Increase the likelihood of casualties as it will take time for the fire fighters to reach the spot of accident Hamper the service quality due to lack of equipment and technology at all centers Look towards gathering information so that the fire fighters can act quickly at a slightest hint of an information Have mobile patrol over all areas so that correct and accurate information at the correct time is provided 2. Improve the usage of electricity and water so that unnecessary expenditure can be looked after Could create a situation where false alarms make the fire operators work more Ensure regular checks to see that the alarms and the system installed are working in perfect condition Premises will help Greater Manchester Fire and Rescue Service to increase their reserves as the amount of depreciation will add on in the accumulated depreciation account which will help Greater Manchester Fire and Rescue Service to use it in the future (Brigham & Houston, 2009). In addition to it Greater Manchester Fire and Rescue Service can look towards outsourcing certain functions which will help them to be free from the problems of premise acquisition. Greater Manchester Fire and Rescue Service can look towards purchasing the necessary through debt financing. This will help Greater Manchester Fire and Rescue Service as the amount need to be paid over a period which will reduce the burden on the organization. Greater Manchester Fire and Rescue Service will have to face the fluctuations in the economy which might result in higher interest rate. To curb those effects Greater Manchester Fire and Rescue Service needs to look towards using future or option and curtail it. The overall strategy adopted by Greater Manchester Fire and Rescue Service should look into the risk associated with it and after covering all the risk steps should be taken to cut down the expenditure. Risk area and the subsequent ways to mitigate risk Greater Manchester Fire and Rescue Service faces the following risk along with the ways that will help them to reduce those risk are as follows The proposed cut will increase the likelihood that Greater Manchester Fire and Rescue Service will not be able to deliver fire services as efficiently as it did. This will give rise to operational risk which needs to be watched out. Greater Manchester Fire and Rescue Service by having a proper internal control system which monitors the performance at regular interval will be able to reduce the operational risk. Along with it Greater Manchester Fire and Rescue Service need to recruit trained personnel who are able to identify the pattern of changes the organization is witnessing and take steps to reduce the operational risk (Brigham & Houston, 2009) Greater Manchester Fire and Rescue Service also face the risk associated with funding the project giving rise to financial risk. On this aspect Greater Manchester Fire and Rescue Service has to rely on government and public funds as getting similar funds from the private operators will be difficult. Greater Manchester Fire and Rescue Service also face liquidity risk which arises due to changes in cash flow pattern. Changes in the proposed cut will have an effect on the manner Greater Manchester Fire and Rescue Service has the inflows and outflows of cash. To ensure that this risk is mitigated Greater Manchester Fire and Rescue Service will have to rely on the reserves to be able to meet it. Greater Manchester Fire and Rescue Service also faces credit risk as financing the plan might put the organization in a difficult situation to get the finance. In this situation Greater Manchester Fire and Rescue Service will have to rely on external financing and should look at a mix of floating and fixed interest rates so that the fluctuations are looked after. Recommendations The following will help Greater Manchester Fire and Rescue Service to reduce risk to a large extent and will help the organization to ensure that the budgeted cut in the proposed plan goes through Greater Manchester Fire and Rescue Service should look towards having a strategy which reduces risk. On this aspect Greater Manchester Fire and Rescue Service should look having insurance cover at the same time ensure that steps are taken to protect the private interest of all parties. Greater Manchester Fire and Rescue Service should look towards different tie ups. This will ensure that the organization gets the goods and services when required. This will also save the organization from incurring additional expenditure. Greater Manchester Fire and Rescue Service should look towards private investment. This will help the organization to ensure that there are readily available funds. While doing so special care should be taken to ensure that the stake of the shareholders and stakeholders are not diluted. Conclusion Greater Manchester Fire and Rescue Service can look towards reducing the expenses on staff, premises and equipment on 5% by evaluating the risk and devising strategy to safe guard against those. Greater Manchester Fire and Rescue Service should ensure that while looking towards reducing the expenditure special care should be taken to ensure that services are not compromised. Greater Manchester Fire and Rescue Service need to evaluate all the factors and based on it need to decide the strategy which will help them to build better long term relations and guide them to provide better services. References Brigham, F., Eugene, F. & Houston, J. 2009. Fundamentals of Financial Mgmt. Cengage Learning, Denver. Smith, J. 2009. Greater Manchester Fire & Rescue Auth: Revenue & Capital Budgets 2009/10. Retrieved on March 25, 2011 from http://www.manchesterfire.gov.uk/media/40245/capital- revenue-budgets2009-10.pdf Annual Report. 2010. Greater Manchester Fire and Rescue Authority: Statement of Accounts 2009/10. Retrieved on March 25, 2011 from http://www.manchesterfire.gov.uk/media/68567/statement_of_accounts_2009- 10.pdf Smith, J. 2007. Greater Manchester Fire & Rescue Auth: Medium Term Financial Strategy 2007-2010. Retrieved on March 25, 2011 from http://www.manchesterfire.gov.uk/media/40245/capital-revenue-budgets2009-10.pdf Wang, X. 2010. Financial Management in the Public Sector: Tools, Applications & Cases. M.E Sharpe, Cambridge Read More