This paper examines the fiscal control systems used by South Essex Partnership NHS Foundation Trust ( SEPT ) , and the manner in which these systems relate to Management Accounting theory. The papers besides reflects on the public presentation steps used by the administration and the ways in which both the control and public presentation measuring systems have deductions for the Facilities section. It concludes by urging how the systems could be improved from a Facilities director ‘s position.
SEPT is a mental wellness NHS trust with both inmate and outpatient sites in and around South East Essex.
Having Foundation Trust position means that SEPT enjoys greater fiscal freedoms than NHS administrations without this position. FT ‘s are assessed and hazard rated by Monitor, the administration set up by Parliament, to guarantee that they are financially stable and able to pull off their ain resources. As such, FT ‘s are non required to utilize a resource accounting government, which would necessitate them to interrupt even on an one-year footing. However they must hold a strategic concern program, robust systems to vouch that public financess are managed responsibly and that there are governance agreements in topographic point to guarantee that all facets of their public presentation is managed and reported upon to both the external regulative organic structure, Monitor and other stakeholders. ( Introductory Guide to NHS Finance in the UK, 2008 ) .
Therefore, being portion of a Foundation Trust has deductions for the Facilities Department, as they provide the ‘hotel ‘ support services, such as cleansing, portering, conveyance, waste direction etc to all countries of the Trust. The section has aims and characteristics in the Trust ‘s strategic program to better the quality of the patient journey. It must besides work within the restraints of the procurance and fiscal systems, market trial the services it provides, and supply information and grounds to the Performance Department, who are responsible for describing on the Trust ‘s conformity with the National Standards.
THE FACILITIES DEPARTMENT
SEPT, the administration, is the consequence of a amalgamation between two Community Healthcare Trusts during the 1990 ‘s. The two Trusts had different attacks to Facilities Management, one provided the bulk of their services in-house, and the other outsourcing all but the direction of theirs. Subsequently, there are still different methods of service proviso across the Trust. The Facilities section endeavours to pull off the inequalities on the assorted sites, as clinical staff working on different sites have realised that more flexible SLA ‘s and service proviso exists in specific countries. These differences have brought the construct of value for money ( Imperial College, 2010 ) to the bow as it is apparent that this is non something that can be measured in strictly fiscal footings.
It is besides of import to recognize that while clinical services can take to present specific services on specific infirmary sites, so that Centres of excellence may be developed, this is non an option for a Facilities Departments. Hospitals have to be cleaned, irrespective of where they are, auto parking has to be provided, and so the list goes on. As services are decentralised to smaller, more economic sites, Facilities Managers in SEPT have found the cost of the services they are tasked with providing has risen because they have lost the economic systems of graduated table they were able to use on big sites.
The media have highlighted jobs in both clinical and the support services provided by Facilities Management over the past few old ages ( BBC 2009 ) . A figure of white documents have been written to turn to jobs and deficits in these services, and the authorities compiled the National Standards in 2004 which Trusts are required to follow with and are later rated upon. These are referred to in both the Introductory Guide to NHS Finance in the UK ( 2008 ) and by Pollock and Talbot in the New NHS Explained ( 2006 ) . The world for Facilities Managers is that they face the of all time progressively more hard undertaking of presenting first-class quality services alongside Cost Improvement Programmes.
The primary aims of the Facilities Department are as follows:
To back up the clinical services by keeping the patient environment to a high criterion in order to heighten the Patient Experience
To supply services within budget
To guarantee that value for money is achieved by market proving
To follow with the comparative criterions, counsel and statute law relating to the services provided, i.e. waste, cleanliness
See three of the primary aims, i.e. to stay within an allotted budget, guarantee value for money is achieved and conformity with assorted criterions and counsel. Achieving these aims, could really compromise the accomplishment of the 4th aim mentioned – the care of the Patient Environment. The Patient Environment includes, non merely edifices, but furniture, linen, security, cleanliness, porters, waste disposal, auto parking and so on.
Having accomplishable aims and marks is a motivative factor for directors and staff likewise. Assorted theories sing motive at work ( Mullins, 2005 and Lyne, 1988 ) have been written by experts such as Hertsberg ( Motivation – Hygiene Factors ) , McClelland ( Achievement Theory ) and Vroom ( Expectancy Theory ) .
Accomplishment of the aims is a challenge and a reconciliation act. Vroom, in peculiar, believes that in order for either an person or squad to accomplish that attempt, public presentation and motive are inextricably linked.
Vroom claims that the Expectancy Theory
“ is non about self involvement in wagess but about the associations people make towards expected outcomes and the part they feel they can do towards those results. ”
This would look to be right in the instance of the Facilities Department, nevertheless as theorised by Vroom, motive can be affected by, holding the right resources, e.g. clip and natural stuffs, holding the right accomplishments and holding the necessary support e.g. right information.
It can hence be deduced that if directors are to accomplish their aims and present the services required by the administration, they need sufficient resources, i.e. staff and equipment, which have been budgeted for, and seasonably accurate information to help them to pull off and command the public presentation of those services.
CONTROL AND PERFORMANCE MANAGEMENT
The Facilities Department has a budget in surplus of ?3 million, which it must pull off utilizing the fiscal control systems. The section besides gathers information about their assorted services to provide the Performance Department with the grounds they require to document conformity with the National Standards.
The Financial Control systems are known as Standing Financial Instructions, and are the policies and processs which dictate how fiscal minutess must be handled. They include information on who may empower outgo, outgo bounds for authorized individuals, and advice and certification to utilize for specific cases.
Attachment to the SFI ‘s can do a director ‘s occupation more hard, particularly when a specific undertaking is required, or there is a necessary piece of equipment to be purchased that exceeds the director ‘s outgo bound. The procedure so becomes protracted and the section can look inefficient and may non run into its aims or fulfill client demand.
The ‘authorised signers ‘ component of the control system, restricts who may subscribe off bills, orders and other fiscal certification, it can besides hinder the velocity at which the staff in both the Facilities and the Financial Accounting sections can work. This in bend can impact the Trust ‘s conformity with the Better Payment Practice Code, which requires NHS Trusts to pay their creditors within a specified figure of yearss.
Atrill and McClaney ( 2006 ) province that accounting systems guarantee that information is gathered and communicated to relevant parties both inside and outside the administration. They besides province that all accounting systems, whether in the private or public sector have common characteristics which include:
The designation and gaining control of relevant fiscal information
Recording the information collected in a systematic mode
The analysis and reading of the collected information
The coverage of the information gathered in a manner that meets the demands of the users.
Broadbent and Cullen ( 2007 ) besides agree that fiscal accounting systems are entering systems, and guarantee administrations follow with the Companies Act, and the NHS is no different from any other administration in that they must bring forth audited histories on a regular footing.
It is hence necessary to hold an efficient and effectual accounting system in topographic point for the administration to run in an efficient and effectual mode, and for the Facilities Department this chiefly translates into utilizing the correct processs for securing goods and services, guaranting that bills received are dealt with quickly and charged to the correct cost codification and that income and recharges are likewise dealt with.
The information gathered and recorded by the Financial Accounting section is used by the Management Accountants to mensurate the public presentation of the administration. However, the ratios and public presentation steps ( other than budgets ) that are used to mensurate public presentation are communicated merely at Board degree and to regulative organic structures instead than operational directors. All operational directors, including Facilities directors are given budget statements on a monthly footing. Any computations such as the cleansing cost per square meter on different sites, would be determined by the operational director.
The direction comptrollers set the budgets, for both the administration, and so for every board of directors and section. For ongoing services, for whom there are no major alterations planned, incremental budgeting is used, i.e. planned outgo is normally increased by a given per centum each twelvemonth unless there are specific costs force per unit areas that have been highlighted which will hold a direct consequence upon a director ‘s ability to run into a planned mark. Budgets may besides be decreased if fortunes change. Accuracy should be an of import factor to see because most theoreticians agree that budgets should be merely right, instead than excessively easy or excessively difficult to accomplish ( Hofstede 2001 ) .
Where a new service is planned and implemented, zero based budgeting is used, i.e. each component of the service is costed to do up the budget.
Budgets may be considered as rather combative. There are a figure of sentiments as to how utile, relevant and actuating they truly are.
CIMA specify a budget as follows:
“ A quantitative statement, for a defined period of clip, which may include planned grosss, disbursals, assets, liabilities and hard currency flows. ”
Cullen and Broadbent ( 2007, p115 ) believe this is a comparatively restricted definition because budgets normally contain and make mention to both fiscal and non-financial information.
They besides province that:
“ it is of import that planning and budgeting is non a mechanistic procedure, but a dynamic and synergistic one affecting every director within the administration. The engagement of all directors will let their expertness to be decently used and will supply a strong motivational force. ” Cullen and Broadbent, ( 2007 p117 )
Gowthorpe ( 2005 ) agrees with this position and provinces that the budget scene procedure signifiers portion of a broader planning procedure and takes into history the strategic way the administration is taking, in that both short and long term aims are taken into history, along with alternate classs of action that can be taken should fortunes alter.
Atrill and McLaney ( 2006, p282 ) are of the sentiment:
“ the budget is basically a concern program for the short term. It is likely to be expressed chiefly in fiscal footings, and is designed to change over the long term program into an actionable design for the hereafter. ”
They are of the sentiment that budgets benefit any administration and are utile and have explained this as detailed in the diagram in appendix 1.
Within SEPT, budgets are by and large accurate in footings of the information they contain, and on the whole, accomplishable.
There are two chief jobs that the Facilities directors face with their budgets, foremost, for historical grounds, there are history codifications on some of the Facilities budgets, that the directors responsible for those budgets have no control over whatsoever, and which, in some instances, history for the whole of the overspend on that budget every twelvemonth.
And secondly, that budget statements are non available until the center of the month.
Johnson and Kaplan ( 1991 ) suggest that corporate direction accounting systems are unequal for today ‘s environment because they do non supply utile, timely information for public presentation rating of directors. Other theoreticians agree with this point of position, but highlight the fact that truth can be sacrificed for seasonableness. ( Gowthorpe 2005 )
Whilst the general position is that an accomplishable budget will be a incentive for directors, it is besides accepted that an unattainable budget, with elements that are unmanageable will be a de-motivating influence. Gowthorpe in Management Accounting for non-specialists ( 2005, p153 ) provinces:
“ Although the budgeting procedure is intended, ideally, to promote engagement and ‘ownership ‘ , the practical consequence may non be as intended. If the budget procedure is basically autocratic with small or no effectual engagement, in-between directors and staff may experience resentful and disinclined to work to budget. ”
The Facilities Department is portion of the People Management and Business Development Directorate. Directors are asked prior to the budget planning procedure if they are cognizant of any cost force per unit areas that could impact budgetary demands, but this is normally the extent of their engagement in the procedure, as budgets are agreed upon at Director and Assistant Director degree.
As antecedently discussed, some theoreticians would reason that this deficiency of engagement in the budget scene procedure is non contributing to good direction patterns and will take to miss of sensed ownership, and be a de-motivating factor. Others, ( Atrill & A ; McLaney, 2006 ) disagree and believe that budgets imposed on directors by and large improve public presentation, but measure up this by adding that merely accomplishable budgets are a motivative factor. However, they believe that where directors are involved in the budget scene procedure, their sense of engagement and motive is heightened because they are committed and feel they have a moral duty to accomplish the budgets they have signed up to.
It can therefore possible to see that budgets and the SFI ‘s are two of import elements of the control system, and that the fiscal public presentation of the section can be measured utilizing these systems. However it is besides evident with respects to these command systems that they are non needfully conducive to accomplishing end congruity, as the Finance Department ‘s aims require stiff systems in topographic point to command fiscal minutess, whereas the aims of the Facilities Department topographic point accent on flexibleness of service proviso.
Maximizing Gross saless and income, whilst maintaining costs and outgo to a lower limit, is the doctrine, which in the private sector should take to gain. In the populace sector, doing a net income is non a demand, but guaranting that services provided are giving value for money is highly of import, and as antecedently mentioned this is one of the premier aims of the Facilities Department. When Butt & A ; Palmer ( 1985 ) wrote about VFM in the populace sector, they described how public services need to be accountable, by holding strategic programs that considered how and when an administration was to develop. These had to be to the full costed, have operational aims and marks linked to public presentation steps.
SEPT uses market proving and benchmarking to accomplish VFM. The Cabinet Office ( 1997 ) suggests that the best result for a public administration when looking to present services that represent value for money is to travel through a competitory command procedure.
All Facilities services that will be the administration in surplus of ?50,000 for a three twelvemonth period, go through a market proving procedure. Unfortunately Market Testing does non needfully ensue in accomplishing value for money over the whole term of a contract because fortunes can alter, or because there are deficient monitoring agreements and a deficiency of punishment clauses.
Attachment to a budget and cogent evidence that the administration has tested the market to accomplish VFM are two fiscal PI ‘s. However these are PI ‘s, which harmonizing to Johnson and Kaplin ( 1991 ) are of small usage to operational directors because they need PI ‘s which will see the operational efficiency of their sections.
Although Financial PI ‘s are of importance, peculiarly to external stakeholders such as Monitor and the Trust ‘s commissioners, from an operational position, it is frequently the Non-financial Performance Indicators ( NFPI ) that give an option, but every bit of import step of success, and are significantly more utile to operational directors and their managers.
“ Some of the drawbacks of fiscal public presentation steps such as ROI can be addressed by measuring public presentation utilizing a set of non-financial measuring. These do non hold to be an absolute option ” Gowthorpe ( 2008, p260 )
She goes on to state:
“ The best manner of measuring the public presentation of an administration or division is likely to be via a combination of fiscal and non-financial steps. ” Gowthorpe ( 2008, p263 )
In the Facilities section some of the NFPI ‘s used affect the administration as a whole, i.e. those that consider the cleanliness of our wards and edifices, the quality and measure of the linen provided for patients, and whether patients, staff and visitants are protected by equal security systems. These are audited and reported on via PEAT. The consequences are published by the relevant regulative organic structure, and although they are non a step of fiscal success, they contribute to the success of the administration, and without them, the value of the health care service provided, could be dramatically reduced.
Kaplan and Norton identified four positions that required cardinal public presentation steps. To each of these, ends and critical success factors were allocated, and it was intended that the Balanced Scorecard was to be linked to overall concern scheme. ( Gowthorpe 2008 ) .
Broadbent and Cullen ( 2007, p310 ) noted that:
“ An of import characteristic of this attack is that it is looking at both internal and external affairs refering the administration ” .
In drumhead, a figure of Management Accounting theoreticians believe that The Balanced Scorecard ( Kaplin and Norton 1992 ) is a utile and comprehensive method of mensurating public presentation.
“ In theory there ‘s no difference between theory and pattern. In pattern there is. ”
Management Accounting theoreticians agree that administrations need accounting systems in topographic point to bring forth information which they should go through on to operational directors to assist them do determinations and work more efficaciously.
“ Management Accounting describes the procedure of roll uping, collating and describing information that is of usage to the directors of a concern for doing determinations, for supervising past public presentation and for doing the most efficient usage of resources. ” Gowthorpe, Management Accounting for non-specialists, 2005 p96.
Johnson and Kaplan ( 1991 ) , considered that direction accountants no longer bring forth relevant information that could be easy used by operational directors for determination devising and measuring public presentation and stated:
“ Today ‘s direction accounting information, driven by the process and rhythm of the administration ‘s fiscal coverage system, is excessively late, excessively aggregated, and excessively distorted to be relevant for directors be aftering and control determinations. ” ( Johnson and Kaplan, 1991, P1 )
The fiscal control and public presentation measuring systems in topographic point in SEPT are non perfect, and it would be just to state this is to be expected, given that SEPT has been through a period of extended alteration as it has moved to Foundation Trust position.
The writer considers that the undermentioned recommendations would help the Facilities Department to pull off more efficaciously and take to a more productive relationship with the Trust ‘s Management Accountants:
Budget statements available throughout the month on the intranet. To be Available in bill of exchange format, in PDF format for budget holders.
Greater engagement and input with respects to budget scene. This would include both the transportation off the budget of outgo codifications for which directors had no control, and the transportation onto the budget of outgo codifications that are relevant to the Facilities Department and public presentation managed by them.
Adopt a utile public presentation steps that relates to Facilities, i.e. The Balanced Scorecard. Using a direction tool such as the Balanced Scorecard would take into history and balance the fiscal and non-financial public presentation indexs ( see appendix 2 )
CIMA Chartered Institute of Management Accountants
FT Foundation Trust
KPI Key Performance Indexs
NFPI Non-Financial Performance Indexs
NHS National Health Service
PEAT Patients Environment Action Team
PI Performance Indicator
ROI Return on Investment
SEPT South Essex Partnership Trust
VFM Value for Money
Glossary of Footings
National Standards A papers published in 2004 compromising of 24 nucleus criterions and 10 developmental criterions, and arranged within seven spheres based upon bing demands and depicting acceptable degrees of service which must be achieved within all NHS Trusts. ( Pollock and Talbot 2006 )
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BENEFITS OF A BUDGET
Supply a footing for a system of controls
Supply a system of mandate
Promote forward thought and place short-run jobs
Help organize the assorted subdivisions of the concern
Motivate directors to better public presentation
( Re-produced from diagram in Accounting and Finance for Non-Specialists ( 2005 ) , ATRILL, Peter, and McCLANEY, Eddie. )