The Financial Data of Fire and Rescue Greater Manchester - Case Study Example

Greater Manchester Fire and Rescue Introduction Most expenditure cut downs by governments are done following general elections. This report provides a discussion of the greater Manchester Fire and rescue service budget proposal for the year 2011. The report entails a critical assessment and appraisal for the structure of finance, control, systems and the effect of its implementation (FRS., 2006). A critical review and appraisal of the existing practices which are related to the finance control and their relevance in terms of the indicators in the context of the management of public service are also discussed. The report finally makes an interpretation of the financial data that is supplied to help in making an effective and logical recommendation to be used in strategic decision making process. Greater Manchester Fire and Rescue is one of the largest FRS outside London which has 41 fire stations with over 2,500 employees. The area covered by Greater Manchester Fire and Rescue is about 500 square miles and it serves a population of about 2.5 million people with diverse cultural background. The area covered by the Greater Manchester Fire and Rescue is prone to many risks such as floods, traffic accidents that are rail, road or air accidents, and other environmental and community related risks (FRS., 2006). The vision of the firm is to make Greater Manchester a safer place by being a modern community focused and influential fire and rescue authority. The key role of fire fighters at the service is to respond to emergencies to save life. The emergencies range from house fires, road, rail and air traffic accidents, and floods and clean up chemical spills and defending the public against acts of terrorism (Horne & Wachowicz, 2008). They are also involved in promotion of fire safety within the community. This is done through home fire assessments which entail advising people on their escape routes. The fire fighters are also involved in inspecting buildings to ensure that businesses are meeting their fire safety regulations in addition to raising awareness of fire safety and highlighting dangers of activities such as fireworks and matches in schools through presentations. The company wants to reduce its expenditures and thus a proposal is required on how to effectively implement this without impacting negatively on the operation of the firm. The firm is expected to make a 5% cut in its total expenditure and areas which are likely to contribute to this are the employees, equipments and premises. Employees How Effect How to reduce the negative impact Increase working hours Cut wages Offer intensive training Introduce pensions Lose of employee morale leading to strikes and lose of service Training will improve the quality of services offered to the community by employees Pensions will improve employee morale Outstanding employees in their duties need to be motivated through rewards and recognition and promotions. Reduce working hours Reduce the number of workers being promoted Non replacement of retiring employees Increase the number of employees on retained duty system and reduce the number of regular employees Reducing working hour may compromise the service offered to the community Cutting the number of employees being promoted will de-motivated and will lead to mass employee turnover resulting in loss of talented employees. Reduced number of permanent employees will imply that those remaining will have increased work load which may lead to workplace related stress. This may compromise service delivery. Division of work and specialization may reduce workload and enhance efficiency at the firm. Equipment The company is planning to sell off old equipments and funds from the sale to be used in acquisition of new ones (Horne & Wachowicz, 2008). The new machinery to be bought are expected to be more sophisticated in terms of technology and are also expected to cut on expenditures on fuel. The new equipments will also increase efficiency at the firm hence cutting costs of running the firm (FRS., 2006). The introduction of these new machines is expected to result in loss of jobs since some of the machines may replace manpower. However, the firm will have to incur training cost for employee to use these equipments. Thus through acquisition of new machineries, the firm will be able to cut down operation costs in the end (GMFRA., 2010). By selling some of its old equipments, the firm will reduce the amount of loan required to finance such ventures. Premise The firm is planning to acquire premises for their offices which charge cheaper rent. This is expected to reduce operation costs for the firm (FRS., 2006). The premises are being sourced in areas which are prone to emergency risks and near to where raw materials required for serving the community such as water and carbon dioxide are readily available (Great Britain: D.C.L.G., 2009). This will cut on transport costs for moving to areas hit by emergency. Operational boundary and authorized limits setting The calculation of authorized limit should be able to provide headroom above and below the operational boundary for the company to experience unusual movement of cash. Thus, the authorized limit provide for the 5% variation required by the company to attain its objective. This proposal aims to reduce the cost by 5% of the total cost (GMFRA., 2010). The figure obtained will be rounded off to the nearest £0.5 million of the operational boundary to provide the headroom. After obtaining the headroom, the treasury management policy is determined by the authority. This policy governs how finances ought to be borrowed and invested in the firm. This is usually done prior to commencement of each new financial year (Great Britain: D.C.L.G., 2009). The setting of operational boundary limit and authorized limit takes into consideration the following indicators: Interest limits exposure. The authority is involved in the setting of the upper and lower limits of its exposure to changes and effect of interest for the variable loan rates and fixed rates of interest. Borrowing structure maturity (Horne & Wachowicz, 2008). Under this, the authority sets the upper and the lower limits its exposure to changes and effect of interest for the variable loan rates and fixed rates of interest of the following year with reference to the maturity of the company’s rate of borrowing. Any borrowing that is made by a firm ought to mature within ten years and should not be less than 50%. The 50% new borrowing of a firm must have a maturity period of between two to ten years and borrowing must always have a maturity period that exceeds two years (GMFRA., 2010). Thus maturity profile for new borrowing is dependent on market conditions or factors in existence. The following table provides maturity structure of projected borrowing. Period Upper limit % Lower limit % Under 12 months 0 0 Between 12 and 24 months 0 0 Between 24 months and 5 years 50 0 Between 5 years and 10 years 50 0 10 years and above 100 50 The code of treasury management. The code for managing all the services related to treasury in public services is usually determined by the authority management. The total sum of principle invested for more than one year. It is envisaged that a firm will not make any investment lasting more than one year (GMFRA., 2010). Thus any investment lasting for more than one year calls upon the authority to set a limit in order for its investment to be safe. The Great Manchester FRS characteristics Owing to the fact that Great Manchester FRS serves both rural and urban population, the system employed is a mixed system (Great Britain: D.C.L.G., 2009). In order to effectively and efficiently analyze community risks and its management the firm is characterized by improved employee training, increased safety resources, juvenile post of fire setters, a post for trainers or the educationist and more trainers for the community. Six risk areas and their relevance to Great Manchester FRS All firms are prone to risks which call for risk management. Risk management enables a firm to deal with risks that are both predictable and unpredictable (Great Britain: D.C.L.G., 2009). FRS encounters or is prone to various risks during provision of its services (Grundy, Johnson, & Scholes, 1998). Some of these risks cannot be predicted and thus the FRS needs to be prepared all the time to deal with such unpredictable risks that may arise during their operation (Horne & Wachowicz, 2008). For effective management of risks firms are involved in enumeration of possible risks expected during operation process. One of the risk areas is strategic risk. This occurs as a result of industrial malfunctioning, transportation or accidents during building construction or road constructions. Another risk area concerns the community (Great Britain: D.C.L.G., 2009). This entails how people live, their housing, their health services and resources that they lack. Another risk area is the environment. This concerns events like flood, which may lead to drowning of people and their properties (FRS., 2006). Natural calamities constitute another risk area. This entails things like landslides and earthquakes in addition to changes in sea levels and glaciations that may result from climatic changes (GMFRA., 2010). Another group of risks is operational risk that may result from industrial faults such as fire outbreaks in a firm or accidental death of an employee at workplace. The final risk area is emergency risks such as disease outbreaks. Of relevance to Greater Manchester FRS are strategic risks, environmental risks such as floods, the community risks and operational risk. Many of previous emergencies have arisen from accidents from building and road constructions in addition to fire outbreaks. In addition, the region has been hit on several occasions by floods (Grundy, Johnson, & Scholes, 1998). Thus it is expected that such risks may recur. In addition accidents at workplace have been common in the region and presents risk to people working within greater Manchester. Thus the firm needs to distribute resources effectively to address and respond to these emergencies in case they arise. However, some resources need to be kept aside to be utilized in unpredictable occurrence of risks in the environment or occurrence of natural disaster such as earthquakes (N.A.O., 2008). Through thorough analysis of these risks, the firm will be able to obtain financial aid to help it prevent or counter the occurrence or effects of accidents arising from these risk areas (FRS., 2006). This will also enable the firm to focus on how to protect the community from these risks. The analysis is also important in the allocation and distribution of resources to different risk areas (GMFRA., 2010). In addition, this is essential in engaging the relevant government authorities in addressing the risk areas prior to occurrence of such incidents such as overcrowded residential areas, which may increase fire and disease outbreaks and road accidents (Grundy, Johnson, & Scholes, 1998). This is also instrumental in ensuring that government department involved in regulations concerning construction of buildings compels developers to adhere to laid down codes of construction. Through risk analysis the firm is also able to partner with meteorological department in order to be prepared for any climatic changes that may compromise the safety of the community. For GMFRS = £11.698M = Operational Boundary For GMFRS Authorized limit = £12.5M So proportion of authorized limit used = operational boundary/authorized limit = 11.698/12.5 = 0.935 Therefore the safety margin = 100% - 93.5% = 6.5% The recommended safety margin is 5% Therefore, GMFRS operates within recommended safety margins If number at 6.5% is less than 5 – FRS is not operating in recommended limits. How Greater Manchester FRS has accommodated the risk areas Risk management enables firms to define and plan for the way risks in a system will be accommodated (Sargent, 2006). Greater Manchester has taken responsibility of managing risk areas adequately. To accommodate the risk areas Greater Manchester FRS has properly weighed and measured financial risks and their implications to aid in decision making process (GMFRA., 2010). In order to attend to unexpected risks, the firm maintains enough balances of revenue to ensure long term stability and planning in addition to smooth running of the firm. The firm is aiming at increasing its returns in relation to its costs of operations (Great Britain: D.C.L.G., 2009). The firm uses probability values to accommodate all the risk areas. To obtain these values the firm uses the following formulae: ∑ (each possibility × the associated possibility) From previous emergencies, the firm is aware of the rate at which some risks such as fire and other accidents occur within the region. Thus, the firm is concerned with prevention of these accidents in addition to addressing their effects in case they occur (Great Britain: D.C.L.G., 2009). The firm is also aware that increased fire outbreaks are being caused by increased migration to congested residential areas (Grundy, Johnson, & Scholes, 1998). Thus greater Manchester FRS is working with housing sector stakeholders to help in curbing fire outbreak accidents. The increasing use of timber as a building material is presenting new challenges to the firm since it increases the risks of fire outbre4aks and thus the FRS is working with both planners and developers to minimize risks from such buildings. Greater Manchester region is prone to floods resulting from great storms and increase in sea levels. This often leads to destruction of property, disease outbreaks, and even loss of life and property (Grundy, Johnson, & Scholes, 1998). The greater Manchester FRS is working with environmental agencies in the region to reduce impacts of floods to the community (FRS., 2006). To help in rescue activities the firm has equipments which are used during such emergencies and employees are well trained to use them. Even though the firm is involved actively in responding to floods, it has no specific duties during such times (N.A.O., 2008). This has been a challenge to the firm and thus it has embarked on analysis of the risks that are expected during flooding to enable it deal with it effectively and efficiently since public demand for its services is great during flooding season (GMFRA., 2010). The firm is also analyzing environmental trends in order to understand the techniques to be employed during emergencies resulting from such. This is expected to help the firm reduce the resources needed in such emergencies. The firm is also looking for ways of being eco friendly through reduction of use of carbon in fighting fires (N.A.O., 2008). Due to economic down turn, many residents in greater Manchester have compromised fire safety measures in place. This presents a challenge to the firm since they have to depend on its resources and fire incidents are bound to increase (N.A.O., 2008). Greater Manchester FRS is involved in formulation of laws, policies, and legislations aimed at risk management. By adhering to these laws, residents in the region are able to drastically reduce incidents of fire outbreaks and other accidents. Some of these laws and regulations are concerned with protection of the environment, which go a long way in alleviating some risk. Safety is also addressed in these regulations to allow prioritization of human and property safety (N.A.O., 2008). The legislations also encourage personal responsibility among residents served by the Greater Manchester FRS. This ensures that each person has the responsibility of taking care of his or her own safety by ensuring that they avoid sites associated with great exposure to risks and that they avoid exposing others to any risks as they carry out their own activities. Reference FRS. 2006. The Fire and Rescue Service: Session 2005-06. London: The Stationery Office. GMFRA. 2010. Summary Corporate Plan 2011-2014. Accessed from http://www.manchesterfire.gov.uk/media/78753/summary%20corporate%20plan%2023-11-10.pdf GMFRS. 2010. Financial Strategy 2010/11. Accessed from http://www.manchesterfire.gov.uk/media/44046/financial_strategy_2010-11.pdf Great Britain: D.C.L.G. 2009. Occupational health, safety and welfare: guidance for fire and rescue services, generic risk assessments, introduction. London: The Stationery Office. Great Britain: N.A.O. 2010. Reducing the costs for procuring fire and rescue service vehicles and specialist equipment: Department for Communities and Local Government. London: The Stationery Office. Grundy, T., Johnson, G., & Scholes, K. 1998. Exploring strategic financial management: Upper Saddle River: Prentice Hall Europe. Horne, J.C. & Wachowicz, J.M. 2008. Fundamentals of financial management. Upper Saddle River: Financial Times/Prentice Hal. N.A.O. 2008. New Dimension: Enhancing the Fire and Rescue Services Capacity to Respond to Terrorist and Other Large-scale Incidents. London: The Stationery Office. Sargent, C. 2006. From Buddy to Boss: Effective Fire Service Leadership. London: Fire Engineering Books. Read More