The paper "Financial Statement for Humberside Fire and Rescue Authority" is a perfect example of a finance and accounting case study. Operational boundaries are established by summing up the cash flows of the financial period and the previous financial balances from the previous accounting year. The operational boundary provides an estimate of the funds available to facilitate the operations of the fire and rescue services (The Operational Boundary, p21). In the absence of the operational boundary, the authority may spend more than the budgetary allocations that will eventually force them into debt.
On the other hand, the authorised limits are set at 5 per cent of the operational boundary to cater for the income and expenditure fluctuations within the financial year (The Operational Boundary, p21). It should, however, be noted that only fixed-rate debt financing ensures certain future cash flows and hence stability in the FRS’ s operations 2.2 Main Considerations of HFRS HFRS has four major considerations that aim to ensure sound financial management practices. The first consideration involves capital spending that seeks to strike a balance between the funds acquired from the central government channelled towards undertaking capital projects.
Capital financing requirements are re-evaluated annually to evaluate the necessity of capital projects (Frank 2006, p47). Since the capital projects are set to be completed in the future, the determination of the NPV is important to ensure sufficient budgetary allocations. The HFRS has considered this requirement by determining the estimated capital expenditures and financing requirements. Similarly, the GMFRS considers the financial resources utilised in the implementation of capital programmes that span more than a year. Secondly, the impact of capital decisions should be analysed to ensure that other urgent activities are undertaken as well as to ensure the availability of funds for daily operations (Khan & Hildreth 2004, p92).
Apparently, the HFRS has not accommodated this impact analysis as the capital projects are determined by the local authority and provide funding to the FRS towards the implementation of this project. Additionally, investments made by the HFRS have a limited timeframe of 364 days that also complements the annual re-evaluation of capital projects. Comparatively, the GMFRS engages in short-term investments and makes bank deposits for a period of not more than one year. Lastly, the HFRS considers treasury management that seeks to ensure that funds are set aside to cater for emergencies.
Treasury management involves the determination of the operational boundary as well as the authorised, fixed-rate exposure and variable rate exposure limits (The Operational Boundary, p23). However, the HFRS does not accommodate the variable rate exposure limits as it only borrows at fixed interest rates. On the other hand, the GMFRS embarks on treasury management that seeks to basically address the credit and liquidity risks. This enables the FRS to monitor the movements of funds in the reserve accounts as well as movements in capital funds and assessing the financial borrowings.
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HFRS 2005, An Intro to HFRS, Accessed from < http://www.humbersidefire.gov.uk/aboutus/intro.asp > on Jan 4, 2010
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Khan, A & Hildreth, WB 2004, Fin. Mgmt Theory in the Public Sector, Carolina: Greenwood Pub. Grp
Oneplace 2009, GMFRS Organizational Assessment 2009, Accessed on Jan 4, 2010 from < http://oneplace.direct.gov.uk/infobyarea/region/area/localorganisations/organisation/ pages/default.aspx?region=53&area=423&orgId=1025 >