Essays on Financial_Management Assignment

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Implications of amalgamating fire departments in EastshireIntroductionOwing to declining revenues and increasing demand for efficiency from the community, fire departments in counties, villages, towns and cities are looking for new ways of improving the quality of services delivered while cutting down the huge costs involved. The Eastshire fire rescue service as well as fire departments in the adjacent towns are no exception and have been in talks likely to lead to amalgamation of these departments. It is expected that through amalgamation, the departments will increase their effectiveness and efficiency as this will lead to better use of resources while providing greater capability and flexibility (Robert, 2005).

It is also expected that through amalgamation, the departments will save a lot of costs due to increased efficiency and reducing duplication of effort by reorganization. The three departments have factored the following in their decision to amalgamate; The three departments are adjacent to each other and each has complete duplicated set of resources. There is increasing demand at all government levels for essential services funding leading to reduced funding and hence the need to reduce cost. The other two departments unlike Eastshire have had difficulties in recruiting and retaining staff. There has been increasing levels of disasters while the revenues have been reducing hence the need to increase efficiency while reducing costs. Although the above reasons for amalgamation are varied, amalgamation can prove to be a risky process as it may not always lead to the intended results.

As such, the fire departments need to be very careful in implementing the proposed amalgamation to ensure it meets the intended objectives. As such, this paper looks at the potential benefits of amalgamating the fire departments as well as the risks that might be involved.

It is hoped that the paper will be of great help in making informed decision on whether or not to amalgamate. Benefits of amalgamationThere are many benefits that could be derived from amalgamating the fire departments. First, there will be improved service delivery due to financial economies of scale and avoiding duplication of services. Amalgamation will also lead to increased coordination through avoiding fragmentation as well as financial stability. The benefits are explained as follows; Economies of scale/cost reductionEconomies of scale in this case refer to the benefits that come with large scale operations in terms of cost savings.

This relates to costs associated with the day to day operating expenses which may be fixed such as rent or variable such as staff allowances which increase with the number of emergency calls. By amalgamating the three fire departments, this will result in one large department with increased/expanded operations. The increase in size will enable the department enjoy financial economies of scale/ cost savings that result from enlarged operations.

This cost savings will result from resulting greater purchasing power which will always lead to discounts due to purchasing in large quantities. The discounts will lead to lowered costs of apparatus. In fact, the greatest aspect of cost saving is expected to result from bulk purchasing with data from related amalgamations in the united states indicating this direct cost savings could amount to up to fifteen million pounds every year. Some cost savings will also result from scrapping of some departments which is likely to increase profitability and hence financial stability.

Some posts will also have to be scrapped (Robert, 2005). For instance, the three departments will only operate under one CEO as opposed to the current scenario where each department has its own CEO. This implies that amalgamation will also result in the number of staff being reduced implying reduced expenses on salaries. Another costs saving benefit will result from sharing of facilities. For instance, the three departments could decide to close all rented premises and only operate on the premises they own thereby eliminating rent expenses something that is not possible currently.

Through amalgamation, all the equipment owned by the three departments will now be owned and controlled by the resulting department. This means the cost of replacing equipments will reduce owing to reduced duplication of effort which is likely to result in great saving thousands of pounds. In fact, the amount of savings expected to result from such efforts to increase efficiency is expected to be up to 25 million pounds every year based on similar amalgamation efforts in the USA. This implies that the fire departments could realize total cost savings of up to 40 million pounds per year (Barrack, 2006).

If we are to assume that costs related to the amalgamation process such as research and employee retrenchment among others will amount to 70 million pounds, the managements of the three fire departments should find the amalgamation idea worthy since it will also give them a chance to offer superior quality services and greatly reduce their costs of operations. In other words, this will result in increased profitability and hence financial stability for the new department.

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