The Financial Health of Shropshire Fire and Rescue Service - Case Study Example

Financial Management of a Fire Department: A Critical Analysis of the Financial Health of Shropshire Fire and Rescue Service This paper is prepared and submitted by [Client’s Name] Submitted to [Professor’s Name] [Subject] (1) In any type of organization, defining the operational boundary and authorized limits are important. Organizations can only function if all the resources needed to operate can be readily made available. In most cases, the availability of these resources depend highly on the availability of funds to purchase or pay for these resources. Operations are typically outlined for over a specific period, with the length of the period determining the amount of funds required to perform the organization’s intended functions. On the other hand, authorized limits provides the ceiling expense an organization can spend in the given period which can be defined by its source of funds or by its periodic performance (Siegel & Shim, 2000). In the case of Shropshire Fire and Rescue Service, the operational boundary and authorized limits are set from the number of activity it needs to perform in a given period. From an objective point of view, the operational boundaries and authorized limits are somehow low given the scope of its functions and operations and the economic considerations in operating the organization. The operational boundary of the Shropshire Fire and Rescue Service (SFRS) is defined by the six main activities it is engaged into namely administration, fire safety, health safety, human resources, operations, and technical and training. As a unit, the SFRS manage administrative details of its function using an internal body that sees the day-to-day operation of the organization. Fire and health safety refer to the equipments, manpower, and the required materials relating to any major operations that require fire and health safety measures. This cost driver is very similar to operations but on a more specific level. Human resource refers to the expenses SFRS requires to hire, pay, and manage individuals working for the organizations. Technical and training are the expenses incurred in modernizing the approach towards fire and risk management of the fire fighters in the form of technical seminars and skills development. These cost drivers identified are the minimum number of cost drivers required for SFRS to operate. Any financial planning and budget allocation for SFRS must consider these major cost-driving activities of the organization. This is because these identified factors in the operations of the SFRS are very important in one way or another. Allotting meagre funds on any of these areas may result to serious consequences, particularly since the main goal of the operations of SFRS is to save lives and properties. That is to say that if any of these considerations are not met, or if they are met but the budget allotted to these activities lack to some degree, then there is the possibility that SFRS would be rendered useless and unable to perform its intended function. With six sub-departments to sustain, SFRS needs to be able to handle its funds appropriately in order for it the organization to perform all the functions expected of it. (2) The safety margin defined for the operational boundary for SFRS is 5% or a deviation of ±5% from the 100% budget. To check whether the operational boundary for 2009-2010 is within the safety margin of the authorized limit, the figure for the operational boundary is divided by the authorized limit to get the available percentage. That is, £16.419,000 / £17,500,00 to yield 93.82% or a safety yield of 6.18%. This means that the SFRS is operating within the recommended safety margin. (3) Fire services organizations no longer confined the scope of their function and operations on fire emergencies. The context with which these organizations operate have broadened considerably to include natural and man-made disasters not necessarily relating to fire emergencies (like acts of terrorism, building collapse, etc). These additional scopes of responsibilities also increases the utilization of funds for fire services departments, hence increases the need for FRS to take full control of these expenses. In this regard, it is necessary to understand the financial risks associated in running a Shropshire Fire and Rescue Service and assess whether the operational boundary allocated appropriate financial provisions on these risks. In managing risks in organizations, it is necessary that organizations must be able to identify risk factors and create appropriate plans to counter the effects of the risk, or handle the risks even before its adverse effects show (Hankin et al, 1998). Shropshire Fire and Rescue Service face the challenge of preparing risk management plans involving management of community hazards, enhanced safety measures for firefighters, and tools for continuous evaluation of emergency response systems among others. The ability of the SFRS to allocate resources and deploy personnel based on the level of service commitment and the existing risks will be the major measuring stick of the organization’s success in management. Six of the risk factors for fire services organizations like SFRS that has strong influence on the organization’s financial activities include (a) safety committees, (b) accident investigations, (c) ground units, (d) communication, (e) emergency medical services, and (f) specialized rescue and response to community needs. Financial Statements from various FRS have made clear indications on the inclusions of some of these activities in their cash flow and funds allocations. These areas are considered financial high-risks for three major reasons. First, lack of funds allocations on these areas could have a strongly negative impact on the operations of the organizations. As a service organization that caters the special and emergency needs of the community, SFRS do not generate their own money and depends highly on the government funding and the funds derived from private and institutional donors. Because the organization does not generate their own funds, their operations are constrained by the funds made available to them. In other words, the scope and complexity of the operations of SFRS is up until all the available funds are exhausted. Second, any miscalculations on the distribution of funds often reflect as endangered lives or damaged properties. If SFRS would run an emergency ground unit with not enough funds, it is highly likely that the whole operations will be jeopardized by the inability of the ground unit to perform its duties. This asserts the importance of miscalculations on funds allocation in any of these six areas as a major risk factors. Lastly, these areas are considered as risk factors because they are the central operating activities of the organization. This means that if the organization fails to perform its functions, the organization can be subject to public scrutiny. Shropshire Fire and Rescue Service (SFRS) cater both urban and rural emergencies. Fire rescuers and other field units depend on the Brigade Orders, a set of policies and procedures that determines the scope of activities and coverage of responsibilities for SFRS units. Apparently, these risks identified have strong impacts on the movement of funds in the organization. The creation of safety committees entails appropriate funding. Although the operational boundary never specifically discussed about how the organization should appropriate its funds, the expense for the creation and maintenance of safety committees fall under the statutory MRP’s use of revenue. Similarly, formation and deployment of ground units assigned to investigate accident locations, the provisions of emergency support on any operations, and the creation of specialized rescue units to cater the immediate needs of the community translates to the expenses for appropriate gadgets, tools, and ground support equipments. More importantly, the need to communicate between and among individuals during operations as well as for interaction with the community require additional expenses of communication units like cellular phones, high speed internet connections, main servers, and the likes. Purchase of any of the fire fighting equipments, gears, and consumables should have been easy considering that the annual budget for SFRS is considerably large. However, this amount of funds becomes significantly smaller when one takes into account the various sub-departments of FSRS that operates independently from each other yet aiming for the same goal. SFRS could not, in any way, detach the administration and human resource from its sub-departments because this would stop the mobility of the organization as a whole. Eliminating the administration from the main sub-departments of the organization would mean a decentralized approach in emergency situations, rendering any efforts made by the ground units useless. Similarly, not allocating enough funds for the human resource departments may posit a threat in the number of fire-fighter the organization can employ because any reduction of the funds allocated for human resource would have impact on the salaries and benefits of all the people working for the organization. As can be seen on the file detailing the finances of Shropshire Fire Rescue Services, each of these categories has been filled up, explained and elaborated. This is an indication of a good strategic management on the part of SFRS. The movement of the funds and resource on these risk areas are proper documented, monitoring the use of these funds and controlling it becomes easier. In other words, the SRFS has employed a good financial management process as it was able to identify its major risk factors and placed strong monitor on the expenses and acquisitions made on these risk areas. By doing so, the organization ensured that it would not fail in any aspects of its operations. References Hankin, J. Siedner, A. & Zietlow, J. (1998). Financial Management for Nonprofit Organization. Wiley. Seigel, J. & Shim, J. (2000). Financial Management. Barron’s Educational Series. 1. Identify six categories of risk facing the FRS. For each category comment on whether the risk has a financial impact on the FRS and if so, whether it has been recognised in the financial statements. If your opinion it has not been recognised, explain why you believe there has not been recognition in the Summary. (Max 1000 words). Read More