Value for money

ACCA P5 Advance Performance Management


Assessing the use of fund:

Many Not for Profit organisations, particularly public sector organisations, do not generate revenue but simply have a fixed budget for spending within which they have to keep. The funding in public sector organisations tends to come directly from the government. This forces them to hit government targets with limited funds. However, sometimes failure to meet the target may lead to higher level of funding.

Approach to VFM (Synopsis from the article A brief guide to Value For Money)

In achieving, and seeking to achieve, VFM, there are many objectives for organisational behaviour and activity to be taken into account. These include:

• the culture of the organisation, for example, continually striving to do more at the appropriate quality for less money
• adopting good practice
• clearly defining the organisation's aims, strategies and policies
• providing an organisational structure which promotes accountability, through placing power at the point where responsibility is required to be taken, together with appropriate control and oversight exercised at a higher level
• being committed to effective communication and staff development so that the culture and aims of the organisation permeate to, and are identifiable at, all levels within the organisational structure
• providing an appropriate infrastructure in systems, resources and training.

An assessment of VFM can be achieved in a number of ways, for example:

• through benchmarking an activity against similar activities in other organisations
• by using performance indicators
• through conducting VFM studies (possibly in conjunction with other institutions)
• by seeking out and then adopting recognised good practice where this can be adapted to the institution's circumstances
• through internal audit work. Although internal audit has a primary responsibility for assessing the internal control system, the auditor is frequently well placed to assess and comment on VFM in the areas reviewed. This should be reported in individual audit reports and in the internal audit annual report
• through retaining both documents that show how an activity has been planned to build in VFM, and evidence of the good practices adopted
• by examining the results or outcomes of an activity.

A brief guide to Value for Money