BY: MOHAMMAD WAHID ABDULLAH KHAN
Summary: The adequacy and effectiveness of arrangements for securing value for money (VFM). These arrangements consist of controls that should be established by management to ensure that their objectives will be met, and are based on promoting the managerial control system. Value for Money is the term used to assess whether or not an organization has obtained the maximum benefit from the goods and services
In addition to the consideration of evidence provided by existing activities, the direction-finding Group may also commission separate VfM studies to assess whether the objectives of a particular programme, project or activity could be carried out in a more economic, efficient or effective manner. Priority will be given to areas of significant expenditure which cut across the responsibilities of organization.
What is Value for Money?
Put simply, value for money (VfM) is about obtaining the maximum benefit with the resources available. Decisions about VfM are a daily reality in all our lives. We are constantly choosing which items or services to buy, and judging the right balance for us between quality and cost. Public services are no different. VfM is about achieving the right local balance between economy, efficiency and effectiveness, spending less, spending well and spending wisely.
This means that VfM not only measures the cost of goods and services but also takes account of the mix of cost with quality, resource use, fitness for purpose and timeliness to judge whether or not, together, they constitute good value.
Component of the scope of internal audit involves evaluating it acquires and/ or provides for securing value for money (VFM), within the resources available to it. It not only measures the cost of goods and services, but also takes account of the mix of quality, cost, resource use, fitness for purpose, timeliness and convenience to judge whether or not, when taken together, they constitute good value.
The end product of the audit will be an assessment of the management of the audited body. Such audits should be tailored to the circumstances of the audited body. Auditors should plan their work to be able to identify problems and determine the scope for improvement; they should involve management in a continual search for efficiencies that may result in a level of savings. It is not internal audit’s responsibility to identify these savings, and this performance measures should not include the amount of money saved through implementing audit recommendations.
In observe to Value for Money Audit, it is not criteria of the audit to identify the policy virtually, but the auditor should find out the effects of policy and how policy decisions are arrived. Suffice it to say that the auditors may consider whether there are satisfactory arrangements for considering alternative policies. Value for money as an integral part of its corporate and academic strategy. While it has a specific responsibility to achieve VfM from its use of public funds, this principle extends to all sources of funding. Similarly, the responsibility for pursuing VfM lies with all staff, and not just those with financial duties. This point must be understood and may be restated in that we would expect our audit recommendations to place management in a position to identify areas where they may make savings Our duty is to get management to implement improvements in systems of control where required. It is possible to resource as part of our consultancy services VFM reviews that are designed to lead to savings for management. There are two views of VFM: VFM in its true sense is about the way management organizes and controls its resources to maximum effect.
In general, the following equation expresses cost effectiveness:
Cost effectiveness = effectiveness x efficiency x economy
Economy is what goes into providing a service, such as the cost per hour of care workers or the rent per square meter of accommodation. Also Resources required to perform the operation are acquired the most cost effectively
Efficiency is a measure of productivity; resources are employed to maximize the resulting level of output how much you get out in relation to what is put in. For example, the number of people visited per home care worker per week or the amount of refuse collected per refuse-lorry.
Effectiveness is a measure of the impact that has been achieved, which can be either quantitative or qualitative. Examples include how many people were prevented from needing residential care through using home care services (quantitative), and feedback from different sections of the community with arrangements for tenant participation (qualitative). Outcomes should be equitable across communities, so effectiveness measures should include aspects of equity, as well as quality. Sustainability is also an increasingly important aspect of effectiveness
The some criteria of value for money audit:
The slight view sees VFM as ad hoc initiatives that result in defined savings and/or a greater level of service/output. Auditors should pay particular attention to the critics of good practice in performance audits and may refer to studies produced from time to time through proportional performance.
The scope of a performance audit be capable of extensive but capacity include, for example
•Interviewing the principal stakeholders, such as political parties,
•Reviewed relevant, temporary staff or contractors engaged for the activities.;
•Examining the strategic plan, management structure, relevant policies, operational plans, and task assignments, and the implementation of these planned activities;
Value for money Implementation:
In order to confirm that satisfactory arrangements are in place to promote economy, efficiency and effectiveness’s across the organization and controls, the VfM direction-finding Group will consider the evidence provided by a wide range of existing activities which form part of the Organizes and controls management practices and which can provide a broad appreciation of The Organizational effectiveness.
Value for Money Annual Review of Effectiveness:
The board advised by the Audit Committee, must be satisfied that the organizations has fulfilled its obligation to achieve VfM from its use of public funds so that the appropriate statement can be made in the organizational Financial Statements each year. In order to meet this deadline,
Dissemination of Good Practice:
Faculties, Departments and Divisions may not always be aware of opportunities to achieve greater VfM or of the full extent of the potential benefits. The direction-finding Group will take the lead in promoting the sharing of good practice throughout the organization, where this has implications for VfM. To this end, the Central Secretariat will maintain a Value for Money site on the organization web site, which will include a copy of this Policy, copies of VfM strategy, copies of the annual reports and any other published VfM reports or guidance.
Conclusion: For efficiency reviews a systems-based approach to an efficiency review would consider the standards, plans, direction and type of information that management applies to controlling their operations. The key objectives of a financial management are to generate wealth for the business and its shareholders, to provide a return of investment and to generate cash flow. There are two main aspects of financial management, The investigative approach, on the other hand, concentrates on specific methods by which efficiency may be improved. This may be by applying best practice in terms of alternative operational practices,
About the Author
MOHAMMAD WAHID ABDULLAH KHAN
S/O MOHAMMAD SAADULLAH KHAN
Home page: http://wahidbd.page4.me
Mr. Mohammad Wahid Abdullah Khan is the Chief financial officer (CFO) of Orient Polymer Group (former Project director of “Max Textiles Ltd” from May 2010 to March 15, 2011 ). Prior to that he had completed over ten (10) years in various fields of Business like - Accounts, Finance, Internal & External Audit, project budgeting and project costing related positions in some of the largest group companies & the join venture companies in Bangladesh.
He consults about small- medium business owners and services professionals, business consulting service and project process. He is most experience in Financial Risk Assessment, Financial analysis, Financial Advising and Project Cost Analysis. He is a co- author of “The complete performance management”, Mr. Khan has written more than 200 articles & case studies which have published in different international journals. Such as Business, finance, personal finance, international finance, auditing, Risk assessment topic and performance & industrial related,
Mr. khan’s most popular articles is “WAK” Model - The way of best solution for an organization internal audit process,( 1st,2nd,& 3rd part) “WAK” Model”- for successful financial resource , “Wahid khan”- cost analysis, Wahid theory – the key of dynamic series for successful financial consulting, Wahid techniques – the Significance and dependability manner for Performance audit(1st,2nd,& 3rd part) Wahid’s Opinion - non-conformity among the performance audit and financial audit, Wahid’s view- The cogent task and the confront of financial/economic analysis in the modern business decision making , Wahid’s outlook - The Business Financial Analysis Should Be Included several required Documents with the analysis report or plan, WAHID’S JUDGMENT- difference strategic plan as opposed to an operational plan ,WAHID’S METHOD– the charismatic and fruitful guideline for financial investment decision making ,WAHID’S MEASURE - the influential and evaluated of similarity between profit & non- profit business planning & Wahid’s philosophy- The examined & careful consideration of strategic planning against business planning, Planning ,programming and budgeting system Models (PPBS Model)
He has consulted with more than 35 service & product companies, in recent years Mr. Khan has been spending most of his professional time for financial consulting, Mr. Wahid khan is the owner of “WAM Associates” and “WAK business solutions
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