- Report this article
David Broohm, CA, MBA 
David Broohm, CA, MBA
Chartered Accountant | Corporate Governance Enthusiast | Public Sector Accounting | Audit | Taxation |
Published Sep 7, 2022
+ Follow
Value just like beauty is dependent on what one sees. What may be of value to X may not necessarily be of value to Y. Measuring value is therefore relative.
In the Public Sector, the subject of value is one of the most challenged areas between people in government and the ordinary citizens.
So what then is Value for Money?
The concept of Value of Money is an everyday phenomenon. Basically, it could be defined as ‘not paying more for a good or service than it’s quantity and quality.’
In Public Sector finance, Value for money is concerned with obtaining the best possible combination of services from the least resources. It is thus, the pursuit of economy, efficiency and effectiveness.
In our attempt to define Value for money, we shall confine it to these 4Es;
Economy, Efficiency, Effectiveness and Equity
Recommended by LinkedIn
·Economy
Simply put, Economy here seeks to answer the question ‘Are we buying inputs of the appropriate quality at the right price?
Economy is the term and condition under which an organization acquires human and material resources of the appropriate quality and standard at the lowest cost. From this, procurement will be a purchasing activity whose purpose is to give the purchaser best value for money and that for complex purchases, value may imply more than just price since quality issues also need to be addressed. 1
·Efficiency
Efficiency seeks to answer the question ‘How well are we converting inputs into outputs? (‘Spending well’). Efficiency forces you to think in terms of inputs and outputs.
Efficiency is the relationship between goods and services produced and resources used to produce them. An efficient operation produces the maximum output for any given set of resource inputs; or, it has a minimum input for any given quantity and quality of services provided. In addition, efficiency implies practicality, especially in terms of compatibility with the government's administrative resources and professionalism. 2
·Effectiveness
Effectiveness answers the question ‘How well are the outputs produced by an intervention having the intended effect? (‘Spending wisely’). This refers to whether the outputs will translate into the project’s outcomes and at what cost.
Effectiveness measures the impact of your investment against the expectations you had outlined. This normally involves setting targets giving KPIs to allow you measure what has been achieved. Data to support these KPIs will need to be extracted and analysed on an ongoing basis.
·Equity
Equity answers the question ‘How fairly are the benefits distributed? To what extent will we reach marginalised groups? (“spending fairly”). Equity is the degree to which everyone benefits fairly from an investment, whether the project is addressing social or economic disparity. It is a cross-cutting principle to consider throughout a VFM analysis.
Conclusion
It is said that ‘What gets measured, gets done’. In other words, whatever does not get measured, does not get done. If you don’t know what value is, you may not know when/if you achieve it. To ensure Value for money, you should minimize expectation gaps through active stakeholder engagement. It is imperative to know that, ‘value is in the eye of the beholder’.3
References
1. department IS. VfM Guidance : The 4 E Equity External Version September This is a companion note to the 2019 VfM Smart Guide for External Partners . VfM Guidance : The 4 E Equity External Version Executive summary What is equity ? September. 2019;(July 2017):1-13.
2. Christopher Pappas. The Four E’s: How To Find A Value For Money LMS Based On Effectiveness, Efficiency, Economy, And Equity. https://elearningindustry.com/find-value-for-money-lms-based-on-effectiveness-efficiency-economy-equity
3. Mwangi Karanja. Value for Money (VfM) in the public sector. https://www.pwc.com/rw/en/publications/value-for-money.html
Help improve contributions
Mark contributions as unhelpful if you find them irrelevant or not valuable to the article. This feedback is private to you and won’t be shared publicly.
Contribution hidden for you
This feedback is never shared publicly, we’ll use it to show better contributions to everyone.
Like
Celebrate
Support
Love
Insightful
Funny
1
To view or add a comment, sign in
More articles by this author
No more previous content
- THE VISCIOUS CYCLE OF CORPORATE SCANDALS… WHAT DOES THE ENRON-GATE HAS TO TEACH US Dec 20, 2022
- MONEY LAUNDERING Oct 8, 2022
- ELEMENTS OF TAX PLANNING Sep 30, 2022
- PUBLIC DEBT AS AN ALTERNATIVE TO TAXATION. Sep 2, 2022
- TAX EVASION Aug 31, 2022
No more next content
Sign in
Stay updated on your professional world
Sign in
By clicking Continue to join or sign in, you agree to LinkedIn’s User Agreement, Privacy Policy, and Cookie Policy.
New to LinkedIn? Join now
Insights from the community
- Economics How do you implement economic solutions for institutions?
- Economics What is the best way to measure economic efficiency in financial analysis?
- Critical Thinking What steps can you take to identify assumptions in an argument?
- Economics How can you use economic impact analysis to attract investors?
- Corporate Finance What is the best way to determine the discount rate in a cost-benefit analysis?
- Economics What do you do if economic policies are failing due to poor decision making?
- Economics What do you do if you're faced with complex economic problems that require critical thinking skills?
- Economics Here's how you can assess the economic consequences of policy decisions.
- Economics What are the best ways to make your economic policy advice relevant?
- Commercial Real Estate What is the best way to evaluate a new development's impact on the local economy?
Others also viewed
- How did financial services help in economic development? Signs Media 2y
- The Economic Factors Role Within the Business Environment Mustafa Fakhouri 7y
- Why 'Cheap' is a false economy Sue Barrett 9y
- SMEs to lead the economic recovery in 2023 and beyond Gareth S. 1y
- Why should companies invest in the UK? UK in Thailand 1y
- UK SMEs 'exploring new sources of finance', research finds Christa Cameron 5y
- How could the UK Economic landscape affect your business? Robert Hulse 8y
- Is Privatization the Solution for Pakistan’s Unstable Economy? Tanzeel Raza 8y
- Inflation and investing: Funding for equipment, vehicles and machinery. Simon Knowler 10mo
- SME's funding for growth and the EU debate Roy Butcher, FCCA, MAAT 7y
Explore topics
- Sales
- Marketing
- Business Administration
- HR Management
- Content Management
- Engineering
- Soft Skills
- See All
