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ACCA Strategic Professional · Strategic Business Leader · Public sector governance

A government department adopts a framework requiring it to show economy, efficiency and effectiveness in using public funds. It buys equivalent equipment at 10% lower cost (input price), but the equipment fails to improve the service outcomes the policy intended. Which statement is most accurate?

The department has achieved economy but not effectiveness. Buying at a lower input price shows economy, but because the equipment did not deliver the intended service outcomes, effectiveness is missing, so value for money has not been fully demonstrated.

  1. AIt has achieved economy but not effectiveness, so value for money is not fully demonstratedCorrect
  2. BIt has achieved effectiveness but not economy
  3. CIt has achieved all three elements because costs fell
  4. DIt has achieved efficiency only because outputs doubled

Explanation

Economy concerns the cost of inputs, which fell. Effectiveness concerns whether intended outcomes are achieved, which did not happen. Value for money requires all three, so it is not fully shown.

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