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ACCA Strategic Professional · Strategic Business Leader · Public sector governance

A government department is deciding whether to build a new facility. A manager argues that because the department has no profit motive, its success should be judged only by whether it stayed within budget. Which criticism is most valid under public sector value-for-money thinking?

Judging success only by staying within budget is flawed because value for money also requires economy, efficiency and effectiveness. A department must show that intended outcomes were achieved at reasonable cost, not merely that spending stayed under the limit.

  1. AStaying within budget ignores effectiveness and economy, so success should also be judged on whether outcomes were achieved at reasonable costCorrect
  2. BValue for money applies only to private companies with shareholders
  3. CBudget compliance is irrelevant for public bodies funded by taxation
  4. DSuccess should be judged only by the number of staff employed

Explanation

Value for money combines economy, efficiency and effectiveness. Meeting budget shows spending control but not whether objectives were achieved or resources used well. Budget compliance still matters, so the claim that it is irrelevant is wrong.

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