1. BUDGET
• A budget is a tool for planning, quantifying the plans and controlling costs.
—Finkler, 1984
• A budget is a plan that uses numerical data to predict the activities of an
organization over a period of time and it provides a mechanism for planning
each unit’s needs and contributions. —Carruth, Carruth and Noto, 2000
2. Principles of Budget
• Budget should provide sound financial management by focusing on
requirement of organization
• It should focus on objectives and policies of organization
• It should ensure the most effective use of scarce financial and non
financial resources
• Budget requires that programme activities planned in advance
• Budgeting should include coordinating efforts of various departments
establishing a frame of reference for managerial decisions, and
providing a criterion for evaluating managerial performance
• Setting budget target requires utmost care to check against and
balance between too high or too low estimates.
3. Features of Budget
• The budget should be flexible
• It should be synthesis of past, present and future
• Budget should be the product of joint venture or participation of executive at
different levels
• It should be clearly defined
• It should be in the form of statistical standard laid down in specific numerical
terms
• The budget should represent expected revenue as compared with anticipated
expenses
• It should be based on specific concepts of financial management
• The budget should facilitate goal achievement.
4. Typology of Budget
There are various types of budgets, each of these are classified
differently by the fiscal mangers based on different criteria/basis.
Various types of budgets:
1. Based on fiscal/non fiscal budget:
Financial budget
• Capital budget
• Revenue budget
•Operational expenditure budget
• Zero based budget
• Performance budget
• Program budget
5. Non financial budget
• Direct labour budget
• Material budget
• Production budget
• Advertising budget
2. Fixed Vs variable/flexible budget, open ended budget
3. Historical Vs Forecast/statistical budget, Trended budget
6. 4. On the basis of period of their coverage
• Annual budget
• Long term budget
• Current budget
• Rolling budget
5. On the basis of financial position
• Balance budget
• Deficit budget
• Surplus budget
7. BUDGETING
Definitions
• Budgeting can be defined as allocation of scarce resources on the basis of
forecast needs, for proposed activities over a period of time.
• Budgeting is the formulation of plans for a given future period in numerical
terms. —Koontz
8. Principles of Budgeting
According to Rene Stourum, university, comprehensiveness and accuracy should be
the principles of budgeting.
According to Howard, SK, the principles of budgeting are:
• Annularity
• Comprehensiveness
• Unity: It should contain both long term and short term expense items (annual
operating funds)
• Exclusiveness: The budget is concerned with money, not with issues
• Specificity: It should be allocated to identifiable objects
• Accountability: Money should be spent as indicated in the budget plan.
9. Purposes of Budgeting
Main Purpose
•To ensure the most effective use of scarce financial and non financial
resources
Specific Purposes
• It provides detailed plan to reduce uncertainty
• It controls expenses by efficient and economical manner
• It provides the mechanism for measurement of work effort on a timely
basis
• Ensures the accountability by someone for variances from budget
• Enhances the budget planning
10. • Coordinates effort among organizational departments
• Establishes a frame of reference for management decisions
• Provides a criterion for evaluating managerial performance
• Allows for feedback, concerning the events to which actual spending
confirm the budgetary sending
• Offers a useful format for communication
• Provides best care that science can make possible on as economical a
basis as possible
• It aids in planning and controlling
• It guides for action and future needs
• It serves as an instrument for economic and social policies
• It conserves the resources by regulation.
11. BUDGETARY PROCESS
• Budgeting process is a systematic activity that develops a plan for the
expenditure of a usually fixed resource, such as money or time, during a
given period to achieve a desired result. Budgetary process is a
sequential activity where various steps are followed.
• The budget process consists of activities that encompass the
development, implementation, and evaluation of a plan for the provision
of services and capital assets.
12. Steps in Budgetary Process
The following steps are followed in budgetary process:
• Budget estimate preparation
• Budget approval
• Budget allocation and appropriation
• Budget monitoring Budget Estimate Preparation
13. Budget Estimate Preparation
Usually the finances and budget preparation is dealt by account
section of the Institute/hospital. The record of revenue/income and
expenditure is usually centralized. They keep the record of cash
deposited or the money sanctioned from the Ministry; even to the head
of Department is usually under the head of Institution. Each department
is also keeping a record of money received/sanctioned and expense.
14. Budget Approval
Extra mural approval system
The approving authority is the same for all government funded hospitals
i.e. through joint Secretary, Health Secretary, and Health Minister. It is
then presented in the Parliament and final approval is signed by Prime
Minister who is the chairman of Planning Commission
15. Intra mural approval system
The intra mural approval system, i.e. within the organization approval
system, it has to go in two steps: firstly by the head of hospital and then
by the head of Institute.
16. Budget Allocation and Appropriation
After the final approval the budget is voted on account of maintenance
and then allocated to organizations. The finance is sanctioned in
installment based on hospital funding, management policy,
performance, actual expenditure of last year and future plans.
17. Budget Monitoring
Budget monitoring is usually made by the budget reports. There is
budget monitoring committee comprising of representatives of each
department, financial advisor to review budget prepared in terms of
forecasting, expense, cash position and deviation from budget.
