BUDGET ESTIMATE SEMINAR in nursing Management

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SEMINAR ON
BUDGET ESTIMATE,REVISED ESTIMATE,
PERFORMSNCE BUDGET
SUBMITTED TO SUBMITTED BY
DR.K.MEENAKSHI M.Sc.(N) (ACU) R.SATHYA BAMA
LECTURER M.Sc. (N) YEAR
GCON GCON
CUDDALORE CUDDALORE

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BUDGET
INTRODUCTION:
The hospital management is the field relating to leadership, management
and administration of public health system. Hospitals and hospital networks
in all the primary, secondary, tertiary sectors.
A healthcare or hospital budget is an estimation of revenue and expenses
over a specified time frame.
Through the health care budgeting process, health systems come to an
understanding of how much funding must be planned in certain areas,
including operating cost and capital equipment.
During the budgeting process, leaders must account for key components of
planning in healthcare, volume growth assumptions of planning in
healthcare, feedback and inputs from key stakeholders and the ability to
adjust when input and circumstances change.

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• R K Shanmukham Chetty was known as the father of the Indian
Budget. New Delhi: The first Budget of Independent India was
presented by R K Shanmukham Chetty, a lawyer, economist as well as
an industrialist who was active in politics.
• K. Shanmukham Chetty presented the first ever budget of
Independent India on 26th November 1947. Before independence, it
was British economist James Wilson who presented the first budget
for India in 1860.

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BUDGET
• MEANING:
British kings coined the word “BUDGET” in early days from the word
“BOUGETTE” which means a leather bag or pouch that held the seal of the
medieval court Exchequer (Former Government Department in charge of
national revenue).
As early in 1215 AD, it had constitutional exposure, and in 1718 AD,
consolidated fund act was passed, which considered budget as a
comprehensive financial statement of government activities for facilitating
accountability of public fund. In 1882 AD, budget entered the parliament
for first time seeking advice.

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BUDGET
• DEFINITIONS:
Budget is a numerical expression of the entire management process for a
fixed period of time.
-Anonymous.
A budget is an estimation of future needs arranged according to orderly
basis, covering some or all activities of an enterprise for definite period of time.
-TN Chhabra

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IMPORTANCE OF BUDGET
• Budget is an essential management tools.
• Budget provides an estimation of the money required to carry out
organizational activities.
• Budget needs rigorous thinking for financial planning.
• Budget monitors, income and expenses.
• It provides a base for financial accountability.

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PURPOSES OF BUDGET
To provide definite targets for income and expenditure of the department.
To coordinate the activities of different functional heads in the working of these
departmental budget.
To enable a case flow statement prepared month by month.
To aid management in formulating future policy decisions to promote the growth
and welfare of the organization.
To provide useful tool for the control of costs.
To provide a tool for communication and coordination within the organization.
To improve financial planning and decision making.

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PRINCIPLES OF BUDGET
 The budget plan should be according to the requirement of an organization.
 It should focus on the objectives and policies of the organization.
 It ensures appropriate utilization of the scarce, financial and non financial
resources.
 It requires planning of program activities in advance.
 The managers need to delicate responsibilities in framing and executing budget at
a different level.
 It needs coordinating efforts to make managerial decisions and to develop a
criterion for evaluating managerial performance.

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PRINCIPLES OF BUDGET contd….
 While setting the budget target, take utmost care to check against and balance
estimates.
 Budget period and type of budget should be appropriate to the nature of service.
 Prepare and interpret budget consistently throughout the organization.
 Review performance of the previous year and evaluate its adequacy in terms of
quantity and quality.
Make the budget flexible.

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CHARACTERISTIC OF BUDGET
 It is a plan, framed based on experiences.
It is a comprehensive plan of action.
 Budget is a scheme for work.
It should estimate revenues and expenditure as accurately as possible.
 It generally involves an annual plan.
The budget should be flexible and defined clearly.
 It should be synthesis of past, present and future.
It should be in the form of statistical standard.
The budget should facilitate goal achievement.

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TYPES OF BUDGET
1.Based on fiscal / non fiscal budget:
• Financial budget:
 Capital Expenditure budget: The capital expenditure budget includes the
purchases of land, buildings, major equipment of considerable expenses and
lifelong.
 Operating budget: It provides for the cost of supplies, minor equipment
repairs, and overhead expenses.
 Zero based budget: It is one of the budgets that do not utilize any historical
data to determine the active level or cost anticipated. All the expenses are
justified based on expectation or desires for the upcoming year.

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1.Based on fiscal / no fiscal budget:
Financial budget cont.….
 Program budget: Computing cost for a total program refers to the
program budget.
 Performance budget: The budget based on functions such as direct
nursing care, supervision, in-service education, nursing audit, and
so on, is a performance budget.
 Revenue and expense budget: It is expressed in financial terms and
takes the nature of proforma income statement for the future. It shows
items of profit and loss under classified headings.

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1.Based on fiscal / no fiscal budget cont.….
• Non financial budget:
Direct labor house: Direct labor house budget includes the wages
and salaries of regular employees.
 Time space material under production budgets: These budgets are
expressed in quantities rather than in monetary terms, translated into
financial terms.

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2.Based on the period of coverage
Annual budget: Yearly budget is a financial plan that depicts income and
expenditure for a fiscal year of an organization.
 Long term budget: A long term budget is a financial plan, depicting income and
expenditure extended for more than 1 year in future. Usually it is for a period of 5
years with strategic planning.
 Current budget: A temporary or adjusted financial plan, depicting the amount of
money to spend in the current fiscal year that usually start from July 1 to June 30.
Rollover budget: It is on that forecast program, revenue and expenses for a
period higher than a year to accommodate applications that are larger than annual
budget cycle.

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3.Based on the financial position
Case budget: It is prepared by the way of projecting possible case receipts
and payments over the budget period.
Balanced deficit budget: A balanced deficit budget is a type of financial
plan when expenses exceed the income.
 Balanced budget: A balanced budget is financial plan having revenue and
expenditure equal are nearly equal are expenses that do not exceed income,
usually found in the government sector.
Surplus budget: It is financial plan depicting expected revenue exceeding the
estimated expenditure for a fiscal year.

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4.Other types of budget
Fixed budget: It refers to those components of budgets that will not vary
regardless of changes in patient census or number of procedures.
 Flexible budget: It is a variable budget and refers to those components of
the budget that will determine how the budget should fluctuate based on
those changes in the number of procedures or units of activity.
Open ended budget: It is a financial plan that present a single cost estimate
that considers the optimal activity level for each program without indicating
how the policy should be scaled down if less funding is available.

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4.Other types of budget
Historical budget: In the historical budget, the previous year’s expenses are
considered as a basis for costs for the next year. Most healthcare institutions use
historical data to develop a budget.
Forecast are strategical budget: Forecast budget is developed by establishing a
level of anticipated activity based on historical or other data such as loss or gain
reappears specific program.
Trended budget: Trended budgets is one that is developed based on the previous
years expenditures pattern. If a specific percentages of expenses occur in a particular
month, the budget will be developed using those trends to spread the costs.

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BUDGET ESTIMATE
• Budget estimate is the calculation of the amount of expenditure that is
expected in an organization in a year.
• This estimate is based on the previous year expenditures and
according to the new programs and projects of the organization.
• This is also influenced by the market rate fluctuations.
• This helps the top level manager in proper administration of the
organization without financial crisis.
• While preparing a budget estimate, forecasting of the coming events is
a must.
• The financial manager should be aware about what happened in the
organization what is happening in the organization, What will happen
in the organization.

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BUDGET ESTIMATE PREPARATION
GOVERNING
BODY
THE
ADMINISTRATOR
THE BUDGET
DIRECTOR
DEPARTMENT
HEADS

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BUDGET ESTIMATE PREPARATION contd….
1. GOVERNING BODY: Responsible for general planning function.
Select the budget steering committee, determines the budgetary
objectives, and reviews and approves the master budget.

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2. THE ADMINISTRATOR: Responsible for the formulation and
execution of the budget by correlating the governing boards, goals with
the guidelines for budget preparation and supervising the budget
preparation.

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3.THE BUDGET DIRECTOR: Responsible for budgeting procedures
and reporting.
• Establishes a completion timetable.
• Supervise data collection and budget preparation.
• Serves as the chair person of the steering committee, which approves
the budget before it is submitted to the governing bodies.

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4. DEPARTMENT HEADS: Prepare and review goals and objectives
and prepare the budgets for their departments.
• Departmental budgets needs to be prepared and coordinated.
• During this phase, units of service, staffing pattern, salary and
non salary expenses and revenues are forecasted, so that preliminary
rate setting can be done.

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PREPARING BUDGET ESTIMATE
Item no Income or
expenditure
Actual last
year
Current cell Budget next year
Budget Actual Proposed Approved
1
2
3
4
5

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STEPS IN BUDGET ESTIMATE PREPARATION
1.Preliminaries
2.Estimation of income
3.Budgetary plan

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STEPS IN BUDGET ESTIMATE PREPARATION cont.….
• 1.PRELIMINARIES:
i. Formulate the budget objectives.
ii. Form budget committee and appointment a budget officer.
Budget needs budget committee in an organization.
To receive and approve all forecast departmental budgets, periodic reports showing
comparison of actual and budgeted income and expenditure.
iii. Formulate budget time table
iv. Drawn an organization chart specifying who will provide key information and
who can be held accountable for performance.
v. Create a database.
It will contain summary of financial statement for previous one or two years.
Gather information about other hospital to which ones patient may look as
alternatives.

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STEPS IN BUDGET ESTIMATE PREPARATION cont.…
2. ESTIMATION OF INCOME:
The sources of income are.
I. THE CHARGES FOR HOSPITAL SERVICES payable by the patient
either on their own or through third parties.
The services could be broadly categorized under,
a. Nursing home beds
b. Ancillary and services, such as Operation theater, Diagnostic center.
c. Outpatient Department
d. Other operating income like blood bank, ambulance, canteen etc.
e. Miscellaneous income like rent from hospital properties, scrap
sales.

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2. ESTIMATION OF INCOME CONT.….
II. INVESTMENT INCOME:
a. Interest from fixed deposits
b. Dividend income from share
III. DONATIONS: In kind for general or specific purposes and through cash boxes, charity
shows, donation drives.
IV. GRANTS: To meet expenditure on specific activities or specialized programs and to
cover deficit in current account.
V. TRANSFER OF RESTRICTED FUNDS TO GENERAL REVENUE INCOME.

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• FORECASTING INCOME:
1.Assessment of the likely demand from existing and potential
customers.
2. Make a conscious effort to optimize use of available resource, and
3. Estimate the income considering the above two factors.

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• FORECASTING INCOME cont.….
The following information is required is to be able to make realistic estimate of
future income:
1. Capacity of each department in terms of number of shift per day and number
of working days in a year.
2. Current level of activity, utilization for the previous.
3. Any new developments in the catchments area of the hospital, which are
likely to have bearing and demand for hospital services.
4. Steps proposed to be the hospital management, purchase of new equipment's
and working extra hours.
5. Patients profile classifying under medical and surgical linking categories of
patients through demands made for various services.

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3.BUDGETARY PLAN:
The plan is made based on
1. Operating expenditure forecast:
Recurrent ( operating )costs are required for the operation or
maintenance of facilities and services. The more important cost for
salaries and wages, supplies like drugs, dressing, reagent, fuels, etc.
Utilities, including electricity, water, telephone, etc. and equipment
maintenance and purchase of spare parts.

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• 3.BUDGETARY PLAN cont.…
2. Capital budget:
 Growth with new facilities being provided
 Replacement of obsolete worn out equipment, furniture and machinery.
 The new facility may be by way of buildings, plant and machinery or
equipment. There will be many competing requirements. Funds are never
available to meet all the demands. Choice has to be made. The needs may
be classified as essential and desirable.

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• 3.BUDGETARY PLAN cont.…
3. Cash budget: The enough cash must be available to meet the
obligation as and when they arise. There is need to maintain the right
flow of cash.
 Among the receipt will be the revenue for patient service.
 Salaries have to be paid on payday along with salaries other items
like contribution to provident fund have to be met.
 Payment have to be met for electricity and water so also insurance
premium, taxes on vehicle and property and service contract.
 Payments have to be made for supplies and expansion. Most of these
payment are usually made at the beginning of the month.
Good planning will help in an even flow of cash as required.

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AN ESSENTIAL REQUISITION FOR
BUDGET ESTIMATION

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An essential requisition for budget estimation will include,
1. Forecasting sound forecasting may be related to making decisions
on purchases, expenses, working capital, etc.
2. Accounting well conceived accounting system must be needed to
compare the budget information with actual accomplishment.
3. Lines of authority budget preparation, operation and supervision
require clearly defined lines of authority.
4. Budget Committee
To receive and approve all forecasts, departmental budget
periodic reports showing comparison of actual and budgeted income
and expenditure
To request for special studies of deviations from the budget and
consider revision of budget to meet changed conditions.

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An essential requisition for budget estimation will include,
cont.….
5.Business policies clearly defined business policies serve as basis for
budget preparation.
6. Statistical information in the form of figures, estimation regarding their
budget terms are essential for budget. Top level management supports are
essential to ensure successful installation of the budget program.
7.Period of budget length of budget period specified, ( usually a year)
should be specified.

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REVISED ESTIMATE
 A change in the calculation of the cost of a project. This calculation is
made and presented to a buyer, usually while a project is in progress, and
may be subject to further changes due to both exogenous factors and
endogenous factors.
 In calculating quarterly GDP, a third estimate published approximately
three months after the end of quarter.
 It includes information not available at the time of the advance estimate or
primarily estimate as well as any necessary data revisions.

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REVISED ESTIMATE cont.….
 The budget revision is a process that allows budget specialists to
make changes to a budget in order to increase the company’s financial
standing.
This can mean making revision to pull in more income to pay off
liabilities or finding methods to satisfy the amounts of expansion the
business is currently spending.

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REVISED ESTIMATE cont.….
• PURPOSES:
• To bring changes in proposed estimate
• To ensure adequate utilization of resources
• To reduce miss utilization of resources.

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PERFORMANCE BUDGETING
Is a system of presenting both inputs of resources and outputs of
service of a organization and units.
 The revenue and expenditure reflected in functions, programs,
performance units, primarily the output and its cost.
The funds and resources are allocated to specific goals. It emphasis
accountability, efficiently and economy by highlighting outcomes.
The main goal is to find out the measure relative performance to
achieve goal for a specified result.

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PERFORMANCE BUDGETING cont.…
• OBJECTIVES:
o Correlate the physical and financial aspect of programs and activities.
oImprove budget formulation, review and decision making at all levels of
management in the government machinery.
oFacilitate better appreciation and review of the legislature.
oMake possible more effective performance audit.
o Measure progress towards long term objectives as envisaged in the plan.
oBring annual budgets and developmental plans together through a common
language.

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PERFORMANCE BUDGETING cont.…
• Features:
The budget must indicate purpose and objectives for getting funds.
It must also show the cost and output of each program and program activity.
Each activity based on the cost benefit analysis, regardless of fund
allocation.
It uses management tools such as work measurement, benchmarking and
cost cutting.
It is applicable for long term plans.
It has performance criteria.
 It requires a lot of effort in formulating objective, scientific problem based
on cost benefit analysis, developing target, performance indicator/criteria,
mantra assessing performance with planned program budget, etc.,

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PROCESS OF PERFORMANCE BUDGETING :

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PREPARATION OF PERFORMANCE BUDGETING
1. Allocation of resources.
2. Budget execution.
3. Appraisal and evaluation.

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PREPARATION OF PERFORMANCE BUDGETING cont.…
1.Allocation of resources:
Submit the recruitment per program classification.
Indicate its past activities, their cost ,the activities to be taken up during
next year, the results expected a pattern of assignment of responsibility,
or time based plan for expenditure and work.

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2. Budget Execution:
Initiate the action for implementation after getting the grants,
monitor the activities and regulate the flow of expenditure.
Prepare the time based reports showing investment and work and
keep a record.

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3.Appraisal and the evaluation :
Evaluate each program in the light of results obtained and
expenditure incurred.

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PERFORMANCE BUDGETING SYSTEM-A CRITICAL EVALUATION
• The very basis of performance budgeting is classification of
governmental work into functions, programs and activities. But in
practice, it may not be possible to have such well organized categories.
• The program and activity classification developed are sometimes too
broad to reveal the significant activities of the department to serve as
the basis for budgetary decision and management.
• This technique focus on quantitative than a quality evaluation.

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PERFORMANCE BUDGETING SYSTEM-A CRITICAL
EVALUATION cont.…
• The process of allocation of cost estimate over performance elements
is difficult and often these estimates may not be as meaningful as they
should be.
• Performance budget aids, but it does not solve the greatest problem in
budget decision making.

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• Advantages:
 The budget has clear goals and objectives based on performance.
 It allocates the funds and the expected performance cost.
The method aim at improving the performance.
It is a very objective method based on cost effective analysis.
 Each program evaluated based on criteria and indicators.
 The outcome weighs against budgeted performance.

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• Disadvantages:
 There is a probability of inaccuracy in forecasting and expenses.
 It measures the results quantitatively.
 It needs a proper accounting, monitoring and reporting system.
 It is difficult to measure the social benefit of function.
 The process is time consuming and expensive.
 Due to its flexibility feature, programs may change at the time of implementation.
 It requires more skilled man hours to plan and implement the process.

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SUMMARY
• A budget is simply a spending plan that takes into account estimated
current and future income and expenses for a specified future time
period usually year. It also serves as a tool for monitoring and
evaluating the performance of the hospital and its department.

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CONCLUSION
• Financial management in nursing is crucial as it ensures that resources
are allocated efficiently, promoting quality patient care it aids in
strategic planning, decision making and cost control within healthcare
facilities, ultimately leading to improved patient outcomes and
healthcare services.

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JOURNAL FINDINGS:
• Source: BMC Health services research.
• Topic: Comparing the average cost of outpatient care of public and for
profit private providers in India.
• Authors: SAMIR GARG et al.,,
• Findings, comparison of average cost of care for public provider and
for profit providers. The average cost for government households put
together was substantially greater when formal for profit providers
were utilized than the public providers.
• This has important policy implications for India’s mixed health
system, including the desired public private mix and the appropriate
role for profit sector.

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JOURNAL FINDINGS cont.…
• It suggests that purchasing from private providers or extending the
publicly funded insurance to outpatient care in India may increase
costs. Poor regulation of for profit providers seems to be an important
structural cost driver in mixed health system of LMISC’s like India.
Policies to strengthen public provisioning of curative primary care
close to communities need to be encouraged to reduce cost.

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THEORY APPLICATION
Taylor’s scientific management theory (1909)
INPUT
Budget
estimate
Man power
Material
Machinery
resources
OUTPUT
END RESULT
Health care
organization
provide cost
effective,
efficient quality
care
Planning Directing
Organizing Controlling
Proper budgeting

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ASSIGNMENT
• Plan for budget estimation of 100 bedded hospital for the
year of 2025.

BUDGET ESTIMATE SEMINAR in nursing Management

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