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Budgeting
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- 3. Introduction • Increasing demandof health care but limited resources - importance of planning and management • Budgeting is the financial part of planning • Budget is an important tool in the hands of a trained health professional
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- 5. Definitions • Budget -anticipatedreceipts and available resources of an organisation during the given year, Or Statement of future plans described in quantitative and monetary terms, for a specific period of time. • Budgeting – the process of preparing the budget. • Budgetary control –preparing, implementing and monitoring of budgets.
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- 7. NEED OF BUDGETIN HEALTH a) Budgets are effective means of communicating the future organizational plans in monetary and financial terms. (b) A pre-decided and approved budget monitor the ongoing operations. (c) Budgeting reduces wastage and losses (d) Budgets, when drawn up through participation, encourage, and develop team spirit (e) Budgets form the basis for assessing the performance of managers
- 8. Budgeting at differentlevel differs Organisations Ways to communicate plans Public health programme Resources in to services Central and State government Policy & plans for implementation
- 10. Changing pattern ofpublic health expenditure • India needs to double or triple its existing health spending with their proper allocations Decentralization Community participation. • Financing control more important at the primary level. • Budgeting important tool in financial planning in health care
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- 12. Why budgeting inhealth is complicated? • Intangibility and often non-measurability of the product (health outcome). • Actual expenditures for health care will never exactly match the budget. • The ever increasing healthcare cost. • Needs to meet unfunded healthcare. • The complexity of fundflow.
- 13. Organization DivisionS DepartmentS Individuals Approaches in Budget TOPDOWN APPROACH BOTTON UP APPROACH
- 14. Top down budget-Imposed Budget Bottom up budget- Participatory Budget A top-down budget may be participatory if the top managers seek input from the lower levels
- 15. TYPES OF BUDGET •Based on Time, Function Flexibility
- 16. Time-based Budgets • (i)Long term budgets >5 year duration. • (ii) Short term budgets - up to one year duration. • (iii) Current budgets -very short term periods. • (iv) Rolling (Progressive/continuous budget) - – Budget prepared for 1 year – After a quarter new budget is prepared (for 1 yr). – Some advanced budget will always remain
- 17. Function based budgets •Revenue budget • Expenditure budget • Capital budget • Operation budget • Cash budget • Research budget • Master budget
- 18. Revenue budget (Salesbudget) Commercial and profit-based organisations. Sales budgets are developed based on the anticipated sales volume
- 19. Expenditure budget Based onthe expected expenditure
- 20. Capital budget Financial resourcesfor new proposed projects,
- 21. Operation budget • Overviewof an agency’s functions by projecting the planned operations usually for the upcoming year
- 22. Cash budget Ensure thatthe agency has enough, but not too much, cash on hand during the budgetary period Cash budget are planned to make adequate funds available.
- 23. Research budget Allocating financialresources for innovation
- 24. Master budget • Amalgamationof all organizational budgets •Balance sheet •Fund flow statement
- 27. Flexibility-based budgets • Fixedbudgets • Flexible budgets
- 28. . PHC PROGRAMME BUDGETEDFOR 5 LAKH POPULATION 7 LAKH POPULATION PERFORMANCE Fixed budget
- 29. 5,00,000 10,00,000 15,00,000 BASIC COST 5BEDS 10 BEDSFLEXIBLE BUDGET
- 30. Fixed budget Flexiblebudget Static Dynamic Remains constant regardless of activity Change with change in activity Fixed Budget cannot be modified as per the actual volume Flexible budget can be easily modified in accordance with the activity level attained Actual Performance cannot be accurately measured Actual Performance can be measured Based on assumption Realistic and Practical
- 31. Types of budgets FIXEDBUDGET FLEXIBLE BUDGET REVENUE BUDGET EXPENDITURE BUDGET CAPITAL BUDGET OPERATION BUDGET CASH BUDGET RESEARCH BUDGET MASTER BUDGET LONG TERM BUDGET SHORT TERM BUDGET CURRENT BUDGET ROLLING BUDGET Time based Function based Flexibility based
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- 33. Techniques of Budgeting •Incremental budgeting • Zerobased budgeting • Programme budgeting(Performance budgeting) • Planning Programming and Budgeting system(PPBS)
- 34. Incremental budget • Previousyear’s expenditure is applied to the next year • With additional components of increased salaries and cost of materials • Requires little budget expertise from the part of the manager.
- 37. Advantages: Simple to prepareand understand Requires little budget expertise from the part of the manager. Consistent basis Better coordination between budgets
- 38. Disadvantages: Totally ignorethe impact of changes Wasteful expenditures of previous years are again included No incentive in development and innovation Encourages spending up to the budget Administrators of various departments often tend to inflate their proposed individual budgets, since no detailed justification is sought along with the proposal.
- 39. Zerobased budgeting Assumesthe base for projecting next year’s budget is zero. Managers are required to justify all activities and programs as if they initiated for the first time
- 42. Advantages of ZBB •Efficient allocation of scarce financial resourses. • Links budget to organisational objectives- Management by objectives. • Only essential projects and activities. • Activity must justify before each budget that the activity proposed is essential, cost effective • Identifies wasteful expenditure.
- 43. Disadvantages • Initial planningstage needs effort and time • Very complex Time and manpower consuming • Necessary to train employees, especially managers • Less applicable for those activities with intangible cost-benefit relationship- public heath programmes
- 44. 3.Performance based budgeting •Decision making and budgeting depends on performance. • Performance Based on goals and objectives of programme • Outcome of the programme measured. • Efficiency and effectiveness of the programme measured for continuous improvement.
- 45. PERFORMANCE BUDGETING -The departmentalhead usually prepare periodic performance reports - Which compare the budgeted actual performance -In terms of output, production or services rendered (to detect any deviations at the earliest possible.)
- 46. PB • Introduced inUSA in 1951 • GOI & some State Govts have accepted it. • Most useful in public health
- 48. Problems in PerformanceBudgeting • Time gap b/w the input ( intervention) and output ( improvement in health) • Establishment of standards, norms for measurement is difficult • It is almost impossible to separate out the individual effects of different units.
- 49. 4.Planning programming and budgetingsystem.PPBS • Planning, Programming, and Budgeting System (PPBS) is in effect an integration of a number of techniques in a planning and budgeting process.
- 50. • The aimof PPBS was to Identify the Goals, Objectives, Tasks • Prioritise in planning process, • Identify, estimate costs and assign the various resources needed for the achievement of the established goals in the form of major programs, in the programming phase
- 52. • Difference betweenconventional budgeting PPBS – More importance is given for planning Conventional budgeting- Planning phase is not very important
- 53. Gender budgeting • GenderBudgeting is a powerful tool for achieving gender mainstreaming. • Women 48% India’ s popularion. • Gender budgeting translate gender commitments into budgetary commitments
- 55. Advantages of budgetingADVANTAGESOF BUDGETINGADVANTAGES OF BUDGETING
- 56. Limitations of budgeting Over budgeting Under budgeting Blamingfor outcome Time consuming Behavioural problem
- 57. conclusion • Financing inhealth care sector is presently in its nascent stage in India and it is imperative that all health care professionals and those associated with health have a sound knowledge of budgeting and health care financing.