BUDGETING PROCESS

1. Group members
• JACKLINE JEPKOSGEI BSN-1-8115-2/2018
• MAUREEN JERONO BSN-1-8157-3/2018
• ANNASTACIA MARONGO BSN-1-8136-3/2018
• FREDRICK OTIENO ANDETA BSN-1-8172-3/2018
• DENNIS KIPKOECH RUTTO BSN-1-8148-3/2018
• DORCAS SAMATI BSN-1-8142-3/2018
• MUKUHI MWATHA BSN-1-8643-2/2017

2. BUDGET
-Is a statement in monetary terms of resources required to support
organizational operations during a given period of time.
-A budget is a plan that identifies the financial resources required to
achieve programmatic objectives.
A budget is a management tool
- A budget is a means of control which reflects the plan against
which actual performance is measured.

3. Types of budgets
• Operating budget(annual budget) -for operations and is short term. It indicates both the revenue
and the expenditure. This monitors day to day activities of the organization. It’s the organizations
statements of expected revenues(income) and expenses for the coming year.
-Revenue budget- indicate funds collected from different sources/expected funds to be collected
from different sources; in this case it comes from the money the patients pay for services or actual
payment generated via a given services or procedures e.g. admission fees or drugs sold.
-Expense budget- indicate activities in which the funds will be spent. Consists of salary and non
salary items e.g. uniforms for personnel, medical equipment and maintenance.
Capital budgets -indicates only the assets with large amounts/sums of money are outlined e.g. the
physical innovations, the new constructions, new or replacement equipment like CT scan buildings,
land, etc.
• Cash budget -based on available cash only. this brings together the organizations budgeted
estimates for revenues, expenses and new capital expenditures. The budget reveals information
about the level of funds flowing through the organization and about the pattern of cash
disbursements and receipts.

4. Purposes of budget
-an organisation develops a budget for various purposes which include
the following;
1. To prevent spending more than an organisation can afford
2. To aid in planning and controlling the organisation’s finances
3. To assist in assessing the financial requirement of the institution.
4. To indicate the areas on which money raised or received will be
spend
5. To facilitate comparison of actual performance with budget targets

5. Budgeting process
Keys to a successful budgeting process
• The hospital should have a clearly defined organisational structure with
responsibilities defined and assigned
• All responsible personnel at all levels of management should participate in
budget development.
• The personnel involved should have an understanding of the ideas and
financial goals of the hospital
• There must be an adequate system which provides reliable financial and
statistical information to the responsible person
• Budget should allow enough freedom to accomplish departmental
objectives
• Budget must be flexible enough to allow for unpredictable expenditures

6. REQUIREMENTS TO A MEANINGFUL BUDGET
- The hospital should have a clearly defined organizational structure with
responsibilities defined and assigned.
- All responsible personnel at all levels of management should participate
in budget development.
- The personnel involved should have an understanding of the ideas and
financial goals of the hospital.
- There must be an adequate system which provides reliable financial and
statistical information to the responsible person.
- Budget should allow enough freedom to accomplish departmental
objectives.
- Budget must be flexible enough to allow for unpredictable

7. Budget allocation methods
• Organisation use different methods to determine the budget;
1. Rolling approach- in this method the budget allocated for the next
year is set equal to actual expenditures during the previous 12
months, updated on a month to month basis.
2. Profit level approach- the departmental budgets are automatically
increased when profits are high and vice versa.
3. Operational approach- individuals are asked how much they need in
order to achieve predetermined objectives. Resources are then
distributed and the individuals assume the responsibilities for
administering the resulting budgets.

8. cont’
5. Zero-based approach- each department is initially set at zero
assuming no funds will be available in the future. Therefore each
manager must identify each and every activity and cost them and argue
for anew allocation at the start of every year. This attempts to
overcome the problem of managers deliberately overspending to
increase future allocation. There is no presumption that the amount
given during the budgetary period will be repeated.

9. Nursing budgeting process
• All the nurse managers are involved in budgeting process. A specific time table with specific dates
for implementing budget process is developed which may spread over a period of 3-9 months.
This allows for careful preparation. The major steps include:
• It is important to review the policies, standards, objectives of the organization to enable the
manager align the budget appropriately.
• The Top level management provides the projections for the future and prepares guidelines.
These include, external environmental analysis in terms of e.g growth and interest rates.
• Nurse Managers then prepare the unit/ departmental annual budgets which they forward and
discuss with the administrator of nursing services.
• The administrator of nursing services and the Finance Director/Manager review the budget.
• Budget is accepted or modified appropriately.
• Finally the Budget is implemented and regularly evaluated.
• To maintain efficient operations, the control function of management is necessary. This is to
ensure that the unit is operating within the approved budget.

10. The budgeting process management
• Typically the budgeting process should begin at least four months
before the end of the fiscal year to ensure the budget is approved by
the Board before the start of the new year.
• How long the process should take and who should be involved varies
depending on the management style and complexity of the
organization.
• The process has 8 steps;

11. Step 1:Planning the process
• Identify who will coordinate the budgeting process and which staff,
board members and committees need to be involved;
• Agree upon key definitions, assumptions and document formats
• Set timelines and key deadlines
• Determine and schedule any training or key meetings.

12. Step 2: Communicating about the Process
• Clearly communicate responsibilities, expectations and deadlines to
everyone involved
• Explain and distribute forms and assumptions

13. Step 3: Programmatic Goal Setting
• Determine program goals and objectives
• Project staffing requirements and salary and benefit assumptions
based on program goals;
• Get board agreement on goals and assumptions

14. Step 4: Information Gathering
• Research and gather information about income and expenses based
on program goals and assumptions
• Construct budget details by program
• Communicate regularly to avoid duplication of effort and to share
information and assumptions

15. Step 5: Compilation and Revision
• Have one person compile all information, review it for consistency
and redistribute to everyone involved
• Leave plenty of time for review and revisions

16. Step 6: Committee Review
• Have the finance committee and other appropriate staff and board
committees review a budget draft and key assumptions
• Be sure to allow enough time between committee meetings and the
final approval deadline to address questions and recommendations
and make revisions

17. Step 7: Final Approval
• Distribute information to the board prior to the board meeting,
including budget draft, program goals and other supporting
information
• Have program and development committees play a role in making an
informative presentation to the board based on the opportunities,
challenges and resources behind the budget numbers
• Have the finance committee or treasurer present the budget proposal
to the board.

18. Step 8: Implementation and Management
• The real work begins once the budget is approved
• Communicate budget, program goals and timelines for the next year
to staff
• Review actual income and expense compared to the budget on a
monthly basis
• Update and revise the budget as there are changes during the year.
Depending on the significance of changes, the board may need to
approve revisions