SEMINAR ON FISCAL PLANNING

SUBMITTED TO

MRS k. sathiya lakshmi

PROFESSOR

SARVODAYA COLLEGE OF NURSING

SUBMITTED BY

MR. SHARIN K VARGHESE

MSC 2ND YEAR

SCN
Introduction

Budgeting is the heart of administrative management. It serves as a powerful tool of co-

ordination and negatively an effective device of eliminating duplication and the wastage. These are
served by devices such as justification of estimates, supervision of the us of appropriate funds, timing of
the rate of expenditure and the like.

Definition:

A budget may be a simple plan of ones personal finances, or it may be a complex document
used by large organization.

According to TN Chhabra “a budget is an estimation of future needs arranged according to

orderly basis covering some or all activities of an enterprise for a definite period of time”

According to Dimock “Budget is a balance estimated expenditure and receipts for a given period
of time. In the hands of the administrator the budget is the record of the past performance, a method
of current control and projection of future pans”.

Feature of budget

 Budget should be simple in design and oriented to those who use it

 It should be flexible. It should be adjust various needs and conditions of the institution
 It should be synthesis of past, present and future
 It should be product of joint venture and co-operation of executives/ department heads at
different levels of management.
 Budget is composed of two segment; that are income and expenditure. Income limits
expenditure; hence income should be estimated prior to the estimation expenditure.
 A budget reflects the goals and aspirations of the faculty
 Budget making involves the whole situation
 Budget is forward planning. Planned activities are vital for efficient and successful functioning
 A budget gives direction- it is more than the list of the desired and approved expenditure. It is
also the instrument of administration and management.
 It should have support of top management throughout the period of its planning and
supplementation.
 Budget has a time period usually annual. It is important to secure the maximum participation of
organization in preparation on of budget.

Objectives of budget

1. To provide definite targets for income and expenditure of the department

2. To co-ordinate the activities of the different functional heads in the working of these
departmental budget
3. To enable a cash flow statement prepared month by month
4. To aid management in formulating future policy decision to promote the growth and welfare of
the organizations
5. To provide useful tool for the control of costs
6. To provide a tool for communication and co ordination within the organization.
7. To improve financial planning and decision making.
8. To identify controllable and uncontrollable cost area.

Importance of budget
 Budget is a numerical description of expected income and planned expenditure for an
organization for a specified period of time. It is a concrete, picture of the total operation of an
enterprise/ organization/ institution in monetary term, i.e., finance

The following point serves the importance of budget:

- Budget is needed for planning for future course of action and to have a control over all activities
in the organization
- Budget facilities co coordinating operation of various departments and sections for realizing
organizational objectives.
- Budget serves as a guide for action in the organization
- Budget helps one to weigh the values and to make decision when necessary on whether one is
of a greater value in the programme than the other.

Principles of Budget

Budget is an operational plan for a definite period, usually a year, expressed in financial terms
and based on expected income and expenditure.

1. Budget should provide sound financial management by focusing on requirement of the

organization
2. Budget should focus on objectives and policies of the organization. It must flow from objectives
and give realistic expression to the way of realizing such objectives.
3. Budget should ensure the most effective use of scarce financial and non financial resources.
4. Budget requires that programme activities planned in advance
5. Budgetary process requires consistent delegation for which fixed duties and responsibilities are
required to be allocated to managers at different level for framing and executing budget.
6. Budgeting should include coordinating efforts of various departments establishing frame of
reference for managerial decisions, and providing a criterion for evaluating managerial
performance.
 7. Setting budget target requires an adequate checks and balance against the adoption of too high
or too low estimate. Utmost care is a must for fixing targets.
8. Budget period must be appropriate to the nature of business or service and to the type of
budget.
9. Budget is prepared under the direction and supervision of the administrator or finance officer.
10. Budget is to be prepared and interpreted consistently throughout the organization in the
communication of planning process.
11. Budget necessitates a review of the performance of the previous year and an evaluation of its
adequacy both in quantity and quality.
12. While developing a budget, the provision should be made for its flexibility.

Types of budgets:-

Budget consists mainly three sections, i.e.

1. Manpower budget
- The Manpower budget includes wages and other benefits provided for regular and
temporary workers.
2. Capital expenditure budget,
- The Capital expenditure budget includes purchases of land, buildings and major
equipments of considersible expense and long life.
3. Operating budget.
- The operating budget includes the cost of supplies, minor equipment, repairs and
overhead expenses.

Other types of budget as follows:

1. Incremental budget is one based on estimated changes in present operation, plus a percentage
increase for inflation, all of which is added to previous year budget.
2. Open-ended budget is a financial plan in which each operating manager presents a single cost
estimate for what is considered optimal activity level for each programme in the unit, without
indicating how the budget should be scaled down if less funding is available.
3. Fixed- ceiling budget is a financial plan in which the uppermost spending limit is set by the top
executive before the unit and divisional managers develop budget proposals for their areas of
responsibility.
4. Flexible budget consists of several financial plans, each for a different level of programme activity.
5. Rollover budget is one that forecasts programme, revenues and expenses for a period rater than a
year, to accommodate programme that are larger than annual budget cycle.
6. Performance budget is based on functions, which allocate functions, not divisions, e.g. direct
nursing care, in service education, quality improvement, and nursing research.
7. Programme budget is one where costs are computed for a total programme , i.e. group total for
each service programme, e.g. MCH, FP, etc
8. Zero base budgets require the nurse manage to examine, justify each cost of every programme
both old and new, in every annual budget preparation.
9. Capital expenditure budget is prepared for assuring planned timely capital investment in the
business to ensure the availability of capital at the right time over longer period.
10. Cash budget is prepared by way of projecting the possible cash receipts and payments over the
budget period.

Zero –based budgeting

It is a method of budgeting used to control costs. In a zero based budget, the budgeting process
starts from zero, and everything must be justified by each new budget cycle. A previous activity can be
included in the budget, but its relation to the current organizational objectives must justify funding for
it. In theory, each function in a zero- based budget must stand on its own merits, and the merits of
each function are reviewed annually. All labor power and costs are recalculated, and decision is made
about whether to continue the function and at what levels. When using zero-based budgeting it is
important to have a policy in place to motivate cost-center managers to accumulate unused funds.

Revenue budgeting
 The actual calculation of revenue for specific units of service is straight forward: units of service
multiply by the price per unit. Obviously, if similar activities or procedures are priced differently, each
price type must be projected and calculated individually. For examples, if the room charges vary for
private and semiprivate rooms, the revenue projections must be based on the number of patient days
projected for each type of room,

However, with the advent of the DRG-based prospective system for medicare patients and the
proliferation of alternative reimbursement systems and managed care programs in the private sector,
calculation revenue has become increasingly complex. Distribution of patients by DRG, special discounts
or allowances, and projections for free care must all be factored when determining revenue. In addition,
individual state regulations may affect the revenue that an organization will be able to generate. These
calculations are generally done by the finance department for the total hospital.

The capital budget

The capital budget is a summarization of all anticipated (items with a life of more than 12
months) expenditures in the budget year. Although many capital purchases and projects may be
needed, all might not be readily affordable in the course of a single year. The capital budget is the result
of the decision concerning capital projects that will be undertaken, and, most important

How they will be financed. If a competitor is to open a large, all-new facility nearby, for example, a
contingency capital item might be funds for renovations of a portion of the facility to compete should
census drop precipitously.

Steps in budgeting

While designing and implementing a planning programme the nurse administrator or the
manager should follow steps as given below:
1. Review the goals of the agency or hospital to identify activities of highest because these are most
likely to receive funding
2. Review the objectives of the existing programme and written for proposed programme to ensure
that achievement of these objectives will support agency
3. Existing programme are revised and proposed programmes designed to maximum goal
accomplishment
4. Manpower, capital and operating expenses are computed for each programme old and new.
5. Alternative methods are identified for realizing designated objectives and price of alternative is
determined.
6. Comparisons are made to determine which alternative is most cost effective.
7. A budget request is developed which details a fiscal plan for the preferred programme indicates
alternative methods for meeting the same objective, and explains why recommended programme
is preferred

For Nursing in hospital

8. Request the assistant nursing officers and supervisors to present their needs for coming year by a
specified date, and confer with those who have presented such need.
9. Review the budget appropriation and actual expenditure for the current year in conjunction with
statistical data as to the numbers and distribution of patient, nursing hours, per patient by
services, operations and others.
10. ascertain whether any changes are contemplated such as opening new facilities patients or
changes in other departments, which affect the nursing services required
11. Prepare the programme which the new budget is to cover in terms of the nursing hours to be
given to patients, the distribution of the hours among the various groups personal, the ratio of
supervisors and head nurses to patients care and the provision, for the administration of nursing
unit.
12. Determine the percentage of salaries of personnel who have both educational and nursing service
function to be allocated to each function on the basis of time devoted to each
13. Estimate the requirement for the coming year from the information supplied as the expenditure
for supplies, equipments and repairs to date.
 14. Prepare a summary of new needs, both personnel and material with data to support the request.
The budget report submitted to the head of the nursing department after carefully
reviewed by her/ his associates.

Conclusion

Budget is considered as a blue print of financial management and it place a vital role in any
successful functioning of an organization. Budgeting is a complex task because it serves both planning
and control functions. I require an expansion or innovative work.

Bibliography

1. Ashok sahni, Hospital health administration, 2 nd Edition, Yem Yess printers, 1992, Pp; 191- 193
2. Eleanor J Sullivan, Effective leadership and management in Nursing, 4 th Edition, Addison Wesley
longman; 1996, Pp; 91-104.