BUDGET, BUDGETTING PROCESS, CLASSIFICATION OF BUDGET,

BUDGET IN HEALTH CARE SYSTEMS

A budget is a list of all planned expenses and revenues. It is a plan for saving and spending. A
budget is an important concept in microeconomics, which uses a budget line to illustrate the
trade-offs between two or more goods.

MEANING OF BUDGET

The word “budget” derived from the old English word “budgettee” means a sack or pouch
which the Chancellor of the Exchequer used to take out his papers for laying before the
Parliament, the Government, and financial scheme for the ensuing year. Now the term “budget”
refers to the financial papers, certainly not to the sack.

“Budget” is a concrete precise picture of the total operation of an enterprise in monetary terms.

- HM Donovan

Budgeting disciplines & streamlines administration, & goes hand in hand with program planning.

PURPOSES OF BUDGETING

 Budget supplies the mechanism for translating fiscal objective into projected monthly
spending pattern.
 Budget enhances fiscal planning & decision making.
 Budget clearly recognizes controllable & uncontrollable cost areas.
 Budget offers a useful format for communicating fiscal objectives.
 Budget allows feedback of utilization of budget.
 Budget helps to identify problem areas & facilitates effective solution.
 Budget provides means for measuring & recording financial success with the objectives
of the organization.

FEATURES OF BUDGET

 It should be flexible.

1
  It should be synthesis of past, present & future.

 It should be product of joint venture + cooperation of executives/ department heads at

 It should be in the form of statistical standard laid down in specific numerical terms.

 It should have support of top management throughout the period of its planning &
supplementation.

BUDGETING PROCESS

In India usually annual budget estimates for coming financial year are prepared in the months of
September/ October of the current year. Since the budget for next year are required, to be
submitted by the Directorate of Medical, Health & FW on October 25 current year to the State
Government.

Every head of the office is required to prepare budget estimates in respect of salaries of
establishment, contingent expenditure & various other items. The estimates should be
accompanied by explanatory notes & every major increase or decrease from current year’s
allotments must be clearly & precisely explained. The budget estimates should give closest
possible attention to this work. All likely factors should be taken into consideration while
preparing estimates.

Item no. Income/ Expenditure Actual Current year Budget next year

Last year Budget Actual Proposed Approved

1.

2.

3.

2
CLASSIFICATION OF BUDGET

Budget consists mainly three sections, i.e. manpower budget, capital expenditure budget, &
operating budget. The manpower budget includes wages & other benefits provided for regular &
temporary workers. The capital expenditure budget includes purchases of land, buildings &
major equipments of considerable expense & long life. The operating budget includes cost of
supplies, minor equipment, repairs & overhead expenses.

There are several types of budget as follows:

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.

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 program in the unit, without
indicating how the budget should be scaled down if less funding is available.

Fixed- ceiling budget- is a financial plan in which the uppermost spending limit is set by the top
executive before the unit & divisional managers develop budget proposals for their areas of
responsibility.

Flexible budget- consists of several financial plans, each for a different level of program activity.

Rollover budget- is one that forecasts program, revenues & expenses for a period greater than a
year, to accommodate program that are larger than annual budget cycle.

Performance budget- is based on functions, which allocate functions, not divisions, e.g. direct
nursing care, in service education, nursing research.

Program budget- is one where costs are computed for total program, i.e. group total costs for
each service program, e.g. MCH, FP etc.

Zero base budget- the nurse manager to examine, justify each cost of every program both old &
new, in every annual budget preparation.

3
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 a period.

Revenue & expense budget- is expressed in financial terms & takes the nature of a performa
income statement for the future. It may be prepared in a detailed form or in an abstract statement
showing the items of profit & loss under classified headings.

Cash budget- is prepared by way of projecting the possible cash receipts & payments over the
budget period.

BUDGET IN HEALTH CARE SYSTEMS

Budgets are basic for finance, more than a forecast of income & expenditure. The financial
system consists of laws, policies, regulations, procedures & performa related to the collection &
expenditure of Government money. It is designed to support the health personnel as they carry
out their program and to protect the Government money from being misused or wasted. Most of
the hospital administrators in India are from the Medical profession. They do not have adequate
knowledge of the basic principles of finance & they do not understand the financial implication
of the activities of the hospital. Now some of the private hospitals started utilizing the services of
personnel who are qualified in financial system. But particularly in Government hospital,
because of lack of proper planning the budget or delaying in planning & implementation, loss of
finance sanctioned remains unutilized & funds lapse.

In Government setting, financial resources available to health services are less or very limited.
In which about 60% budget allocated is required to be spent on salaries & wages and remaining
percentage of budget spent on stores & consumables include drugs, equipment & other medical
supplies.

SOURCES OF FUNDS FOR HEALTH SERVICES

In India, sources of funds for health services are as under:

213- Cabinet (non- plan)

280- Medical non- plan

4
280- Medical plan

281- Family welfare- plan

282- Public health- non- plan

282- Public health- plan

299- Hills- non- plan

299- Hills- plan

288- Samajik Suraksha and Kalyan (non- plan)

289- Relief in calamities (non- plan)

In addition donation & payments from community can be accepted only on specific sanction of
the Government. Such receipt in cash cannot be spent on health services, but rather just be
deposited into treasury under departmental receipt unless there are Government orders to the
contrary. As soon as any proposal for donations in cash or kind (land, building, equipment,
furniture etc.) is received from the public or community send a detailed description to the DH &
FPWO/FPWS and the State for obtaining orders of the State Government.

STEPS IN BUDGETING

While designing & implementing a planning program, the nurse administrator/ manager should
follow steps as given below:

 Review the goals of the agency or hospital to identify activities of highest priority,
because these are most likely to receive funding.
 Review the objectives of the existing programs & written for proposed programs to
ensure that achievement of these objectives will support agency.
 Existing programs are revised & proposed programs are designed to maximum goal
accomplishment.
 Manpower, capital & operating expenses are computed for each program, old & new.
 Alternative methods are identified for realizing designated objectives & price of each
alternative is determined.

5
  Comparisons are made to determine which alternative is most cost- effective.
 A budget request is developed which details a fiscal plan for the preferred program
indicates alternative methods for meeting the same objective, & explains why the
recommended program is preferred.

For nursing in hospital

 Request the assistant nursing officers & supervisors to present their needs for the coming
year by a specified date, & confer with those who have presented such need.
 Review the budget appropriation & actual expenditure for the current year in the
conjunction with statistical data as to the numbers & distribution of patient, nursing
hours, per patient by services, operations & others.
 Ascertain whether any changes are contemplated such as opening new facilities for
patients or changes in other departments, which affect the nursing services requires.
 Prepare the new program which the new budget is to cover in terms of nursing hours to
be given to patients, the distribution of hours among the various groups of the personnel,
the ratio of supervisors & head nurses to patient’ s care & the provision for the
administration of nursing unit.
 Determine the percentage of salaries of personnel who have both educational & nursing
service function to be allocated to each function on the basis of time devoted to each.
 Estimate the requirement for the coming year from the information supplied as the
expenditure for supplies, equipments & repairs to date.
 Prepare a summary of new needs, both personnel & material with data to support the
request.

In summary, the purpose of budgeting is to:

1. Provide a forecast of revenues and expenditures i.e. construct a model of how our
business might perform financially speaking if certain strategies, events and plans are
carried out.
2. Enable the actual financial operation of the business to be measured against the forecast.

6
In other terms, a budget is an organizational plan stated in monetary terms. Budgeting, though
primarily recognized as a device for controlling, becomes a major part of the planning process in
any organization.

BIBLIOGRAPHY

 Basavanthapa BT. Nursing Administration. 2nd ed. New Delhi: Jaypee Brothers Medical
Publishers; 2008. 183- 211.
 Yoder P. S. Leading & Managing in Nursing. 3rd edn.Missouri: Mosby ;303-5,492
 http://en.wikipedia.org/wiki/Budget

7
 CLASS PRESENTATION

SUBJECT- NURSING ADMINISTRATION

TOPIC- BUDGETTING FOR VARIOUS UNITS & LEVELS

SUBMITTED TO- Mrs. MANOSHANTINI

(LECTURER)

S. G. R. D.COLLEGE OF NURSING,

HOSHIARPUR.

SUBMITTTED BY- AMANDEEP KAUR

M. Sc. (Nsg) IInd YEAR

ROLL NO. 2

8
9