Budgeting

Under the Public health management and administration

1. BUDGETING Presented by Puspa kc Neelam S uwal BPH 2 nd year

2. Content Introduction Objective Importance Characteristics Processes of budgeting Advantages and disadvantages Health budget Financial flows in the health financing system in Nepal 2

3. Introduction : Budget is an operational plan , for a definite period usually a year , expressed in financial terms and based on expected income and expenditure . Budget is a concrete precise picture of the total operation of an enterprise in monetary terms . -H. M. Donoven A budget is a plan that outlines an organization’s financial goals . 3

4. Contd …… A budget is an estimation of revenue and expenses over a specified future period of time and is usually compiled and re-evaluated on a periodic basis. Budgeting is the process of calculating how much money you must earn or save during a particular period of time , and of planning how you will spend it: - D ictionary meaning Budgeting is the process of creating a plan to spend your money. 4

5. Budgeting is the simply balancing your expenses with your income. Budgeting is related to the process of defining the allocation of resource to produce the best output given the level of revenues. An important step to financial security About choices – choosing how to make and spend money Knowing what your income and expenses are every month 5

6. Contd ….. It is done at the beginning of fiscal year. In Nepalese context the fiscal year begins in S hrawan and ends in Ashad and the process of budgeting is started in Shrawan . 6

7. OBJECTIVES : Provide structure : A budget is specially useful for giving a company guidance regarding the direction in which it is supposed to be going .thus , it forms the basis for planning what to do next. Predict case flow : A budget is useful for predicting for case flows but yields increasingly unreliable result further into the future . Allocate resources : Some company use budgeting process as a tool for deciding where to allocate funds to various activities . Measure performance : A common objective in creating a budget is to use it as the basis for judging employee performance , through the use of variances from the budget . 7

8. Contd ….. 5) Budget provides the standard against which future result can be compared. 6) With the establishment of budget , actions can be taken by management if there are any material variance against budget. 7) Assist to plan and control earning and expenditure so that maximum profitability can be achieved. 8

9. Importance: Budgeting is needed for planning for future course of action and to have control over all activities in the organization. It facilitates coordinating operation of various departments and section for realizing organizational objectives. Budget serve as guide for action in the organization . Budget helps one to weight the values and to make decision when necessary on whether one is of greater value in the program than the other. It motivates manager to strive to achieve budget goals. It recognizes controllable cost areas. 9

10. Characteristic: Should be flexible. Should be synthesis of past present and future. Should be product of joint venture and cooperation of executive/department head at different level of management. Should be in the form of statistical laid down in the specific numerical terms. Should have support of top management throughout the period of its planning and implementation. 10

11. Process of budgeting Step 1 : Establishment of operational goals and objectives and polices. Step2 : Goals must be translated into quantifiable management objectives for organizational units. Departmental goal are made. Step3 : Formal plan for budget preparation are review including assignment of responsibilities and timetable is prepared. Step4 : Departmental budget are revised and master budget is prepared . Step 5 : Financial feasibility of master budget is tested and final document is approved and distributed to all parties involved. 11

12. Contd.. Step 6 : Every head of the office are required to prepare budget estimate in respect of salaries of establishment , contingent expenditure and other e.g. telephone, office expense, rent of building etc. 12

13. Fiscal planning : A fiscal plan is prepared to display how funds will to spent for a fiscal year. Fiscal planning is kind of business planning that run according to a fiscal financial year . A Continuous process which involves decisions or choices about alternate ways of using available resources with the aim of achieving particular goals. It is intended at creating a budget that will meet the needs of the organization and its units. 13

14. Accounting : “ The process of identifying measuring and communicating economic information to permit informed judgment and decisions by users of the information’’ . Accounting is an art of recording , classifying , summarizing and interpreting financial events and transactions in a significant manner and in terms of money. Accounting provides information on the - Resource available - use of those resource and -result achieved through their use 14

15. AUDITING Auditing is the process of examining an organization’s financial record to determine if they are accurate and in accordance with any applicable rules ( including accepted accounting standards), regulation, and laws. Auditing is done at the end of fiscal year. IT can be external or internal. Internal auditing is done by the internal staff of the organization and external auditing is done by person/ organization external to the organization 15

16. Advantages: When properly developed administered budget: Reduces wastages and losses by identifying wasteful expenditures well in advance and rectifying them. Effective means of communicating future organizational plans to all people , in monetary and financial terms. Pre-decided and approved budget serves as an effective benchmark for monitoring ongoing operations. 16

17. Contd …… Budgets through participation , encourage and develop team spirit and collective responsibility towards excellence. Basis for assessing performance of senior managers in any organization. Fixes accountability , assignment of responsibility and authority. Financial matters can be handled in orderly fashion . Activities are balanced. 17

18. Disadvantage : Promotes waste ; Managers tend to spend all budgeted resources at the last minute. Conflict can occur due to differing perception about budget . Estimates can prove inaccurate. It is time consuming and expensive . There is the chance of over budgeting ,the budget become meaning less. 18

19. Health budget : A health budget is the portion of the national budget allocated to the health sector , including all ministries and agencies involved in health related activities. A health budget is more than a simple accounting instrument to present revenues and expenses – rather , it is a crucial orienting text, declaring the country’s key financial objectives and its real commitment to implement its health policies and strategies. F or fiscal year 2076/77 the Government Of Nepal has provided NPR 56, 118.80 billion (4.26%) to FMOHP ( Federal Ministry Of Health and Population, out of which 19

20. CONTD.. NPR 4.2 billion (74%) was allocated to P rovincial Government NPR 18.15billion ( 32.2%) allocated to Local Government NPR 34.08 billion (60.4%) remains at the FMOHP 20

21. Types: Regular budget or operating budget: For salary For all types of allowance For telephone ,electricity, water, internet, etc chargers. For general repair and maintenance For stationary etc B) Developmental program budget 21

22. Contd ….. For AIDS control program For leprosy control program For TB control program For Family planning program For child health and health education program For diarrheal disease control program For different type of construction etc. 22

23. Financial flows in Health financing system in Nepal 23

24. 24

25. Ministry Of Finance Ministry Of Health and Population Department of Health Service Regional Health Office D PHO/DHO/Distric t Primary health care centre Health Post 25

26. Reference Financial flow chart-District Health Assessment To Guide the Design of National Health Insurance scheme. Budgeting for health –WHO report College Accounting Coach Nepal Federal Budget FY 2019-20 highlights and key Announcement 26

27. THANK YOU 27