budgeting in health field

1. Budgeting
Remya.G

2. CONTENTS

3. Introduction
• Increasing demand of 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

4. BOUGETTE

5. Definitions
• Budget -anticipated receipts 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.

6. Budgeting in Healthcare

7. NEED OF BUDGET IN 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 different level differs
Organisations
Ways to communicate plans
Public health programme
Resources in to services
Central and State government
Policy & plans for implementation

10. Changing pattern of public 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

11. Health
needs
Fund raising
Fund
allocation
Limited
resources

12. Why budgeting in health 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
TOP DOWN 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 (Sales budget)
Commercial and profit-based
organisations.
Sales budgets are developed based on the
anticipated sales volume

19. Expenditure budget
Based on the expected
expenditure

20. Capital budget
Financial resources for new proposed projects,

21. Operation budget
• Overview of an agency’s functions by
projecting the planned operations usually for
the upcoming year

22. Cash budget
Ensure that the 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 financial resources for innovation

24. Master budget
• Amalgamation of all organizational budgets
•Balance sheet
•Fund flow statement

27. Flexibility-based budgets
• Fixed budgets
• Flexible budgets

28. .
PHC PROGRAMME BUDGETED FOR
5 LAKH POPULATION 7 LAKH POPULATION
PERFORMANCE
Fixed budget

29. 5,00,000 10,00,000 15,00,000
BASIC
COST
5 BEDS 10 BEDSFLEXIBLE BUDGET

30. Fixed budget Flexible budget
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
FIXED BUDGET
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

32. TECHNIQUE OF BUDGETING

33. Techniques of Budgeting
• Incremental budgeting
• Zerobased budgeting
• Programme budgeting(Performance
budgeting)
• Planning Programming and Budgeting
system(PPBS)

34. Incremental budget
• Previous year’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 prepare and understand
Requires little budget expertise from
the part of the manager.
Consistent basis
Better coordination between budgets

38. Disadvantages:
 Totally ignore the 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
 Assumes the 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 planning stage 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 departmental head 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 in USA in 1951
• GOI & some State Govts have accepted it.
• Most useful in public health

48. Problems in Performance Budgeting
• 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
budgeting system.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 aim of 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 between conventional budgeting
PPBS – More importance is given for planning
Conventional budgeting- Planning phase is not
very important

53. Gender budgeting
• Gender Budgeting is a powerful tool for
achieving gender mainstreaming.
• Women 48% India’ s popularion.
• Gender budgeting translate gender
commitments into budgetary commitments

55. Advantages of budgetingADVANTAGES OF BUDGETINGADVANTAGES OF BUDGETING

56. Limitations of budgeting
Over
budgeting
Under
budgeting
Blaming for
outcome
Time
consuming
Behavioural
problem

57. conclusion
• Financing in health 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.