FISCAL PLANNING

INTRODUCTION
Planning skills are an essential function of Nursing Management, so that personal as well as organizational needs and goals can meet. Planning has specific purposes and is an approach to strategy making. Planning also represents specific activities that lead to achievement of objectives.

Fiscal planning is important, but often neglected element of planning process. Fiscal planning must reflect the philosophy, goals and objectives of the health care organization. As with elements of planning, fiscal planning must be proactive, flexible and clearly stated in measurable terms.

The intended goal of fiscal planning is to create a budget that will meet the needs of the organization and its units. While making, the managers should look into the future and try to predict what would happen in the future

Meaning of Budgeting
Literally the word Budget means, a leather bag to carry official papers in.. The word budget is derived from the English word; budgettee means a sack or pouch which the Chancellor used to take out his papers for laying before the parliament, the government, and financial scheme for the ensuring year. Now the term budget refers to the financial papers, not the sack.

Definitions
Budget is a concrete precise picture of the total operation of an enterprise in monetary terms. (H.M.Donovan) Budget is the plan for the acquisition, allocation and utilization of financial resources.(John.K.W) Budget is the planned expenditure outlines of a retailer for a given time period based on its expected performance.(www.prenhall.com)

Purposes
1. It enhances fiscal planning and decision making 2. Budget supplies the mechanism for translating fiscal objectives into projected monthly spending pattern 3. It recognizes controllable and uncontrollable cost areas 4. It offers a format for communicating fiscal objectives

5. Budget allows feedback of utilization of resources. 6. It helps to identify problem areas and facilitates effective solution 7. It provides means for measuring and recording financial success with the objectives of the organization.

Features of Budget
1. Budget should be flexible 2. It should be the synthesis of the past, present and the future 3. It should be the product of cooperation of executives and the department heads at different levels of management

4. It should be in the form of statistical standards and should be mentioned in specific numerical terms

5. The budget should have support of the top level management throughout the period of its planning and supplementation

Principles of Budgeting
1. It should provide sound financial management by focusing on requirement of the organization 2. It should focus on the objectives and policies of the organization. It must flow from objectives and gave realistic expression to the way of realizing such objectives. 3. It should focus on the most effective use of scarce (rare), financial and non financial resources

4. This process requires consistent delegation of responsibilities and allocates the duty to a single person. (Appoint a financial officer with fixed duty for planning the budget) 5. It should include coordinated effort of all the departments in an organization. 6. For setting budget target, atmost care is a must. 7. Budget period should be appropriate to the nature of the business.

8. It should prepare under the direction and supervision of the administrator or financial officer. 9. It necessasitates a review of the performance of the previous year and evaluation of adequacy of both in quality and quantity. 10. It should be prepared and interpreted consistent throughout the organization

TYPES OF BUDGETING
I. Plan and Non plan budgeting II. Zero budgeting III. Capital budgeting IV. Revenue budgeting and Expense budgeting V. Performance based budgeting

I. PLAN BUDGETING
The

organizational Objectives, mission, vision and policies are reviewed before the commencement of the next financial year. The entire expenditure is forecasted in terms of input and output of the organization. Based on the comparison with the past year expenditure and turnover

A plan budget is a forecasted budget. This budget is usually made for attaining an idea of expenditure in different areas of functioning. Thus the organization can have in hand prior information regarding expected expenditure. Planned Budget is used in planning the entire budget of a nation as it forecasts the entire need of the nation for the next financial year.

II. NON PLAN BUDGETING

Every

organization or nation may face unexpected crisis even though it is functioning in a planned budget. In such situations the expenditures has to be regulated as per the intensity of the crisis. It is in this time the non plan budget comes in to action.

A non plan budget is prepared immediately after the crisis occurs and there will be an administrative level meeting, in which a proposal of budget to meet the crisis is made. Examples for non plan budget was the budget prepared after the occurrence of wars, natural calamities like floods, volcanic eruptions.etc which is happen sudden and unexpectedly.

III. ZERO BUDGETING:

Zero Budgeting applied first time in Texas, USA in year 1971.In India; it becomes a focus of discussion among policy makers and government only a few years ago. Now it has been adopted by many departments of Indian government and also by some state governments like Maharashtra and Rajasthan

 The

term Zero budgeting is a technique of planning and decision making which reverse the working process of traditional budgeting. In traditional budgeting, departmental managers justify only increase over the previous year budget and what has been spent is automatically sanctioned

 In

Zero budgeting, every departments function is reviewed comprehensively and all expenditures must be approved, rather than only increase. No reference is made to the previous level of expenditure.ZBB requires the budget request be justified in complete detail by each division manager starting from zero-base.

Definition of ZBB
ZBB

is defined as, operating, planning and budgeting process which requires each managers to justify the entire budget request in detail and shifts the burden of proof to each manager to justify why he should spend any money. This procedure requires that all activities and operations be identified in decision packages which will be evaluated and ranked in order of importance by systematic analysis. By

Steps involved in implementing ZBB

1. Identification of Decision Units Different departments are classified as decision Units Each decision units are under different senior officers. They have certain responsibility for producing goods or services, of for carrying out certain activities spending the funds of the organization to achieve the goals or targets laid for them.

2.Preparation of Decision Packages (DP)

Decision Packages is the building block of the ZBB concept These DPs are independent activities, each capable of being measured in terms of costs incurred, targets completed and objectives achieved. These are the activities or programme on which the manager in charge can take decision to carry out or drop

The Decision Packages contains the following informations;

Goals of Decision Units. Description of the programme and activity Targets Benefits expected from the performance Consequences of not approving the packages Projected or expected costs

3.Evaluating

and ranking packages in the order of importance of Decision Packages

Evaluation of packages is carried out in the basis of benefits and costs. . It is measured by using cost benefit ratio or CBR. The alternative in each programme or activity which provides the best CBR is chosen The decision packages of individual DUs are brought together and ranked in the order of importance on the basis of CBR and makes a lists

 From

the list, Decision Packages are chosen from the top, one after another according to the importance. This should cover all the activities of all the departments means the need of the entire organization.

4. Allocation of resources to each unit

Allocation

of resources to each unit based up on ranking. Thus, emphasis is placed up on resource allocation according to the contribution of each unit.

Advantages of Zero Budgeting

efficient allocation of resources based on the needs of organization drives managers to find costeffective ways to improve operations detects inflated budgets increase staff motivation by providing greater initiative and

 increase

communication and coordination within the organization identifies opportunities for outsourcing forces cost centres to identify their mission and their relationship to overall goals. useful for service departments, where the output is difficult to identify

Disadvantages
Difficult to define decision units and decision package as it is time consuming and exhaustive forced to justify every detail related to expenditure It must be clearly understood by managers at various levels to be successfully implemented. Difficult to administer and communicate the budgeting because more managers are involved in the process

IV. PERFORMANCE BASED BUDGETING

A Performance Based Budget is an inputoutput budget. It considers both cost and results. It highlights the end results to be achieved rather than money to be spent. It helps in knowing whether the organization is getting adequate results for the money spent.

 It

lays immediate stress on the achievement of specific goals over a period of time. It requires periodic preparation of performance reports and such reports should be analyzed for finding out any variation from the budget goals.

Definition:
1. According to CARTER, Performance based budgeting use statements of missions, goals and objectives to explain why the money is been spent. It is a way to allocate resources to achieve specific objectives based on program goals and measured results.

According to SEGAL and SUMMERS, Performance Based Budgeting comprises of three elements, -the result (final outcome) -the strategy (the different ways to achieve the final outcome) -activity or out comes (What is actually done to achieve the final outcome)

3. Performance based budget is a goal or set of goals, to which money are connected (i.e. allocated).From these goals, specific objectives are delineated and funds are then subdivided among them.(Harrison)

Functions of Performance Based Budgeting

1. A performance based budget informs the public about the total expenditure of various services, as well as the anticipated benefits which the buyers will derive 2. It informs the public about the possible destinations where these expenses go , along with the cost of the expected benefit.

3. A Performance based budget permits the policy and decision makers like executives, elected officers, budget officers, managers and others to have a transparent view of the tradeoffs between alternative expenditure plans, thus make more up-todate, beneficial and effective allocation of the financial

Advantages of PBB

1. Shorten the lengthy traditional budget and reporting procedures (ex. feeder applications multiple spread sheetetc) which saves money and time simultaneously. 2. Managers in the public sector are empowered for effective promotion of resources. 3. Makes the agencies more focused on a constant basis on the reduction of resources, as being their highest priority activity. 4. Improves performance on a continuous basis

V. REVENUE BUDGETINGIt refers to anticipated income from the sales of products and services, in the case of hospitals, by providing direct patient care. Patient service revenues generates from, Providing hotel services, viz.bed, room, diet, housekeepingetc. Providing professional and other support services, viz. X-rays, pathology..etc to operating. Providing professional and other

EXPENSE BUDGET
Expense

budget includes the classification of expenses in an enterprise such as staff, labour, medical consumables, general stores, equipment, maintenance, rent, water, power, office, supplies etc. The process of developing expense budget requires an estimate of the departmental workload, and translation of the workload into

In short, Revenue and expense budgets can be prepared in relation to responsibilities centers in the hospital. Example for responsibility centers are various departments in the hospitals such as medical, surgical, O T etc. Here in responsibility centre, accounting system of budgeting is doing. It means, a system of accounting tailored in an organization

VI. CAPITAL BUDGETING

Capital budget is the estimated fund requirement for capital items needed for growth, for providing new facilities and for replacement of worn equipment, machinery and furniture. It involves creating facilities for carry out activities involving capital expenditure whose returns accure over a number of years.

The decision on capital budgeting is primarily based on needs of patient and existing alternatives effects of additional equipment on income and expenditure availability of funds

There will always competing demands from various departments vis--vis the common requirement for the hospital as a whole and funds are not generally available for meeting all the demands.

Priorities for capital budgeting must therefore need two types of analysis. Cost benefit analysis Cost effectiveness

a. Cost benefit analysis

It is a tool which is useful in setting priorities for various courses of action to meet objectives and provide an estimate of the net financial value associated with each course of action. Example: manpower and labour, material and equipment facilities. All inputs and outputs have to be converted into monetary terms because of all inputs (ie, costs) and all outcomes (ie, benefits) are valued in money terms.

Example for some outputs for cost evaluation is;

Cost of department. ( e g: blood bank, ICU, OT etc) Cost of emergency services. Cost of radiology services Cost of outpatient laboratory services.

 A clear

statement of objectives. Identifying all alternative actions that can achieve the objectives Identifying all costs and all benefits with each alternative. Covering all costs and all benefits for each alternative to monetary value and quantitative evaluation of costs and benefits of each. Selection of the best cost-effective approach.

Steps for cost- benefit analysis

b. Cost effective analysis (CEA)

Cost effective analysis is the technique for choosing from alternative courses of action, preferred choice when objectives are not very clear, in such areas as sales costs or profits. In CEA decision criteria may include; Achieving a given objective at least. Attaining it with reasonable resources or Providing a trade-off of cost for effectiveness

CEA is not an analysis for cost reduction- It is an optimization approach to a specific set of goals. After the objectives has determined, CEA considers the number and type of alternatives available. After determining the possible alternatives, resources requirement for each alternative, viz -people, money, equipment and facilities are determined and converted to monetary costs. The analysis first determines the criteria to be used in determining the effectiveness of each cost factor and then prepare cost effectiveness models for each alternative.

Some of the criteria for effectiveness are ;

1. Capacity 2. Accuracy 3. Degree of physical acceptance 4. Quality of output 5. Performability 6. Professional acceptance 7. Flexibility 8. Power consumption 9. Personal safety

A CEA depends on a series of models. Cost models are developed to show cost estimate for each alternative and effectiveness models developed to show relationship between each alternative and its effectiveness. Then synthesizing these results may be made to show the relationship of costs and

Example; At 3 different cost

levels(C1,C2,C3), three different levels of effectiveness (E1,E2,E3) are assumed to be found and four alternatives (A1,A2,A3,A4) are considered. The purpose of cost effectiveness analysis is to relate an effectiveness measure to various costs, this example indicate that at E1 and C1 alternative, A1 is the most cost effective. At E2 and C2 alternative A2 is the most cost effective and alternative A3 is the most cost effective

MID TERM APPRAISAL (MTA)

Midterm

appraisal (MTA) takes mid course stock of the economy with particular references to the projected macro-economic aggregates. The MTA makes an assessment of the public finance and highlights the total investment of the plan initially estimated.

a. Market appraisal
The importance of the potential market and the need to develop a suitable marketing strategy cannot be emphasized. Hence efforts are made to;

Examine the reasonableness of the demand projections by utilizing the findings of available surveys. Asses the adequacy of the marketing infrastructure in terms of promotional efforts, distribution network, transportation network etc. Judge the knowledge, experience and competencies of key marketing personnel.

b. Technical appraisal
The technical review is done by qualified and experienced personnel available in the institution and or outside experts.

The technical review done by financial institutions focuses mainly on the following aspects; Process of manufacture Raw materials Location and site Building Equipments

c. Financial appraisal
The financial appraisal seeks to assess the following ; Reasonableness of the estimate of capital cost Reasonableness of the estimate of working results Adequacy of rate of return Appropriateness of the financial pattern

d. Economic appraisal

The methodology adopted by financial institutions for the purpose of economic evaluation is called Partial Little Mirrlees approach. This approach looks at two other economic indicators; 1.effective rate of protection, 2.domestic resource cost.

e. Managerial appraisal
In order to judge the managerial capacity of the promoters, the following questions are raised; How resourceful are the promoters How sound is the understanding of the project by the promoters? How committed are the promoters?

BUDGET ESTIMATE
Budget

estimate is the calculation of the amount of expenditure that is expected in an organization in a year. This estimate is based on the previous year expenditures and according to the new programmes and projects of the organization. This is also influenced by the market rate fluctuations. This helps the top level managers in proper administration of the organization without financial crisis.

While preparing a budget estimate forecasting of the coming events is a must. It should be a synthesis of the past, present and the future. The financial managers should be aware about, what happened in the organization, what is happening in the organization and what will happen in the organization.

REVISED ESTIMATE
It

is revising the estimate of the budget during the budgetary period. A revised budget is prepared immediately after the crisis occurs in order to face the situation , It is due to the unexpected crisis even though it is functioning in a planned budget.

In such situations the expenditures has to be regulated as per the intensity of the crisis. Ex: An unexpected earth quake will lead to loss of lives, destruction of buildings, destruction of farm lands, poverty in a country, In order to cope up with this situation, the Budget should be revised.

PREPARATION OF A BUDGET

ESSENTIAL REQUISITION FOR PREPARATION OF A BUDGET 1. Forecasting- Sound forecasting may be related to purchase, expansion of activities, advertising, and other working needs 2. Accounting- Well conceived accounting system must be necessary. 3. Line of Authority- Budget preparation, Operation and supervision requires clearly defined line of authority. Usually in nursing schools and colleges, Principal is the head of the budget committee.

4. A budget committee A budget committee is necessary, while preparing the budget. Principal in college of nursing is the head of the budget committee. Other members include representatives from the management, head of the various departments, and administrative officer. Functions includes; (a) Forecasting the needs of the institution. (b) Revision of Budget (c) Further analysis of the budget

5. Business policies- There should be clearly defined business policies, which serves a basis for budget preparation 6. Statistical information- Budget should be in the form of figures 7. Top level management support-It is essential to ensure successful instillation of the budget. 8. Periods of Budget- The length of budget period should be clearly

STEPS IN BUDGETING
1. Review the goals of the agency to

identify activities of the highest priority. 2. Review the objectives of existing programmes and return of the proposed programme to ensure that the achievement of this objective will support the agency. 3. Existing programmes are revised and design the proposed programme for maximum goal achievement. 4. Man power and operating expenditures

5. Alternative methods are identified for realizing designated objective and price of each alternative should be cost effective. 6. Comparisons are made to determine which alternative is most cost effective 7. A budget requisite is developed which details a fiscal plan for the preferred program and indicates alternative methods for meeting the same objective and explains why

PREPARATION OF BUDGET FOR A HOSPITAL

1.Preparation of quantitative expression of plans of hospital operations like; Patient days of care Number of investigations Number of procedures Number of surgeries Number of patients visited OPDs. 2.Preparation of economic forecasts in respect of some new services to be started, new persons to be employed, new materials to be procured,..etc. 3. Establishment of quantifiable goals of budget in consultation with the finance

4.The chairman of the budget committee, i.e. the finance officer/Accounts Officer, he will prepare the budget package and written instructions to different heads of the departments/designated members of the budget committee. 5. They will analyze the statistical details available in their departments and accordingly formulate their departmental budget estimate. 6. Presentation of the budget estimate to finance officer/Chairman of the committee, explaining the details to him for incorporating their departmental budget estimates to the hospital budget.

7.The chairman will prepare the revenue budget of the departments, summarize departmental expense budget. 8. The finance officer/Chairman of the budget committee will prepare preliminary operating budget for whole hospital. He will also prepare the cash budget. 9. Summarizing the total budget of the hospital, including cash budget and

10. The final budget is discussed in the budget committee for consensus and approval, obtaining signatures of every member as a token of accent. 11. Presentation of the budget before the governing board will full deliberations and decision of the budget committee 12. Communicating the finally approved budget to all the heads of the departments and heads of the

PREPARATION OF BUDGET IN NURSING SERVICE While preparing the Budget for nursing service, the expenditure will have to reflect; a. The amount of money spend towards basic pay and allowances of all categories of nurses employed in the institution per annum b. The amount of money spend towards staff welfare activities , Pension ,P.F, and Gratuity per annum c. It should include the expenditure involved towards nursing staff development

d. It should also include the expenditure towards extra- carriercular activities organized by the organization during the period under reference. Income is usually not shown in the preparation of budget in nursing service, since the income earned in the hospital through patients payment for Nursing services are incorporated in the general budget.

ROLES AND RESPONSABILITIES OF NURSE SERVICE ADMINISTRATOR IN BUDGETING 1. It should be a cooperative activity of the nursing superintendent and other supervisors 2. Should be prepared under the direction and supervision of financial officer 3. Consult and take assistance from their subordinates about their opinion regarding the needed things in the department

4. Request sufficient funds to suggest a sound programme. 5. She should cover the routine budget control

PREPARATION OF BUDGET FOR SCHOOL/COLLEGE OF NURSING

The Budget consist of 2 parts; The Income and Expenditure. In the process of Budget making, the administrator mainly concerned with the Control of expenditure, however the income limits the expenditure of the nursing unit. Therefore, the income budget should be estimated first. The budget affects the faculty and students; hence all should be involved in the

1. The administrator should have the knowledge of educational function and requirements of nursing colleges 2. She must have an understanding of the source of income and expenditure of the organization. 3. Expenditure from gifts or grants for specific purposes are usually authorized when the funds are allocating. 4. Expenditures from general or unrestricted funds may be made as necessary in accordance with provision budget.

5. Tuition fees are paid in advance at the beginning of each year. 6. All that are affected by the budget are involved in the budget making. Faculty and students representative must be on the advisory committee. 7. The administrator should get all view of the budget in needs and available finances. 8. The income should be estimated prior to estimating expenditures because income limits the

CONCLUSION

We all know that budget is a formal expression of policies , plans , Objectives and goals laid down in advance to top level management of the organization in a given period. It helps I forecasting the future performance and also it contributes to control by anticipating cash needs , planning necessity financing and establishing the standards for measuring the current performances. In short we can say that budgeting is essential for the proper functioning of the Organization by proper

BIBLIOGRAPHY
1.Rebacca A. Patronios Jones.Nursing Leadership and management. Jaypee Publications. New Delhi.First edition 2008.PP.265-278 2.B.M.Sakharkar.Principles of Hospital administration. Jaypee publications.New delhi.First edition 2008.PP-152, 169,172. 3.B.T.Basavanthappa.Nursing administration.Jaypee Publications, New delhi.First Edition 2002,PP-152-164. 4.www.wikipedia.com 5.www.scribd.com 6.www.researchnet.com 7.www.nursing planet.com