ERA COLLEGE OF NURSING

PRACTICE TEACHING
ON:
BUDGETING

SUBMITTED TO, SUBMITTED BY,

Ms. Sonia Agnes Singh Ms. Kirti Singh

Associate Professor M.Sc Nursing 2nd Year

Era College of Nursing Era College of Nursing

Submitted on – 07.02.2020

BUDGETING
Budgeting:

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

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

Budget is defined as a statement of anticipated results during a stipulated period expressed in

financial and non financial term. Three essential terms in the control process include establishing
standards, comparing result with standard and taking the required corrective action.

Definition:

A budget may be a simple plan of one’s 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 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.

Taylor: budget is a financial plan of the government for a definite period.

Donavan: budget is a concrete precise picture of the total operation of an enterprise in monetary.

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.

Purposes 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.
9. To allow feedback of utilization of moneys spent.

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

Types of budget:

1. Incremental budget: this is based on estimated changes in the present operation, allowing
for a percentage increase for inflation, all of which is added to the previous year's budget.
2. Programme budget: This is one where costs are computed for entire programme, ie. Group
total costs for each service programme, e.g. Maternal and Child Health Programme (MCH),
Family Planning Programme (FPP), Universal Immunization Programme (UIP), etc
3. Open-ended budget: This is a financial plan in which each operating manager presents a
single-cost estimate for the optimal activity level for each programme in the unit, without
indicating how the budget should be brought down if appropriate funding is not available.
4. Flexible budget: This comprises several financial plans, each for a different level of
programme activity. It is based on the fact that operating conditions rarely abide by
expectations.
5. Revenue and expense budget: This is expressed in financial terms and takes the nature of a
Performa income statement for the future. It may be prepared in a detailed form or abstract
statement, reflecting the items of profit and loss under classified headings.
6. Zero-based budgets: This requires the nurse manager to examine and justify each cost of
every programme, both old and new, in every annual budget preparation.
7. Sales budget: This is the starting point in a budgetary programme, since sales, activities give
shape to all other activities. Sales budgets are compiled in terms of quality as well as of
value.
8. Rollover budget: this one forecasts programmes, revenues and expenses for a period more
than a year, to accommodate programmes that are larger than the annual budget cycle.
9. Fixed ceiling budget: : this is a financial plan in which the uppermost spending limits are set
by the top executive. the unit and divisional managers develop budget proposals for their
respective areas.
10. Production budget: this is the budget that aims at securing the economical manufacturing
of products and maximizing the utilization of production resources.
11. Performance budget: This is based on functions not divisions, e.g. direct nursing care, in-
service education, quality enhancement, nursing research.
12. Capital expenditure budget: This is prepared for assuring planned timely capital
investment in the business to ensure the availability of capital at the right time over a longer
period.
13. Cash budget: This is prepared by way of projecting the possible cash receipts and payments
over the budget period.
14. Sunset budget: This is designed to 'self-destruct' within a prescribed time period to ensure
the expenditure is stopped by a predetermined date.

Principles of budgeting: Budgeting needs to follow certain principles:

1. A budget should provide sound financial management by focusing on the requirement of the
organization.
2. A budget should focus on objectives and policies of the organization. It must flow from
objectives and gives realistic expression to the realization of such objectives.
3. A budget should ensure the most effective use of the available financial and nonfinancial
resources.
4. A budget should ensure that programme activities are planned in advance.
5. This process requires consistent assigning of fixed duties and responsibilities to managers at
different levels for planning ?framing and executing the budget.
6. Budgeting should aim at ensuring coordination among the various departments establishing a frame
of reference for managerial decisionsand providing criteria for evaluating managerial performance.

Coordinating efforts Planned in

advance

Under directions Based on objectives

and supervision and policies

Quantity and quality Sound financial

evaluation management

Principles of budgeting

Flexibility Financial and

nonfinancial

Interpretation Consistent
delegation

Appropriate to the Adequate check

nature and balance

Essential Requisitions for budget:

1. Forecasting: Sound forecasting may be related to taking decisions on purchases, expansions

advertising, services working capital needs, etc.
2. Accounting: Well-conceived accounting system is needed to compare the budget
information with actual accomplishment. The cost information tells as to how much it will
cost to produce or provide service.
3. Lines of authority: Budget preparation, operation and supervision need/require clearly
defined lines of authority.
4. Budget committee: The budget committee in an organization needs
 To receive and approve all forecasts, departmental budgets and periodic reports showing
comparison of actual and budgeted income and expenditure.
 To request for special studies of deviation from the budget and consider revision of budget to
meet changed condition.
5. Business policies: clearly defined business policies serve as the basis for budget
preperations.
6. Statistical preparation: information in the form of figures i.e estimates regarding the budget
terms that are essential for budget.
7. Support: top- level management support is essential to ensure the successfulinstallationofthe
budget programme.
8. Period of budget: length of budget period (usually a year) should be specified.

STEPS IN BUDGETING

Collection of past data

assess success and failures of past

setting objectives for forecast year

objectives arranged in terms of indicated units

preparation of reports on expenses

preparation of budget report

review of budget report

evaluation for modification or changrs

Final presenation before board of trustees for decision

Budget for educational institution: both the school/college and hospital should have separate
budgets. The budget for the school and college is annually planned by the nursing director,
principal and general manager and approved by the managing director. The budget is classified
into:

1. Revenue: it includes assets, fixed deposits, investment, loan, advances and income.
2. Expenditure: it includes capital,recurring,annual mandatory and nonrecurring, expenditure.
the recurring annual mandatory expenditure includes the following:
1. University administration fees –rs. 50,000.
2. Affiliation fees – rs- 3,00,000 and every year rs. 50,000 per course.
3. Inspection fees- rs. 25,000.
4. Stte council- rs. 7000 every year for recognition.
5. INC recognition fees – rs. 50,000 per course
 6. INC inspection or affiliation feess – 7500
7. Reinspection fees- rs. 7000.
8. Affliation fees to other institution.

The recurring monthly expenditure also includes the following:

1. Rent
2. Salary
3. Stationary items.
4. Contingency.
5. Guest relation
6. House keeping indent.
7. Pharmacy indent
8. AVaids
9. Journals.
10. Books
11. Maintenance: repair, replacement, electricity,phone, drinking water, sewage disposal.
Nonrecurring expenditure include the following:
1. DME endowment (property or income left to someone like insurance)- Rs. 20,00,000 in
two installments(before first year Rs.10,00,000 and second year Rs. 10,00,000 ) which is
paid to the DME office.
2. Security fixed deposit Rs. 10,00,000 with the joint account of registrar of the university
and trustees.
3. Solvency certificate (state of having more money than one owes) for Rs. 30,00,000 from
nation alized bank for a period of 5 years.
4. University endowment.
5. Approximately the revenue is Rs. 21,24,000 whereas the expenditure is rs. 20,52,859.
Annual auditing is done to plan for the next year budget and to evaluate the current year
budget.
6. Endowment fund

Roles and Responsibilities of the Nurse Administrator/Principal in Budgeting

 Participation in planning budget.

 Consult and take assistance of his/her subordinates.
 Request sufficient finds
 Submit budget request.
 Support the budget when it is allotted.
 Cover the routine budget control
Advantages of budgeting process:

1. Budget helps plan for detailed programme activities.

2. It helps fix accountability.
3. It states goal for all units, offers a standard of performance and stresses the continous nature
of planning.
4. It encourages managers to make a careful analysis of operations and base decision after
careful consideration.
5. Weakness in the organization can be revealed where there are no facilities available.
6. Staffing, equipment and supply needs can be projected and waste be minimized.
7. Financial matters can be handled in an orderly fashion.
8. Agency activities can be coordinated and balanced.
9. Budget helps in just measurement of performance.

Disadvantages of budgeting:

1. A budget may become an end in itself instead of the means to achieve an end.
2. Budgetary goals may curb agency goals and gain autocratic control of the organization.
3. Over budgeting is a big danger which may render a budget meaningless and expensive.
4. Skill and experience are essential for successful budgetary control.
5. Budgetary planning is expensive and time consuming.

Conclusion:

Budget can be regarded as the heart of administrative management. It provides a definite

direction to an organization to move into, not only the managers but everyone in the organization
knows what he or she has to achieve in a given time frame. It is a big tool for effective
aministration in any organization.
 Bibiliography:

 I Clement. Management of nursing services and Education.1 st ed. Elsvier publication;

NewDelhi. 2011: Pp- 219-226
 Basavanthapa BT.Nursing administration. 3rd ed. Jaypee brothers medical publishers; New
Delhi;2014:Pp-334-343.
 K. Deepak. A Comprehensive Text Book on Nursing Management. second
edition.2019:EMMESS medical Publishers; Bangalore. page no-190-197.
 Vati Jogindra.principles and practice of Nursing Management and administration. first
edition jaypee brothers medical publishers pvt ltd; New Delhi. 2013.pg no. 576-589.