GOVERNMENT COLLEGE OF NURSING

RAJNANDAGAON (C.G.)

SUBJECT : NURSING MANAGEMENT

SEMINAR ON : BUDGETING FOR VARIOUS UNITS

AND LEVELS

GUIDED BY PRESENTED BY
MRS. MAMTA NAIK MRS CHANDRIKA SAHU
ASSOCIATE PROFESSOR MSC. NURSING FINAL YEAR
OBSTETRICS AND GYNAECOLOGY GOVT. COLLEGE OF NURSING
NURSING RAJNANDGAON (C.G.)
GOVT. COLLEGE OF NURSING
RAJNANDGAON (C.G.)
 INTRODUCTION

 A budget is a forward financial plan. It provides a prediction of

expected flows of money in and out of the firm in the immediate
future. Normally, a budget will be prepared in advance of a
period of time, usually a year but could be on a monthly or
quarterly basis.
MEANING OF BUDGET
 Literally the word budget means a leather bag to carry official
papers in. this word is derived from the old English word
“budgettee” which means a sack or pouch. Budget is the heart of
administrative management. It is a formal expression of policies,
plans, objectives and goals laid down in advance by top level
authorities of the organization as a whole in a given period of
time.
 DEFINITIONS OF BUDGET

 According to H M Donovan “Budget is a concrete

precise picture of the total operation of an enterprise in
monetary terms”.
 According to Taylor “Budget is a financial plan of

government for definite period.”

 Hospital budget: A Hospital Budget is designed to meet

future service expectations, to provide quality patient

care at minimum cost.
 Nursing Budget: A Nursing Budget is a plan for

allocation of resources based on preconceived needs for a

proposed series of programs to deliver patient care during
one fiscal year.
 OBJECTIVES OF BUDGETING

The main objectives of budgeting include the following:

 To direct all employees to the goal of the organization and plan

activities to meet the goal.

 To forecast the income or inputs from various sources to the

organization.
 To anticipate various activities and requirements for the coming year.
 To calculate the expenditure and cost required for all the activities and

requirements in coming year.

 To allocate the budget depending on the fiscal condition of the

organization and the goal of the operation.

 To promote and motivate activities of different operations to obtain

maximum efficiency.
 To allocate the activities to various members of the organization in an

effective way.
 To exercise a good control over the expenditure during various

activities in the organization.

PLANNING HOSPITAL BUDGET

 A budget is a financial plan that includes estimated

expenses as well as income for a period of time. Budget
is at best a prediction, a plan and not a rule. Budget
planning requires flexibility, ongoing evaluation and
revision. If a budget is not properly written, the hospital
may be unable to deliver medical services at all. So
many expenses and sources of revenue must be taken
into consideration, so the budget process takes an expert
to get through it successfully. Let's find out how to start.
A Budget Plan for health care institutions, which is
simply a plan for future activities, generally consists of
four components-
 A revenue budget: is summarizing the income the

management expects to generate during the planning

period.
 An expense budget: is describing expected activity in

operational financial terms for a given period of time.

 A capital budget: outlines the programmed acquisitions,

disposals and improvements in the institution's physical

capacity.
 A cash budget: consists of money received, cash

receipts and disbursement expected during the planning

period.
BUDGETARY PLANNING IS IMPORTANT FOR

 Analyzing activities for appropriateness.

 Focusing on the future rather than just the present.
 Anticipating problem or opportunities in time to deal
with them.
 Reinforcing motivation to work toward organization
goals.
 BUDGET APPROACHES

Managing Resources: How to manage your existing budget?

1. Review health facilities vision, mission, objectives and its
relation to the importance of budgeting.
2. Identify / discuss steps in preparation of budget showing:

a. Monthly goals
b. Outline specific actions that will be taken
c. Target date or time frame
d. Return of investments
e. Price Index.
3. Manage intra-organizational network to complete an effective
Budget statement, it is essential to have a working link with
different departments / cost centers / key people within the
organization.

Example:
 Review of stock levels of hospital supplies to ensure that they

are not wasted and misused.

 Develop a model to display why require an X amount of staff,

to defend staffing levels and requirements.

 Determine patient dependency to determine the patient need,

planned nursing hours, available nursing hours and the cost of

nursing for each patient.
4. Manage and Control Spending.
a. Identify Controllable and Non controllable Costs as well
fixed and variable costs.
Example: A controllable cost is an increase in price by a
supplier, use less expensive supplier could control this.
A non controllable cost would be a general increase in the
cost of utilities such as electricity, water etc.
b. Monitor Spending
Keep a file of all budget statements received; expenditures
trends can be highlighted and examined.
 TYPES OF BUDGETING
 The two most basic types of budgeting are the
CENTRALIZED and DECENTRALIZED approaches to
budgets.

 CENTRALIZED BUDGET: Centralized budgeting is

developed and imposed by the comptroller, administrator and/or
director of nursing with little to no consultation with lower level
managers.

 DECENTRALIZED BUDGET– Decentralized budgeting, has

the middle level manager Involved in the planning and
budgeting process.
COMPONENTS OF TOTAL INSTITUTIONAL
BUDGET

 The components of total institutional budget are:

 Manpower Budget: this consists of the wages and

salaries of the regular employees and the fees paid to

outside registries through which the institution
contracts short-term employees.
 Capital Expenditure Budget: this involves the large

expense of purchasing of lands, buildings, and major

equipment meant for long-term use.
 Operating Budget: this indicates the cost of supplies,

minor equipment repair and maintenance as well as

other overheard expenses.
 BUDGET PROCESS
1. Assessment
2. Planning
3. Implementation
4. Evaluation
1. ASSESSMENT: Assessment is the first step involved in the
budgeting process. It consists of need identification, a composite of
unit need in term of manpower, equipment and expenses should be
identified during this phase.
 Instructions:
1. Determine hospital revenue.
 Revenue can come from patient payments, tax dollars, donations,
insurance credits.
 Be sure to deduct a percentage of the patient bills that will remain
uncollected, the charity work expected by the hospital.
Continue..
2. Figure out expenses.
 Start with the physical facility.
 How much does it cost to keep up the building or buildings.
 What is the maintenance cost of each department, engineering,

air-conditioning, heat, water, other utilities.

 Know what equipment costs, how much must be replaced per

patient day.
 Include the non-medical cost of each bed in the hospital.

3. Cost of personnel
 Personnel, all employees and ancillary staff, including

consultants, outsourced contracts, perhaps laundry or nurse

staffing services.
 For all employees of the hospital, from janitorial to hospitalists,

figure the fringe benefits the hospital must pay for each.
Continue..

4. Add all medical equipment costs, ongoing and expected

expansion or replacement of new diagnostic equipment.

5. The medical costs of hospital bed.

 How many staff hours are spent on each bed, occupied or not.
 Use this figure as an average to get a cost per patient year.
 Add to that the non medical costs per bed.
 Include every possible cost that keeps that bed in the
hospital.
 Don't forget replacement costs per annum for any and all
patient needs.
Continue..

6. The expansion of hospital

 Are you planning a new wing, or the renovation of an

old one?
 Are you expanding into a new specialty that could

bring in extra revenue?

 Estimate that revenue when planning your budget.

7.Don't forget parking garages, lots, landscaping,

grounds keeping or window washing.

8. Include all insurance for the facility and personnel.

Continue..

2. PLANNING: the steps of planning budget for nursing units are as

follows:
 Assistance of his/her subordinate
 Review of the budget
 Preparing requirements
 Summary of new need
 Submitting to institutional administration
3. IMPLEMENTATION:
 In implementation ongoing monitoring and analysis occur to avoid
inadequate or excess funds at the end of fiscal year.
 If a major change is indicated, the entire budgeting process must be
repeated.
4. EVALUATION: the budget must be reviewed periodically and modified
as needed through the fiscal year.
 HOSPITAL BUDGET

Nature of Budgeted figure Actual Average

expenditure expenditure expenditure
during the year during last three
years
Salaries
Equipment
Contingencies
Medicine
Entertainment
Surgical equipment
Service charge
 PREPARATION OF THE NURSING BUDGET

 Generating and controlling a divisional budget is a major

responsibility of the nurse executive. The budget is a major
operating document of the nursing division. The following steps
illustrate how the nurse executive can prepare the nursing division
budget.

Step one: Review past performance:

 As a starting point, the nurse executive will require to review the
following
a) The financial records from prior financial periods as a basis for
planning.
b) The present activities of the nursing division.
c) The activities that the division plans to institute during the
projected financial period.
 Step two: Review the organization's goals and projections:
a) The nurse executive has to study the organization's goals and
financial projections thoroughly.
b) Items in the major budgetary report that affect the nursing
department should be determined.
 Example of hospital goals and projections:"This division is
going to lose 4 beds from February to November and then gain
12 additional beds after that. A gerontologist and clinical
specialist in gerontology have been added to the staff. This
division will then admit older and sicker patients. If the
shortage of nurses continues, nursing service will have to
consider alternative staffing pattern to deal with this situation".
 Step three: Review of the variances with higher levels
of management:
a) Once the goal statement is finished, it (together with the
actual versus budget analysis done earlier) should be
reviewed with higher level management.
b) The departmental goals proposed should be carefully
considered as well as the variances, their causes, and
proposed corrective actions should be reviewed.
c) Once the final statement for the department is in place,
the new budgeting process can begin in earnest.
 Step four: Actual preparation of the budget:
a) The actual preparation of a new budget can be done
based on a previous budgetary plan, or newly proposed
plan (if a newly developed or modified service).
b) To complete the budget, a budget worksheet is
essential. Worksheet is "a tool used by managers to
prepare their budget".
 It includes a number of columns including information
about:
I. Historic information with old budget.
II. Actual numbers with comments explaining the
variances.
III. Revenue and costs.
FACTORS AFFECTING THE NURSING SERVICE BUDGET

 Types of patient admitted.

 Personnel policies such as hours/day on duty per week,

vacation, sick leaves.

 Size of hospital, number of patient services given.
 Kind and amount of care.
 Proportion of nursing care provided by the professional

nurse and nursing aides.

 Amount and quality of supervision available and

provided, job description and job classification.

 Methods of performing nursing procedures, charting,

record keeping.
 Continue…

Standards of nursing care.

 Responsibility of nursing service for non-nursing

functions such as dietary or housekeeping.

 Method of reporting required by the administration

whether simple or complex.

 Method of appointment of medical staff size and

activities, frequency of treatment and orders.

Affiliation with medical, nursing and midwifery school.
 STEPS IN PREPARATION OF NURSING BUDGET

 Review the goal of hospital.

 Review the objectives of the existing programs.
 Prepare a budget proposal.
 Revise the existing programme with the revised programme
 Compute the expense for each programme.
 Adopt the alternative approach for realizing the proposed plan.
 Compare the proposal to identify the effective one.
 Prepare a budget request which details a fiscal plan for the
preferred programme.
 Present the need of required staffs review the budget
appropriation and actual expenditure for the current year
conjunction with current hospital statistics.
BUDGET COMMITTEE

 The budget committee generally consist of a representative

cross section of the major functional areas or divisions within
the institution, with the designated budget director usually
serving as the chairperson. Budget committee frequently
include, among others those who hold the following position.
 Director of nursing
 Director of human resource
 Director of material management
 Director of engineering and plan operations
 Chief of medical staff
 Chief executive officer, chief operation officer, and/ or chief
financial officer.
NURSE ADMINISTRATORS ROLE IN BUDGETTING

 Visionary
 Planner
 Demonstrator
 Anticipator
 Role model
 Commander
 Facilitator
 BUDGET FOR EDUCATIONAL INSTITUTION

 School should have a separate budget, i.e. principal in

charge of the school of nursing should be the drawing and
disbursing officer and empowered to plan for operating the
funds in all different heads (as per government rules and
regulations and as seemed necessary for running an
educational institutions).
 Both the school/college and hospital should have separate

budget. The budget for the school or college is annually

planned by the nursing director, principal and general
manager and approved by the managing director.
 The budget is classified into three heads as-
 Revenue
 Expenditure
 Capital

 Revenue: It includes assets, fixed deposits, investments,

loan, advances and income.
 Expenditure: It includes capital, recurring annual

mandatory and non recurring.

 BUDGET PROPOSAL FOR NURSING EDUCATION INSTITUTION

In general, the items which are budgeted for the average

government college/ school of nursing in India are-
 Salaries for professional, clerical and domestic staff and

drives.
 Stipends for the students.
 New techniques and supplies.
 Office supplies include stationery and postage.
 Maintenance of library or setting up a new library.
 Contingency fund for educational tours, professional

activities, capping and graduation ceremonies, prizes,

entertainment etc.
 PREPARATION OF BUDGET STATEMENT IN NURSING EDUCATION

 The nurse administration is responsible for the preparation of

the annual budget of the school of nursing
 In conference with the president and other budgetary unit
head
 The administrator or gets on over all view of the budget.
 In the proposal for the next financial year, when the budget
allotted the amount should be made known the staff.
 So that they may establish priorities among items on which
of is proposed to be spent purchase should be made, accounts
maintained in accordance with the financial practice of the
institution.
 STEPS IN BUDGETING FOR COLLEGE OF NURSING

Request the professor of various department and librarian to

present their needs for the coming year by a specified date and
confer with these who have presented such need

Review the budget appropriation and actual expenditure for the

current year in conjunction with statistical date

Ascertain whether any change are contemplated

Prepare the program for which the new budget is to cover

Determine the percentage of salaries of personnel. eg. Principal,
vice principal, professors, lectures, librarian, clerk, peon, etc

Estimate the requirement for the coming year from the

information supplied as the expenditure for supplies, equipments
and repair to date

Prepare a summary of new needs, both personal and material

with data to support the request

Implementation of budget
THE RECURRING ANNUAL MANDATORY EXPENDITURE INCLUDES

 University Administration Fees – Rs. 50,000/-

 Affiliation Fees – Rs.3,00,000/- and every year Rs

50,000/- per course

 Inspection Fees Rs 25,000/-
 State council – Rs 7000/ every year for recognition.
 INC recognition fees Rs 50,000/ per course.
 INC inspection or affiliation fees is 7,500/-
 Re-inspection fees 7000/-
 Affiliation fees to other institution.
 THE RECURRING MONTHLY EXPENDITURE ALSO INCLUDE

 Rent
 Salary
 Stationary items
 Contingency
 Guest relation
 House keeping indent
 Pharmacy indent
 AV aids
 Journals
 Books
 Maintenance: Repair,: Replacement, Electricity, Phone,
Drinking Water, Sewage
 NON RECURRING EXPENDITURE INCLUDES

 DME endowment
 Endowment Fund (property or income left to someone like
insurance) Rs 20,00,000/- in two installments (before one year
10,00,000/ and second year Rs.10,00,000/) which is paid to the
DME office.
 Security fixed deposit Rs.10,00,000/ with the joint account of
registrar of the university and trustees.
 Solvency certificate (state of having more money than one owes) for
Rs. 30,00,000/ from nationalized bank for a period of 5 years.
 University endowment.
 Approximately the Revenue is Rs. 21,24,000/ and where as the
Expenditure is Rs. 20,52,859/
 Annual auditing is done to plan for the next year budget and to
evaluate the current year.
THE RESPONSIBILITIES OF PRINCIPAL/
NURSING ADMINISTERATION

 Participation in planning budget.

 Consult and take assistance of his/her subordinates.
 Request sufficient funds.
 Submit budget request with justification with proposed

expenditure.
 When the budget is allotted, the administrator should

support the budget.

 Since the nurse administrator who is responsible for

budget, she/ he should cover the routine budget control.

 SUMMARY

Budget is the heart of administrative management. It is a

formal expression of policies, plans, objectives and goals laid
down in advance by top level authorities of the organization
as a whole in a given period of time, allocate the budget
depending on the fiscal condition of the organization and the
goal of the operation. A Budget Plan for health care
institutions, which is simply a plan for future activities.