Fiscal planning

1. PRESENTED BY:
SANIL VARGHESE

3. DEFINITION:
Approximation of the cost of an
activity, job, program or project, prepared
for budgeting and planning purposes only.
Not accurate enough to provide a basis for
a firm commitment, it represents only the
budget maker's understanding of the scope
and expense of what needs to be done.

4. THE PREPARATION OF THE BUDGET
ESTIMATES / STAGES OF BUDGET
ESTIMATION
(1) Preparation of the estimates by the Heads of
Departments (Chief controlling Officers and
Estimating Officers) based on the estimates
submitted by the Regional/District Officers.
(2) Scrutiny of the Budget Estimates by –
(a) The Administrative Department
(b) The Finance Department
(3) Final consolidation of estimates in the Finance
Department before presentation to the Legislature.

5. POINTS TO BE BORNE IN MIND
WHILE ESTIMATING BUDGET
(1) Salaries:
(2) Travel Expenses:
(3) Office Expenses
(4) Provision for Stores

6. CATEGORIES OF COST ESTIMATION /
BUDGET ESTIMATE
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Operational costs
Organisational costs (core costs)
Staffing costs
Capital

7. FRAMEWORKS FOR
BUDGET ESTIMATE

8. A. Estimating operational costs
Activity:
Materials
Equipment
Services
Transport
Total cost for
Activity
Unit cost
The unit cost is
the cost of a single
item,
or one unit.
e.g. Cost per day,
per person.
Quantity
This is the number
of units (how many)
you will need for the
activity. e.g. 500
bed hospital, 130
days of nursing
hours.
Total cost of item
Multiply the total
number of
units by the unit
cost.
The sum of all the
individual costs

9. B. Estimating organisational cost
2010
Management:
Salaries/benefits:
Donor liaison:
Public relations:
Fundraising:
Human resourcing:
Administration:
Salaries/benefits:
Equipment:
Stationery:
Governance and organisational development:
Board meetings:
Organisational processes:
Resource centre:
Overheads:
Electricity and water:
Maintenance:
Legal fees and audit fees:
Annual totals:
Total:
2011
2012

10. ADVANTAGES:
• In a business with rapidly changing situations as well as
in the enterprises having non-repetetive character of
activities, estimated costs supply the sensible and
practical standard for control purposes.
• Intangible operations like research, morale development,
public relations and so forth, are not subject to control by
any other standards except estimated costs.
• Estimated costs are superior to historical costs as control
standards. As the estimated cost peers into the future
and incorporates results of forecasts, it provides a sound
basis for evaluating actual costs.

11. LIMITATIONS
• Like the historical cost, estimated costs also fail to
prescribe what the cost should be under scientifically
determined conditions.
• The determination of accurate estimated cost is a
difficult task and depends upon the knowledge and
experience of the analyst.

13. DEFINITION
Revised estimates is an estimate for the probable
revenue and expenditure of the current financial
year under the various heads, framed during the
course of the year based on the actual transaction of
the first five months and anticipation for the next
seven months of the year.

14. GUIDELINES TO PREPARE REVISED
ESTIMATE
The Revised Estimate helps to arrive at the approximate closing
balance and also serve as best guide for the fixing of the
next year’s budget estimates. Therefore the Revised
Estimate has to be fixed in accordance with:1. The transactions as recorded for the first five months
2. The expenditure those are likely to be required for the rest of the
year.
3. The new schemes sanctioned in the course of the year
4. Additional funds already obtained
5. New heads of account opened during the year and
6. Other relevant factor.

15. USES
• A change in the calculation of the cost of a project.
This calculation is made and presented to a buyer,
usually while a project is in progress, and may be
subject to further changes due to both exogenous
factors and endogenous factors.

16. ADVANTAGES
• It includes information not available at the time of
the advance estimate or preliminary estimate, as well
as any necessary data revisions.

18. DEFINITION
Performance budgeting is a system of planning,
budgeting, and evaluation that emphasizes the
relationship between money budgeted and results
expected.

19. Performance budgeting:
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•
•
•
Focuses on results.
Is flexible.
Is inclusive.
Has a long-term perspective.

20. CHARACTERISTICS
• Agency identification of mission, goals, and
objectives;
• Linkage of strategic planning information with the
budget;
• Development and integration of performance
measures into the budget; and
• Disaggregation of expenditures into very broad areas
(such as personnel, operating expenses, and capital
outlays) rather than more specific line-items.

21. STEPS OF PERFORMANCE
BUDGETING
• Define the objectives or areas of accomplishment for the unit or
department. These are called performance areas. Some examples of
performance areas are quality of care, nursing satisfaction, patient
satisfaction, productivity and innovation.
• Identify the operating budget costs for the cost center being
evaluated. In a nursing unit these costs include items such as
salary for the unit nurse manager, salaries for clinical staff,
education costs, and supplies.
• Determine what percentage of available resources should be used
for each performance area.
• Assign the budgeted and costs for the centre to the individual
performance areas on the basis of those percentages.
• Choose measures of performance for each performance area and to
determine the cost per unit of workload based on those measures.

22. OBJECTIVES
Performance budgeting seeks to:
i) correlate the physical and financial aspects of programmes
and activities;
ii) improve budget formulation, review and decision-making
at all levels of management in the government machinery;
iii) facilitate better appreciation and review by the
legislature;
iv) make possible more effective performance audit;
v) measure progress towards long-term objectives as envisaged
in the plan; and
vi) bring annual budgets and developmental plans together
through a common language.

23. COMPONENTS
The performance budgets have certain vital ingredients that
need to be constantly kept in view:
i) a programme and activity classification that represents
the range of work of each organisation;
ii) a framework of specified objectives for each programme;
iii) a stipulation of the targets of work or achievement; and
iv) suitable workload factors, productivity and
performance ratios that justify financial requirements of
each programme.

24. PURPOSE
• To review at every level of organization, so as to
measure progress towards the short term and long
term objectives.
• To interrelate physical and financial aspects of every
programme or activity.
• To facilitate more effective performance audit.

25. BENEFITS OF PERFORMANCE
BUDGETING
• It correlates the physical and financial aspects of
every programme or activity.
• It improves budget formulation, review and decisionmaking at all the levels of department or undertaking.
• It facilitates better appreciation and review of
performance.

26. Sample Performance Budget
It is prepared by the Health Department, City of Milwaukee, to control the
spread of communicable disease in Milwaukee by increasing the immunization
level of two-year olds from 35 percent in 1993 to 90 percent by the year 2000.
Year
1993
1994
Percent of 2 year olds
immunized
35.0%
37.2%
Budget
$4,172,585
$5,813,303

28. DEFINITION
•
Financial audit is an independent appraisal
activity within an organisation for the review of
accounting, financial and other operations as a basis
of services to the management.
•
Financial audit is an independent and systematic
examination of the data, statement records,
operations and performances of an enterprise for a
stated purpose
{Institute of chartered accountants of India (ICAI)}

29. OBJECTIVES OF FINANCIAL AUDIT
• Checking of arithmetical accuracy
• Detection of fraud or error
• Providing an opinion on financial statements

30. PRINCIPLES OF FINANCIAL AUDIT
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Integrity, objectivity and independence of auditors
Confidentiality in audit work
Position of skills and competence to undertake audit
Proper documentation and planning of audit work
Obtaining sufficient and appropriate evidence during
audit
 Conclusive Evidence
Circumstantial or Corroborative evidence
Persuasive evidence

31. TYPES OF FINANCIAL AUDIT
1.
2.
3.
Based on the objective of audit:
a. Statutory or external audit
b. Internal audit
c. Cost audit
d. Propriety audit
e. Secretarial audit
f. Quality audit
g. System audit
i. Tax audit
Based on entities being audited:
a. Company audit/corporate audits
b. Audit of partnership concerns
c. Audit of proprietary concerns
d. Audit of banks
e. Audit of Cooperative Banks, societies
Based on timing and procedure adopted in audit:
 Annual and final Audit

32. FINANCIAL AUDIT IN THE
CLINICAL AREA
1.
2.
3.
4.
5.
6.
7.
8.
9.
Cash receipts and payments
Purchases and stores
Free of charge and subsided services
Care on the missing charges
Maintenance and repair of machinery and equipment
Maintenance of vehicles
Misuse of infrastructure
Boxes and crates
Gift items

33. PERFORMING THE FINANCIAL
AUDIT IN A HOSPITAL
(Using an example: use of pacemaker in a cardiology hospital)
For an analysis of charges and payments, a personal computer is
used to establish databases from the documents. The documents
thus audited are as follows:
• Accounts payable files by manufacturer.
• Medical records and billing.
• The hospital’s pacemaker and lead charges, found in its billing files,
are compared to its pacemaker purchases, listed by manufacturer or
serial number.
• Pacemaker code assigned are checked because incorrect coding can
lead to incorrect payment.
• The profit or loss record is then examined.
• Verify whether charges are consistent from patient to patient.

34. ADVANTAGES OF FINANCIAL
AUDIT
• An effective financial audit leads to improved accountability,
ethical and professional practices.
• It can improve the quality of output, support, decision making
and performance tracking.
• If financial audit can become an inherent part of management
reporting by suggesting remedies for the problem areas
identified, it can truly fit into the fundamental and critical area
of financial reform which focuses on outcomes, of objectives
being achieved at a reasonable cost. It will help in integrating
the internal auditing with the ongoing public financial
management reforms.

36. DEFINITIONS
Cost effectiveness: The minimal cost for a given benefit,
a maximum benefit for the one cost, or a balance of
low-cost and high benefits that has maximum utility.

37. DEFINITIONS
• Cost effectiveness analysis (CEA): an economic analysis in which
all costs are related to a single, common effect, usually in terms of
cost expended per outcome achieved. Or it can be defined as a form
of economic analysis that compares the relative expenditure (costs)
and outcomes (effects) of two or more courses of action. Typically
the CEA is expressed in terms of a ratio where the denominator is a
gain in health from a measure (years of life, premature births
averted, cases prevented) and the numerator is the cost of the health
gain.
• Cost effectiveness analysis or CEA, is a comparison tool to help
evaluate choices. It will not always indicate a clear choice, but it
will evaluate options quantitatively based on a defined model. For
managers, CEA provides peer reviewed evidence for decision
support.

38. DEFINITIONS
• Cost effectiveness ratio: the ratio of total costs of
investment to total accrued benefits, in terms of both
dollars and benefit value.
Cost effectiveness ratio = Σ(all benefits)/Σ(all
costs)

39. SITUATIONS APPROPRIATE FOR
COST EFFECTIVENESS ANALYSIS
CEA is used most appropriately in situations having:
• Interventions with shared goals
• A specific population
• Sound evidence
• Possibly inefficient programs

40. USE COST-EFFECTIVENESS
ANALYSIS (CEA)
Three types of comparisons become immensely easier
with cost-effectiveness analysis:
• Comparisons of different interventions for the same
disease.
• Comparisons of different interventions for reaching
specific segments of a population.
• Comparisons of different interventions for different
diseases.

41. Cost effectiveness analysis:
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Support objective decision making
Brings clarity to data sources and outcomes
Allows for strategic review of organizations
Can be used in a host of operational and benefits
areas including
• Presents evidence that can help gain support for
changes in benefits plans or employer-sponsored
health programs.

42. TIPS FOR INTERPRETATING A COSTEFFECTIVENESS ANALYSIS (CEA)
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Consider perspective
Identify the strategies under comparison
Be aware of the analytic horizon
Analyze all stated assumptions
Examine the sensitivity analysis
Understand all metrics

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REFERENCE:
Nursing division budgeting. Accessed from: http://faculty.ksu.edu.sa/hananAlkorashy/Nursing%20management%20489NUR/6_Nursing_Division_Budgeting.pdf
Budget Manual. Accessed from: http://img.kerala.gov.in/docs/ind/budget_manual.pdf
Revised estimate. Accessed from:http://financialdictionary.thefreedictionary.com/Revised+Estimate
Budgeting. Accessed from: http://www.civicus.org
Satya Saran Chatterjee. An instruction to management-its principles and techniques.12th ed. World
press private Ltd. 1996. Calcutta. P.no. 296-297
Finkler, Mc Hugh. Budgeting concepts for nurse managers. 4th ed. Saunders publishers. USA.
2001
Module 5 overview. Accessed from:
http://www.finance.alberta.ca/publications/measuring/results_oriented/module5_overview.pdf
Unit 11. Accessed from: http://www.egyankosh.ac.in/bitstream/123456789/25369/1/Unit11.pdf
Neelam Kumari. A text book of management of nursing services and education. 1st ed. S Vikas and
company. India. 2011
Fatima Anjum. Text book of nursing administration. 1st ed. Emmes medical publishers. Bangalore.
2010
P V Sathe, A P Sathe. Epimediology and management for health care for all. 2nd ed. Popular
prakashan. Mumbai; 2003.

44. THANK
YOU