INTRODUCTION:
Budget is the heart of administrative management. It served as a powerful tool of co-ordination and negatively an effective device of eliminating duplicating and wastage. Budgeting, though primarily recognized as a device for controlling, becomes a major part of the planning process in any organization. Budget 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. It involves forecast and future performance and also it contributes to control by anticipating cash needs, planning, necessary financing and establishing the standards for measuring the current performance. Lastly budgeting presents an opportunity for evaluation programmes and policies thereby identifying obsolete or unnecessary activities and giving a call for their discontinuance. It is this sense pre- audit. MEANING: Literally the word ‘budget’ means a leather bag or sachet to carry official paper in. From that association, it came to mean those papers themselves, more particularly the paper containing the financial proposals for the year. The word “budget” derived from the old English word “budgettee” means a sack or pouch which the chancellor of the exchequer used to take out his papers for laying before the parliament, the Government, the financial scheme for the ensuring year. Now the term budget refers to the financial papers not the sack. ABOUT BUDGET:
BUDGET------ A TOOL FOR EFFECTIVE ADMINISTRATION: When budget becomes really an effective tool of administrative management, the executive must have adequate power. The following principles should be followed- Executive programme: Budget should go hand in hand with programming under the direct supervision of chief executive. Executive responsibility: the chief executive must observe the economy in the execution of the programme. Reporting: Budgetary process like preparation of estimates, legislative action and the budget execution must be based on full financial & operating reports coming from all levels of administration. Multiple procedures: The method of budgeting may vary according to the nature of operation. Flexibility in timing: should have provisions to accommodate necessary changes in the light of changing economic situation. Two-way budget organization: Traffic between central offices & the agency offices responsible for budgeting and programming should move in two-way rather than one way street. BUDGET-------- A TOOL FOR LEGISLATIVE CONTROL The budget is the most important tool of legislature control over the public purse. Legislative control signified that no tax can be collected without its prior authorization and no expenditure incurred without its prior approval. Harold A Smith explains the principles of legislative as follows:- Publicity: The main stages of the budget process, which includes executive recommendation legislative consideration and action & budget execution, should be made public. Clarity: The budget should be understandable to every citizen. Budget unity: All receipts should be recovered into one general fund for financing all expenditure. Detailed speciation: Receipts & appropriation should be specific for to transfer the items Prior authorization: Budget execution should stay strictly within the legislative authorization & should be checked by an auditing agency reporting to the legislature. Accuracy: It should be accurate as possible, & there should be no padding of expenditure estimates or providing for hidden reserves by underestimating revenue. PURPOSE OF BUDGETING:
FEATURES OF BUDGET:
IMPORTANCE OF BUDGET: Budget is a Numerical description of expected income & planned expenditure for an organization for a specified period of time. It is a concrete, precise, picture of the total operation of an enterprise/organization/institution in monetary term, i.e. finance. The following points serves the importance of budget:-
PRINCIPLES OF BUDGET: Budget is an operational plan for a definite period, usually a year, expressed in financial terms 7 based on expected income & expenditure.
WHO SHOULD BE INVOLVED IN BUDGETTING? Budgeting is a difficult and responsible job. Your organisation’s ability to do what it has planned to do and to survive financially depends on the budgeting process. Whoever does the budgeting must: · Understand the values, strategy and plans of the organisation or project; · Understand what it means to be cost effective and cost efficient · Understand what is involved in generating and raising funds. To ensure you have all these understandings, it is usually a good idea to have a small budgeting team. This may only mean that one person does a draft budget which is then discussed and commented on by the team. Where staff is competent to take full responsibility for the financial side of the organisation or project, the following would normally be involved in the budgeting process: ü The Finance Manager and/or Bookkeeper; ü The Project Manager and/or Director of the organisation or department. Where staff lack confidence to do the budgeting, then Board members can be brought in. Some Boards have a Finance Committee or a Budget Sub-Committee. It is a good idea to have someone on your Board with financial skills. S/he can then help the staff with budgeting. The budget is the business of everyone in the organisation. At the very least, senior staff should understand the budget, how it has been drawn up, why it is important, and how to monitor it. Where an organisation has branches and/or regions, or several departments, then each branch, region or department should draw up the budget for its own work. These budgets then need to be consolidated (put together) in an overall budget for the organisation. Each branch, region or department should be able to see how its budget fits into the overall budget, and should be able to monitor its budget on a monthly basis. Financial monitoring works best when those closest to the spending take responsibility for the budget. CLASSIFICATION OF BUDGET: Budget consist mainly three sections:-
Budgets can be classified according to Time, Function, and Flexibility. ACCORDING TO TIME:
ACCORDING TO FUNCTION:
ACCORDING TO FLEXIBILITY:
BUDGETTING PROCESS Every head of the office is required to prepare budget estimates in respect of salaries of establishment, contingent expenditure and various other expenses, rent of building etc. In hospital requirements in respect of medicines, diet equipment, hospital contingencies, surgical dressing, clothing, linen etc. are also needed to be worked out. For budget preparation will include:-
· To receive and approve all forecast, departmental budgets, periodic report showing comparison of actual and budgeted income and expenditure. · To request for special studies of deviations from the budget and consider revision of budget to meet changed conditions.
STEPS IN BUDGETING
BUDGET PLAN: It is for the top, management to define the planning premises and provide procedural details. In the committee after discussion, the members have the opportunity to plan amongst themselves. A best possible plan combining the talents of the entire group thus emerges; the approach enhances communication, coordination and harmony of various operational plans and efforts. BUDGET CONTENT: The budget consists of a master budget supported by various functional and supporting budgets. The master budget consists of:- Revenue & Expenditure budget. Balance sheet budget. Funds flow budget. The master budget is supported by functional/departmental budgets. Some of the important functional budgets are: Purchase, personel, engineering and research. The functional budgets are in two parts. Part one deal with the departmental costs. Items over which the departmental head has full control-such as material used, departmental manpower, maintenance expenditure etc. these are not specifically identified with the department such as salaries of hospital administration, general maintenance etc.Part two deal with their performance expressed in terms of numbers to the extent possible. The initial draft budget contain proposal for additional manpower, equipment, space and any other resources or changes in rate structure or operating system. Then these are discussed with the top management, who after deliberating and considering all aspects either accept, reject or suggest changes to the draft budget. Once the budget is accepted, the departmental manager is committed to achieve the targets set. BUDGET PERIOD: The budget period indicates the time span covered by a budget. It is generally one year, coinciding with the financial year, such as in construction or film industry, each job could have a separate budget to coincide with the time required to complete the assignment. These are consolidated in annual budget. Others are supplemented by long range plan, which covers 3 to 5 years period. PROBLEMS, DISADVANTAGES, LIMITATION OR BUDGETARY CONTROL:
SOME BUDGETING ISSUES:-
RESPONSIBILITY OF NURSE ADMINISTRATOR IN BUDGET:
ROLES:
FUNCTIONS:
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