SEMINAR ON

BUDGET ESTIMATE, REVISED

BUDGET AND PERFORMANCE
BUDGET)

SUBMITTED ON: 2019

SUBMITTED TO: SUBMITTED BY:

MRS. REGHUPRIYA RESHMA ANILKUMAR

DEPT OF MSN MSC NSG.2ND YEAR,

TOCON TOCON

BANGALORE. BANGALORE.
 FISCAL PLANNING

BUDGET

Introduction
Budgeting is the heart of administrative management. It serves as a powerful tool of
co- ordination 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.

Definition:
A budget may be a simple plan of ones 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 a 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 plans.

Features 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.

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.

Principles of Budget
Budget is an operational plan for a definite period, usually a year, expressed in
financial terms and based on expected income and expenditure.

1. Budget should provide sound financial management by focusing on

requirement of the organization

2. Budget should focus on objectives and policies of the organization. It

must flow from objectives and give realistic expression to the way of
realizing such objectives.

3. Budget should ensure the most effective use of scarce financial and
non financial resources.

4. Budget requires that programme activities planned in advance.

5. Budgetary process requires consistent delegation for which fixed duties

 and responsibilities are required to be allocated to managers at different level
for framing and executing budget.

6. Budgeting should include coordinating efforts of various departments

establishing frame of reference for managerial decisions, and providing a
criterion for evaluating managerial performance.

7. Setting budget target requires an adequate checks and balance against

the adoption of too high or too low estimate. Utmost care is a must for
fixing targets.

8. Budget period must be appropriate to the nature of business or service

and to the type of budget.

9. Budget is prepared under the direction and supervision of the

administrator or finance officer.

10. Budget is to be prepared and interpreted consistently throughout the

organization in the communication of planning process.

11. Budget necessitates a review of the performance of the previous year

and an evaluation of its adequacy both in quantity and quality.

12. While developing a budget, the provision should be made for its
flexibility.

STEPS IN BUDGETING

1. Collection of past data.

2. Assess success and failure of the past.
3. Setting objectives for forecast year.
4. Objectives arranged in terms of indicated units.
5. Preparation of reports on expenses.
6. Preparation of budget report.
7. Review of budget report.
8. Evaluation for modification or changes.
9. Final presentation before board of trustees for decision.

BUDGET ESTIMATE:

It is approximation of cost of an activity, job, programme prepared for budgeting and

planning purposes only. It is not accurate enough to provide a basis for a firm commitment.

An essential requisition for budget estimation will include:

 1. Forecasting: Sound forecasting may be related to making decisions on purchase,
explanation, adverting services, working capital needs etc.

2. Accounting: Well conceived accounting system must be needed to compare the

budget information with actual accomplishment. The cost information tells as to how
much it will cost to produce or give services.

3. Lines of authority: Budget preparation, operation and supervision need/ enquire

clearly defined lines of authority.

4. Budget committee: Budget needs budget committee in an organization to receive

and approve all forecast, departmental budgets, periodic reports showing comparision
of actual and budgeted income and expenditure.

5. Business policies: Clearly defined business policies serve as basis for budget
preparations.

6. Period of budget: Length of budget period ( usually a year) should be specified.

7. Statistical information: In the form of figures i.e, estimates regarding the budget
terms are essential for budget. Top level management supports are essential to ensure
successful installation of the budget programme.

TYPES OF BUDGETING
There are three common budgeting methods:

 Top-down Budgeting
 Bottom-up Budgeting
 Iterative Budgeting

TOP DOWN BUDGETING

Top-Down Budgeting is the term given to a budgeting process based on estimating

the cost of higher level tasks first and using these estimates to constrain the estimates for
lower level tasks. Top Down Budgeting A crucial factor for successfully implementing this
method for estimating budgets is the experience and judgment of those involved in producing
the overall budget estimate.

ORGANISATIONS NEED THE ABILITY TO ALLOW:

 Financial Managers to establish centralized budgets to control organization spending.
 Project Managers to establish projects budgets that consume the centralized
organization budget and control project spending.
 Takes less time
 Promotes upper-level commitment
 Involves no multilevel participation
  Lower management better understands what upper management expects
 Presented down the ladder

DISADVANTAGES

 Translating long-range budgets into short-range budgets.

 Problems scheduling projects in a "sub- optimal way" to meet the
strategic goals Result of top management's limited knowledge of
specifics of project tasks and activities
 Competition for funds among lower-level managers, try to secure
adequate funding for their operations.
 May cause unhealthy competition. This process is a zero sum game--
one person's or area's gain is another's loss.
 Subordinate managers often feel that they have insufficient budget
allocations to achieve the objectives

ADVANTAGES

 Aggregate budget is quite accurate, even though some individual activities subject to
large error
 Budgets are stable as a percent of total allocation and the statistical distribution of the
budget is also stable leading to high predictability
 Small costly tasks don’t need to be identified early in this process - factored into
overall estimate

BOTTOM UP BUDGETING
Bottom Up Budgeting Sometimes called Zero Based Budgeting. Bottom-up budgeting begins
with identifying all the constituent tasks that are involved in implementing a project and
working out the resources and funding required by each

 Provides the opportunity to create organisation level budgets by rolling

up project budgets
 Create centralised project level budgets from their sub-project budgets
(WBS)
 This method of budgeting provides the following benefits:
 Project Managers have the flexibility to define their project budgets
independently
 Financial Managers have the ability to centrally review the total project
budget/s
 Takes more timeTakes more time
 Involves cross-section of the organisationInvolves cross-section of the
organisation
 Presented up the ladderPresented up the ladde
 Seeks participation at all levelsSeeks participation at all levels
 Encourages commitment to the planEncourages commitment to the
plan

DISADVANTAGE
  Top management has limited influence over the budgeting process,
 Individual tend to overstate their resource needs because they suspect
that higher management will probably cut all budgets by the same
percentage
 More persuasive managers sometimes get a disproportionate share of
resources
 A significant portion of budget building is in the hands of the junior
personnel in the organisation
 Sometimes critical activities are missed and left unbudgeted


ADVANTAGE

Is in the accuracy of the budgets for individual tasks

Clear flow of information • Use of detailed data available at project
management level as basic source of cost, schedule, and resource requirement
information.
Participation in the process leads to ownership and acceptance

Iterative Budgeting
Iterative means to repeat or do again. A combination of top-down and
bottom-up budget building Higher project level estimated (top down)
Lower level costed (bottom up) The two costs negotiated and
reconciled

Disadvantage
• Is in the relative inefficiency and time consuming nature of the
negotiations over the budgets
. • Process may not work well when communication channels are either
informal or blocked between lower-level managers and senior
management

Advantage
• It promotes employee involvement and stimulates a high degree of
information flow between those involved in the project at different
levels • Both senior management and lower level managers closer to
the actual process participate in the budgeting process

REVISED ESTIMATE:

A change in the calculations of the cost of a period. 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 and endogenous factors.
 These are midyear review of possible expenditure, taking into account the trend
of expenditure, new services and new instruments of services.

PURPOSES:

 To bring changes in proposed estimate

 To ensure adequate utilization of resources
 To reduce miss utilization of resources

PERFORMANCE BUDGET:

It is the practice of developing budgets based on the relationship between programme funding
level and expected results from the programme.

OBJECTIVES:

 Correlate the physical and financial aspects of programme and activities.

 Improve budget formulation, review and decision making at all levels of management
in the government machinery.
 Facilitate better appreciation and review by the legislature
 Make possible more effective performance audit.
 Measures progress towards long term objectives as envisaged in the plan and
 Bring annual budgets and developmental plans together through a common language.

COMPONENTS OF PERFORMANCE BUDGET:

 A programme and activity classification that represents the range of work of

each organization
 A frame work of specified objectives for each programme
 A stipulation of the targets of work or achievements
 Suitable workload factors, productivity and performance ratios that justify
financial requirements of each programme.
STEPS IN PERFORMANCE BUDGET:

1. Establishing a meaningful classification of public expenditure in terms of functions.

2. The establishment, improvement and extension of activity schedules for all
measurable activities of the government.
3. The establishment of work output, employee utilization, standard or unit costs by
objective methods.
4. Resource allocation is followed by budget execution. Budget execution must ensure
achievement of objectives and for that following budgetary and managerial
considerations must be kept in view.

Steps in effective budgeting process

 • Determine the requirements: inputs from all levels of hierarchy must be
obtained

• Develop plan: Budget for 12months is set. Zero-Based budget

• Analyze and control the operation: continuous monitoring is essential

• Review the plan: Periodic revision and modification

Steps in budgeting for college of nursing

• Request for the needs of various departments

• Review the budget appropriation and actual expenditure for the current year

• Contemplated changes

• Salary fixation

• Requirement estimation

• Summary of new needs

The steps of planning budget for nursing unit

• Assistance of his/her subordinates

• Review of budget

• Ascertain changes

• Preparing requirements

• Summary of new needs

• Submitting to institutional administrator

Roles and Responsibilities of the Nurse Administrator/Principal in

Budgeting
– Participation in planning budget
– Consult an 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:

 Budget plans for detailed programme activities.

 They help fix accountability by assignment of responsibility and authority.
 They state goals for all units, offer a standard of performance and stress the
continuous nature of planning.
 Budget encourages the managers to make a careful analysis of operation and to base
decisions on careful consideration.
 Weakness in the organization can be revealed where there are no facilities available.
 Staffing, equipment and supply needs can be projected and waste minimized.
 Financial matters can be handled in an orderly fashion.
 Budget helps managers in integrating personnel efforts within the organization
towards common goal.
 Budget acts as controlling devices to correct any if the expenditure of a given activity
exceed the allotted budget at any point of time.
DIS ADVANTAGES:

 Budgetary goals may suppress agency goals and gain autocratic control of the
organization.
 There is danger of over budgeting, the budget becomes meaningless and expensive.
 Forecasting is required but uncertain because budgetary control is subject to human
judgment, interpretation and evaluation.
 Skills and experience are required for successful budgetary control.
 Budget planning is time consuming and expensive.

CONCLUSION:
Budget covers a designated time period usually a year. The budgeting process begins when
top management sets the strategies and goals for the organization.

The budgeting process helps management learn from past experiences. The
management can critically look the success or failure of the past budget and isolate errors and
analyze their causes and establish steps to be taken to avoid errors and repetitions. The
budgeting process includes the management to shift attention to future operations. Since
budgets are a part of planning process it forces managers to anticipate and forecasts the trends
and changes in the external environment and control process.

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publication. 2nd edition. [Link]. 361 – 369.
2. Basavanthappa. BT. Textbook of nursing administration. Jaypee publications. 1st
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3. Neelam kumari. A textbook of nursing management and services. PV publications. 2nd
edition. [Link]. 44 – 50.
4. Clement. I. Management of nursing services and education. Elseiver publications.
[Link]. 80 – 86.
5. Nisha clement. Textbook of nursing services and administration. EMMESS
publications. 1st edition. [Link]. 109 – 114.
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