Importance of Financial Management at a Health Facility:

• Fundraising and Security: Effectively acquire and protect financial resources for operations.

• Efficient Allocation: Prioritize vital spending and invest in cost-effective health interventions.

• Service Accessibility: Ensure resources are available to deliver crucial health services to the community.

• Informed Decisions: Provide reliable financial information for making sound management choices.

• Build Trust: Foster confidence among staff and the community through transparent financial practices.

Financial Management Obligations for Managers:

• Budget Creation: Develop a financial plan outlining anticipated income and expenses.

• Financial Forecasting: Predict future financial needs and potential financial challenges.

• Cost Analysis: Evaluate service costs to identify areas for efficiency improvements.

• Reporting Compliance: Fulfill reporting obligations to funding bodies and government.

• Data-Driven Decisions: Utilize financial reports to guide decisions and improve healthcare service delivery.

Process of Financial Management in a Health Facility:

• Collect Revenue & Receipt Issuance: All income must be collected and officially receipted.

• Record Exemptions & Debts: Accurately document any exemptions granted or debts owed.

• Secure Funds: Safeguard collected funds, either securely on-site or deposited in a bank account.

• Transaction Recording: Document all income, deposits, exemptions, and debts in cashbook and bank book.

• Bank Statement Verification: Regularly compare bank statements with the bank book for accuracy.

• Record Reconciliation: Match total recorded amounts with receipts, debtor records and exemption records to prevent discrepancies.

Sources of Health Financing:

• Public Funding: Government funds (central and local) and support from health development partners.

• Private Funding: Funds from non-governmental sources, including direct payments, insurance, donations, and NGO projects.

Primary Methods/Mechanisms of Financing Health Care Systems:

• Direct Payments (Out-of-Pocket): Individuals pay directly for healthcare services.

• General Taxation: Funding from taxes collected from both formal and informal sectors.

• Social Health Insurance: Mandatory premiums from income, government regulated.

• Voluntary/Private Health Insurance: Premiums paid by individuals or employers to insurance companies for health coverage.

• Donations: Financial aid through grants or loans from development partners.

BUDGETING AND BUDGET CONTROL

A budget is a quantifiable financial plan, usually in monetary terms, detailing planned activities and expected outcomes over a set period. It involves allocating funds to priority activities.

Importance of Budgeting:

• Strategic Planning: Provides a framework for organizational planning and policy development.

• Performance Evaluation: Serves as benchmarks to assess actual financial results against planned outcomes.

• Resource Identification: Helps identify necessary financial resources to achieve organizational goals.

• Expenditure Limits: Establishes spending limits for various organizational activities.

• Expenditure Authorization: Authorizes future spending according to the budget plan.

• Activity Coordination: Ensures all departments work towards shared financial objectives.

• Income & Expense Control: Functions as a regulatory mechanism for responsible financial management.

• Program Affordability: Assesses the financial viability of new initiatives or programs.

• Motivational Tool: Acts as a target to motivate team members towards financial goals.

Qualities of a Good Budget:

• Realistic: Achievable with available resources.

• Balanced: Addresses all essential needs proportionally.

• Plan-Driven: Based on a structured operational plan.

• User-Friendly: Easily understood by all involved personnel.

• Comprehensive Revenue: Includes all potential income sources.

• Forward-Looking: Considers future needs and projections.

• Collaborative: Reflects teamwork and consultative input.

Types/Kinds/Forms of Budgets:

• Operating Budget: Expected revenues and expenses for the coming year.

• Personnel Budget: Projected salary costs for the budget period.

• Supply & Non-Salary Budget: Identifies needed supplies and non-salary operational expenses.

• Capital Budget: Budget for long-term investments, such as renovations or equipment.

The Budgeting Process/Budgeting Cycle:

1. Objective Identification: Align budget objectives with organizational mission, vision, and strategic plan.

2. Resource Needs Determination: Identify the resources required to meet objectives.

3. Requirement Pricing: Estimate the costs of needed resources.

4. Revenue Source Identification: Determine sources of funds to finance the budget.

5. Budget Negotiation: Justify and adjust the budget with supervisory levels.

6. Needs Prioritization: Rank needs to determine essential vs. deferrable items.

7. Consolidation into Master Budget: Combine individual budgets into a comprehensive master budget.

8. Approval: Obtain official approval from organizational leadership.

9. Ongoing Review: Regularly monitor and update the budget.

Approaches/Methods/Classifications of Budgeting:

• Zero-Based Budgeting (ZBB): Starts budgeting from zero, requiring justification for every expense.

• Incremental Budgeting: Adjusts the previous budget incrementally, based on changes.

• Program/Activity-Based Budgeting (ABB): Links costs to specific activities and creates a comprehensive program budget.

• Value Proposition Budgeting: Justifies expenses based on the value each item provides.