Budgeting- JULY 16, 2008-07-17

Management

Plan that expresses the activities of an agency in terms of

pesos covering a specific period of time
Plan for allocation of resources and a control for ensuring
that results comply with the plans
A plan or schedule adjusting expenses during a certain
period to the estimate or fix income for the period
An operational management plan stated in terms of income
and expenses

Preparing the budget

Nursing budget- a plan for allocation of resources based

preconceived needs for a proposed series of programs to
deliver patient care during one fiscal year
Hospital budget- is a financial plan to meet future service
expectations

Pre Requisites for budgeting

Sound organizational structure with clear lines of authority

and responsibility is needed
Nonmonetary statistical data- such as number admission,
average length of stay, percentage of occupancy and
number of patient days- are used for planning and control of
the budgetary process
Chart of accounts are designed to be consistent with the
organization plan
Management support is essential for a budgetary program
Formal budgeting policies and procedures should be
available in the budget manual

Applied Economics

Economic goods
o These are goods or services purchased by consumers
from supplies to provide a benefit to the consumers
Income
o Additional resources gained over time
Utility

It is the benefit consumers get from the purchase of

goods and services
Marginal Utility
o It is the additional utility gained by consuming one
more unit
Supply
o It is the amount of goods or services the suppliers
are willing to provide at a given price
Demand
o It is the amount of goods or services the consumers
are willing to buy at that price
Elasticity of Demand
o It is the degree to which the demand for a good or
service decreases in response to a price increase and
increases in response to price decrease
Cost Factor
o Cost is a money expended for all resources used
Expenses
o Cost of providing services to patients also called
OVERHEAD
Expense Budgeting
o The process of forecasting recording and monitoring
the manpower, materials, and supplies and monetary
needs of an organization
Types of Expense or cost fixed
o They remain constant as volume increases and
decreases over a period of time
Variable Cost
o Relate to volume and census
Sunk Cost
o Fixed expenses that cannot be recovered even if a
program is cancelled
Direct Cost
o The cost of providing and service
Cost Accounting
o System assigns all cost to cost centers
Procedures of Budgeting
o Determining the productivity goal
o Forecast the workload
o Budget patient care hours
o Budget patient care hours and staffing schedule
o Plan non productive hours
o

o Chart productive and non productive time

o Estimate cost of supply and services
o Anticipate capital expenses
Budget Stages
o Formulation stage
Usually a set number of months before the
start of fiscal year for the budget
Develop objective and management
plans
Gather all financial, historical, and
statistical data and distribute to costcenter manager
Analyze data
o Review and Enactment
Prepare unit budget
Present unit budget for approval
Revise and combine into organizational
budget
Revise and distribute to cost-center
o Execution Stage
Direct and evaluate expenses and receipts
Revise budget if indicated

Change theory
Reddins theory

Historical approach to budgeting

Historical approach is the most effective for calculating the

relationship between volume of business and variable cost
when a company manufacture a few products and each
product contributes a relatively stable percentage to the
total sales volume

Standard cost- it is develop to predict what labor and

supplies should cost

Budget Approaches

Zero based budgeting

o It is a method of budgeting used to control cost

Type of budget no program is take for granted and

each program must be justified each time funds are
requested
Program budgeting
o It is a part of budget planning
o Items such as continuing education program,
employees benefits fares, health promotion program
Flexible budgeting
o It determines a range of volume instead an actual
volume which is much more difficult to plan
Purpose of budgeting
o To plan the objectives, programs and activities of
services and the fiscal resources need to accomplish
o To motivate nursing workers through analysis of
actual experiences
o To serve as standard to evaluate the performance of
nurse administrator and manger and to increase
awareness of cost
o

1.
2.

3.
4.
5.
6.

7.

Developed a planned change model that can be used by

nurses
Suggested seven techniques by which change can be
accomplished
Diagnosis- a scientific problem solving
Mutual objectives- ensures that the goals of both groups,
those instituting the change and those affected by are
brought into like
Group emphasis- team emphasis, change is more successful
when supported by team
Maximum information- important to the success of change
Discussion of implementation
Use of ceremony and ritual consider the culture of
organization, particularly the use of rewards to reinforce the
change
Interpretation to any resistance to change- the process and
systems which may require revising of the group work and
objectives set for implementation

Lewins Theory

Most widely used change theory

3 stages
o Unfreezing stage- development through problem
awareness of a need for change
Problem is identified and diagnosed and best
solution is selected
3 possible mechanism provides input to initial
change
Individual expectations are not being
met (lack of confirmation)
Individuals feels uncomfortable about
some action or lack of action
Former obstacles to change no longer
exists (psychological safety)
o Moving stage- working toward change by identifying
problem or need for change, exploring the
alternatives defining goals and objectives, planning
how to accomplish and implementing the plan for
change
o Defreezing- the integration of the change into ones
personality and the consequent stabilization for
change

Rogers Theory

Modified Lewins Change theory

5 phases
1. Awareness
2. Interest
3. Evaluation
4. Trial
5. Adaptation
Havelocks Theory

Expanded to 6 elements

1. Building a relationship
2. Diagnosing the problem
3. Acquiring the relevant resources
4. Choosing the solution
5. Gaining acceptance
6. Stabilization and self renewal
Lappits theory

Added seventh phase to Lewins original theory

1. Diagnosing the problem

2. Assessing the motivation and capacity
3. Assessing the change agents motivation and resources
4. Selecting progressive change objectives
5. Choosing the appropriate role of the change agent
6. Maintaining the change
7. Terminating the helping relationship
Types of change
1. Coercive changes
2. Emulative change
3. Indoctrination change
4. Interactional change
5. Natural change
6. Socialization change

7. Technocratic change
8. Planned change
Resistance to change
Resistance- often based on a threat to the security of the individual
Change- upsets an established pattern of behaviour
Causes of Resistance to change
1. Threatened self interest

Odrorne- a system for making organizational structure work, of

bringing about vitality and personal involvement in the hierarcy by
means of statements of what is expected from everyone involved
and measurement of what is actually achieved
Procedure and process educating- the process to be used and the
methods for evaluating the programs effectiveness
First meeting

The managers creates the condition for fulfilling the nurse

need including the removal of obstacles encouragement of
growth and provision of guidance

Set goals that are specific promote team work that are
measurable and attainable

2. Embarrassment
3. Insecurity
4. Habits
5. Complacency
6. Inaccurate perception
7. Perceived loss of power
8. Rewards or relationship

Action

11. Low tolerance for change

12. The changes going against the current change
13. The system having been stable for a long time
Management- by objectives

First advocated by Peter Drucker

Is a process where by the superior and subordinate mangers

of an organization jointly, identify its common goals

Employees perform work that meets their mutual objectives

Second meeting

9. Objective disagreement
10. Psychological reactions

Major arena of responsibility

The meeting will provide a time for evaluation of results,

review, appraisal and the setting of further goals

Problems of MBO
1.

Top management is not supportive- must be

supportive/monitored closely

2. Inconsistency exists among mangers0 can be fixed or

avoided by increase
3. Goals are too easy or are attainable
4. Conflicts between goals and policies exists- policies should
give way to the goal

5. Accountability is beyond the control of employees- mange

should modify the goal; make allowance for difference
decrease accountability
6. Employees have a lack of commitment- determine the
cause, produce interaction that will increase commitment
Managerial grid
1, 9- country club management thoughtful attention to needs of
people for satisfying relationship leads to a comfortable, friendly
organization atmospher and work tempo

9,9 team management work accomplishment is from committed

people independence through a common common stable in
organization leads to relationship of trust and respect

5,.5 organization man management- adequate organization

performance is possible through balancing the necessity to get out
work with maintaining morale of people at a satisfactory level
1,1 impoverished management- exertion of minimum effort to get
required work done is appropriate to sustain organization
membership
9,1 authority- obedience efficiency in operations results from
arranging conditions of work in such a way that human elements
interfere to a minimum degree