Budgeting- JULY 16, 2008-07-17 •


Economic goods o These are goods or services purchased by consumers from supplies to provide a benefit to the consumers

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 • •

Income o Additional resources gained over time

Utility o It is the benefit consumers get from the purchase of goods and services

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

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

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

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

Applied Economics

Expense Budgeting o The process of forecasting recording and monitoring the manpower, materials, and supplies and monetary needs of an organization •


Anticipate capital expenses

Budget Stages o Formulation stage

Types of Expense or cost fixed o They remain constant as volume increases and decreases over a period of time

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

Variable Cost o Relate to volume and census

Sunk Cost o Fixed expenses that cannot be recovered even if a program is cancelled • o

Review and Enactment    Prepare unit budget Present unit budget for approval Revise and combine into organizational budget Revise and distribute to cost-center

Direct Cost o The cost of providing and service

Cost Accounting o System assigns all cost to cost centers

Procedures of Budgeting o o o o o o o Determining the productivity goal Forecast the workload Budget patient care hours Budget patient care hours and staffing schedule Plan non productive hours Chart productive and non productive time Estimate cost of supply and services o

Execution Stage   Direct and evaluate expenses and receipts Revise budget if indicated

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

Change theory Reddin’s theory • Developed a planned change model that can be used by nurses Suggested seven techniques by which change can be accomplished

Standard cost- it is develop to predict what labor and supplies should cost

Budget Approaches • Zero based budgeting o 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

1. Diagnosis- a scientific problem solving 2. Mutual objectives- ensures that the goals of both groups, those instituting the change and those affected by are brought into like 3. Group emphasis- team emphasis, change is more successful when supported by team 4. Maximum information- important to the success of change 5. Discussion of implementation 6. Use of ceremony and ritual consider the culture of organization, particularly the use of rewards to reinforce the change

Program budgeting o o It is a part of budget planning 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

7. Interpretation to any resistance to change- the process and
systems which may require revising of the group work and objectives set for implementation Lewin’s 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

Purpose of budgeting o To plan the objectives, programs and activities of services and the fiscal resources need to accomplish To motivate nursing workers through analysis of actual experiences To serve as standard to evaluate the performance of nurse administrator and manger and to increase awareness of cost



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)

2. Diagnosing the problem 3. Acquiring the relevant resources 4. Choosing the solution 5. Gaining acceptance 6. Stabilization and self renewal Lappit’s theory • Added seventh phase to Lewin’s original theory


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 Defreezing- the integration of the change into one’s personality and the consequent stabilization for change

1. Diagnosing the problem 2. Assessing the motivation and capacity 3. Assessing the change agent’s 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


Roger’s Theory • Modified Lewin’s Change theory

5 phases 1. Awareness 2. Interest 3. Evaluation 4. Trial 5. Adaptation Havelock’s Theory • Expanded to 6 elements

1. Building a relationship

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 2. Embarrassment 3. Insecurity 4. Habits 5. Complacency 6. Inaccurate perception 7. Perceived loss of power 8. Rewards or relationship 9. Objective disagreement 10. Psychological reactions 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 Major arena of responsibility

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

Action • Employees perform work that meets their mutual objectives

Second meeting • 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

Odrorne- a system for making organizational structure work, of bringing about vitality and personal involvement in the hierarcy by

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

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