Financial Management

and Decision Making

by: Jesa Joy M. Caldito- MSSW612
Financial Management
- means planning, organizing, directing and
controlling the financial activities such as
procurement and utilization of funds of the
enterprise.
- it means applying general management
principles ti financial resources of the
organization
3 important financial factors in Social Work
agency
1) The attitude of the administrator and the staff members
toward money and budgets
2) The amount of income and money available to the
agency
3) The effective or ineffective use of the money available
Elements in Financial Management
1) Planning
2) Controlling
3) Organizing and directing
4) Decision Making
Objectives of Financial Management
1) To ensure regular and adequate supply of funds to the concern
2) To ensure adequate returns to the shareholders which will depend upon
the earning capacity, market price of the share, expectations of the
shareholders
3) To ensure optimum funds utilization; once the funds are procured, they
should be utilized in maximum possible way at least cost
4) To ensure safety on investment, i.e. funds should be invested in state
ventures so that adequate rate of return can be achieved
5) To plan a sound capital structure -there should be sound and fair
composition of capital so that a balance is maintained between debt and
equity capital
Financial Resources
● Social Welfare Agencies obtain money from a variety of
sources, both public and private
● Private sources include foundations and corporations as
well as individuals who are interested in the services of a
given agency
● Public or government funds, they need to plan a long time
before the meeting or the activity to be able to justify the
request, they need a well-prepared explanation of
needs,services and specific plans
Budgeting

•Define budget derives from an old French term,

bougette which means a little bag a sack or a
pouch
•Budget is the most universally used
comprehensive, formal management system for
planning and controlling
Elements for an effective budgeting
1) The budget must be well-conceived and have been
prepared or approved by the board
2) The budget must be broken down into periods
corresponding to the periodic financial statements
3) Financial statements must be prepared on a timely
basis throughout the year and a comparison made to
the budget, right on the statements
4) The board must be prepared to take action where the
comparison with the budget indicates a significant
deviation
TYPES OF BUDGET
•Line item budgeting – is the most elementary and most
used format in private an, public social work agencies. This
system indicates how the money is to be spent but does
not depict what the agency does. The expenditures for
each department or unit are listed for a specific period of
time
•Program budgeting – includes services offered by the
agency. Goals and objectives are a significant part of this
system. Such budget may cover a several years
particularly as a program is offered and approved for a
specific amount of time
TYPES OF BUDGET
•Functional budgeting- this encompasses program
services but emphasizes the supporting administrative
services that are needed for operating an agency. Programs
and services r put into categories that can be monitored on a
functional accounting basis
•Zero based budgeting- this is an attempt to tighten budget
strings and to require agencies to justify their expenditures in
relations to services and outcomes. Like the agency starts
with no money each year and describes and justifies all
expenditures that are claimed for the ensuing year whether
they have existed before or not
BUDGET MAKING PROCESS
1)Setting specific goals related to the trends of the agency - budget formulation is
to look at the specific needs and goals of the agency
2)Ascertaining facts regarding the agency’s operation - to collect and study basic
information regarding the current and past operation of the agency including what
has and has not been accomplished
3)Looking at specific alternatives for the operation of the agency, particularly in
terms of money - to study different alternatives and list them in order of priority;
different ways of using the money that may become available during the year
BUDGET MAKING PROCESS
4)Deciding on priorities for the agency - it is essential to look at agency policies
and goals to see which are most financially compatible with the agency
5)Finalizing decision regarding the budget - this is to take all the factors into
consideration in making final decisions; social welfare agencies particularly
important to consider the welfare of clients along with the efficiency of the
agency’s operation
6)Providing adequate interpretation and public relations - competent
administrators interpret it to those in positions of power so that they fully
understand the reasons of specific requests
FINANCIAL OPERATIONS
1 Preplanning – gearing up for the process
2 Launching – the planned budgeting process
3 Data Gathering and analysis
4 Objectives setting
5 Programming the objectives
6 Preparing and testing the budget
7 Modifying the budget
8 Adopting a balanced budget
 SUMMARY
● Financial operations in Social Welfare agencies include
(1) obtaining financial resources (2) budgeting and
planning (3) expending the money available
● Funding for Social Welfare agencies may derive from
public or private sources or both
● 4 kinds of budgeting used by Social Workers in the
delivery of social services : line-item, program, functional,
and zero-based
- by using each of these patterns has advantages and
disadvantages, and they are commonly combined
 SUMMARY
● Budgeting and financial planning processes include
setting goals, ascertaining facts, describing alternatives,
setting priorities, making decisions and carrying on
effective public relations
● It is important that the administrator periodically check
check the agency’s budget to ascertain the balance
between income and expenditures
● Flexibility in the operation of a budget is essential within
the framework of agency policies
Sources https://www.managementstudyguide.com/financial-management.htm ; SOCIAL WORK ADMINISTRATION (Dynamic Management and Human Relationships 3rd Edition by
Rex A. Skidmore copyright 1995, 1990, 1983 by Allyn & Bacon A. Simon & Schuster Company
DECISION MAKING
DECISION MAKING
- Is the process of making choices by identifying a
decision, gathering information, and assessing
alternative resolutions

- By using a step-by-step decision-making process can

help an administrator making more deliberate,
thoughtful decisions by organizing relevant
information and defining alternatives
Source:https://www.umassd.edu/fycm/decision-making/process/
DECISION MAKING

- is important in Social Work because it affects the lives of individuals,

families, groups and communities

- For financial matters, it is also very important because it concerns with

manner on how to decide for expenditures along with implementation of
services in an agency
 3 types of decisions
1) Intuitive - tied to feelings rather than to rationality;
the action decided on relates to what the person feels
to be right or best
2) Judgemental - decisions are based on knowledge and
experiences
3) Problem solving - involves situations in which quick
judgements are not judgement; usually require some
time, allowing for study, analysis and reflection
Guidelines for decision making
1) Define the Situation or Problem-introduced by Social
Psychologist W.L. Thomas it implies that to
understand people and their behavior

2) Collect and Study the Facts-collecting and studying

data germaine to the situation or problem

3) Formulate choices-it is important to make alternatives

in making decisions
Guidelines for decision making
4) Anticipate Likely Results of the Choices-to understand
different choices and priorities made in making decisions;
you are also to anticipate the outcomes of it
5) Consider Feelings-it is important to recognize that all
have a variety of feelings, each of which may be
significant in making a specific decision.
6) Choose Sound Action-in making decisions it should not
be taken not to move too fast or too soon; sometimes
considerable time is needed for sound decision making.
Guidelines for decision making
7) Follow Through-every decision made should be
supported and must do what needs to be done or carry
out.
8) Be Flexible-flexibility is critical in making decision to
make and effective outcome; it is necessary to have an
open mind and in case an error has been made or another
alternative becomes more desirable or advantageous.
9) Evaluate Results-careful evaluations should be made to
ascertain developments that have followed the decision.
 Techniques of decision making
Individual or Group - decisions may be made either by individual or
group
For group decision advantages:
1) Acceptance by those affected is increased
2) Coordination is easier
3) Communication is easier
4) Greater number of alternatives can be considered
5) More information can be processed
 Techniques of decision making
For individual or group disadvantages:
1) Group decisions take longer to reach than individual decisions
2) Groups can be indecisive
3) Groups can compromise
4) Groups can be dominated
5) Groups can play games
6) Groups can fall victim to “groupthink” where the drive to achieve
consensus becomes so powerful that it overrides independent, realistic
appraisals of alternative actions)
 Techniques of decision making

● Programmed or Nonprogrammed

Programmed - is the regular, organized, formal kind of situation; decisions

that are repeated over time and for which an existing set of rules can be
developed (like Standard Operating Procedure; organizational structure)

Nonprogrammed - novel and not based on a well-defined or known criteria;

relatively unstructured and occurs much less often than a programmed
decisions (like quick decisions of an administrator)

Source:”ttps://www.managementstudyguide.com/financial-management.htm ; SOCIAL WORK ADMINISTRATION (Dynamic Management and Human Relationships 3rd Edition
by Rex A. Skidmore copyright 1995, 1990, 1983 by Allyn & Bacon A. Simon & Schuster Company