PRESENTED BY : VRUTI PATEL,FINAL YEAR

M.SC.,SNC.

Budget word was first coined by the British Kings in early days from the word ‘BOUGETTE’ which means leather bag or pouch.

A budget is a tool for planning, quantifying the plans and controlling costs. - Flinker, 1984

A budget is a plan that uses numerical data to predict the activities of an organization over a period of time and it provides a mechanism for planning each unit’s needs and contributions. - carruth, carruth and Noto, 2000

A budget can be defined as ‘a tool used to relate planned resource consumption to a period of time’. - Mellett et al. 1993

This definition highlights the three main features of a budget:• It is a plan that is developed before an event has occurred;• It can include a broad range of resources – not just money;• It relates to a specific period of time.

WHAT IS UNION BUDGET ?•The union budget of India, referred to as annual Financial Statement in Article 112 of constitution of India, is the annual budget of the Republic of India, presented each year on the last working day of February by the Finance Minister of India in Parliament.•The budget has to be passed by the parliament house before it come into effect on April 1, the start of India's financial year. The Union Budget 2013-14 presented by P.Chidambaram on 28 February 2013,11 am, the Financial Minister of India.•The budget implemented on 1st April 2013.

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BUDGET APPROVAL

BUDGET ESTIMATE PREPARAT

ION

BUDGET MONITORING

STEPS IN BUDGETARY PROCESS

BUDGET ALLOCATION

LOGO

ADMINISTRATORGOVERNING BODY

DEPARTMENT HEADBUDGET DIRECTOR

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BUDGET ESTIMATE PREPARATION

THE GOVERNING BODY• Responsible for the general planning function• Selects the budget steering committee, determines

the budgetary objectives, and reviews and approves the master budget.

THE ADMINISTRATOR• Responsible for the formulation and execution of

the budget• by correlating the governing board’s goals with the

guidelines for budget preparation and supervising the budget preparation.

THE BUDGET DIRECTOR

•Responsible for the budgeting procedures and reporting.•Establishes a completion timetable.•Forms prepared, and supervises data collection and budget preparation. •serves as the chairperson of the steering committee, which approves the budget before it is submitted to the governing board.

DEPARTMENT HEADS

•Prepare and review goals and objectives and prepare the budgets for their departments. •Departmental budgets need to be prepared and coordinated. •During this phase, units of service, staffing patterns, salary and non-salary expenses and revenues are forecasted so that preliminary rate setting can be done.

ITEM NO

INCOME EXPENDITURE ACTUAL LAST YEAR

CURRENT BUDGET ACTUAL

BUDGET NEXT YEARPROPOSED APPROVED

           

           

           

           

           

The revised estimate is an estimate of the probable receipts or expenditure for a financial year, framed in the course of that year.It does not authorise any expenditure, nor does it supersede the budget estimate as the basis for regulation of the expenditure.If an excess is anticipated in the revised estimate under any particular head, it is necessary for controlling authority to apply separately in proper time for additional funds required.

REVISED ESIMATION

PLAN EXPENDITURE Plan expenditure is estimated after

discussions between each of the ministries concerned and the Planning Commission.

Plan expenditure forms sizeable proportion of the total expenditure of the Central Government.

The demands for Grants of the various Ministries show the Plan expenditure under each head separately from the Non-Plan expenditure.

NON-PLAN REVENUE EXPENDITURE Non-plan revenue expenditure is

accounted for by interest payments, subsidies (mainly on food and fertilizers), wage and salary payments to government employees, grants to States and Union Territories governments, pensions, police, economic services in various sectors, other general services such as tax collection, social services, and grants to foreign governments. The expenditure in developing ‘planned’ projects is plan expenditure.

 

Non-plan capital expenditure mainly includes defence, loans to public enterprises, loans to states, union territories and foreign governments.

The maintenance and running of the existing projects is known as non-plan expenditure.

NON-PLAN CAPITAL EXPENDITURE

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TYPES

TYPES OF BUDGET

ZERO BASED

PERFORMANCE

CAPITAL AND REVENUE

ZERO-BASED BUDGETING one  of  the  budgets  that  do  not  utilize  any historical  data  to  determine  activity  level  of expenses anticipated. 

All  the  expenses  are  justified  based  on expectation or desires for the upcoming year.

Zero based budgeting was adopted in India in 1986  as  a  technique  for  determining expenditure budgets. 

According  to  the  ministries  of  Finance instructed  all  the  administrative  ministries  to review  their  respective  programmes  and activities  in  order  to  prepare  expenditure budget  estimates  based  on  the  principles  of zero based budgeting. 

STEPS IN ZERO BASE BUDETING

   ADVANTAGES• Forces the nurse managers to plan each program package afresh.

• Avoids the common tendency in budgeting of looking at changes from a previous period

• Efficient allocation of resources, as it is based on needs and benefits

• Cost effective ways to improve operations• Detects inflated budgets• Useful for service departments where the output is difficult to identify.

• Increases staff motivation by providing greater initiative and responsibility in decision-making.

• Increases communication and coordination within the organization

• Identifies and eliminates wasteful and obsolete operations.

• They force managers to set priorities and use resources most efficiently.

• Identifies opportunities for outsourcing• Forces cost centres to identify their mission and their relationship to overall goals.

    DISADVANTAGES• Difficult to define decision units and decision packages, as it is time-consuming and exhaustive.

• Forced to justify every detail related to expenditure.• Necessary to train managers. • Difficult to administered and communicate the budgeting because more mangers are involved in process.

• Compressing the information down to a useable size might remove critically important details.

• Honesty of the managers must be reliable and uniform. 

CAPITAL BUDGET• It consists of capital receipts and payments. Capital Budget also incorporates transactions in the Public Account.

• Capital receipts: The  main  items  of  capital receipts are loans raised by Government from public  which  are  called  Market  Loans, borrowings  by  Government  from  Reserve Bank  and  other  parties  through  sale  of Treasury  Bills,  loans  received  from  foreign Governments  and  bodies  and  recoveries  of loans granted by Central Government to State and  Union  Territory  Governments  and  other parties.

• Capital payments: Capital payments consist of capital  expenditure  on  acquisition  of  assets like  land, buildings, machinery, equipment, as also investments in shares, etc., and loans and advances  granted  by  Central  Government  to State  and  Union  Territory  Governments, Government  companies,  Corporations  and other parties.

REVENUE BUDGET• Revenue defined as total income produced by a given source. The revenue budget consists of revenue  receipts  of  the  governments (revenues from tax and other sources) and the expenditure met from these revenues.

Revenue Receipts: Revenue receipts are divided into tax and non-tax revenue. •Tax revenues are  made  up  of  taxes  such  as income  tax,  corporate  tax,  excise,  customs  and other duties which the government levies.•Non-tax revenue consists  of  interest  and dividend  on  investments made  by  government, fees and other receipts for services rendered by Government.

• Revenue expenditure:  Revenue  expenditure  is  the payment incurred for the normal day-to-day running of government  departments  and  various  services  that  it offers to its citizens. 

• The  government  also  has  other  expenditure  like servicing  interest  on  its  borrowings,  subsidies,  etc. Usually, expenditure that does not result in the creation of  assets,  and  grants  given  to  state  governments  and other parties are revenue expenditures. 

• The difference between revenue receipts and revenue expenditure is usually negative. This means that the government spends more than it earns. This difference is called the revenue deficit.

PERFORMANCE BUDGETING• It is based on functions such as direct nursing care, supervision, in service education, nursing audit and so on.

   STEPS IN PERFORMANCE BUDGETING• Identify and analyse  the work of organization into  functions,  sub  functions;  programmes, sub  programmes,  activities,  sub  activities  in result

• Lay  down  the  targets  of  each  scheme, function, programs

• Set  the  performance  norms  or  standards  for each activity or task.

• Identify specific indicators regarding each task.

• Specify means of achieving them.• Design  the  monitoring  and  evaluation system  or  performance  recording  and reporting system.

• Calculate the costs of all inputs, resources to achieve the targets in terms of benefits

• Thus  the  performance  budgeting  tries  to define  the  physical  and  financial  aspects  of each  program  and  activities  and  thereby establishes the relationship between output and  inputs.  IT  assesses  each  programme  in the light of financial and economic factors.

Tools Used in Performance Budgeting

 It involves the development and use of more refined management tools :•Work measurement studies to measure or to identify various works.•Performance standards and its specific indications to measure the performance•Monitoring methods like PERT•Other methods like cost analysis.

ALLOCATION OF RESOURCES

BUDGET EXECUTION

APPRAISAL AND EVALUATION

PREPARATIOPN OF BUDGET

MID TERM APPRISAL • The Mid Term Appraisal (MTA) reviews the experience in the first three years of the five year plan and seeks to  identify  areas  where  corrective  steps  may  be needed. 

• Provides an opportunity to take stock of the economy and to introduce policy correctives and new initiatives in  critical  areas  in  the  context  of  the  new  priorities, the success achieved on the investment front. 

• MTA  presents  a  candid  assessment  of  the  resources position facing both the centre and the state and the implications.

AUDIT• Audit is an assessment of the management practices, financials and operations of an organization.

• According to the institute of chartered Accountants of India (ICAI) ‘Auditing  is  the  independent examination  of  financial  information  of  any  entity, whether profit oriented or not, and irrespective of its size  or  legal  form,  when  such  an  examination  is conducted  with  a  view  to  expressing  an  opinion thereon.’

• The  Marriam-webstar Dictionary  defines  an audit  as  ‘a  formal  examination  of  an organization  or  individual’s  accounts  or financial situation.

   PURPOSES

It makes sure that all the financial statement of concern is presented fairly.

Audit gives a fair and true picture in accordance with financial reporting framework.

It enhances the degree of confidence of intended users in financial statement.

EXTERNAL AUDIT

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INTERNAL AUDIT

TYPES OF AUDIT

     EXTERNAL AUDIT

• An  external  audit  is  a  review  of  the financial  statements  or  reports  of  an entity,  usually  a  government  or business,  by  someone  not  affiliated with the organization or agency. 

• The  audit  is  conducted  by  regulatory agency  hired  by  the  entity  and  the auditors  are  generally  in  public accounts. 

For government or public sectors, an external audit will  include a  review of  the budget,  the allocation of funds and the actual expenses to ensure  the  budgeted  revenues  and  expenses were correctly compiled and used.

In a private-sector,  it  includes a  review of the  organization  quarterly  or  monthly financial  reports  as  well  as  statement  on revenues  and  expenditure  to  ensure  they are correctly tabulated and reported.

Usually  conducted once a  year  at  the end of fiscal year. 

A  yearend  financial  report  is  prepared  by the entity, which  is one of  the documents verified in external audit.

FINANCIAL AUDIT

OPERATIONAL AUDIT

COMPILANCE AUDIT

TYPES OF EXTERNAL AUDIT

FEATURES OF THE EXTERNAL AUDIT

• It generates a summary of overall validity of the financial statement.

• It uncovers the discrepancies between the statements. Presented by the organization and the external the external auditor.

• It reflects the conclusion of the audit.

PURPOSE OF EXTERNAL AUDIT• The main purpose of external audit is to ensure that internal control, processes, guidelines are adequate and in line with the government requirements.

• To provide an independent and unbiased assessment of an organization’s internal governance and financial matters.

• To verify internal procedures.• To evaluate adherence of the organization to standards and principals.

• To evaluate the adequacy and effectiveness of existing internal control. 

INTERNAL AUDIT• Internal audit has been recognized as an aid to management for monitoring the financial performance and effectiveness of various departments in the execution of various programmes.

• According to the Institute of internal auditors (IIA), internal auditing is an independent objective assuring and consulting activity design to add values and improve organization operations.

OBJECTIVE OF INTERNAL AUDIT

• To suggest improvements to the functioning of the entity organization

• To strengthen the overall governance mechanism of the entity organization including its strategic risk management as well as internal control system

• To prepare for the external audit

PURPOSE OF INTERNAL AUDIT

• To  establish  standards  and  to  provide guidance in respect of internal planning.

ROLE OF INTERNAL AUDIT

Regulatory and compliance role•Quality of public expenditure•Proper implementation of rules and regulation•Maintenance of proper records•Accuracy in expenditure reporting

Efficiency cum performance roles•Efficiency and economy in public expenditure•Propriety of expenditure•Effectiveness of expenditure•Proper realization, accounting and reporting of revenue receipts. 

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