Objectives 

1.      To ensure that a proper budget is developed, before the beginning of each year, that is a workable and acceptable guide for all employees in terms of activity, revenues and expenditures, and is an appropriate document for funding requests. 

2.      To ensure that a budget is developed that will facilitate adequate fiscal monitoring of operations in order that timely and appropriate management decisions are made. 

3.      To ensure that the Board of Directors and all appropriate personnel are involved in the budget development and monitoring processes to achieve congruence in goals/activities and to maximize employee satisfaction. 

4.      To ensure that, as a working document, the budget is revised as needed and when assumptions change that changes are documented, made and approved by the Executive Director in conjunction with the Board of Directors, and communicated to all necessary parties. 

Overview 

A budget is a formal quantitative expression of plans.  Once the NUIHC Board of Directors determines the activities it wishes to undertake for the coming year(s), the budget can be prepared to translate those goals, objectives, and plans into revenue and expense figures.  The Executive Director will normally take the lead role in developing the budget in close collaboration with the Board of Directors.  Input should be obtained from others, such as the Clinic Manager.  The Board of Directors should review and approve both the operating and the capital expense budgets. 

Budgets must be completed each year as required by grants and contracts. 

Procedures 

A.  Operating Budget 

1.      The operating budget consists of the statistical budget, and the revenue/expense budget.  The statistical budget is an estimation of the number of encounters and procedures expected from each of NUIHC’s services.  The statistical budget should be estimated by using the previous year’s utilization and adjusting for an expected rate of growth, change in program status, or change in provider mix. 

2.      The revenue budget includes expected revenue, adjustments to that revenue, and receipts NUIHC expects to ultimately collect.  Revenue includes: 

a.       Grants from federal, state and local governments;

b.      Fee income from third parties and patients for services rendered;

c.       Donations;

d.      Income from space rental and sale of equipment, if applicable;

e.       Community Grants;

f.        Contracts from federal, state and local governments;

g.       Other miscellaneous income, if applicable. 

3.      The revenue generated by providing services will not necessarily be realized; contractual allowances, and patient discounts, will reduce the amount collected.  Unless care is taken when preparing the statistical budget and the revenue budget, NUIHC might not realize its expected receipts for the period.  The amount of receipts depends on: 

a.       The number of encounters;

b.      The average reimbursement per encounter; and

c.       The percentage of charges collected. 

Care must be taken to ensure that an error in any one of the three factors does not result in a significant overestimating or underestimating revenue or receipts. 

4.      The expense budget contains all expenses other than capital expenditures.  It includes salaries and fringe benefits, and other operating expenses such as rent, utilities, consultant fees, administrative and clinical supplies, depreciation, and staff training expenses.
 

B.  Capital Budget 

1.      The capital budget process involves budgeting for buildings and fixed equipment (those items having a useful life of over one year and costing over $500 per item).  A capital budget should show the sources of funds, which are to be used for capital expenditures. 

Venders can be contracted to determine the price of a piece of equipment, if there is a question of whether it should be considered a capital expenditure.  The Board of Directors approves the Capital budget. 

2.      A capital expenditure schedule should be prepared which shows, quarterly the planned expenditures for buildings and equipment.  The schedule may be revised quarterly as construction schedules or purchasing priorities change. 

            C.  Budget Revisions 

1.      If the budget is tied to realistic goals and objectives, it should need little, if any, revision.  However, goals and objectives sometimes change.  New goals are initiated; old goals are dropped or modified for a variety of reasons.  The budget should be modified to reflect conditions, which have developed since its original preparation. 

2.      The Finance Committee will review the budget 6 months into the fiscal year and make appropriate recommendations for the remainder of the fiscal year. 

            D. Budgetary Performance Measures 

1.      The budget should be created by the staff responsible for expenditures or revenues and should be reviewed and authorized by the Board of Directors. 

2.      A continuing actual/budget comparison should be prepared monthly (with YTD figures) in adequate detail to provide basic comparative data to staff responsible for expenditures or revenues. 

3.      An internal review of actual vs. budget performance should be implemented on a quarterly basis. 

4.      Variances of actual vs. budget comparisons should not exceed 10%.  When they do, reasons should be documented and explained by the Executive Director and attached to the monthly financial statements for Executive staff and the Board of Directors.