Metropolitan Healthcare Services: Budget Information Problem - Essay Example

FINANCE AND ACCOUNTING Budget Information Problem number: Summary The report aims to carry out an investigation on the budget information problem at Metropolitan health care services company, concerned with the delivery of health care of services to the locals. I am the hold the position of an accountant to the company and I was tasked with analysis of the budget information problem with a focus on a framework for problem solving. The investigation is the central issues, budget increment limitations, budgeting information transparency. The analysis from the report is essential in the making of competent decisions by the health care facility. Finally, the report wraps up with an analytical assessment of these budget information problems and suggests recommendations to address the budget information deficiencies. Table of contents Summary 2 1.0 Introduction 4 2.0 Analysis of the problem 5 2.1 Revenue budget information issues 5 2.2 Expenditure budget information issues 7 2.3 Debt budget information issues 7 2.4 Budget information transparency problems 8 3.0 Conclusion 9 4.0 Recommendations, Implications, Advantages and Disadvantages 10 5.0 Reference list 11 1.0 Introduction I as the accountant carried out a survey on the state of the budget information problem. The budget information problem is as a result of a company not being transparent enough to itself and the public or parties concerned. There is no accountability in the way the budget funds are used and in this case. The report will consider the effect of the availability of budget information to Metropolitan health care services company (Tyler, 2007, p. 146). In so doing, it is essential be familiar with nature and organizational structure of the Metropolitan health care services company. The report will establish the central issues in the budget information affecting Metropolitan health care services company. Besides, it suggests the available policy choices that it can employ in their budgeting processes. The company is expected to select a policy option that is in line with the goals in its budget financing. The report found that it was essential for the the company to have information on issues regarding the expenditure and revenue budget. Budget information is vital, and when it is unavailable, it could imply the lack of accountability and hence misappropriation of funds. Debt management information deficiency is also a constraint for the company’s budgetary processes. I observed that the approach taken by company concerning debt management is not appropriate in the budget stipulation. I hold the position that aims to reform the criteria and conditions that will enable the elimination of budget information problem at Metropolitan health care services company (Lindridge, 2011, p. 157). 2.0 Analysis of the Problem There are frequent typical problems that exist in the budgetary making process at Metropolitan health care services company. One of the fundamental problems is budget information concerning revenue, debt, and expenditure. The existence of this problem will have an impact on the management of the revenue; debt and expenditure after the budget appropriations are implemented (Tyler, 2007, p. 146). 2.1 Revenue Budget Information Issues The revenue budget information of the company missing include the total financial resources amounts that the company collects or receives. The budgetary information established to be missing includes user charges, fees, loans, donations, grants and funds transfer. The information above is vital to the company since it enables it to account for all the revenues that allow financing of service provision to the locals and meeting of operational costs in the provision of health care. The study in the company established that the information on revenue was incomplete. It implies that not all revenue sources were recorded or reported. What was evident was that the company only recorded revenues and donations from local sources and omitted those from external sources. It led to the company’s budgetary committees underreporting the real amount of financial resources available for spending. The incomplete financial information on revenues made the budget not consolidate all revenues but instead reflected them on other parts of the extra budget allocation. It made the company’s financial situation reported in the budget to be inaccurate (Tyler, 2007, p. 146). Another issue I noted in the company’s revenue information is the components classification that was incomplete. Information in the records revealed that there was misclassification of information on donations and revenue thus creating a budget information problem. The problem resulted since there was a mixture in the capital and recurrent donations and revenues into a single classification. They instead should have been categorized into two classifications. As a result, difficulties arise in planning of expenditure on investments and operations. The budget formulated from the misclassification of revenues made adequate monitoring, evaluation and control of revenue performance difficult. Another observation in the company was reporting of information on revenue forecasting that was inadequate. It made revenue forecasting meaningless because of the absence of correct inputs. 2.2 Expenditure Budget Information Issues Same as the revenue information problem; the company faced the problem of expenditure information that was incomplete. It was evident that the company lacked all the information on its expenditures, and furthermore even the expenditures were not being accounted for. There existed a mismatch on the information reported on expenditures budgeted for and the actual approved budgetary expenses. It meant that the company was not reporting some of the expenditure information and data accurately as they are. In most cases, the budget for the expenditure of the company was over reported, not reported or under reported in more than one category. Further investigation revealed that an efficient and effective budgetary control was lacking making information on some categories of expenditure to be inaccurate. In general, expenditure analysis, forecasting, evaluation, and performance became meaningless to the company (Tyler, 2007, p. 146). Another problem as a result of incomplete information on expenditure budget is the inaccurate reflection of the financial situation and actual expenditure at Metropolitan health care services company. Also evident was the problem of expense budgets components that were being inadequately classified. Capital and recurrent expenditures mixing, and misclassification was predominant. It created difficulties in that the controller of the company’s budget found it impossible to make a determination on balancing between investment and operations. 2.3 Debt Budget Information Issues Metropolitan health care services company failed to report adequately on information concerning its debt. Another information mismatch is between capital and recurrent debt mix up and misclassification by the company ‘s budget committees. As a result, the compan’s budgeting and accounting of debt became inadequate. 2.4 Budget Information Transparency Problem I observed that the company was not that transparent and accountable with the information regarding its budget appropriations. It was because there was possibly misappropriating its budget revenue resources. The diagram below shows how information flow should have been flowing in a transparent manner to allow for oversight by the auditing department of Metropolitan health care services company The Gantt chart below shows the Track performance of the budget of the company. Task Start Date End Date Days to Complete Estimate Labor Estimated Materials Estimated Total Actual Labor Actual Materials Actual Totals Phase 1 11/22/2013 11/28/2013 6 £ 2,500.00 £ 3,750.00 £ 6,250.00 £ 1,800.00 £ 2,450.00 £ 4,250.00 Task 1 11/22/2013 11/22/2013 1 £ 250.00 £ 500.00 £ 750.00 £ 200.00 £ 450.00 £ 650.00 Task 2 11/23/2013 11/23/2013 1 £ 500.00 £ 750.00 £ 1,250.00 £ 600.00 £ 750.00 £ 1,350.00 Task 3 11/26/2013 11/27/2013 2 £ 750.00 £ 1,000.00 £ 1,750.00 £ 500.00 £ 750.00 £ 1,250.00 Task 4 11/28/2013 11/28/2013 1 £ 1,000.00 £ 1,500.00 £ 2,500.00 £ 500.00 £ 500.00 £ 1,000.00 Phase 2 Phase 2 Phase 2   £ - £ - £ - £ - £ - £ - Task 1 11/29/2013 11/29/2013 1     £ -     £ - Task 2 11/30/2013 11/30/2013 1     £ -     £ - Task 3 12/3/2013 12/3/2013 1     £ -     £ - It reveals the budget variance and summary including the dependencies. The comparison of the actual and estimated materials, other costs and labor should have been consistent with the targets. 3.0 Conclusions To conclude the report, it becomes evident that Metropolitan health care services company had problems with understanding the information it should record in its budgets. It is as a result of policy issues and options choosed in the financing of its budget. It is vital for them to facilitate their gaining understanding and knowledge on the options available in terms of expenditure and budget. The problems facing Metropolitan health care services company’s budget information differ in the debt, revenue and expenses management areas of concern. To achieve expected results, the budgetary process needs to ensure inclusive participation of all departments in the company. Consultation with the external agencies and benchmarking from health care facilities is also equally essential. Budget information is vital, and when it is unavailable, it could imply the lack of accountability and hence misappropriation of funds. Debt management information is also a constraint for the company’s budgetary processes. An approach taken by the company concerning debt management is often not appropriate in the budget stipulation (Tyler 2007, p. 146). 4.0 Recommendations, Implications, advantages and Disadvantages SMART recommendations include: the central management of the company offering definite levels of funding and donation to the company. The company should include budgeting processes geared to SMART outcomes. It should focus on involving members, residents and officers in the budget making process. Besides, the company should use non-financial and financial evidence and above all undertake prevention planning methodologies. Additionally, the company should ensure information on procurement; general spending; debt, donations and revenues is as accurate as possible and above all transparent (Lindridge 2011, p. 157). If the approaches mentioned above are being adopted by Metropolitan health care services company, the implication will be positive. The company will be in a position to bridge the gap of information mismatch and mix up in the budget making process. Another implication of the approaches is that it will ensure ethical practices are being undertaken in the budget making process. The advantage of the methods mentioned above is that the company’s budget information problem will be minimised if not eliminated. Besides, the company will be able to save resources since all funds will be accounted for. Also, appropriate allocations will be made to the correct departments that will spur qualiy heath care to the locals (Lindridge 2011, p. 157). The major disadvantage with the approaches I mentioned above to eliminate the budget information problem is that the company is will face rebellion in its effort to adopt them . The forces behind the rebellion are from those benefiting from the leakages in the system. Another disadvantage is that the implementation of the approaches is indeed costly in terms of cost and time. Word count: 1517 5.0 References Lindridge, A. (2011). Understanding marketing and financial information ([2nd ed.). Milton Keynes: Open University. Pg 157 Tyler, S. (2007). The managers good study guide (3rd ed.). Milton Keynes: Open University. Pg 166 Read More