TOPIC: FINANCIAL

MANAGEMENT AND RESOURCE

MOBILIZATION
Kenya Medical Training College
Department of Pharmacy/OT/HRIT/RAI
 UNIT CONTENT
• Financial management and resource mobilization;
the role of parliament, treasury the controller and
auditor general in public financial management,
sources of health care financing, financial accounting
systems and mechanisms, accounting documents;
impress, vouchers, per diem, facility improvement
fund (fif), salary, allowances, vote books, budget
types
 Learning Objectives
Main objective
• To provide the learner with knowledge on financial
resource management in Health care Systems
 Learning Objectives
Specific objectives
i. Describe the role of parliament
ii. Describe the role of treasury
iii. Describe the role of controller and auditor
general
iv. Discuss the sources of health care financing
v. Discuss financial accounting systems,
mechanisms and accounting documents.
 HEALTH CARE FINANCING DEFINITION
Health care financing refers to the “function of a
health system concerned with the accumulation,
mobilization and allocation of money to cover the
health needs of the people, individually and
collectively, in the health system.
The purpose of health care financing is to make
funding available, as well as to set the right financial
incentives to providers, to ensure that all individuals
have access to effective public health and personal
health care”
 HEALTH CARE FINANCING
A good health financing system raises
adequate funds for health, in ways that ensure
people can use needed services, and are
protected from financial catastrophe or
impoverishment associated with having to pay
for them.
It provides incentives for providers and users
to be efficient
 HEALTH FINANCING IN DETAIL
 It encompasses resource mobilization allocation
and distribution at all levels/ national to local
including how providers are paid.
 Refers to methods used to mobilize the resources
that support basic public health programs, provide
access to basic health services.

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 Financial management
• Financial management is strategic planning,
organising, directing, and controlling of
financial undertakings in an organization or an
institute.
 Financial Management
 Financial management entails the following
components:
i. Planning,
ii. Organising,
iii. Controlling and
iv. Directing/Monitoring the financial resources of an
organisation to achieve objectives.
 Financial Management
Financial management in the public sector is
governed by:
• The Public Financial Management Act. The
objective of this Act is to ensure that public
finances are managed both at the national level
and the county level in accordance with the
constitution of Kenya.
• Government financial regulations and procedures.
This contains financial regulations and procedures
that govern government finances.
 Principles of Financial Management
 These principles provide a high-level guide for
staff members which can be used as a
standard in developing proper financial
management systems.
1. Consistency The financial policies and
systems must be consistent over time.
Inconsistent approaches to financial
management could be a sign that the
financial situation is being manipulated.
 Principles of Financial Management
2. Accountability
The organisation must explain how it has used its
resources and what it has achieved as a result to all
stakeholders, including beneficiaries.
3. Transparency
The organisation must be open about its work,
making information about its activities and plans
available to relevant stakeholders. If an organisation is
not transparent, then it may give the impression of
having something to hide.
 Principles of Financial Management

4. Viability
 To be financially viable, a health facility’s
expenditure must be kept in balance with
incoming funds, both at the operational
and the strategic levels.
 Viability is a measure of financial
continuity and security.
 Principles of Financial Management
5. Integrity
 On a personal level, individuals must operate with
honesty and propriety.
 The integrity of financial records and reports is
dependent on accuracy and completeness of
financial records.
 Principles of Financial Management
6. Stewardship
 It is expected to take good care of the financial
resources it is entrusted with and make sure that
they are used for the purpose intended, this is known
as financial stewardship.
 In practice, financial stewardship is achieved through
careful strategic planning, assessing financial risks
and setting up appropriate systems and controls.
 What are the key concepts of financial
management?
• Key Concepts of financial management
include:
 Budgeting, financial planning, cash flow
management, investing, risk management,
and debt management
 Government role in health care

• The Parliament, treasury , the controller

of budget and auditor general play a
major role in public financial
management.
 Role of parliament of Kenya in
managing financial resources
 Section (99) through to Section (103) of the
Constitution gives parliament the authority to oversee
the finances of the country including the budget.
 The key responsibility of Parliament is to ensure that:
I. The resource collection and mobilization policies are
sound and in tune with the laid down legislations
II. The expenditure programs are sound

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 CONT….
III.The budget is implemented as it was
approved in parliament.
IV. The budgetary items are in line with the
existing legislation.
V. The appropriations match the needs of the
people .
 ROLE OF PARLIAMENT, AUDITOR
GENERAL AND THE CONTROLER
• The Controller of budget and Auditor General is a
corollary to the Public Accounts and Public
Investments Committees.
 The relationship between the Auditor-General and
Parliament emanates from the Constitution.
 The relationship between the two should be
balanced so that their roles and independence
remain clearly defined and separate.
 The provision of fair and impartial audit reports
and information to Parliament through the Public
Accounts Committee, PAC
ROLE OF PARLIAMENT, AUDITOR GENERAL
AND THE CONTROLER
Accounts for bodies or entities which
received public funding in order to assure
the taxpayer that there exists a body to
investigate accountability on behalf of
Parliament.
In turn, a close working relationship between
the Auditor-General and Parliament
enhances public confidence that resources
are used with due regard to the efficient and
effective running of the economy
 Cont.
The auditor General and the controller of
budget are offices of the public and they are
supposed to provide an oversight and
accountability to the funds and how they are
spent and managed.
 Controller of Budget in Kenya
 This role involves overseeing the implementation of
the budgets of both national and county
governments.
 The Controller of Budget in this role therefore
monitors the use of public funds in-year and reports
to Parliament on how the funds have been utilised.
 The Controller of Budget (COB), serves for a non-
renewable term of eight years.
 Controller of Budget in Kenya
• The role of the Controller of Budget in Kenya is important
in enhance accountability in the expenditure of public
resources.
• Article 228 of the Kenyan Constitution establishes the
Office of the Controller of Budget. The OCOB oversees
the implementation of the national and county
government budgets.
• The OCOB exercises the oversight by authorizing
withdrawals from public funds.
• The Office of the Controller of Budget (OCOB) is an
independent office.
 Roles of Controller of Budget
1. Oversight role
• This role involves overseeing the implementation of
the budgets of both national and county
governments. The Controller of Budget in this role,
therefore, monitors the use of public funds in-year
and reports to Parliament on how the funds have
been utilized.
 Roles of Controller of Budget..
2. Controlling role
• The controlling function involves authorizing withdrawals from
public funds. Before authorizing any withdrawal from Public
funds, the Controller of Budget must first be satisfied that the
said withdrawal is authorized by law, as per Article 228(5) of
the Constitution.
• Public funds include the–
i. Equalization Fund (Article 204 of Kenyan Constitution);
ii. Consolidated Fund (Article 206); and
iii. County Revenue Fund
 Roles of Controller of Budget..
3. Advisory role
 This function involves giving advice to Parliament on
financial matters.
4. Investigation role
 Under Article 252 (1) (a) of the Constitution, the
OCOB (as an independent office) has the power to
conduct investigations on its own initiative or
following a complaint made by a member of the
public on budget implementation matters.
 Roles of Controller of Budget..
5. Arbitration Or Mediation Role
• The Controller of Budget under Article 252(1) (b)
of the Constitution has powers for conciliation,
mediation and negotiation.
• The Mediation role may involve the resolution of
conflicts between the national government and
the county government, or between county
governments with respect to budget
implementation.
 Roles of Controller of Budget..
6. Public Sensitization Role
 This role involves the dissemination of information to the
public on budget implementation at both national and county
levels as stipulated under section 39(8) of the Public Finance
7. Reporting role
 This role entails the preparation of quarterly, annual and
special reports to the legislature and executive on budget
implementation matters of the national and county
governments as provided by law according to (Article 228 (6)
of) the Constitution.
 Reports Prepared by Controller of Budget

i. Quarterly Reports on Budget Implementation to the

Executive and Parliament
ii. Annual Reports on Budget Implementation to the President
and Parliament
iii. Special Reports to the President and Parliament
iv. Investigation reports
v. Reports on stoppage of funds for governments units
vi. Arbitration or Mediation Reports to Parliament on matters
relating to Budget Implementation
vii. Performance reports for the activities of the OCOB.
The Role of the Auditor General in Kenya

1. Auditor-General shall audit and report, in respect of

that financial year, on the–
a) Accounts of the national and county governments;
b) Accounts of all funds and authorities of the national
and county governments;
c) The accounts of all courts;
d) Accounts of every commission and every independent
office set up by the Constitution;
e) Accounts of the National Assembly, the Senate, and
the county assemblies;
 Contd..
f) The accounts of political parties that receive
funding from public funds;
g) Public debt (how much the government owes to
lenders); and
h) Accounts of any other entity that legislation
requires the Auditor-General to audit.
The Role of the Auditor General in Kenya

2. The Auditor-General audit and report on the accounts of

any entity that receives money from public funds.
 An audit report shall confirm whether or not public money
has been applied lawfully and in an effective way.
 The Auditor General shall submit the audit reports to
Parliament (National Assembly and Senate) or the relevant
County Assembly for each county.
 Within three months after receiving an audit report,
Parliament or the County Assembly shall debate and
consider the report and take appropriate action.
 The Role of the Auditor General in Kenya

3. Confirms that all reasonable precautions have

been taken to safeguard the collection of
revenue and the acquisition, receipt, issuance
and proper use of assets and liabilities; and
4. Confirms that collection of revenue and
acquisition, receipt, issuance and proper use of
assets and liabilities conforms to the authority;
5. Issue an audit report in accordance with
Article 229 of the Constitution;
 The Role of the Auditor General in Kenya

6. Provide any other reports as may be required under

Article 254 of the Constitution; and Public Accounts
Committees (PAC) for National and County
Government accounts, and Public Investment
Committees (PIC) for accounts of State and County
Corporations.
 TREASURY DUTIES

i. Establish procedures and systems for proper and

effective management of government money
and property;
ii. Establish accounting procedures and systems for
the government to properly account for
government money and property;
iii. Superintend the expenditure of government
money to ensure that it can be properly
accounted for;
 Contd…
iv. Prepare and submit accounts for each
financial year under the Public Audit Act,
2003' for audit by the Controller of budget
and Auditor-General; and‘
v. Ensure- that the accounts prepared comply
with the provisions of this Act
 Summary of the National Treasury Core
Functions
 The core functions include:
1. Overall Economic Policy and Public Finance Management;
2. Formulation of National Budget;
3. Public Debt Management;
4. Manages the national government's public finance
5. Formulation and Maintenance of Government Accounting
Standards and Oversight Over Revenue;
6. Bilateral and Multilateral Financial Relations
 FINANCIAL ACCOUNTING SYSTEMS

 By the end of the lesson the student will be able to

explain the following terms;
 Imprest
 Vouchers
 Perdiem
 Facility improvement fund
 Salary
 Allowances
 Vote books
 Cont..
• The Financial Accounting System (FAS) is an
on-line integrated financial accounting
system that records, monitors and
maintains all accounting and financial
transactions of the organization.
 Contd…
Imprest
 It is a form of financial accounting system.
 The most common imprest system is the petty
cash system.
 The most important characteristic of imprest
system is that a fixed amount is reserved which
after a certain period of time it will be
replenished.
 Petty cash imprest system allows only
replenishment of the spent monies.
 Contd… Advantages of Imprest system

i. The claimant can only spend what they

have and is only replenished with what they
spend.
ii. The amount requested is documented. This
documentation are the petty cash dockets
and their associated receipts or invoices.
iii. Petty cash receipts are written for each
amount issued.
 Voucher system

 This is a system in which a receipt

representing monetary value is issued but
can only be spent on certain items.
 For example a charity organization can offer
a health Centre a voucher to provide
assistance in paying the utility bills.
 Salary

 Agreed upon and regular remuneration for

employment that is a common practice.
 It is paid on a monthly or bi -weekly basis
and is not based on hourly , daily or weekly
or piece work basis.
 Wage on the other hand is monetary
remuneration computed on hourly, daily,
weekly or piece work basis.
 Contd..
 Civil servants in the public sector are often
associated with low motivation, low
productivity and low quality of services
based on their salaries.
 Salaries are also being combined with
capitation and performance based
components to promote motivation as well
as higher productivity and quality.
 Advantages and disadvantages
Advantages
• Cost containment
• Equitable provision
• Easy administration
Disadvantages:
• Low productivity
• Low quality of care or service delivery
• Low morale of the providers
 Facility improvement fund
• Is revenue collected at public health facilities
as user fees paid to defray the costs of
running these facilities.
• The fund is usually vital in enabling facilities
to manage their day to day expenses and
manage situations where emergency
supplies have to be acquired.
• However most health facilities in Kenya are
facing challenges regarding this facility
improvement fund:
 Challenges:
i. There is a lot of bureaucracies when the
facility is trying to get the money disbursed
to them from the county
government(county treasury)
ii. Graft and total misuse of the funds by the
county treasury of the facility.
iii. Lack of financial management tools for
managing and planning of the FIF funds.
 Allowances
• Amount paid to employees as part of their
salary package, or to defray their out of pocket
expenses incurred on behalf of the firm.
 Vote book
 Is an account book which is used to record
and monitor expenditure in the public
sector. The information on these books is
subject to auditing to ensure that budgets
are well controlled and coincide with
financial regulations
 Public sector such as government health
institutions and schools use vote books
systems.
 Advantages of vote books
i. Ensure no extra budgeting spending.
ii. Highlight unnecessary expenditure out of
the ordinary.
iii. Show the balance available so the
organization can keep on top of their
finances
iv. Ensure that sufficient funds are available
for future payments.
 Per diem
 "Per diem is a daily allowance for expenses
—a specific amount of money an
organization gives an individual, often an
employee, student athlete (usually for
away matches), per day to cover living
expenses when traveling for work”.
 Health Care Financing
 Refers to making funding available, as well as to set
the right financial incentives for providers to ensure
that all individuals have access to effective public
health and personal health care.
 Health financing is a core function of health systems
that can enable progress towards universal health
coverage by improving effective service coverage and
financial protection.
 Different financing methods available
and organization of the financing systems

Financing Systems

Methods of public financing Methods of private financing

External financing
Internal financing User For-profit Medical Social
“Aid”
payments or savings contributions
Non-profit voluntary employers
private or compulsory employees
Social insurance insurance

Public systems of systems (illness)

health services

Unified Fragmented
System System
 Health Care Financing Sources

• Government of Kenya budgetary

allocation- In the financial year 2020/21,
the allocation was Kshs152 billion which
was approximately 4.9% of the total
government budget. These allocations
were made to the Ministry of Health.
 Health Care Financing Sources
• Appropriation in aid (AIA) - This includes
grants and loans from development partners.
• The main development partners in health care
in Kenya include the German Federal
Government and the African Development
Bank (ADB) among others.
 Health Care Financing Sources
• National Health Insurance Fund (statutory
insurance) - This is a fund for formally employed
individuals and those in the informal sector.
• Formal sector employees' contributions are
deducted and remitted to the Fund by their
employers.
• For members, under the voluntary category, they
pay Kshs.500 per month (Kshs.6000 per annum).
• For those in formal employment, contributions are
made as per their income.
 Health Care Financing Sources
1. Private Insurance- This is a fund contributed
by corporates and individuals for various
insurance products to the health sector.
2. Ordinary revenue: which represents the
amount of money raised in a given period
through taxes such as income tax, import
duty corporation tax, stamp duties, Value
Added Tax (VAT) and excise duties.
 Sources of finances for the government

3. User charges
• which are fees charged to consumers of goods and
services produced by the government.
• These are only paid by those who use the services,
such as birth certificates, driving licences, passports
and registration of real estate properties.
 Sources of finances for the government

4. Sale of assets: which includes the sale of bonded

goods and other assets including shares in
commercial enterprises.
5. Investment income:
• which represents income derived from public
commercial activities, e g. dividends and interest on
on-lent funds, from Central Bank and state
corporations.
 Sources of finances for the government
6. Grants from foreign governments: which are non
repayable funds provided by foreign governments
for a specific purpose.
7. Borrowing: which are repayable funds loaned by
foreign governments, donors or domestic markets.
 BUDGETING AND BUDGET TYPES
 Budgeting is the process of creating
business/organization budgets that estimate the amount
of money required to run business operations
successfully.
 Budgets -are expressions of expected future income and
expenses.
 They are generally based on historical data, if available,
and adjusted based on assumptions regarding inflation,
increases or decreases in income or expenses, and
expected expansion of programs and services.
 Principles of a good budget

A good budget should have the following

attributes:
1. Comprehensiveness: which means that the
budget includes all fiscal operations, on
receipts and expenditure sides, within a
sustainable macroeconomic framework.

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 Principles of a good budget
1. Predictability: which means that the budget should
be predictable within a medium term horizon.
2. Contestability-means that economic actors
compete fairly for resources and can challenge or
question the Government on any of the items in the
budget, or on any of its priorities
 Principles of a good budget
3. Transparency: which means that the budget should
be prepared and presented openly and information
should be available on a timely basis.
4. Periodicity: which means that that the budget
should cover a specific period of time.
 Importance of budgeting in an
Organization
 Budgeting allows organizations;
i. Set clear goals
ii. Control spending, and
iii.Save for future needs
iv. It Ensures Resource Availability- At its core,
budgeting’s primary function is to ensure an
organization has enough resources to meet its goals.
 By planning financials in advance, you can determine
which teams and initiatives require more resources and
areas where you can cut back.
 Importance of budgeting in an
Organization
iv. It Helps Prioritize Projects.
v. It Can Lead to Financing Opportunities.
vi. It Provides a Pivotable Plan- A budget is a financial
roadmap for the upcoming period; if all goes
according to plan, it shows how much should be
earned and spent on specific items.
 Stages in The Budget Process
The budget preparation process is initiated by
the National Treasury CS.
This process involves multiple stakeholders
such as the Executive, Parliament, and the
public.
CS Treasury issues a circular advising all
government agencies on how to prepare the
budget for the next financial year.

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 Contd….
 The Kenyan budget cycle passes through the
following four major phases:
I. Budget planning and preparation-defining financial
objectives and allocating funds to each section
according to its needs
II. Budget proposal, debate and approval
III. Budget execution (implementation, supervision and
audit)
IV. Budget monitoring and evaluation
 Types of budgets
1. Annual Budgets
An annual budget is a budget that is
developed for a year long period of time.
An annual budget is often the organization's
yearly budget that they would publish in
summary form in their annual report or
business statements.

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 Types of budgets
• Depending on the organization, an annual budget
could operate according to the financial year (e.g. 1st
July 2000 – 30th June 2001) or the calendar year (e.g.
1st January 2000 - 31 December 2000).
 Contd...
1. Operational Budget
 An operational budget can also be called an
organizational budget.
 This type of budget highlights the income
earned and expenditure that is incurred by an
organization.
 Operational budgets may be broken into
areas/departments so that these
areas/departments have their own budget
allocation to operate within.

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 Contd...
3. Program Budget
• A program budget highlights the income and
expenditure that is incurred for the
development and implementation of a specific
program e.g. Malaria Program
4. Capital Budget.-A capital budget focuses on
long-term investments in fixed assets or
capital projects.
 contd...
5. Cash budget.
 A cash flow budget gives you an estimate of
the money that comes in or goes out of a
business for a specific period in time.
 The cash budget is for cash planning and
control.
 It presents expected cash inflow and outflow
for a designated time period.
 TAKE HOME ASSIGNMENTS

• TYPES OF BUDGETS- READ MORE AND MAKE SHORT NOTES

• THE BUDGET PROCESS- READ MORE AND MAKE SHORT NOTES.

REFERENCE
• Fundamentals of Health Care Financial Management by Steven Berger
2007, 3rd Edition
• The constitution of Kenya 2010

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