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Financial Management Guide

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Financial Management Guide S E C T I O N4 Financial Management About this section This section explains financial management, and therefore forms the basis for the other sections that follow. inancial management is an integral part of district health management. It is made up of a F number of distinct processes that happen in a cyclical way. Service and district managers receive support from their finance sections to manage the finances. 4.1 Understanding Financial Management The processes that make up financial management are explained in the table below. Note that these approaches are implicit to the district management cycle explained in Section 3. Table 2: Financial Management Pr oc e s s e s Process Description Financial Planning Assessing the current resource position, linking resources to service ● Budgeting plans and determining a budget. ● Setting targets ● Drawing up a budget which will guide how money is spent in for monitoring order to achieve the goals set. and evaluation ● Setting targets for revenue and expenditure. ● Setting targets for efficiency and equity. Resource Allocating resources across district services. allocation In-year ● Ensuring that funds are spent and revenue collected according management: to the financial plan and according to the norms and standards Operating, set by the Treasury. monitoring, ● Making sure that there are good internal control measures and safeguarding monitor that these are applied. Evaluation: ● Linking expenditures to service outputs and analysing with Reviewing and respect to equity, efficiency and sustainability. reporting ● Drawing up an annual report. ● Identifying key strategic issues for the next District Health Plan. Financial Management: An Overview and Field Guide for District Management Teams 17 In the past the management of services and finances happened separately from each other. This is now changing in an integrated district health management approach as was discussed in Section 2. The Financial Management Cycle The figure below shows the order of the different processes of financial management. Th e s e processes happen within the Medium Term Expenditure Framework (MTEF). The MTEF is a 3-year rolling expenditure showing a detailed present year budget with projected figures for the next two years. The MTEF requires that the Financial Plan must include longer term planning for a further two years. Figure 4: The Financial Management Cycle Planning and Budgeting (Section 5) Evaluation Resource and reporting allocation (Section 8) (Section 6) In-year management: Operating, monitoring and safeguarding (Section 7) The Financial Management Cycle is supported by a financial administration system that is designed to make sure that all transactions are captured, and that management can withdraw data to monitor trends. The financial administration system, such as the Financial Manage- ment System (FMS), has a specific structure with identity codes to show the following: ◆ Where funds are spent (responsibility area such as a clinic) ◆ Why funds are spent (programme such as district health services) ◆ What the money is being spent on (the objective, for example environmental health services) ◆ What item the money is being spent on. These are called line items and will be explained in more detail in Section 5. 18 Financial Management: An Overview and Field Guide for District Management Teams Good performance in this phase The following measures would indicate good financial management: ✔ A clear understanding of the financial management processes. ✔ Integrating the management of services and finances. Financial Management: An Overview and Field Guide for District Management Teams 19.
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