General principles of financial management

The Basic aim of Financial Management is to operationalize an effective and accountable financial management system for budgeting, release, monitoring and utilization of funds under NHM at the central/state/district/block and facility level.

1. Planning and Budgeting: Planning is required to formulate achievable targets for various activities for program implementation and allocate appropriate funds to states under various programs. Allocation of funds is facilitated through the preparation of detailed budgets. Under NHM, the planning and budgeting process is carried out by preparing State Project Implementation Plans (SPIPs) and District Health Allocation Plans (DHAPs).
2. Allocation and Release of Funds: The funds must be allocated to states per the budget approved for the program/ activities. These have to be disbursed in tranches on a timely basis, subject to certain conditions to be fulfilled by states/ lower units.
3. Accounting: Availability of funds implies accountability. Proper books of accounts and records must be maintained at all levels (accounting centers) under the accounting policies and principles.
4. Reporting: Financial Statements need to be prepared and submitted in specified formats and within the fixed timelines to report the utilization of the funds disbursed.
5. Monitoring: The utilization levels of the states need to be monitored and evaluated on established parameters. Timely monitoring is essential for process improvement and follow-up on audit observations.

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6. Auditing: An audit is of foremost importance to ensure the correctness of financial statements & accounting records and appropriateness of internal control mechanism. Under NHM, in addition to the annual Statutory Audit, Concurrent Audit also needs to be implemented.
   
   Resources:

   1. Operational Guideline for Financial Management, Ministry of Health and Family Welfare, Government of India