Solving Health Issues in Africa Research Paper

Introduction

The establishment, operation and the function of many formal non-profit organizations has largely been affected by social, political, legal and economic institutions. In addition, the major big non-profit organizations are found in developed nations but their operations have become largely transnational in nature.

These non-profit organizations (NGOs) continue to perform an important role in facilitating health development in sub-Saharan Africa. Moreover, the critical role of non-profit organizations in confronting diseases in Africa has intensively and extensively been documented.

Furthermore, the work of NGOs working in Africa especially those in health care has been spurred by the shrinking of state health services across the entire continent, a consequence described as ‘hollowing of the state’ which has been caused by increased privatization and structural programs throughout the 1980s and 1990s which in turn placed the burden on NGOs to fill the gap.

These NGOs get much of their funds and donations from governments of high-income countries such as the United States, Japan, and members of the European Union together with other OECD members (Merson, Black and Mills, 2006, p.497).

From time to time, the generosity manifested by the assisting governments has largely varied and usually depends more on the supposed geopolitical importance of the problem than the real and actual needs of the affected populations. The aspect of financial prudence has become requirement for many NGOs which in turn dictates the success or failure of NGOs.

Financial problems for these NGOs has further been fuelled by global financial recession which means that most NGOs have to operate efficiently within limited budget in order to meet the unlimited health requirements in African countries. Buoyed by this observation, this report will propose an expenditure plan that is necessary in making appropriate administrative decisions with regard to budgeting of health care in African countries.

NGOs role in provision of health services in Sub-Saharan Africa

The Sub-Saharan Africa has experienced numerous activities that have been spearheaded by non-profit organizations. For instance, the NGOs sector has contributed significantly in the provision of health and education services since the colonial era although many a times, some governments have worked to impose restrictions and measures on NGOs (Mwabu, et al, 2001, p.82).

Generally, Sub-Saharan Africa is a region that has been credited with experiencing success and prominence in NGOs work of service provision in health, but over time the form and extent on NGOs effort to provide the health services has reduced due to certain reasons such as:

1. The extent of health problems which determine the demand for services and the roles of state and NGOs sector in responding to the demand;
2. Government perceived attitude towards the NGOs and also the existing state policies in the health sector which tend to be influenced by political model and regime;
3. Economic factors which are vital in establishing resources available to the state sector and hence able to finance service provision programs and also the scope of NGOs to participate in service provision; and
4. The participation and level of interest by foreign aid donors and western NGOs ability in providing resources and influencing domestic social policy which on an evident note has become increasingly important in the context of economic crisis and the structural adjustments that started taking place from 1980s (Mwabu, et al, 2001, p.82).

In most African countries, the larger population is subjected to poor quality of government health facilities, coverage of such facilities is limited, available technical capacity is inadequate, decision-making process is over centralized and the process of providing the required services is generally overwhelmed by inefficiencies and small corruption (Mburu, 1994, cited in Mwabu, et al, 2001, p.82).

In addition, the increasing cases of diseases such as AIDS and chloroquine-resistant malaria is resulting in emergence of a resource gap and the sustained argument has been that such resource gap can be filled by the NGOs sector (World Bank, 1993; cited in Mwabu, et al, 2001, p.82).

Moreover, foreign NGOs continue to exert their presence in Sub-Saharan countries and their presence is seen either in their direct involvement in service provision or through their increased funding for their domestic counterparts and from these, NGOs sector has turned out to be a major source of health provisioning in Africa and such NGOs continue to receive immense support from official donors.

NGOs and Health expenditure in Sub-Saharan Africa

Non-profit organizations have played a crucial role in financing health services in Sub-Saharan Africa. The efforts of NGOs in this region have boosted the efforts of the respective governments in the region in their efforts to provide and improve health situation of the people of the region (World Bank, n.d, p.14).

In addition, NGOs sector has channeled a lot of resources which in turn are used in providing for the basic and tertiary health services that would not be available to the majority of the population if the NGOs sector was to withdraw its activities from the society. Overall, non-profit organizations account for almost 35 per cent of all health donations in Sub-Saharan countries (World Bank, n.d, p.16).

The activities of NGOs have been accelerated by the inability of the governments to provide fully and adequately health services to its population and also the profit motive of most private organizations permitted and involved in provision of health services to the population, thereby increasing the prices for vital health care services and products.

In most cases, non-profit organizations have partnered with respective governments in extending and facilitating accessibility of critical health care services and products to the disadvantaged populations.

The graph below shows the comparison between private and public health spending in Sub-Saharan countries. It should be noted that, the private expenditure figures in the graphs below include expenditure figures by the NGOs sector.

Budgeting for Non-Profit Sector

The primary objective of non-profit organization has been regarded to involve provision of service which in many instances may or may not be sold, and in evaluating the performance of such organization, emphasis is put on how well that service is provided by the organization compared to its cost.

From this, many NGOs provide services for which there is no direct financial charge made on consumers and in cases where such financial charge is incurred, it is always negligible when compared to the cost incurred in providing for the services (Cutt and Ritter, 1984, p.5).

The objectives of any budgetary model adopted by any organization carrying out specified activities are a function of the goals of the specific organization and the accountability regime specified for the budgetary model functioning within the management cycle of the specific organization.

Primarily, the goals of any budgetary model are specifically seen to generate process and display information which, in the initial stages, appear to be proposals but later they become decisions tools employed in order to achieve the organizational goals (Cutt and Ritter, 1984). Second, the goals of any budgetary model reflect the accountability regime responsible for the budgetary model within the organization. This is done with conviction that resources allocated need to be reported and their use also reported in the required manner since all resources are regarded to be scarce (Cutt and Ritter, 1984).

For the non-profit organizations, the aim is to provide service, and the value of service provided is measured not in terms of money but through some indicators of quantity and quality of the service being provided. Service goals for most non-profit sector are generally broken down into three large categories: allocation, redistribution and stabilization (Cutt and Ritter, 1984, p.9).

Furthermore, the accountability regime which essentially determines the goals of the budgetary model in non-profit organizations is similar to that of profit-making organization with respect to procedural accountability but differ with respect to consequential accountability.

Non-profit sector’s accounting mechanisms

Non-profit organizations and especially government agencies carry out their operations in different political and economic environments than other business enterprises; hence accounting standards for non-profit organizations have developed differently as compared to business-enterprise standards.

Although many principles and concepts such as controlling, reporting, concern for relevance, comparability, consistency and understandability, apply to both non-profit and private sector, the non-profit sector manifests some differences that include:

• Non-profit organizations have inflow (revenue) and outflow (expenditure) statements but in most cases the concern is on raising and expending resources in accordance to the budget plans; non-profit organizations are expenditure rather than expense-oriented;
• non-profits emphasis is placed on the sources of revenues and ways the acquired resources are used, and in this respect the organizations are dollar accountability-oriented;
• largely in non-profits, there is no equity accounting and funds are generally based on legal requirements, further accounting may use either the cash basis or modified cash-accrual basis;
• non-profits do not typically have operational accountability as a central objective and thus major emphasis of these organizations is placed on stewardship and role of administrators and the management become accountable for the inflow of funds and also their expenditure in attainment of set objectives (McKinney, 2004, p.50).

Funds in non-profit organizations are categorized as resources that are available for the organization to obtain goods and service and these resources may either be restricted or unrestricted whereby in case of restricted resources, the donor or the authorizing body outlines the conditions to be observed or adhered to in using the funds (McKinney, 2004, p.50).

Expenditure Budget model for Non-profit organization

With the availability of specification of the revenue budget and ultimate determination of a planning framework of objectives and priorities, the first constituent of the expenditure budget model is the set budgetary terms of reference. In accordance to these set goals the primary function on which information is collected is for budgetary decision-making.

The organization is seen to be divided into specific major programmatic activities and each of which is divided into sub-programmatic activities which can further be described in line-items of expenditure (Cutt and Ritter, 1984, p.19). The second constituent of expenditure budget model is the specification of the accountability regime.

Accountability regime is classified into two; the procedural and consequential accountability where procedural accountability deals with accountability for propriety where it exclusively deal with inputs while the consequential accountability is concerned with performance in utilizing the available limited resources hence it includes information on the outputs or benefits consequential on utilizing the limited resources (Cutt and Ritter, 1984, p.21).

Consequential accountability regime is further defined at different levels of sophistication all involving the translation of line-item financial outlays into output-oriented cost concepts that in turn represent three levels of sophistication in the explanation of output described as productivity or efficiency measures, effectiveness measures and measures of the imputed money value of output, therefore these three levels of consequential accountability can be seen as cost-efficiency, cost-effectiveness and social profitability (Cutt and Ritter, 1984).

The third constituent of expenditure budget model is the specification of the scope of the information to be included in expenditure budget in terms of operating and capital expenditures, and the last constituent of expenditure budget model is the specification of the time horizon in which detailed budget information will be required for which spending is formally authorized (Cutt and Ritter, 1984).

Zero-base budgeting (ZBB) for non-profit organization

Zero-base budgeting is a budgeting technique that has gained popularity due to its strong push toward analysis of all costs and hence all costs from a base of zero must be justified. The below diagram illustrates elements of a ZBB decision package.

Elements of a ZBB decision package

Source: Finkler, Kovner and Jones, 2007.

The ZBB model builds on a program budgeting apparatus which determines program objectives and the most cost-beneficial or cost-effective method of pursuing program objectives and hence provides a means of implementing of the program objectives at the activity level.

The general ZBB model takes the existing organizational or programmatic structure and the basic logic of the model require some form of top-down guidance on the objectives of the organization within the activity-level budgeting is being carried out. With ZBB model, the organizational objectives provide the context within which the activity objectives can be determined and hence activity levels of effort ranked.

In general ZBB model does not require the objective-oriented structure of program budgeting but instead relies on the existing organizational structure in most cases may be programmatic in nature. Just like performance budgeting and program budgeting, ZBB model dwell heavily on the line-item budget model and therefore responds to the needs of procedural accountability (Cutt and Ritter, 1984).

The objectives of the ZBB model especially for non-profit organization are: first, financial control which reflects the procedural accountability; and second, management which reflects the activity at the organization level for which information is collected for output-oriented decision-making process.

The structure of the budget model requires cost and output information for the established organizational units over specified time period and cross-referenced to the standard line-item presentation is required to achieve the set financial control objectives of budgeting.

Furthermore, the structure of ZBB budget model generally requires that all set of decision packages for the organization as whole be arrayed in rank order and associated with the funding constraint for the organization in the specified period of time so that emphasis is put on those high priority decision packages and which become first in receiving the allocated funds and also the low-priority packages which become first to be eliminated if the overall budget is reduced or inadequate.

In general, the ZBB budget model provides comparison to three major types of alternatives within the decision package for each individual program: first alternative involves ways to produce service or output; second alternative relates to quantity of service or output to be provided; and third alternative, considers the varying levels of quality (Finkler, Kovner and Jones, 2007).

Budgeting with limited resources

Non-profit organizations have been forced to work with limited budgets to meet unlimited needs specifically in developing societies. For instance, as an organization dealing with health care in Africa, resources available are limited to cater for adequate provision of necessary drugs: medicines from major pharmaceutical companies; non-generic, non USDA approved; and stem cell medication from foreign sources.

It is evident that limited the organization has inadequate funds and therefore any move to acquire the above medicines need to be a financial sustainable. A sustainable budgeting is required that will encourage and promote obtaining of the subsidized medicines in a cost-effective manner without compromising on the quality of the drugs.

In creating an effective budget for the organization to acquire the medicine using the available limited funds, the first important thing is to access the organization’s cash flow in order to know all the available monies and donations. Budgeting in its nature is a financial exercise that should make provision for expenditure after consolidating the revenue resources. Expenditure in this case is the purchase of drugs for an African country.

In the case the budget need to be done objectively and realistically due to limited funds where most pressing needs should be given the first priority. The available pooled fund should be distributed for each drug depending on the demand and priority.

In essence the needs will always be more than the available resources and as a result the budget may not fulfill all the demands but the organization and especially the board should be judicious in balancing the organization’s pooled funds and expenditure so that the basic priorities are not foregone and that expenditure is only limited to the most needed drugs. To realize the objectives of the organization with regard to limited funds in buying the subsidized drugs the following measures will be necessary:

Flexible Budgeting

Flexible budgeting allows the management of the organization to create operating budgets for the various workload levels and this will be done by reviewing the volume of medicine (products) to be provided by the organization and this constitute the workload for the organization.

At the same time the management is presented with opportunity to forecast the changes to take place especially in pharmaceutical operations in foreign environment. A flexible budget provides the organization’s management with the opportunity to understand the effects of adopted workloads.

Cost-Benefit Analysis

Cost-benefit analysis for the organization will compare the costs and benefits of acquiring the needed medicine from the selected foreign sources.

In carrying out cost-benefit analysis five-step process is observed: determine the project goals; determine the benefits of the purchase of the drugs; determine the cost and benefit flow at an appropriate rate; and make a decision analysis based on the data collected. To derive a more viable and workable expenditure decision, the organization will use ZBB budgeting model combined with flexible budgeting ideas and incorporating cost-benefit analysis techniques.

Conclusion

Organizations are formed and exist to accomplish certain set objectives. Non-profits are not insulated from these responsibilities. Further, finance and other resources become necessary and critical in determining the success in accomplishing organizational set objectives within specific timeframe.

In ensuring the health state of organization’s finances the board has the responsibility to ensure integrity and reliability is promoted in the organization with regard to finances. The board has the mandate to ensure the organization is managed in a fiscally sound way and the organization possesses adequate resources to carry out its programs. Budgeting becomes necessary for non-profit organization in that the income and expenses for the organization will need to be outlined to show the healthy and sustainability of the organization.

Effective financial management and budgeting tools need to be adopted to ensure the financial health of the organization is not compromised and also the organization is in a position to meet its set objectives in cost-effective way. Effective budgeting ensures the organization remains upright in contingency planning process and that the management needs to be assertive and tightly control the expenditure of resources which naturally are scarce while the needs are unlimited.

References

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