Public Health

Budget Terminology

© 2016 South University

Budget Terminology

Fixed and Variable Cost

According to Issel, fixed costs remain the same and do not vary throughout the duration of the program (p. 284). Examples of fixed costs include general expenses that are accrued on a monthly basis. For an individual, it would include costs such as annual salary, rent or monthly mortgage, or car insurance. For a program, it might include researchers’ salaries, facility expenses, and routine program expenses and apparatus.

Variable costs are expenses that change throughout the duration of the program such as marketing materials. The main difference between these two types of costs is that fixed costs stay the same and variable costs are characterized by change depending on the item.

Direct and Indirect Cost

Direct costs are items that are allocated directly to a program and these are traced directly to that program. Direct costs include things such as employee salary or researcher benefits.

Indirect costs are not directly allocated to a program. Issel notes, “utility bills, telephone charges, and staff travel expenses to present the program at scientific conferences are all examples of indirect costs” (p. 284).

Breakeven Analysis

“A breakeven analysis is the mathematical determination of the point at which the expenses related to providing the program are equal to or less than the revenues generated for or from the program” (Issel, p. 288).

Budget Justification

The budget justification is a historical term, and it basically means to justify the costs in the budget. It is written in great detail. To prepare a budget justification, you need to first develop a narrative report and draft a budget outline to include pertinent information. This draft of the budget justification is then submitted to an executive committee or stakeholders for analysis of the detailed information.

Consider an example where the program evaluator includes information for a trip for four researchers to interview their target population. The budget would provide an analysis of the trip such as location, expenses for accommodations, rental vehicle, transfer expenses, meals, and so forth. These details are included with the aim of providing the committee with a detailed overview of the significant costs that would accrue from the trip. In the budget justification, the program evaluator would provide justification for the trip including a narrative of evidence-based information to underscore the significance of the team traveling to interview their target population. Usually the evaluator will include information about how the trip would benefit the program.

Budget Variance

The program evaluator reviews the budget variance regularly; generally this is done monthly. As Issel states, it would be important to explore how “current expenditures exceed (or not) the projected program expenditures. The difference between the budgeted and actual expenditures or income is called the budget variance” (p. 293).

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Program Planning and Evaluation

©2016 South University