Estimating costs of programme services and products using information provided in standard financial statements

The financial viability of programme services and product offerings require s that revenue exceeds expenses. Revenue includes payments for services and products as well as donor cash and in-kind contributions. Expenses reflect consumption of purchased or contributed time and materials and utilization (depreciation) of physical plant facilities and equipment. Standard financ ial reports contain this revenue and expense information, complemented when necessary by valuation and accounting of in-kind contributions. Since fina ncial statements are prepared using consistent and accepted accounting prac tices, year-to-year and organization-to-organization comparisons can be mad e. The use of such financial information is illustrated in this article by determining the unit cost of cataract surgery in two hospitals in Nepal. Th e proportion of unit cost attributed to personnel, medical supplies, admini strative materials, and depreciation varied significantly by institution. T hese variations are accounted for by examining differences in operational s tructure and capacity utilization.