Effective financial management at sub-centers remains one of the most critical yet challenging responsibilities for Community Health Officers across India. With sub-centers serving as the first point of healthcare contact for rural populations of 3,000-5,000 people, proper fund administration directly impacts service delivery quality and community health outcomes.
Understanding the intricacies of sub-center accounting is particularly important as health officers navigate multiple funding streams. Community health officer financial responsibilities extend beyond clinical care to include budget planning, expenditure tracking, and compliance with government regulations. Furthermore, rural health financial management requires specialized knowledge of programs like Janani Suraksha Yojana and Village Health Funds, while basic healthcare computing skills have become essential for maintaining accurate financial records.
This comprehensive guide examines the financial management framework for sub-centers, covering funding sources, permissible expenditures, accounting requirements, and audit procedures. By mastering these financial management principles, health officers can ensure transparency, maximize resource utilization, and ultimately deliver better healthcare services to their communities.
CHO - 001 / BNS- 001
BLOCK - 5 - Communication, Management and Supervision
UNIT - 05 Financial management and accounts and computing at sub center
Overview of Financial Streams at Sub-Centers
Sub-centers receive funding from multiple sources to ensure operational efficiency and service delivery. These financial streams are carefully structured to address different aspects of healthcare provision at the grassroots level.
The Funds are allocated under following area
1. Untied Funds Allocation: ₹10,000 per Sub-Center
2. Annual Maintenance Grants (AMG) at Sub-centres
3. Janani Suraksha Yojana (JSY) Cash Assistance for Mother and ASHA
4. Untied fund for VHSC
1. Untied Funds Allocation: ₹10,000 per Sub-Center
The National Rural Health Mission (NRHM) provides each sub-center with ₹10,000 annually as untied funds [1]. This allocation enables health officers to address urgent yet discrete activities requiring relatively small sums of money. The funds are maintained in a joint bank account operated by the Auxiliary Nurse Midwife (ANM) and the village Sarpanch [2].
Decision-making regarding expenditure of these funds falls under the purview of the Village Health Committee (VHC), though the ANM administers the actual spending [1]. This financial arrangement ensures both community participation and professional oversight in resource allocation.
The untied funds serve several practical purposes at the sub-center level. Notably, they can be utilized for:
Minor modifications to sub-centers such as privacy curtains and basic repairs
Ad hoc payments for cleaning, especially after childbirth
Transportation during emergencies or epidemic sample collection
Purchase of essential consumables like bandages and disinfectants
Environmental sanitation measures including larvicidal treatments
However, certain restrictions apply to untied fund usage. The guidelines explicitly prohibit spending on salaries, vehicle purchases, recurring expenditures, or Gram Panchayat expenses [1]. This ensures the funds remain focused on immediate healthcare delivery needs rather than administrative costs.
Permissible and Restricted Use of Funds
Clear guidelines govern the utilization of untied funds at sub-centers, enabling health officers to make informed decisions about permissible and prohibited expenditures. These regulations ensure financial resources support healthcare delivery while preventing misuse.
a. Approved Expenditures under Untied Funds
The primary purpose of untied funds is addressing unexpected, essential, and immediate expenses that fall outside regular budget allocations. These funds primarily fill gaps in service delivery and help complete unfinished public utility assets [5].
Health officers may authorize expenditure for:
Minor modifications to sub-centers including privacy curtains, tap repairs, bulb installations, and other local-level repairs [6]
Ad hoc payments for cleaning the sub-center, especially after childbirth events [6]
Transport services for emergency cases to appropriate referral centers [6]
Transport of samples during disease outbreaks and epidemics [6]
Purchase of essential consumables like bandages for the sub-center [6]
Acquisition of bleaching powder and disinfectants for village common areas [6]
Labor and supplies for environmental sanitation, including larvicidal measures for stagnant water [6]
Payments or rewards to ASHA workers for specific identified activities [6]
Additionally, some states allow untied funds to cover electricity and water bills, provision of sitting arrangements for patients and expectant mothers, installation of water filters, and making or displaying IEC materials on various NRHM schemes [5].
b. Prohibited Uses: Salaries, Vehicles, Recurring Costs
Despite providing financial independence, untied funds come with strict usage restrictions. First, these funds must never be diverted for any salaries, vehicle purchases, recurring expenditures, or to meet Gram Panchayat expenses [6].
Other prohibited expenditures include:
Purchase of office stationery, training-related equipment, and furniture [6]
Engagement of full-time or part-time staff and payment of honorariums, incentives, or wages [6]
Advertisements in newspapers, journals, magazines, or other IEC-related expenditures [6]
Organizing “Swasthya Mela” or setting up stalls in any mela for health scheme awareness [6]
Payment of incentives to individuals or groups in cash or kind [6]
Meeting any recurring non-plan expenditure [6]
Purchasing medicines except during emergencies or outbreaks [5]
Paying for gas cylinders or general electricity costs outside emergency situations [1]
These restrictions ensure the funds remain focused on immediate healthcare delivery rather than administrative or recurring expenses that should be covered by other budget allocations.
c. Emergency and Sanitation Use Cases
Untied funds serve as a critical resource during emergencies and for essential sanitation activities. According to studies, approximately 65% of untied funds go toward cleanliness initiatives, including cleaning water sources like wells and common village areas, clearing bushes and shrubs, and general environmental sanitation [7].
For emergencies, untied funds provide immediate financial backing when:
Patients require urgent transportation to referral centers (supported by 68.4% of health workers) [1]
Samples need collection and transportation during epidemics (endorsed by 68.4% of health workers) [1]
Emergency medical supplies are required during outbreaks [5]
Regarding sanitation, these funds support:
Purchase of disinfectants for village common areas (supported by 68.4% of health workers) [1]
Labor and supplies for environmental sanitation efforts (approved by 78.9% of health workers) [1]
Cleaning of water sources to prevent waterborne diseases [7]
Post-delivery cleaning of sub-centers (endorsed by 63.2% of health workers) [1]
Crucially, untied funds should generally serve community interests rather than individual needs, except in emergency situations involving referrals and transport [8]. This principle ensures the widest possible benefit from limited financial resources while allowing flexibility for genuine emergencies.
2. Annual Maintenance Grant for Government Buildings
In addition to untied funds, sub-centers housed in government buildings qualify for an Annual Maintenance Grant. This allocation supports infrastructure upkeep and improvements. Under NRHM health sector reforms, Primary Health Centers (PHCs) receive ₹50,000 annually as maintenance grants [1].
The maintenance grant addresses physical infrastructure needs that might otherwise deteriorate due to lack of regular upkeep. This financial stream recognizes that functional facilities are essential for effective healthcare delivery at the community level.
In some states like Odisha, the Annual Maintenance Grant matches the untied fund amount at ₹10,000, with a structured release mechanism. The funds are typically disbursed in two tranches—50% as an assured top-up and the remainder as a performance grant [1]. This approach incentivizes quality improvements while ensuring basic maintenance needs are met.
3. Janani Suraksha Yojana (JSY) Cash Assistance
JSY represents another significant financial stream managed at the sub-center level. Launched on April 12, 2005, this safe motherhood intervention aims to reduce maternal and neonatal mortality by promoting institutional deliveries among economically disadvantaged pregnant women [3].
The program classifies states into Low Performing States (LPS) and High Performing States (HPS) based on institutional delivery rates. LPS include Uttar Pradesh, Uttarakhand, Bihar, Jharkhand, Madhya Pradesh, Chhattisgarh, Assam, Rajasthan, Odisha, and Jammu and Kashmir [3].
Cash assistance varies by location and category:
In rural LPS: ₹1,400 for mothers and ₹600 for ASHAs (total ₹2,000)
In urban LPS: ₹1,000 for mothers and ₹400 for ASHAs (total ₹1,400)
In rural HPS: ₹700 for mothers and ₹600 for ASHAs (total ₹1,300)
In urban HPS: ₹600 for mothers and ₹400 for ASHAs (total ₹1,000) [3]
For effective implementation, health workers at sub-centers maintain an advance amount of ₹1,500 to ensure prompt disbursement of benefits [4]. District authorities typically advance ₹10,000 to each ANM as recoupable imprest money specifically for JSY [4]. This advance is kept in a separate joint account from the untied fund account.
4. Village Health and Sanitation Committees (VHSC)
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Village Health and Sanitation Committees (VHSNCs) serve as foundational platforms for community-based health governance across rural India. Established under the National Rural Health Mission (NRHM), these committees create vital links between healthcare systems and local communities, consequently influencing financial management practices at sub-centers.
Composition: 50% Women, 30% NGO Representation
VHSNCs follow strict compositional guidelines to ensure inclusive representation. Each committee requires a minimum of 15 members [3], with women constituting at least 50% of the total membership [3]. This female representation remains consistently strong across multiple states, as confirmed by evaluation studies [4].
The leadership structure follows specific protocols:
A woman elected Panchayat member (preferably from SC/ST communities) residing in the village serves as chairperson [3]
If no woman panch is available from the village, preference goes to any SC/ST panch [3]
The ASHA worker functions as member secretary/convenor [3][9]
Membership must include representation proportional to the village population from scheduled castes, scheduled tribes, and minorities [3]. Additionally, all habitations and hamlets within the village require representation, with special emphasis on vulnerable sections [3][9]. Healthcare workers, including ANMs and Anganwadi workers, automatically qualify for membership given their crucial role in service delivery [3][10].
Annual ₹10,000 Village Health Fund Allocation
Every properly constituted and oriented VHSNC receives an annual untied fund of ₹10,000 [11][12]. This allocation enables committees to address local health priorities without awaiting higher-level approvals. Funds typically remain in a joint account with the Panchayat member and ASHA/AWW as co-signatories [4].
Studies reveal significant variations in fund utilization patterns, with many committees struggling to effectively deploy their allocations. Research indicates that 66.7% of VHSNCs failed to utilize even 50% of available funds in certain regions [4]. Common challenges include delayed fund disbursement (often reaching committees in the subsequent fiscal year) [11] and insufficient knowledge among members about utilization guidelines [11].
Community Participation and Local Governance
VHSNCs typically function as sub-committees of Gram Panchayats [9], operating under their overall supervision yet maintaining autonomy in health-related decision-making. This institutional arrangement strengthens linkages with local self-governance structures.
The committees conduct monthly meetings where members monitor health indicators, plan interventions, and provide feedback on service delivery gaps [3]. These gatherings create essential platforms for community voices, primarily enabling service providers to receive direct community feedback [10].
Key VHSNC responsibilities include:
Facilitating mobilization of pregnant women and children for health services [3]
Creating nutrition awareness and identifying local high-nutrient foods [3]
Investigating and reporting causes of death to inform village planning [3]
Monitoring service delivery at Village Health and Nutrition Days [3]
Accounting and Bookkeeping Requirements
Proper documentation forms the backbone of effective financial management at sub-centers, with standardized accounting practices ensuring transparency and accountability. Health officers must maintain specific records to track all financial transactions, regardless of the funding stream.
Cash Basis and Double Entry System
Sub-center accounting operates on cash basis principles, meaning transactions are recorded only when money is physically received or paid [14]. This straightforward approach aligns with rural healthcare settings where complex accrual systems might prove impractical. The accounting period follows the Government of India’s financial year, running from April 1st to March 31st [2].
Moreover, all financial records must adhere to double entry bookkeeping principles [14]. This system requires every transaction to affect at least two accounts—typically one debit and one credit—creating built-in verification. For instance, purchasing medical supplies simultaneously reduces cash balance while increasing inventory assets, maintaining mathematical equality between debits and credits.
Columnar Petty Cash Book and Bank Register
Health officers must maintain a columnar petty cash book to track smaller expenditures [2]. This specialized ledger contains separate columns for different expense categories, enabling quick analysis of spending patterns. The ANM must update this record weekly and authenticate it with her signature [2].
Similarly, a bank register is essential for documenting all cheque-based receipts and payments [2]. This register requires monthly closing and formal endorsement by the ANM, establishing a clear audit trail for larger transactions. Together with the petty cash book, these documents provide comprehensive financial oversight.
Fixed Asset and JSY Beneficiary Registers
The fixed asset register typically divides into three distinct sections [2]:
Consumables purchased using untied funds (stationery, etc.)
Fixed items acquired through untied funds (furniture, equipment)
Stock of free supplies received from block-level authorities
For JSY implementation, health officers must maintain a dedicated beneficiary register capturing comprehensive information about each recipient [2]. Essential details include name, age, complete address, number of children, husband’s name, and authenticated fingerprints or signatures [2]. This documentation ensures proper disbursement of maternal benefits while preventing fraudulent claims.
Essentially, these standardized bookkeeping requirements facilitate better rural health financial management while simplifying audit processes. When properly maintained, these records enable community health officers to demonstrate compliance with governmental regulations and foster public trust.
Budgeting and Audit Procedures
Effective budgeting and rigorous audit procedures form the cornerstone of fiscal discipline at sub-centers. These systematic approaches ensure optimal utilization of limited resources alongside adherence to regulatory frameworks.
Steps to Prepare Annual Sub-Center Budget
Developing a sub-center budget begins with listing all planned activities for the upcoming fiscal year. Initially, health officers must determine essential resources needed, followed by estimating associated costs. Subsequently, priorities must be established when funds cannot accommodate all requirements. The budget cycle encompasses three critical phases: formulation, execution, and evaluation [15]. Formulation addresses fundamental questions about resource requirements and allocation priorities, whereas execution tracks actual fund utilization through the year.
Audit Scope: Accuracy, Compliance, and Fraud Detection
Audits at sub-centers primarily assess adherence to applicable laws and regulatory frameworks [16]. Professional auditors examine financial records for material irregularities while applying professional skepticism [17]. Their experience significantly influences fraud detection capabilities [17]. The process evaluates both regularity (adherence to formal criteria from laws and regulations) and propriety (sound financial management and ethical conduct) [16].
Audit Process: Record Verification and Reporting
Throughout the audit process, sufficient evidence must be gathered to support conclusions [16]. Auditors verify records across multiple domains including resource management, service delivery, and support systems [18]. They apply professional judgment while maintaining objectivity [16]. The verification focuses on collecting and analyzing data to identify problems, define evaluation criteria, implement changes, and ultimately improve processes [5].
Conclusion
Effective financial management stands as the cornerstone of successful sub-center operations across rural India. Health officers who master funding stream management ultimately deliver better healthcare services to their communities. The structured approach to resource allocation—through untied funds, maintenance grants, and JSY assistance—provides essential flexibility while maintaining accountability.
Understanding both permissible and prohibited expenditures ensures resources target genuine healthcare needs rather than administrative costs. The clear guidelines prevent misuse while allowing necessary adaptations to local circumstances. Therefore, health officers must develop thorough familiarity with these regulations to maximize impact within compliance boundaries.
Village Health and Sanitation Committees strengthen this financial framework through community involvement. Their inclusive composition, with 50% women representation, ensures diverse perspectives inform healthcare priorities. Additionally, the ₹10,000 village health fund enables responsive action addressing unique local challenges without bureaucratic delays.
Proper accounting practices using cash basis and double entry systems create transparency essential for maintaining community trust. The meticulous documentation through columnar petty cash books, bank registers, and asset records establishes clear audit trails. Consequently, health officers can demonstrate responsible stewardship while protecting themselves from potential allegations of financial impropriety.
The systematic budgeting and audit procedures complete this comprehensive financial management framework. Annual budget preparation disciplines resource allocation, while regular audits verify accuracy, compliance, and detect potential fraud. These processes safeguard public funds while ensuring maximum benefit reaches intended beneficiaries.
Financial management at sub-centers thus extends beyond mere bookkeeping—it directly impacts healthcare quality and accessibility for India’s rural populations. Health officers who develop these financial competencies alongside their clinical skills become truly effective agents of positive change in their communities.
References
[1] https://pmc.ncbi.nlm.nih.gov/articles/PMC10900452/
[3] - https://bhs.org.in/a-gentle-introduction-to-vhsnc/
[5] - https://pmc.ncbi.nlm.nih.gov/articles/PMC10561927/
[6] - https://nhm.gov.in/images/pdf/guidelines/nrhm-guidelines/guidelines_of_untied_funds_nrhm.pdf
[7] - https://journals.lww.com/jfmpc/fulltext/2020/09090/evaluation_of_village_health_sanitation_and.37.aspx
[8] - https://nhmharyana.gov.in/page?id=63
[9] - https://nhm.gov.in/index1.php?lang=1&level=1&sublinkid=149&lid=225
[10] - https://pmc.ncbi.nlm.nih.gov/articles/PMC6195149/
[11] - https://ijmr.org.in/assessing-engagement-of-scheduled-tribe-communities-in-the-functioning-of-village-health-sanitation-nutrition-committees-in-india/
[12] - https://www.intrahealth.org/sites/default/files/files/media/role-of-village-health-committees-in-improving-health-and-nutrition-outcomes-a-review-of-evidence-from-india-/ER_Brief_VHC 4.pdf
[13] - https://pmc.ncbi.nlm.nih.gov/articles/PMC9207712/
[14] - https://nhmodisha.gov.in/wp-content/uploads/2023/08/Accounting-Hand-book-for-sub-district-level.pdf
[15] - https://accountabilityindia.in/wp-content/uploads/2023/10/Understanding-Indias-Health-Budgets.pdf
[16] - https://cag.gov.in/uploads/guidelines/Compliance-Guidelines-approved-final-preface-05de4efef9159d0-85033036.pdf
[17] - https://www.researchgate.net/publication/376682763_Auditors’_Experience_in_Financial_Statement_Fraud_Detection_The_Role_of_Professional_Scepticism_and_Idealism
[18] - https://cag.gov.in/uploads/download_audit_report/2021/4.-Chapter-I-0640eda231aa068.99308916.pdf
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