Using Financial Ratios in a Local Health Department to Improve Performance

Effective Financial management systems go beyond simply documenting compliance with reporting requirements. Most importantly they also focus on routinely producing integrated financial, program, and budget information that is needed to effectively support systematic performance measurement. A financial management pilot project was conducted in a mid-size local public health department in Ohio. Using a set of public health financial indicators developed by the Robert Wood Johnson Foundation-supported Public Health Finance Steering Committee, financial ratios were calculated to trend financial and operational performance in three consecutive years. Results revealed information that was beneficial to assessing financial status and for making proactive operational and financial modifications as the local health department began to encounter financial difficulties at the beginning of the current recession. More widespread use of this standardized set of financial ratios will enable local health departments to benchmark their performance with peer organizations and assess the extent to which their financial resources are spent on mission-critical functions.