The analysis of government expenditure on health during the 1980s in AP by IHS happens to be one of the first contributions towards building up of state health accounts in India . Funded by the International Health Policy Program (IHPP), World Bank (Washington DC), this study covered not only standard medical programs like curative and preventive care, but also health related activities such as primary education, water supply, sewerage, sanitation, housing, and community development. Such an approach provided a much clearer picture of government’s overall orientation toward social development. A key finding of the study was that the resource allocation for public hospitals was skewed towards urban tertiary hospitals with first referral (district and sub district level) hospitals receiving inadequate attention. The study recommended a deliberate one time investment to increase secondary hospital stock[1].The evidence base provided by the study was a key driver for the subsequent World Bank AP First Referral Health Systems Project and reallocation of resources to the secondary care sector. The experience gained from analysis of public health spending was instrumental in designing one of the first electronic compilation of government budget and accounts data in the country. The Institute also developed a software called Government Expenditure Analyst (GEA) which allowed analysis of expenditure data upto the sub head level. Expertise gained at the IHS in electronic compilation of government budget data contributed to preparation of the first budget data on disk in India . The first Budget Data on Disk of the Andhra Pradesh Government was released by the State Finance Minister in 1998. The IHS was one of the collaborating Institutions contributing to development and delivery of this new service.A key area of the Institute’s work in supporting health sector reforms in the country has been in the area of National Health Accounts. Information about the sources and uses of funds for health is a key input in deciding how public monies are best used. The Institute has established State Health Accounts (2001-02) for Andhra Pradesh to support development of medium term strategies for health. This DfID[2] funded exercise was the first comprehensive Health Accounts in the country. Extensive consultations with various stakeholders combined with a literature review mapped out the different financing sources, financing agents and providers of health in the State. Using a combination of primary surveys and secondary data, flow of funds from various sources (public, private and external) through a variety of financing agents were traced. Financing Agents are institutions or entities that channel funds provided by financing sources and use the funds to pay for, or purchase, the activities inside the health accounts boundary. Some of the key Financing Agents in the State include health and other related departments, local governments, households, NGOs, social and private insurance, private and public enterprises.  Flow of funds from various agents to different public and private providers (end users or final recipients of health care funds) and functions (services or activities that providers deliver with their funds) were also traced. The exercise provided an in-depth understanding of flow of funds within the public sector and outside. It was found that public expenditure on health was historically underestimated as previous analyses had focused on health department alone, whereas number of departments within the State such as Tribal Welfare, Rural Development, Women and Child Welfare, Labour etc., local bodies (municipalities and PRIs) and different central ministries incur health expenditure in the State. It was found that while expenditure on primary care was consistent with State policy goals, bulk of its expenditure was on delivery of national programmes for disease control and RCH. Basic ambulatory care services were neglected with low allocation for drugs and supplies. Though significant proportion of patients of public providers, particularly hospitalized patients were poor, they incurred substantial out of pocket expenditure which was met through borrowings, loans and sale of assets. Expenditure on health insurance and financial protection schemes accounted for about 10% of total health spending which was mostly contributed by social insurance and other employer managed schemes of government, private and public sector enterprises. There were no financial protection schemes for the poor and more than 85% of the population did not have any kind of financial protection against ill health. User fees charged by the public hospitals were negligible which did not appear to have potential to even partially offset expenditure by DoHMFW providers, as was initially envisaged under the medium term health strategies. Decentralization of health care and involvement of local bodies to enhance performance of public health system was a key policy goal. Though the Constitutional Amendment Acts, subsequent state legislation and executive orders assign an impressive list of health functions to local bodies only 0.3% of the total funds for health in AP flow through Local Bodies. Local Bodies are the primary providers of communicable disease control services such as chlorination of water, vector control etc., in the State and lack of resources is a key constraint. In 2001-02, 97% of the PRI funds came from central and state government sources. Operationalization of health policy goals would therefore require substantial widening of resource base of local bodies either through increased powers to raise their own revenues or increased devolution of funds to local bodies by state and central governments. These findings fed into development of the medium term health sector strategies of the State. Another learning experience was the need for robust household expenditure estimates. Since such expenditure data is available from periodical surveys there is need for a suitable inflator.The SHA exercise had used a GSDP inflator to estimate household expenditure based on 1995-96 NSSO survey on health care. Validation based on subsequent survey in 2004 indicated that household expenditure was underestimated in SHA. The growth rate in monthly per capita expenditure on medical institutional and non institutional items captured by annual NSSO surveys between specific surveys on health care was found to be a more robust inflator. Accordingly it was found that households contributed 73% of the total health expenditure compared to the initial estimate of 60%. The methodologies outlined for development of health accounts in the State was adopted by the National Macroeconomic Commission on Health of Government of India.[3] The Institute provided support at the national level as an institutional partner of the NHA cell of the Ministry of Health and Family Welfare, which was set up to institutionalize NHA in the country as per requirements of National Health Policy of India, 2002. The Institute provided support in developing the Indian Classification of NHA based on the International Classification of Health Accounts (ICHA) and estimation procedures.