Problem:
Dr. Stephanie White, the Chief Administrator of Uptown Clinic, a community mental health agency, is concerned about the dilemma of coping with reduced budgets next year and into the foreseeable future, but increasing demand for services. In order to plan for reduced budgets, she must first identify where costs can be cut or reduced and still keep the agency functioning. Below are some data from the past year.
Program Area Costs
Administration:
Salaries: Administrator $60,000
Assistant $35,000
Two Secretaries $42,000
Supplies $35,000
Advertising and promotion $9,000
Professional meetings/dues $14,000
Purchased Services:
Accounting and billing $15,000
Custodial $13,000
Security $12,000
Consulting $10,000
Community Mental Health Services Salaries
(two social workers) $46,000
Transportation $10,000
Outpatient mental health treatment Salaries:
Psychiatrist $86,000
Two Social Workers $70,000
I want step by step calculations.
1. Identify which costs you think are likely to be discretionary or committed costs.
2. One possibility is to eliminate all discretionary costs. What do you think of this recommendation?
3. How would you advise Dr. White to prepare for reduced budgets?