You are the Budget Director for Alamo Hospice a mid-size hospice organization. You will develop a comprehensive budget and create the associated performance story for Next Year that describes the results the organization is planning to produce.
Your budget should support your organizational goals and objectives. You will develop schedules that will enable you to present the budget to the Board of Directors for Approval. You will be given a set of data for the estimated Current Year (an extrapolated annualized amount), as well as historical data from 1 Year Ago (Actual data) and 2 Years Ago (Actual Data). You will develop the budgeted financial and statistical information for the Next Year that utilizes the historical information as a basis. The accompanying Excel spreadsheet will provide you a template for development of the key information. You will be asked to develop and defend assumptions related to the development of the budget.
PLEASE INCLUDE THE EXCEL WORKSHEET WHEN YOU TURN IN YOUR PROJECT.
Using this document as a guide, begin filling out the assumptions section of the Excel spreadsheet. You will be asked to create some of your own assumptions regarding volumes and rates of increase in revenues and expenses. Don’t forget, budgeting is an iterative process, put your best number in and move on, you can always come back and adjust it.
a.Most budget processes start with making estimates of volume. Read the narrative in this document about volume and enter your estimates into the assumptions tab on the Excel spreadsheet. Your volume numbers will drive your financial performance.
b.Read the narrative in this document about Revenue and enter your estimates in the assumptions tab on the Excel spreadsheet. You will be asked to estimate some payment rates. Make your estimates based on historical trends and be prepared to “defend” your estimate in your paper.
c.Read the narrative in this document about Expenses and enter your estimates in the assumptions tab on the Excel spreadsheet. You will be asked to estimate some rates of increase in labor and benefit costs.
d.Read the narrative in this document about Capital costs and enter your estimates in the assumptions tab on the Excel worksheet. You will be asked to estimate the interest rate on a loan.
e.Evaluate the results on your income statement against your objectives. Make adjustments to your assumptions that are necessary to produce the income statement that meets your Board’s objectives. Discuss these results and your assumptions in your paper.
2.Draft your narrative that demonstrates to the Board, how your budget was constructed, the significant assumptions, and performance management is prepared to deliver.
3.Print the schedules you want to include as support for your narrative (you can reference these in your narrative if you wish).
4.Finalize your presentation and make sure your budget meets the objectives outlined by the Board.
Alamo Hospice
Alamo Hospice is the premier Hospice program in the state. It is 2 times larger than the next largest hospice. There are five more hospice providers in its service area. Alamo is a 501(c)3 not for profit, governed by a volunteer Board of Directors. The Directors are comprised of representatives from the community, few of which have financial backgrounds.
The Board has established 4 key goals for the organization for Next Year:
1. Provide State of the Art service to patients
2. Achieve improvements in productivity of at least 2%
3. Produce at least a 5% Net Margin from Operations
4. Grow the number of patients admitted by 6%
Alamo Operates with two care teams. One team is the Home Care (HC) Team. This team provides services to those patients who reside at home. The other team is the Long Term Care (LTC) Team. The LTC team provides services to patients who reside in Nursing Homes or Assisted Living Facilities. The administrative staff consists of management, billing, accounting, clerical and medical records functions.
Alamo has a sophisticated “Bottom-Up” budget process that creates a unified and comprehensive set of financial targets for the organization. Each manager is accountable to deliver their budget and has a significant voice in the development of the overall organizational goals and strategies. For the purposes of this presentation, we will assume that the product you deliver was developed in conjunction with the key management and other personnel of Alamo.
1. Volume
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