Topic 3 Module 6
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Topic 3 Module 6, 9, and 13
Christine Martinez
College of Humanities and Social Sciences: Grand Canyon University
Admin-626: Public Budgeting and Financial Management
Professor Anita Archambeau
December 13, 2023
2
Topic 3 Module 6, 9, and 13
Module 6
6.1. You have received $100,000 from your grandparents to be used for your graduate studies. You plan to start a program in 5 years. You can invest the money at 6% interest compounded annually. How much will you make in five years?
Formula:
[FV= PV x (1+r) ^ n]
FV = Future Value
PV = Present Value (initial investment)
r = annual interest rate
n= number of years
Given:
PV= $100,000
r= 6% or 0.06
n= 5 years
FV= 100,000x (1+ 0.06) ^5
= $133,822.56
Answer: The future value after 5 years will be approximately $133,822.56
6.2. Mobile Health needs to replace its mobile medical unit To continue providing diagnostic services and preventative medicine to city residents the van costs $120,000, and a bank is willing
to lend the nonprofit the money at a 6% interest rate for five years payments are due at the end of
each month, and interest is compounded monthly how much should you budget for the monthly payment?
To calculate the monthly payment for the loan, we need to use the formula for the loan payment amount, which is: Formula for Monthly Payment = P = [r*PV (1+r) ^n]/ [1+r) ^ n- 1]
P
is the monthly payment
r
is the monthly interest rate (annual interest rate divided by 12)
PV
is the present value or the amount of the loan.
n
is the number of payments (months)
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In this case, the loan amount is $120,000, the number of payments is 60 (5 years x 12 months/year), and the interest rate is 6%/year or 0.06/month. PV
= $120,000 (the cost of the van)
r
= 6% / 12 = 0.005 (the monthly interest rate)
n
= 5 * 12 = 60 months (the number of payments)
Plugging in these values, we get:
P = [0.005 * 120000 * (1 + 0.005) ^60] / [(1 + 0.005) ^60 – 1]
Answer: Mobile Health should budget $2319.94 each month for the payment.
See Module Excel solution.
6.3. The Department of Corrections (DOC) needs to replace two of its present transport buses. There are two companies that have a track record of making reliable vehicles, and both make a bus that meets the needs of the department. The DOC pays an 8% interest rate on money it borrows. The bus from Company A has a purchase price of $105,000 and a 10-year service life expectancy, and it averages $2000 per year in maintenance costs. The bus from Company B has a
purchase price of $110,000 and a 10-year service life expectancy, and it averages $1500 per year in maintenance cost. Which bus should the Department of Corrections select? From the Module The worth of cost of the bus Company A = $105,000 + $13,420= $118,420
The worth of costs of the bus of company B = $110,000 + $10,065 = $120,065
Company A has a lower present worth of costs as compared to the bus from Company B
Answer: The bus from Company A should be selected.
See Module Excel solution.
6.4. The information technology (IT) department has recently completed a major refurbishment and upgrade of the city's data center at $10,145,825. The chief information officer (CIO) has informed the central Budget Office that the IT department will need to do the same kind of upgrade in five years, and he expects the total cost of the project to be 10% more than this year's project, accounting for better future technology and future increases in cost. The city does not
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expect to have enough funding available to pay for the refurbishment in five years and must put money away during each of the next four years to meet this need. How much should the city put aside in each of the next four years to be able to pay for the data Sinner reimbursement 5 years from now, assuming the city can invest the money at a 4.5% interest rate?
Answer:
The amount to be deposited each year will be $2,496,339.10. See Module for Excel Solution.
6.5. The local Community Center has been notified that it is the beneficiary of an endowment the
city center can accept cash today in the amount of $550,000 or receive $875,000 in five years. The Community Center expects to be able to invest the money at a 5% interest rate if it were to take the money now. Should it take the money now or wait?
Answer:
5% after 5 years equals $701,954.8594, less than $875,000, so the community center should wait. See Module for Excel Solution.
6.6. The municipal golf course has made a budget request to remodel and upgrade the clubhouse.
The project will cost $7,200,000, based on reliable estimates. The additional annual operating expenses after the upgrade are expected to be $200,000 per year. An analysis of the experiences of other municipal golf courses reveals an unexpected revenue increase of $1 million per year after the upgrade. The useful life of the upgraded clubhouse is estimated at nine years, and the golf course expects to get a loan for the renovations at an interest rate of 4.25%. Should the renovations be approved?
We need to conduct a financial analysis to determine whether the renovations should be approved. This will involve calculating the project's Net Present Value (NPV). The NPV is the difference between the present value of cash inflows and the present value of cash outflows over a period of time. If the NPV is positive, the project is considered profitable and should be approved.
Here are the steps to calculate the NPV:
1.
Calculate the present value of the expected revenue increase.
2.
Calculate the present value of the additional operating expenses.
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3.
Subtract the cost of the project and the present value of the additional operating expenses from the present value of the expected revenue increase.
The formula for the present value (PV) is: PV = CF / (1 + r) ^n
Yr
Revenue Increase
Operating expenses
Net Cash Flow
Discount Factor
Present Value
1
$1,000,000
$200,000
$800,000
0.959
$767,386.09
2
$1,000,000
$200,000
$800,000
0.920
$736,101.77
3
$1,000,000
$200,000
$800,000
0.881
$706,092.82
4
$1,000,000
$200,000
$800,000
0.842
$677,307.26
5
$1,000,000
$200,000
$800,000
0.803
$649,695.22
6
$1,000,000
$200,000
$800,000
0.764
$623,208.84
7
$1,000,000
$200,000
$800,000
0.725
$597,802.24
8
$1,000,000
$200,000
$800,000
0.686
$573,431.41
9
$1,000,000
$200,000
$800,000
0.647
$550,054.11
Answer:
The project should NOT be approved. See Module Excel Solution.
Module 9
9.1. The state Department of Health (DOH) Is considering implementing several performance measures. In a meeting with the central Budget Office, DOH officials are discussing their options
and seeking advice on which measures to include. Identify the type of measure each statement represents and indicate whether you would recommend it be implemented or not and why.
(a) Number of measles-mumps-rubella (MMR) shots given to 2-year-olds
Answer:
The number of shots represents the output measure; recommended.
(b) Percentage of 2-year-olds who are up-to-date on MMR vaccinations.
Answer:
This is a performance measure reflecting past performances; recommended.
(c) Number of smoking-cessation classes provided.
Answer:
The number of classes measures output; recommended.
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(d) Number of teens attending smoking-cessation classes.
Answer:
The number of teens attending offers a better perspective of the program's effectiveness
through output measures, recommended. (e) Number of workshop materials copied for class.
Answer:
The number of workshop materials copied for the classes measures output; recommended.
(f) Percent of high school students who may smoke two cigarettes or more per week.
Answer:
The % of students smoking does not measure output or process measures; it is NOT recommended. (g) Percent of state population diagnosed with lung cancer.
Answer:
The population of lung cancer diagnosis does not measure performance; it is NOT recommended.
(h) Percent of class attendees who indicated satisfaction with the smoke-cessation class.
Answer:
Participant satisfaction directly measures performance and program effectiveness; recommended. 9.2. The city’s planning department is seeking additional funding for staff supplies to support its permit inspection activity. As businesses and homeowners reach milestones in their building process, they call for a permit inspection so they can begin the next phase of their building project. Then use this output measure: percent of permit inspections provided within 24 hours of request. The planning department has provided the graph in Figure 9.1 to demonstrate its performance. Assuming staffing and funding have been consistent over the period depicted in this graph, do you recommend additional staffing and funding? What questions do you have?
Q: Why the steep decrease from January to February? Was it due to not having enough staff or not enough permit requests?
Answer:
I do not recommend additional staff or funding as the performance does not warrant such.
9.3. The city planning director has recognized that her request may not have been compelling, so she provided you with some additional information, shown in Figure 9.2. Does this change your recommendation?
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Answer:
Based on the more complete data, I would change my recommendation based on being below industry standards in performance and their own internal targets and goals. 9.4. Maricopa county Public defense Services Agency (the public defender’s office) tracks performance metrics very closely. Table 9.2 from the FY [Fiscal Year]2014Annual Business Strategies: Adopted Budget document. Examine the trends and the connection between the measures and the expenditure dollar. Does the FY 2014 adopted budget seem reasonable?
Answer:
This is unreasonable because the measured efficiency decreased by over 50%. Resolved dependency cases are an output measure and do not meet the demand in dependency assignments, dropping from 2013 to 2014 from 77% to 54% and increasing expenses by over 60%.
9.5. Sky High School has significant student dropout and failure rates among its senior-year classes. To address the issue, it has obtained grant funding for the senior class. Because this problem appears to be dispersed across the entire senior class, some elements of the program serve all the seniors, even those who appear successful and on track toward graduation throughout the year. The objective of the program is for the students to complete their senior year
and graduate. Success for this retention program is determined to be graduation. Data in Table 9.3 are available. Please provide measures of process and financial measures of efficiency and effectiveness. Is the Sky-High School guidance office making progress toward its mission? Why or why not?
School Year
2010
2011
2012
2013
2014
Mean
A
# of students who complete their senior year
1250
1225
1267
1223
1260
B # of high school students graduating
1200
1159
1240
1125
1206
C # of students enrolled
on the first day of school
1377
1294
1322
1258
1294
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Expenditures for retention
program
$3,565,053
$3,350,166
$3,4257,852
$4,257,852
$4,257,852
Measures of Efficiency
Growth in Enrollment
y-o-y growth rate in C
-6.03
2.16%
-4.84%
2.86%
% of students completing
senior years A/C
90.78%
94.67%
95.84%
97.22%
97.37%
% completing graduation
B/C
87.15%
89.57%
93.80%
89.43%
93.20%
Dropout rate 9.22%
5.33%
4.16%
2.78%
2.63%
4.82%
Graduation dropout rate
12.85%
10.43%
6.20%
10.57%
6.80%
4.76%
Financial Measures
Growth in expenditure for retention program y-o-y growth in D
-6.03%
2.16%
24.40%
0.00%
Expenditure for retention per enrollment D/C
$2,589
$2,589
$2,589
$3385
$3290
Expenditure for retention per student completing senior years D/A
$2,852
$2,735
$2,701
$3,481
$3,379
Expenditure for retention per student completing graduation D/B
$2,971
$2,891
$2,760
$3,785
$3,531
Answer:
Sky High School is indeed making progress towards its mission:
Over a period of time, school dropout ratio has declined significantly (from 9.22% in the year 2010 to 2.63% in the year 2014)
Graduation drop-out ratio has also declined considerably (from 12.85% to 6.80%)
Enrollments have grown, though they have also declined in some years. Overall, there had been growth over 2010 to 2014 period.
Module 13 FluQ Case:
You have been invited to a department meeting to help develop a budget request for the upcoming legislative session. A new strain of the flu has been spreading your region, and the vaccine FluQ has been approved for children under age 12. The public health department you
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work for is leading in vaccinating children in 30 regional elementary schools. During the meeting, the program manager presented the following information.
The program will have three components. First: Education is needed in each of the schools. The program manager wants to do a series of five in-person, 2-hour meetings, with one doctor, two nurses, and two administrative staff per meeting, and provide each child with an educational coloring book. Each school has 1,200 children. Second: The vaccine clinics will be held at the schools. Children will be vaccinated when their parents or guardians sign the permission slips. Some health conditions rule out certain children as good candidates for the vaccination. Each school is estimated to have 1000 children who should receive the FluQ vaccination. In other states similar to yours, approximately 8% of parents refuse to have their child vaccinated. Vaccines and associated supplies cost $2 per dose. The doctor must be present on each vaccination clinic day, and nurses will be responsible for administering the vaccine. On average, it takes approximately 6 minutes to process a child and administer the vaccine.
Third: federal and state regulations require reporting all FluQ vaccinations administered. Additionally, the school administration and the parents have requested aggregated reports regarding the vaccination coverage in the region. It is estimated that for each child receiving the vaccination, 10 minutes will be required to record and save the necessary data in the various databases. For children not receiving the vaccine (either because of parental refusal or because the child was not a good candidate for the vaccine), it will take 5 minutes to record and save the necessary data. An additional three weeks of analysis and reporting are estimated to be required after each FluQ vaccination season to meet reporting requirements. Assume two administrative staff are working on the entire reporting segment.
While FluQ is a new vaccination, it is anticipated that it will be needed to be administered every year for the next three years to the same group of children. Population growth in the region has been stable for some years and is expected to remain stable in the near future.
Information: The average wages for department staff are as follows: -Doctors $95/hour; - Nurses $64/hour; -Administrative staff $32/hour
Because these are temporary roles. The only benefits are the legally required FICA, HI, workers’ compensation, and unemployment benefits. The last two are estimates at 2% of payroll.
Coloring books (including design and printing) cost about $1.75 per book
when used in another project similar to this one. Based on the vaccine campaigns, the campaign will cost about $10,000
for database administration and computer setup for the program each year.
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1.
Prepare a cost estimate using the format of Appendix A for this module.
2.
As a substantial project, choose a topic involving a potential program within your locality
and prepare a cost estimate.
Assignment 1. Module 13
Per school
30 Schools
For 3 Years
Materials
Database $10,000
$10,000
$30,000
Coloring Books
$2100
$63,000
$189,000
Vaccines
$1840
$55,200
$165,600
Materials Total
$13,940 $128,200
$384,600
Payroll
Meeting Payroll
Doctors 10 hrs
$950
$28,500 $85,500
Nurses 10 hrs
$640
$19,200
$57,600 Admin 10 hrs
$640
$19,200
$57,600
Benefits:
$44.60
$1338
$4014
Meeting Total $2274.60
$68,238
$204,714
Vaccine Payroll
Doctors 92 hrs
$8740
$262,200
$786,600
Nurses 92 hrs
$5888
$176,640
$529,920
Admin 160 hrs
$5,120
$153,600
$460,800
Benefits:
$394.96
$11,848.80
$35,546.40
Vaccine Total
$20,142.96
$604,288.80
$1,812,866.40
Material Total
$13,940
$128,200
$384,600
Payroll Total
$22,4417.56
$672,526.80
$2,017,580.40
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Grand Cost Estimate
$36,357.56
$800,726.80
$2,402,180.40
Assignment 2. Module 13
Hypothetical Project: The Tribal Nation LTBB of Michigan plans to host a formal appreciation dinner for its tribal staff. Below is the cost estimator for cost. Dinner cost is estimated on attendance. The fixed cost is venue $0.
Held at the tribal building
Low attendance
Regular attendance
High attendance
Totals
Scenario #1
Scenario #2
Scenario #3
Variable Expenses: F&B
100 ppl
200 ppl
300 ppl
Food & Beverage=$99 pp
$ 9,900.00
$ 19,800.00
$ 29,700.00
Glassware, Linen etc.. = $25 pp
$ 2,500.00
$ 5,000.00
$ 7,500.00
Taxes & Gratuity (est. 30%) For servers needed
$ 3,720.00
$ 7,440.00
$ 11,160.00
Total F&B cost per person $161.20
Total F&B per attendance
$ 16,120.00
$ 32,240.00
$ 48,360.00