

Craig Whitaker, MBA
Financial Analyst, Franciscan – St. Francis Health

Operating Budget

Productivity Reporting
o Role of the Budget in
o Primary Components of
o Components of the Budget
o Calculating the Standard
Strategic Planning
o Determining How Much to
Budget
o How Operational Data Flows
into the Budget
o Budget Approval Process
Productivity
(Benchmark)
o Quick Method for Calculating
FTEs needed
o Monitoring and Analyzing
Productivity
o Productivity Reporting Tips
o Requesting New FTEs






Mission Statement Goals and Objectives
Fiscal Responsibility per Business Unit
Efficient Use of Resources (Labor and Supplies)
Aligns Operations with Strategic Plan
The Role of the Budget in Strategic Planning
S
T
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A
T
E
G
Y
T
A
C
T
I
C
S
B
U
D
G
E
Mission
Goals & Objectives
Internal Factors
Financial
External Factors
Service Mix
Quality
Economic
Capital Resources
Market Share
Regulatory
Technology
Employee Satisfaction
Political
Organizational Culture
Productivity Efficiency
Social
Marketing
Operations
Financing
Markets
Labor Resources
Short-Term Debt
Services/Programs
Roles & Responsibilities
Long-Term Debt
Price
Information Systems
Contributions
Location
Performance Measures
Shareholders
Capital Budget
Budgets
Operating Budget
Proforma Financials
Projects
Revenues
Income Statement
Construction
Expenses
Balance Sheet
Equipment
Statistics

In this presentation, when we say “budget” we mean the
Operating Budget, which includes the following:

Operating Plan
Statistics Budget
Revenue Budget
Expense Budget
FTE Budget
Notes
Summary (Pro Forma)






 Primary
Objectives
o Factors That May Aid / Prevent from Accomplishing
Objectives
o Operational Factors That Will / Will Not Occur Next Year
o Any New Operational Factors That Will Occur Next Year
 Quality
Improvement Plan
o Less turnover, injuries, increased number of inspections
 Labor
and Productivity Plan
o Keep Square Footage updated, monitor overtime
 Other
Expense Containment Plan
o Less contract labor, standardize cleaning supplies

*Stats are key to a good budget, they impact several other
areas of the budget including:
o Revenue projections
o FTE projections (to be hired)
o Reviewing variable expenses on a per statistic basis from year to
year
o Goals from the operating plan
o Actual v Budgeted statistics are reviewed by management on a
monthly (and/or biweekly) basis

Some typical ES statistics might include:
o Cleanable Square Footage
o Number of Rooms
o Visits (Guests, Patients, Students, etc.)
o Adjusted Discharges (Hospitals)

House keeping departments are overhead departments,
meaning they typically do not generate revenue
The revenue budget is likely made up of misc. income from
various sources, which is categorized as “Other Operating
Income” on the financial statement

Sources of Income:

o Income from recycling
o Trade Credits – 2% 10 net 30
o Rebates on cleaning supplies / equipment
o Contracted cleaning agreements
Salaries
Wages-Fixed
Purchased Labor Svc - Var
Purchased Labor Svc
Benefits
Fringes-Fixed
Supplies
Catered Food
Medical Supplies
Office Supplies
Supplies
Other Expenses
Telephone Expense
Repairs and Maintenance
Printer/Copier/Fax MFD
Purchased Services
Minor Equipment
Employee Retention
Dues
Seminars & Conferences
Travel - Airfare Lodging Meals & Other
Miscellaneous
Courier Services


Review current YTD expenses, and also previous year
expenses
Make sure your expense totals are accurate for the year by
asking the following questions:
o Are we receiving our trade credits?
o Do the invoices hitting our accounts belong to us?
o Have we received the refunds or rebates owed to us by our vendors?
o Are we still being charged a lease expense for equipment we no
longer posses? New equipment?
o What has caused our cleaning supplies expense to fluctuate?
•
•
•
•
•
Level of Acuity – case mix? (Hospital only)
More expensive cleaning solutions? Environmentally friendly?
Special Event?
Additional Square Footage?
More equipment?





Definition: Analysis technique used to compare changes in
statistics, revenue, expenses and hours over various
periods of time (typically years).
Example: How much has our revenue increased in the last 5
years? (%)
Formula:
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑌𝑟.𝑥 −𝑃𝑟𝑒𝑣𝑖𝑜𝑢𝑠 𝑌𝑟.𝑥
𝑃𝑟𝑒𝑣𝑖𝑜𝑢𝑠 𝑌𝑟.𝑥
× 100 = %∆𝑥
X = Statistics, Revenue, Expense, or Hours




2007 Revenue = $195,000
2012 Revenue = $243,000
$243,000−$195,000
$195,000
× 100 = 𝟐𝟒. 𝟔% or $𝟒𝟖, 𝟎𝟎𝟎
Note: When using horizontal analysis, always calculate the
$ change along with the % change. A change of 5% to
$1,000 won’t be nearly as significant as a change of 5% to
$1,000,000.





Definition: Analysis technique used to identify how much a
particular line item of a category contributes to the total.
Example: What % of our expense budget is made up of
purchased services?
Formula:
𝑥
𝑥
× 100 = %
𝑥
X = Statistics, Revenue, Expense, or Hours

Example: What % of our expense budget is made up of
purchased services?


Purchased Services = $33,000
Total Expense = $572,000

Formula:


$33,000
$572,000
× 100 = 𝟓. 𝟖%
Note: use VA to identify the particular expenses that contribute the most to
your overall expense total and monitor the % changes each month. Then,
identify the root causes of any trends that develop.

There are a number of factors that determine the FTE
budget:
o The current year workload (amount of cleanable square ft)
o Anticipated changes in the size of the workload (next year)
o The strategic plan & operating plan
o Task changes in individual job types
o *Productivity efficiency

The FTE section of the Budget may include:
o Job Descriptions
o Employee Names
o Number of Current FTEs
o Number of Projected FTEs (Next Yr.’s Budget)
o Specific FTE Adjustments
o Target Number of FTEs (Based on Productivity)
o Salary / Wages Expense
Always include a sidebar for notes and comments in your
budget.
Why?
 Senior management (budget committee) review process
 Reference for the Finance department – variance review
 For personal reference - after a few months, it is easy to
forget what you budgeted for:

o Various types of expenses
o FTEs
o Statistical fluctuations
o Changes in FTEs

What is it? – All of the estimates and projections used to
create the various sections of the budget (revenue,
expense, etc.) are calculated into a budget income
statement for the following year.

Why? – It can be used to compare to the actualized income
statement of the current year to determine if adjustments
need to be made to the budget, while the budget is still
available to be edited.

Annualize the first 6 months of the current year to project next
year’s budget. (St. Francis method)

Also compare last year’s
actual to last year’s budget
to see if there were any
significant budget
variances that need to be
addressed for next year.


Actual - Jan - Dec 2012
Projected - Jul - Dec 2012
2013 Budget
Allow open participation of those involved with daily operations in
order to estimate increases or decreases in expenses or other
sections of the budget.
Do not use a “gut feel” if possible, base estimates on facts and
calculations.
Charge Entry in
Clinical Areas
[Epic]
Checks and
Cash Received
Income
Hours / FTEs
Payroll Databse
[Peoplesoft]
Revenue
Stats
General Ledger
[Pathways Fin Mgmt]
Budget
[Kaufmann Hall]
Clock-In
System
[Kronos]
Manual Stats
(Cleanable Sq Ft)
Supplies from
Mats Mgmt
Expenses
Journal
Entries
A/P System
[OnBase]
Invoices
Check
Requests
Budget Preparation Process
END HERE
START HERE
Final Budget Approval
Board
Budget Review
Strategic Planning
Budget guidelines
Goals and Objectives
Environmental Analysis
Top Management
Finance / Marketing / Planning
Budget Revision
Department Managers
Evironmental Analysis
Marketing
Financial
Focused Environmental Assessment
Budget Preparation
Budget Submission
Resource Identification
Staff
 Also
keep in mind that it never hurts to bribe the
budget committee with chocolates, desserts,
baked goods, pizza, and especially donuts when
having budgets reviewed for approval


“What gets measured, gets counted!”





How do I know how many FTEs to budget?
Am I currently working too many FTEs?
What productivity statistics should I be monitoring?
How often should I review productivity?
How should I go about requesting additional FTEs?

Productivity reporting normally involves the following
measures from which other metrics are then calculated and
monitored

1. Operating Statistic (Cleanable Sq Ft)
o

[Output]
2. Total Worked Hours (Non-productive is excluded)
o [Input]

3. Standard (Productivity Target or Benchmark)
o Productivity = [Input] / [Output]
o Helps answer the question, “How many FTEs do I need?”
1. The standard is calculated by dividing total
productive hours by total cleanable sq ft, or how
long it takes to clean a specified number of sq ft
(in hours).
2. This same calculation is done biweekly (26
results) for one year or more.
3. The results are sorted starting with the shortest
amounts of time used per square foot,
descending to the longest.
4. (Subjective) A percentage of top
performances must then be decided on,
should we use the top 40%, 25%, 10%,
etc?
5. Top 15% is chosen (15% x 26 = 4), so the
top 4 lowest cleaning times per sq ft are
averaged together as the new standard.
Cleanable
Sq Ft
90,000
Actual
Worked
Hours
9,146
x
Time
Period
14 Days
÷
Total Sq Ft
Cleaned in
14 Days
1,260,000
=
Total Sq Ft
Cleaned in
14 Days
1,260,000
=
Actual
Worked
Hours / Sq Ft
0.00725873







Per our last calculation, Actual Worked Hours / Sq Ft was
0.00725873 .
This means for this 2 week period it took us on average
0.00725873 hours to clean 1 sq ft or 26.13 seconds.
Our square footage total was 1,260,000.
Remember that Actual Worked Hours / Sq Ft is a rate that
will be compared during each two week pay period against
subsequent pay periods.
0.00725873 is a very small, very ugly number to work with
1,260,000 is a very large, very ugly number to work with
So...
Actual
Worked
Hours
9,146
Total Sq Ft Cleaned in 14
Days
÷
(1,260,000 ÷ 1000) or 1,260
Actual Worked Hours / Sq Ft
=
(0.00725873 x 1,000) or 7.26
Pay Ending
Pay Period # Hours/Stat Pay Ending Pay Period # Hours/Stat
1/15/2011
1
7.26 7/16/2011
14
6.29
1/29/2011
2
6.76 7/30/2011
15
6.39
2/12/2011
3
7.23 8/13/2011
16
8.08
2/26/2011
4
7.13 8/27/2011
17
7.06
3/12/2011
5
6.54 9/10/2011
18
6.67
3/26/2011
6
6.68 9/24/2011
19
7.59
4/9/2011
7
6.45 10/8/2011
20
7.07
4/23/2011
8
7.18 10/22/2011
21
7.11
5/7/2011
9
7.11 11/5/2011
22
7.69
5/21/2011
10
6.89 11/19/2011
23
8.02
6/4/2011
11
6.63 12/3/2011
24
7.41
6/18/2011
12
7.27 12/17/2011
25
6.84
7/2/2011
13
7.07 12/31/2011
26
7.36
Pay Ending
Pay Period # Hours/Stat Pay Ending Pay Period # Hours/Stat
7/16/2011
14
6.29 10/22/2011
21
7.11
7/30/2011
15
6.39 5/7/2011
9
7.11
4/9/2011
7
6.45 2/26/2011
4
7.13
3/12/2011
5
6.54 4/23/2011
8
7.18
6/4/2011
11
6.63 2/12/2011
3
7.23
9/10/2011
18
6.67 1/15/2011
1
7.26
3/26/2011
6
6.68 6/18/2011
12
7.27
1/29/2011
2
6.76 12/31/2011
26
7.36
12/17/2011
25
6.84 12/3/2011
24
7.41
5/21/2011
10
6.89 9/24/2011
19
7.59
8/27/2011
17
7.06 11/5/2011
22
7.69
7/2/2011
13
7.07 11/19/2011
23
8.02
10/8/2011
20
7.07 8/13/2011
16
8.08
Pay Ending Pay Period # Hours/Stat 40% 25% 15% 10%
7/16/2011
14
6.29
AVG
7/30/2011
15
6.39
6.34
4/9/2011
3/12/2011
7
5
6.45
6.54
6/4/2011
9/10/2011
11
18
6.63
6.67
3/26/2011
1/29/2011
12/17/2011
5/21/2011
6
2
25
10
6.68
6.76
6.84
6.89
8/27/2011
7/2/2011
10/8/2011
17
13
20
7.06
7.07
7.07
AVG
6.42
AVG
6.50
AVG
6.61

We chose 6.42 as our new standard

And our cleanable sq ft was 1,260
o ( 900,000 per day for 14 days = 1,260,000, adjusted to 1,260).

So…
1260
6.42
80

= 101 FTEs
To maintain our top performance (efficiency), we
would need to use no more than 101 FTEs to clean
1,260,000 total square feet within a 2 week period
*Per Employee
Actual Time
Worked
1
7 ÷
2
Capacity
(Hrs)
7
÷
Shift
(in Hours)
8
=
Sample
(Rate)
Hrs
3
÷
Utilization
(%)
88%
Sq Ft
5,500
[Standard Hrs/UOS]
3
Cleanable
Sq Ft
170,000
÷
Max Sq Ft
Cleaned
12,833
=
FTEs
Needed
13.2
=
Max Sq Ft
Cleaned
12,833
Pay Ending
1/14/2012
1/28/2012
2/11/2012
2/25/2012
3/10/2012
3/24/2012
4/7/2012
4/21/2012
5/5/2012
5/19/2012
6/2/2012
6/16/2012
6/30/2012
7/14/2012
7/28/2012
YTD
SQ FT
1,260
1,260
1,260
1,260
1,260
1,400
1,400
1,400
1,400
1,400
1,400
1,400
1,400
1,400
1,400
20,300
BUD SQ FT
1,260
1,260
1,260
1,260
1,260
1,260
1,260
1,260
1,260
1,260
1,260
1,260
1,260
1,260
1,260
18,900
In this report, actual sq footage
exceeds budgeted sq footage in
March. This change was not
anticipated during the budget
planning process.
More sq ft means a larger
workload and more staff required.
Actual Hours worked will likely be
higher than budgeted hours.
Pay Ending
1/14/2012
1/28/2012
2/11/2012
2/25/2012
3/10/2012
3/24/2012
4/7/2012
4/21/2012
5/5/2012
5/19/2012
6/2/2012
6/16/2012
6/30/2012
7/14/2012
7/28/2012
YTD
SQ FT
1,260
1,260
1,260
1,260
1,260
1,400
1,400
1,400
1,400
1,400
1,400
1,400
1,400
1,400
1,400
20,300
BUD SQ FT Actual Hrs
1,260
9,146
1,260
8,523
1,260
9,104
1,260
8,984
1,260
8,237
1,260
9,345
1,260
9,032
1,260
10,046
1,260
9,959
1,260
9,648
1,260
9,279
1,260
10,172
1,260
9,897
1,260
8,805
1,260
8,952
18,900
9,275
Bud Hours
8,400
8,400
8,400
8,400
8,400
8,400
8,400
8,400
8,400
8,400
8,400
8,400
8,400
8,400
8,400
8,400
Actual Hours
were approx.
8,700 on
average before
the sq footage
increase.
After March,
actual worked
hours increased
to 9,500 on
average, leaving
the YTD average
9,275 v 8,400
budget.
Pay Ending
1/14/2012
1/28/2012
2/11/2012
2/25/2012
3/10/2012
3/24/2012
4/7/2012
4/21/2012
5/5/2012
5/19/2012
6/2/2012
6/16/2012
6/30/2012
7/14/2012
7/28/2012
YTD
Statistics
SQ FT
BUD SQ FT Actual FTEs
1,260
1,260
114.33
1,260
1,260
106.54
1,260
1,260
113.80
1,260
1,260
112.30
1,260
1,260
102.96
1,400
1,260
116.81
1,400
1,260
112.90
1,400
1,260
125.58
1,400
1,260
124.49
1,400
1,260
120.60
1,400
1,260
115.99
1,400
1,260
127.15
1,400
1,260
123.71
1,400
1,260
110.06
1,400
1,260
111.90
20,300
18,900
115.94
FTEs
Flex FTEs Budget FTEs
105.00
105.00
105.00
105.00
105.00
105.00
105.00
105.00
105.00
105.00
116.67
105.00
116.67
105.00
116.67
105.00
116.67
105.00
116.67
105.00
116.67
105.00
116.67
105.00
116.67
105.00
116.67
105.00
116.67
105.00
112.78
105.00
Std FTEs
101.12
101.12
101.12
101.12
101.12
112.35
112.35
112.35
112.35
112.35
112.35
112.35
112.35
112.35
112.35
108.61
Standard
6.42
6.42
6.42
6.42
6.42
6.42
6.42
6.42
6.42
6.42
6.42
6.42
6.42
6.42
6.42
6.42
FTE Type
Measure
Actual FTEs
The number of hours
actually worked (time off
not included)
Flex FTEs
(Workload)
How many FTEs were
needed based on workload
(Cleanable sq ft)
Budget FTEs
(Estimated)
The number of FTEs
budgeted
Standard FTEs
(Historic best)
The number of FTEs that
should have been used to
meet productivity
benchmarks
Calculation
𝐴𝑐𝑡𝑢𝑎𝑙 𝑊𝑜𝑟𝑘𝑒𝑑 𝐻𝑜𝑢𝑟𝑠
𝐻𝑜𝑢𝑟𝑠 𝑃𝑒𝑟 𝑃𝑒𝑟𝑖𝑜𝑑
𝐵𝑢𝑑𝑔𝑒𝑡𝑒𝑑 𝐻𝑜𝑢𝑟𝑠
𝑥 𝐴𝑐𝑡𝑢𝑎𝑙 𝑆𝑞 𝐹𝑡
𝐵𝑢𝑑𝑔𝑒𝑡𝑒𝑑 𝑆𝑞 𝐹𝑡
𝐻𝑜𝑢𝑟𝑠 𝑃𝑒𝑟 𝑃𝑒𝑟𝑖𝑜𝑑
𝐵𝑢𝑑𝑔𝑒𝑡𝑒𝑑 𝐻𝑜𝑢𝑟𝑠
𝐻𝑜𝑢𝑟𝑠 𝑃𝑒𝑟 𝑃𝑒𝑟𝑖𝑜𝑑
𝑆𝑡𝑎𝑛𝑑𝑎𝑟𝑑 𝐻𝑜𝑢𝑟𝑠
𝑥 𝐴𝑐𝑡𝑢𝑎𝑙 𝑆𝑞 𝐹𝑡
𝑆𝑞 𝐹𝑡
𝐻𝑜𝑢𝑟𝑠 𝑃𝑒𝑟 𝑃𝑒𝑟𝑖𝑜𝑑
Pay Ending
1/14/2012
1/28/2012
2/11/2012
2/25/2012
3/10/2012
3/24/2012
4/7/2012
4/21/2012
5/5/2012
5/19/2012
6/2/2012
6/16/2012
6/30/2012
7/14/2012
7/28/2012
YTD
SQ FT
1,260
1,260
1,260
1,260
1,260
1,400
1,400
1,400
1,400
1,400
1,400
1,400
1,400
1,400
1,400
20,300
BUD SQ FT
1,260
1,260
1,260
1,260
1,260
1,260
1,260
1,260
1,260
1,260
1,260
1,260
1,260
1,260
1,260
18,900
Act v Flex Act v Bud
-9.3
-9.3
-1.5
-1.5
-8.8
-8.8
-7.3
-7.3
2.0
2.0
-0.1
-11.8
3.8
-7.9
-8.9
-20.6
-7.8
-19.5
-3.9
-15.6
0.7
-11.0
-10.5
-22.2
-7.0
-18.7
6.6
-5.1
4.8
-6.9
(3.2)
(10.9)
Act v Std
-13.2
-5.4
-12.7
-11.2
-1.8
-4.5
-0.6
-13.2
-12.1
-8.3
-3.6
-14.8
-11.4
2.3
0.4
(7.3)
YTD
Act v Flex Act v Bud
(3.2)
(10.9)
Act v Std
(7.3)

Act v Flex – We should have budgeted 3.2 FTEs less for our
workload (total cleanable sq ft) so far this year.

Act v Bud – Our actual FTEs have exceeded our budget by
10.9 FTEs on average so far this year.

Act v Std – In order to be in the top 15% of most efficient
historic performances, we should have used 7.3 FTEs less
so far this year on average.

1. More sq footage is cleaned w/o using additional FTEs

2. More sq footage is cleaned w/ less FTEs

3. Same sq footage is cleaned w/ less FTEs

4. Sq Footage remains the same, cleaning robots are used
and FTEs are reduced (New Technology)

1. Consistent
o Reporting over same time frame
o Using the same statistic

2. Reliable
o Data and calculations are consistent

3. Measurable
o Statistic should be measurable
o Data systems involved with productivity should be accurate

4. Quantitative
o Do not use subjective or qualitative data for productivity
o Productivity should have a numeric value, not “lazy” or “busy”

5. Comprehensive
o Primary statistic should cover majority of work being done

Business cases typically include, but are not limited to:
1.
A Job Description (Estimated hours given for each task)
2.
All of the benefits associated with the new hire (improved quality,
safety, patient care, etc.)
3.
Any field research or existing statistics to support the case

What would be the consequences of not hiring the employee?
o
o
o
o
Patient Safety Violations
Legal Issues
Lost customers
Lower satisfaction

Is there any added value in the position (i.e. does the added FTE
provide a service that saves money or generates income?)

Could the need for this employee be satisfied by shifting around
existing employees in the department?

What are other hospitals (companies) doing?
o How is the need being satisfied elsewhere?

Does this FTE help increase patient (customer)
satisfaction?
o Higher Press Ganey Scores?

Does this FTE help increase employee satisfaction?

Will there be enough additional volume to support the new
FTE?

What good will this position do, and for what people?


Thank you for your attention, sorry for all of the math!