2 Cost Management

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 near 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.

You need to cut $94,000 in cost. Prioritize those cuts that can be made without affecting the operation or quality care of the organization.

Program Area Current Costs Proposed Cuts New Budget

Administration

Salaries:

Administrator $ 60,000.00 $ (20,000.00) $ 40,000.00

Assistant $ 35,000.00 $ (35,000.00) $ -

Two Secretaries $ 42,000.00 $ - $ 42,000.00

Supplies $ 35,000.00 $ (12,000.00) $ 23,000.00

Advertising and promotion $ 9,000.00 $ - $ 9,000.00

Professional meetings/dues $ 14,000.00 $ (14,000.00) $ -

Purchased Services: $ -

Accounting and billing $ 15,000.00 $ - $ 15,000.00

Custodial $ 13,000.00 $ (5,000.00) $ 8,000.00

Security $ 12,000.00 $ - $ 12,000.00

Consulting $ 10,000.00 $ (3,000.00) $ 7,000.00

Community Mental Health Services $ -

Salaries (two social workers) $ 46,000.00 $ - $ 46,000.00

Transportation $ 10,000.00 $ (5,000.00) $ 5,000.00

Outpatient mental health treatment $ -

Salaries: $ -

Psychiatrist $ 86,000.00 $ - $ 86,000.00

Two Social Workers $ 70,000.00 $ - $ 70,000.00

Total $ 457,000.00 $ (94,000.00) $ 363,000.00

Above are my recommendations to Dr. White for cutbacks that will help her achieve reduced budgets while facilitating the increased demand for services. The following report explains my choices:

Administration (-$55k): I have reduced the salary of the Administrator. Dr. White currently has direct employees that contribute to the profitability of this company who are not making Ð... of the pay of the administrator. These skilled, highly educated professionals should not have to compete for salary grades with administrative support. Further, the Administration has four support staff. For this reason, I have cut one position, the Assistant. I feel that cutting this one position will make the division