HOW MUCH DO SERVICES DELIVERED BY YOUR AGENCY COST? PART II
While the price question is seldom asked in the delivery of human services, costs have to be estimated to complete proposals for funding, budgets, service plans, operational plans, and continuous improvement projects. PART I of this three-part article discussed how service delivery cost and service process productivity can be expressed as the ratio of resources used and unit of output. PART II will discuss data definition or the acquisition of data that will be transformed into cost management information.
At this point, it is important to underscore the often ignored reality that the generation of information has cost. The natural desire to strive for ultimate precision by categorizing cost items ad infinitum and recording work time in minutes and seconds. A general rule is that if the level of precision of cost information is adequate for use in planning, it is precise enough. Precision refers to the closeness among data while accuracy refers to the closeness of data to the target.
The three articles will develop the concept exemplified by a simple but effective cost information system, will diagram data collection and will describe in a step-wise manner the generation of cost information in Microsoft Excel.
The main data elements of a service cost information system include (1) employee program/service process hours, (2) benefit hours i.e. vacation, medical and holidays, (3) administrative hours, e.g. training, agency meetings, work unit meetings and (4) hourly employee pay rate.
Employee-Program/Service Process Hours. Payroll systems often do not feature a facility to divide employee time into process categories that make up an agency’s services. For this, the engaged worker sees to it that his or her time is allocated correctly among program processes the worker “owns.” The administrator ensures that manual data input by the worker is kept to a minimum so as to eliminate worker time away from the service process.
Benefit Hours. Vacation, medical and holiday hours are taken by the employee is usually captured in the payroll system.
Other Administrative Hours. Other administrative hours include employee time during all-agency training and meetings as well as program or unit meetings. Time in these categories is input by the worker adjacent to their respective administrative time category on the employee-program hour form.
Worker Group or Unit. The basic level of cost reporting is the delivery or administrative process that yields a distinct output. This may be the intake unit of an elderly service, a case management service or an adoption service. Administrative activities, service improvement and operational research projects may be considered categories by themselves.
Total Employee Pay-Period Hours to Date. Total employee hours for pay periods recently ended are accurately maintained in the payroll system. While an important in a cost information report, this data also provides a check for the manually input employee-process hour data.
Program Cost Reporting Cycle. Financial information for service agencies typically is reported at the end of a calendar month and at the end of a calendar or fiscal year. Four weeks of a calendar month is analogous to two payroll periods of two weeks each. Hourly data is accumulated from the first pay period of a payroll year to the pay period recently ended. Cost information is always meaningful at the end of any reporting period. Cost information on programs, processes and projects that begin in a period to end in another is best analyzed at the end of a payroll year.
Employee Hourly Pay Rate. Government worker categories have assigned hourly pay rate. Exceptions such as annual salaries or project term pay requires to be calculated into hourly pay rates.
Output Measures. Clients that were denied social, eligibility and income maintenance services may decide to make a court appeal. In this example of a service, the output measure might be the accumulated appeals from the first to current pay period.
The diagram below illustrates in greater detail files containing data elements from a payroll system, a human resources management system and input by the workers. Included in the diagram is the ideal “flat” file in an Excel worksheet from which a period cost management report may be derived upon.
By Noel Jagolino, contributing management consultant
Mgmtlaboratory.com 2018