Assignment 3 Program Budgeting and Financial Analysis

Assignment 3 Program Budgeting and Financial Analysis

Assignment 3 Program Budgeting and Financial Analysis

Name

University

Evidence Based Practice I: Assessment and Design

January 20, 2019

Program Budgeting and Financial Analysis

Every initiative requires financial resources, and that is why it is essential to prepare a budget for a program. A program project, at its core, is developed for a specific activity. It includes the revenue and the expenditure components for that particular project. Many organizations use program budgets for successful implementation of their initiatives. By listing all the sources of revenues and expenditures, it is possible to control all the financial activities in which a project takes part in (U.S. Small Business Administration, n.d.). Another important aspect in healthcare programs is financial analysis. Policymakers must perform financial analysis for effective allocation of resources and determination of economic benefits of a given initiative (U.S. National Library of Medicine, 2008). This paper discusses the budgetary requirements and cost-effectiveness of a breast awareness campaign among African American women in Baltimore County Maryland.

Program Budget

A functional budgeting system, which deals with the inputs and outputs of a program or a project is adopted for this breast cancer awareness program among African American women in Baltimore County Maryland. According to Kettner, Moroney, and Martin (2017) functional budgeting systems usually focus on management and are mainly concerned with a program’s efficiency and productivity. Because of its principal purpose, functional budgeting system is generally thought of as efficiency budgeting. The primary goal of this breast cancer awareness program is to increase awareness and enhance access to breast cancer screening as well as diagnosis among African American women. Like in any other budget, there are various sources of revenues and expenditure items for this program’s budget (see Table 1).

Table 1: Budget Line Items for Breast Cancer Awareness Program

A budget comprises of two principal sections: the revenue part and the expenditure part (Hodges & Videto, 2011). The total budget required for six months, from the start up to the completion of this campaign, is 1 million United States dollars. The program income membership contribution accounts for 10% of the total revenue. By organizing special events such as sporting activities, this campaign intends to raise 15,000 dollars, which is 15% of the total revenue. Program income from various activities like sales of branded shirts is expected to raise 30% of the total revenue. Government grants and contributions will account for 25% of the total revenue. From, third party payments such as nongovernmental agencies, this awareness campaign will raise $100,000 in revenues. Endowment income and other income will contribute 5% each to the total amount of financial resources required for successful implementation of this campaign.

These revenues will go toward development and distribution of educational materials, which will account for $100,000 of the entire budget. This medium is because there is a need to develop and distribute materials that are culturally appropriate to the African American population to realize the program’s goals and objectives. Also, it is important to organize educational workshops for trainers from which they can learn appropriate methods and techniques for spreading the program’s purpose to the target population. Also, it is important to arrange for educational workshops for community leaders and women groups from where they can be sensitized about the importance of breast cancer screening and diagnosis. This activity is expected to cost 23% of the entire expenditure. Trainers must also have one-on-one educational sessions with the most affected group for successful sensitization, and this will account for 7% of the total expenditure. Total salaries for the program’s director, two counselors, three training specialists, and four support services staff is $200,000 for the six months. There is a need to rent an office from where the administrative functions can be carried out. Other utilities like electricity and waters, transport and telephone are also important for successful implementation of the program. Office supplies like pens and books as well as equipment like personal computers and projectors are other essential requirements.

Break-Even Analysis

Dirubbo (2006) defined break-even as a point at which revenue is equal to expenditure. As such, the break-even point focuses on the minimum expectation for a program’s revenue. All revenues earned after break-even analysis point represent margin over profit. Conducting a break-even analysis is necessary to determine the break-even point for this breast cancer awareness program among black American women. Mathematically;

Break-Even Point = Fixed cost/Contribution margin

Contribution margin = sales price per unit- variable cost per unit.

For this campaign, 30,000 branded shirts will be sold at $10 each to raise revenue of $300,000

Out of the $1 million, variable cost is expected to account for 40% with the remaining 60% as fixed costs. The variable cost will be incurred on 100,000 program participants. Therefore;

Fixed cost = $600,000

Variable cost per unit = $400,000/100,000

=$4

Selling price per unit =$10

The Break-Even Point = $600,000/($10-$4)

= $100,000

Budget Variance

Sometimes budgets have variance when revenues do not match with the expenditures (Hodges & Videto, 2011). As for this program, a budgetary variance may arise if the sale of branded shirts does not meet the intended target of surpassing the intended number of 30,000 branded shirts. Also, failure to receive $250,000 in grants from the government may lead to a variance in the budget. An increase in the cost of developing and distributing educational materials may adversely affect the budget. A favorable variance may also arise if the cost of generating and distributing educational materials is lower than the budgeted figure of $100,000. Changes in economic performance may affect the prices of equipment such as personal computers, which may affect the budget either favorably or adversely. An increase in the cost of a personal computer will cause an adverse variance while a decrease in the price of a computer will lead to a favorable variance.

Financial Analysis

Program owners can use different methods of financial analysis, whose suitability, according to the United States National Library of Medicine (2008), depended on the purpose of an assessment, availability of data plus other resources. Some of the commonly used financial analyses are the cost of illness analysis, cost-effectiveness analysis, cost consequence analysis, and cost-benefit analysis. Others are cost-utility analysis, cost minimization analysis, and budget impact analysis. Cost-effectiveness analysis is the appropriate method for this awareness campaign

Cost-Effectiveness Analysis

The cost-effective analysis is the comparison of costs measured in monetary units against the non-monetary outcomes (U.S. National Library of Medicine, 2008). In essence, it compares the costs plus health effects of a program or an intervention to assess the degree to which it can be considered as providing value for money. This medium can enable decision-makers to determine whether or not to allocate resources for a particular program (Palumbo, Sikorski & Liberty, 2013). Mathematically;

Cost-effectiveness ratio = cost of intervention A ($)-cost of intervention B ($)

effect of intervention A- effect of intervention B

We can assume that at the cost of $1million, the breast awareness campaign would help educate 100,000 women of the benefits of screening and mammography to compute the cost-effectiveness ratio. Alternatively, a screening coordination program may be used to help lessen the problem of breast cancer among Black American women. This program is anticipated to cost 2.5 million dollars and reach only 80,000 women.

Cost effectiveness analysis for cancer awareness program=$1,000,000-2,500,000

100,000-80,000

= -70

The negative incremental cost of effectiveness ratio for cancer awareness campaign implies that by adopting the program rather than screening coordination initiative, there is an improvement in the number of women reached out to and reduction in cost.

Conclusion

In conclusion, budget preparation is an important component of a program. At least 1 million dollars will be required for the successful implementation of this awareness program. More than half of these resources will be allocated on some important budgetary elements like preparation of educational materials, organization of workshops and salaries. An analysis of break-even point shows that revenue will equate expenditure at $100,000 for this program. Most importantly, the cost-effectiveness analysis proves that a breast awareness campaign is more effective than screening coordination.

References

Dirubbo, N. E. (2006). Break-even analysis–can I afford to do this? The Nurse Practitioner, 31(7), 11. Retrieved from https://ezp.waldenulibrary.org/login?url=https://search.ebscohost.com/login.aspx?direct=true&db=mnh&AN=16862051&site=ehost-live&scope=site.

Hodges, B. C., & Videto, D. M. (2011). Assessment and planning in health programs (2nd ed.). Sudbury, MA: Jones & Bartlett Learning.

Kettner, P. M., Moroney, R. M., & Martin, L. L. (2017). Designing and managing programs: An effectiveness-based approach (5th ed.). Thousand Oaks, CA: Sage.

Palumbo, M. V., Sikorski, E. A., & Liberty, B. C. (2013). Exploring the cost-effectiveness of unit-based health promotion activities for nurses. Workplace health & safety, 61(12), 514-520. Doi: https://doi.org/10.1177/216507991306101203.

Hiatt, J. (2006). ADKAR: a model for change in business, government, and our community. Prosci.

U.S. Small Business Administration. (n.d.). Writing a business plan. Retrieved January 17, 2019 from http://www.sba.gov/category/navigation-structure/starting-managing-business/starting-business/writing-business-plan.

U.S. National Library of Medicine. (2008). HTA 101: IV. Cost analysis methods. Retrieved January 17, 2019 from http://www.nlm.nih.gov/nichsr/hta101/ta10106.html.

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