Operating Plan: Allocation, Allotment, and Variance

Exercise 1: Develop an Allocation and Allotment Plan using Budget Tools

An operating plan is created with the adopted budget. Given the amount of money actually received. the organization needs to plan how to spend it. The budget analyst must carefully examine any changes in the legislative funding to ensure that an accurate operating plan is Cie-ated. After creating an operating plan. the budget analyst must turn to tracking spending. What the organization plans to spend and what it actually spends will be different. This difference is the variance, and the budget analyst needs to track it carefully throughout the year. 

1.Develop an allocation and an allotment plan. To complete this exercise, use the file pro-vided by your instructor entitled Budget Tools.

2.  Module 22 Operating Plan. On the tab labeled Exercise in the spreadsheet is the proposed budget for a health care finance program. This bud-get spends a lot of money on health care claims in object code 2241 and pays a lot of money for claims processing in object code 2501. The legislature has provided $30 million for new health care claims benefits but no money for the estimated $25,000 in processing costs for new claims: these costs are to he met through administrative savings. The legislature has also demanded other administrative efficiencies, but little guidance has been given for achieving them.

Based on past payroll patterns, you may want to anticipate that 48% of the expenses will be incurred in the first half of the year and 52% will be incurred in the second half. Benefit ratios are provided in the spreadsheet.

There are no special purchases. The building lease for the departmental office is $125,000 per month. Net legislative adjustments are $28.75 million. Asa  new analyst, you are not sure what some of the expenditures are for, so your initial proposal will likely be revised, but you have been tasked with making an initial proposal. Complete this assignment using the provided spreadsheet.

3. Lakeside has closed its books for the first half of the fiscal year. Calculate the variance and variance percentage of the data presented in Table 22.6. 3. The legislative body of Brookville has completely approved your proposed budget of $100,000 for the fiscal year starting July 1, with no reductions. Prepare your annual budget by object code and month using the following guidance:

(a) Salaries are $23.000 per month, and benefits total 15% of salaries each month.

(b) General supplies are purchased at the beginning of each quarter and total $400 per quarter.

(c) There are two service contracts. One is for your website's host and development and is paid in two parts: $15,000 in December and $25.000 in June. The second contract is for data analysis by an outside vendor. Payment on this contract is due every January, for a total of 82,000.

(d) The director of your department attends a national conference every October. Their training (which includes travel) budget is $3.000 for the conference.

(e) This year, your department will be outfitted with new technology equipment, including PCs, laptops, a phone system, and a new server. The cost is expected to be 936,000. and the transition should happen in February.