Don Richards is the superintendent of Muskeg School Division (MSD) which comprises three large schools serving elementary, middle, and high school students.

Services are centralized into two departments: academic and administration. Each department is run by an associate superintendent and is required to operate within its assigned budget. Academic and administrative costs are allocated to the schools based on student enrolment. Don is wondering if there is a better way to allocate these costs as some of the principals are unhappy. Proposed budgets for the two centralized service departments are included in Appendix I.

Provincial funding is allocated to the schools at a fixed rate of $4,700 per student. MSD has committed to fund fixed operating costs as detailed in Appendix I from the per-student allocation to each school. Don also wonders if there is a more appropriate method for allocating funding to the schools given that each school has a maximum pupil-teacher ratio (PTR) negotiated in the recent collective agreement.

Tension amongst the principals and associate superintendents became apparent in a meeting Don recently held (Appendix II). Don admitted that the school budgets are running tight. Performance evaluations of both the principals and the associate superintendents are based on their ability to stay within their budgets and Don knows this is the main cause of the tension. He would like to know if there is a more appropriate way to evaluate performance.

Lastly, Don is concerned about a professional development training trip to a nearby city that is scheduled for an upcoming Saturday. The associate superintendent solicited a bid for the trip from Acme Bus Company and it came in at half the cost of using the school division buses; details have been included in Appendix III. Don doesn't think this makes sense and would like your advice on if there is a better way to charge for bus use between departments that benefits MSD overall.

Please help me to determine the performance and decide the bus transferring price.

Appendix II Notes from meeting High school principal: "I object to the $1,085,000 cost allocation to the high school's budget. My school is subsidizing the other two schools, especially due to the high busing costs. Many high school students drive cars to school rather than taking the bus, so they do not cost as much from an administrative perspective. Additionally, high school courses require less curriculum and academic support than the lower level courses as teachers do more of this work on their own." Elementary school principal: "Our school is a new building, it requires less maintenance and utilities costs than the middle and high schools. The middle school is ancient and it creates most of those costs. We should be paying less than we are!" "As well, I think the way revenue is allocated is unfair. We need to have more teachers than other schools, given our lower PTR of 22. Both the high school and middle school have a PTR of 27, therefore we should receive more money!" Middle school principal: "As a result of the high allocated costs, I cannot afford to hire enough teachers to meet the desired PTR." Associate Superintendent of the academic department: "I am under pressure for exceeding my budget when it is a result of me being charged too much for bus services by the administration department." Associate Superintendent of the administration department: "I cannot transfer the bus service at less than full cost and be expected to meet my budget. It is not fair to compare my transfer price to an outside bid."Appendix III Bus service costs for upcoming training trip Buses will leave the schools at 8:00 a.m. and return by 6:00 p.m. The actual driving time is three hours each way and the total distance driven will be 300 km. Bid from Acme Bus Company: $645 per bus [$1.55/km + $180 per day for the driver ($18 per hour for 10 hours)]- Transfer price from administration department: $1,290 per bus (300 km at $5.16/km). On average, buses operate for three hours per day. The $5.16/km rate is based on the following budgetary data: Garage (Note 1) $166,000 Fuel (Note 2) 216,000 Tires (Note 3) 55,000 Annual insurance 96,750 Drivers (Note 4) 540,000 Bus lease (Note 5) 540,000 Total $1,613,750 Annual kilometres in service 312,500 Cost per kilometre $5.16 Notes: 1. The base facility costs $40,000 per year + $14 per bus per day to cover minor repairs, cleanup, and a visual safety inspection (that is, 200 school days x 45 buses * $14 = $126,000). 2. Buses use an average of $8 of fuel per operating hour (3 hours per day x 45 buses * 200 days * $8 = $216,000). 3. Pursuant to government regulations, bus tires are changed annually. 4. Drivers are paid $20 per hour for regular driving time (double for weekends) and $10 per hour (any day) for waiting. 5. Buses are leased at $12,000 each per year. This amount covers major maintenance