Hamilton Public Services

Hamilton Public Services (HPS) is a not-for-profit organization and has been in existence since 2015. HPS has a set of goals primarily to assist low-income families in and around Greater Hamilton Area. Its stated purpose is "to assist and provide community services and to enhance the quality of life for GHA".

HPS services are classified under three distinctive public services: Family Support (FS), Educational Support (ES) and Recreational Support (RS). HPS is licensed by the ministry of government services as it is the principal provider of funds and as such controlled by the Government of Ontario. In addition to these services, HPS plan to also offer special services for a fee as a source of additional revenue.

Started as a community experiment in 2015, HPS has grown and has been receiving accolades from local chamber of commerce and the surrounding communities for their contribution. Ashley Fields is the CEO of HPS and has the support of a board consisting of six others with diverse experiences from Wentworth and nearby areas. The Board meets quarterly and has organized into three committees: Finance, Program and Strategy.Here is a summary of discussions and issues raised at a special meeting in late 2021.

Ashley Fields(CEO): "Thanks for organizing the meeting Jon. The primary focus today is for us to review our financial position for the fiscal year just ended in June 2021 and the proposed budget for the year 2022. I am very troubled by the proposed deficit for 2022. We nearly balanced our budget last year. So, let us have a look at what is triggering this deficit and how we can improve our performance. Our responsibility is to satisfy the ministry and key stakeholders and continue to be a viable organization".

Jonathan Coffey(Representative from Chamber of Commerce and a board member on Strategy):

"I got the financial statements from Rob Sharma yesterday. I am not sure why we do not have details in terms of the specific programs we offer at HPS. It is difficult for me to understand how the funds are applied to various programs we run. That is why I arranged for this meeting".

Rob Sharma(Program Director): "I received the financials from Beverley Chan. Perhaps, she may be able to explain the deficit. My focus is on programs, administration, and their cost management. I hear you Jon and we can discuss improvements where it is needed. Our goals are well received in the community, but they also need to know the financial projection for 2022.(Exhibit A)

Ashley Fields(CEO): "We are a growing organization and perhaps, we should look at our programs and determine if they are self-supporting. I agree with Rob that we should have a better planning and control system for HPS. Our primary donations are from the ministry and the chamber of commerce and if we are not careful, the funds may shrink or even stop. We certainly need to establish better accountability. Maybe we need an outside consultant to restructure our financial information by programs."

Beverley Chan(Finance Committee): "I have been already working on that front Ashley. I can recommend a business colleague of mine - who has considerable experience in non-profit organizations. She discussed a better business model for HPS based on a Balanced Scorecard approach. I can explore further and certainly offer a much better picture in our follow up meeting next week".

Ashley Fields(CEO): "Let us look at this new approach and make a decision for 2022. I am sure all of us here are passionate and dedicated to offer best social programs we can afford.I have been also asked to add another program that involves community security unless we make a compelling business case; the ministry is not going to increase neither the existing grants nor promote our desire to grow".

Hamilton Public Services (continued)

Rob Sharma(Program Director): "I also want to bring in another matter for our consideration - a capital expenditure decision. I have been researching on the design and implementation of a Planning and Control system like what Bev is suggesting. I believe in this investment".(Exhibit B)

Ashley Fields (CEO):"Thanks for your proposal Rob. I agree that we need to invest in a better planning and control system for HPS.Perhaps, Bev can add this to her list and analyze this proposal and let us deicide on the capital allocation for 2022 in our next meeting. Perhaps, as Jonathan suggested, it is time that we revisited our value proposition, mission, and strategy to refocus.

I certainly would like to see our programs well received in our communities and want to excel in what we do. As part of our business model, I am also committed to more fund-raising approaches for our programs and to have the ability offer more programs in the future".

Let us meet again two weeks from now and discuss our path forward. Thanks all".

Required:

Assume the role of the external consultant and make a formal report to the Board of HPS:

1.Establish a proper value proposition and business model for HPS and reorganize

budget in a Program format and indicate their respective benefit cost ratios.

2.Analyze the Capital Expenditure proposal and make an appropriate decision.

3.Develop a planning and control system that includes a high level

Balanced Scorecard and a Strategy Map for HPS.

4.Write a formal report outlining your findings and recommendations.

(This includes key issues, key conclusions, and key recommendations).

Exhibit A

Hamilton Public Services

Summary of Proposed and actual Financial Statements for 2022 and 2021

Sources of Funding:Budget 2022Actual 2021

Donations from Chamber of Commerce$200,000200,000

Ministry of Community Services - Ontario1,000,000950,000

Local Community support Group150,000130,000

Fund-raising50,00045,000

Total Available funds$ 1,400,0001,325,000

Expenses:

Program Managers (2 @100,000)$200,000$180,000

Salaried Staff (10 @ $80,000)800,000 *720,000

Administrative staff (4 @ 50,000)200,000 *170,000

Maintenance - Facilities80,00060,000

Travel Expenses150,000120,000

Depreciation40,00035,000

Interest expenses20,00020,000

Discretionary Expenses60,00030,000

Total Expenses$1,550,0001,335,000

Surplus / (Deficit)$(150,000)$(10,000)

Benefit /Cost Ratio0.8670.993

** Contract settlement for 2022 from 2021.

Other information:

1.Two Program managers receive annual salaries and considered variable. One takes care of FS program and the other monitors the other two programs. The split between ES and RS is 60/40.

2.Salaried staff work on various programs are as follows: Considered variable.

Family Support (FS) 5; Educational Support (ES) 3; and Recreational Support (RS) 2.

3.Administrative staff - 4 full time clerical staff and spend their time with program staff as follows: Family assistance: 20 %, Employment Services: 20%, Recreational Support 10% and the balance is for general administrative functions and are deemed fixed.

4.Maintenance is considered common administrative costs and treated as fixed.

5.Travel expenses are for program staff. Allocation is based on program effort.

6.Depreciation is considered variable and allocated to program based on effort.

7.Discretionary expenses (Fixed) are for miscellaneous requests from Rob Sharma for additional programs suggested by clients as well as improvements to current planning and control systems.

8.Interest expenses are fixed and charged to administration.

9.HPS has a policy of targeting 20% of the revenue to overall management costs. This is also the stipulation from the Ministry and Chamber of Commerce. The balance of revenue is allocated to programs based on their effort.

10.Board members are not part of the HPS operation, and their honorarium is handled separately.

Design of a Balanced Scorecard and Strategy Map for HPS:

Select a set of key result areas (KRA) for the programs and corresponding two Critical Success Factors (CSF) for achieving the KRAs.

Indicate at least one or two proper target metrics for evaluation (KPI)

Ensure your design supports the chosen value proposition and business model.

Draw a Strategy map for HPS.

Exhibit B

Draft proposal from Rob Sharma to Ashley Fields

Installation of a Management Information System

Software Purchase with Licenses$400,000

Installation & Training Costs100,000

Life of the system4 years

Disposal value of the system - end of 4 years$20,000

Annual operating savings expected:15% of all variable costs.

CCA rate50%

Tax Rate for HPS:20%

HPS is classified as a Not-for-Profit organization.

Cost of Capital for HPS: Based on the following financial information.

Debt load:40% @ a cost of 5%

Start-up Funds (Considered Equity)60% @ a cost of 8%

Risk Adjustment factor:1.25 as suggested by Chamber of Commerce.

(Hint: Use nearest rounded figure for calculation purposes).

Note:

If this proposal is shown viable, then Chamber of Commerce is willing to increase their donation by another $20,000.