In early 20X5, a program manager and Lee worked together to prepare a grant application to provide funding for a new counselling service for persons with developmental disabilities who reside with their families or in MILA?s group homes. The goal of the program is to provide the participants with greater independent living skills. The service would also be available to residential clients of other agencies. Participants, their families, or the other sponsoring agency would contribute a per-user fee to participate, which is expected to cover approximately 14% of total costs. Exhibit A below provides the two-year program budget that was submitted with the application.

The initial application is for a two-year pilot project, beginning in October 20X5. If the pilot is successful, MILA will seek permanent funding. To evaluate the project, interim reports must be provided to the funder at the end of six and 18 months, and a final report at 24 months. The six-month report includes an internally prepared financial report (actual costs compared to budget).

The grant application was approved in May 20X5, with an October program start date. MILA?s year end is March 31. The startup costs in Exhibit A were incurred between July 1, 20X5, and September 30, 20X5, and include the first month?s rent on the required space, design and printing of program materials, and staff time needed to finalize planning for the program and engage the professional counsellors. This startup phase is not considered to be part of the two-year program life, but these costs are to be reported in the first six-month report, which is due March 31, 20X6, even though they were paid before the official start date of the contract.

The salaries represent the salaries and benefits of one current employee who will be assigned on a half-time basis to co-ordinate the program, and 25% of the program manager?s salary and benefits. Any excess revenue over expenses for the program must be returned to the funder at the end of the program.

Exhibit B provides the interim six-month report that was prepared by Lee, approved by the program manager, and submitted to the funding agency

.

Exhibit C provides the draft March 31, 20X7, (18-month) report prepared by Lee for submission to the funder. After Lee prepared the report, the MFA reviewed it, then submitted it to the program manager and CEO for their review.

After the program manager and the CEO reviewed the report, the MFA called Lee into her office to suggest the following changes to the report:

• Based on the time sheets of the program co-ordinator and manager, their actual time on the program was 60% and 27.5% respectively, not the 50% and 25% reported by the accounting system. Therefore, the amount of salary allocated should be increased to reflect their actual time, not the budgeted time.

• The budget approved by the funder included only $12,500 for allocated administrative costs, which is equal to 5% of the grant amount, the maximum permitted by the contract terms. However, the MFA informs Lee that the CEO and program manager have found that the program is much more complicated to run than had been predicted and a fairer estimate to reflect the actual administrative cost would be $22,000. However, there is a maximum on administrative costs. The MFA suggests that to reflect the true administrative costs, one-quarter of the participant fees collected should be assigned to MILA?s general revenues, and the fee revenue line for the program should be reduced by the same amount.

• The MFA also asks Lee to increase the rent expense for the program, which currently covers only the actual rent on the off-site room used for the counselling, by 1/25th of the rent on MILA?s administrative offices because the program manager and co-ordinator do most of their work from this office. This will increase the rent for the 18 months by $2,880.

• Beginning April 1, 20X7, and for the final six months of the program, Lee is instructed to base the salaries allocated to the program on time sheets rather than on a simple calculation, and to include the 1/25th calculation of the rent for MILA?s administrative offices.

Exhibit A MILA approved program budget

For the 24 months ending September 30, 2017

Revenue

Grant $250,000

Participant fees36,000

286,000

Expenses

Startup costs9,500

Salary and benefits ? program manager35,750

Salary and benefits ? co-ordinator55,000

Contracted services (instructors and counsellors)140,000

Occupancy costs18,000

Direct program materials8,250

Contract for independent evaluation7,000

Administration allocation12,500

286,000

Excess (deficiency) of revenue over expenses$-

Exhibit BMILA program revenue and expenses

6-month actual

Revenue

Grant $62,500

Participant fees 7,560

70,060

Expenses

Startup costs $6432

Salary and benefits - program manager 8938

Salary and benefits - co-ordinator 13,750

Contracted services (instructors and counsellors) 32,455

Occupancy costs 4,500

Direct program materials 2,106

Contract for independent evaluation 0

Administration allocation 3,125

71,306

Excess (deficiency) of revenue over expenses ($1,246)

24-month budget

Revenue

Grant $250,000

Participant fees 36,000

286,000

Expenses

Startup costs $9,500

Salary and benefits - program manager 35,750

Salary and benefits - co-ordinator 55,000

Contracted services (instructors and counsellors) 140,000

Occupancy costs 18,000

Direct program materials 8,250

Contract for independent evaluation 7,000

Administration allocation 12,500

286,000

Excess (deficiency) of revenue over expenses $0

Exhibit CMILA draft program revenue and expenses

18-month actual

Revenue

Grant $187,500

Participant fees 32,400

219,900

Expenses

Startup costs 6,432

Salary and benefits - program manager 26,813

Salary and benefits - co-orinator 41,250

Contracted services (instructors and counsellors) 94,529

Occupancy costs 13,500

Direct program materials 5,894

Contract for independent evaluation 7,000

Administration allocation 9,375

204,793

Excess (deficiency) of revenue over expenses $0

24-month budget

Revenue

Grant $250,000

Participant fees 36,000

286,000

Expenses

Startup costs 9,500

Salary and benefits - program manager 35,750

Salary and benefits - co-ordinator 55,000

Contracted services (instructors and counsellors) 140,000

Occupancy costs 18,000

Direct program materials 8,250

Contract for independent evaluation 7,000

Administration allocation 12,500

286,000

Excess (deficiency) of revenue over expenses $0

Required:

Assume that the changes in the 18-month report are made and the changes requested for the final six months are also made. Include supporting calculations to show how the anticipated effect was estimated. Assume that service levels and therefore monthly costs in recurring categories are relatively stable. Use the Excel template Asgn-Templateto answer this part.

DRAFT MILA program revenue and expenses For the 18 months ending March 31, 20X7 As submitted 24-month budget Revenue Grant Participant fees Expenses Startup costs Salary and benefits program manager Salary and benefits co-ordinator Contracted services Occupancy costs Direct program materials Contract for independent evaluation Administration allocation Excess (deficiency) of revenue over expenses 18-month actual $ 250,000 $ 36,000 286,000 187,500 32,400 219,900 9,500 35,750 55,000 140,000 18,000 8,250 7,000 12,500 286,000 $ $ 6,432 26,813 41,250 94,529 13,500 5,894 7,000 9,375 204,793 15,107 With all adjustments Requested change that can be made Adjusted 18 month Projected to end of project Notes