It is now September of 2022, and the daycare center has been successfully operating for 8 months. The demand for daycare has been as strong as anticipated, with enrollment growing by 10 percent per month from Feb. to May and 5 percent per month since June 2022. There is also significant unmet demand. While most of the parameters used to construct the 2022 budget were correct, there are a few adjustments that must be made to personnel scheduling and other cost factors for 2023. 

 

Budget Adjustments: 

1) Tiny Tots, Inc. will start providing paid vacation/personal days to their full-time employees in 2023. Daycare full-time workers get two weeks (or 80 hours) of paid time for their leaves. The daycare center will open 249 days in 2023 (except weekends and federal holidays), whereas in 2022 it only opened 240 days (i.e., 20 days every month). Staff vacation and sick leaves will be covered by additional full-time staff hired for this purpose. 

 

 

2) In 2022, the budget did not include coverage for a lunch hour for each employee. As a result, employees had to work during lunch, which violated union rules. In 2023, the staff will be provided a one-hour paid lunch (they still get paid for 8 hours/day), and the Director is considering using part-time work study college students to cover the lunch hours. The college students have to work at least 15 hours per week and will get paid at $10 per hour. Lunch hours are from 11am to 2pm, and employees can be assigned to any lunch hour. (The objective is to schedule lunch hours for the staff to minimize staffing requirements.) Work study students do not attend the three-day training programs. 2 

 

3) All full-time employees, administrator, and secretary, except work study students, receive fringe benefits.

 

4) Costs for food, supplies, and equipment are expected to increase by an inflation rate of 3 percent during 2023. 

 

5)The center has to add liability insurance of $1,200 per month and fire and theft insurance of $600 per month that will cover any services provided by the center. 

 

6) Presently, the daycare center is housed in an old school that is not being used by the city. While the city agreed to provide free space and utilities the first year, the mayor has said this will not be possible for 2023. The city is willing to lease the full facility and provide utilities for $6,000 per month.

 

 In addition, the Union agreed to raise its contribution to $3.00 per child per day for the children of union members. The day care fee will also rise to $600 per month per child in 2023. 

 

 

1.  Develop a 2023 monthly budget with the aforementioned changes. Assume that the child/staff ratio will be maintained at 8:1. Also, determine the total and per child expenditures, revenues, and balances (i.e., surplus or deficit) for each month from January to December 2023. Enrollment in the center could continue to grow by 5 percent per month as long as space is available. Use the baseline budget of the case study answer key (Tab Q1 of the Excel) 

 

I provided in class. Modify the spreadsheet to incorporate the changes in 2023. You only need to submit one budget sheet (or tab). Submit your 2023 budget Excel document as an attachment in the online exam portal. 

 

2. brief memo summarizing your findings and responses to all questions below. Do NOT copy and paste the Excel table in the memo because the Excel budget is to be submitted separately. Make sure to follow the standard memo format that includes "To, From, Subject, Date," and headings (and subheadings if needed). Submit your Word document as an attachment in the online exam portal. 

 

1) In the memo, please briefly explain your main assumptions and rationale for your calculations in the budget. 

 

2) To help cover the center's deficit, the city is considering two revenue proposals: 

 

a) Adopting a sliding scale fee based on annual family income. Assume that city employees can be grouped into three income classes:

 Low income (below $45,000): average $37,000/year 

Middle income ($45,000-65,000): average $58,000/year 

High income (above $65,000): average $72,000/year 3 and that city workers are evenly divided between these income classes. The new fee structure requires that low income families pay $600 per month per child, middle income $650, and high income $700. Is this fee progressive, regressive, or proportional? Discuss the pros and cons of this fee in the memo (hint: refer to the principles of sound taxation discussed in class). 

 

b)Since the state start-up grant is gone in 2023, the city is considering subsidizing the day care center through property taxes, possibly $8,000 per month. Is this a good idea? Explain in the memo (hint: refer to the principles of sound taxation discussed in class). 

 

3) Rather than using the old school, the Union proposes to build a new day care facility. What factors or elements should be considered when preparing a budget for this expenditure? 

What funding sources would you recommend for financing the new day care center? Why? Justify your choices in the memo (hint: refer to capital budget). 

 

4) What recommendations would you offer to the city for a fiscally sustainable daycare center?