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C A S E Friendly Assisted Living Facility Case8 It was a beautiful day in mid-May 20X8. The Friendly Medical Center Assisted Living Facility project was near- ing completion. As usual, the construction project man- ager, Kyle Nanno, was thinking about the construction project's schedule. It seemed to him that work on finishing the interior of the building was slowing down a bit. He knew that the final weeks of a project always seemed to take forever, but he also knew that the project was running almost 2 weeks late as a result of a problem encountered during the excavation phase of the construction project. During March and April, it appeared that they were catching up. Kyle had discussed with the construction contractor that Friendly Medical Center would pay over- time to catch up, but the speed-up was temporary, and the job continued to be late. Kyle was not quite sure why. Progress just seemed to be in slow motion. He decided to meet with Fred Splient, the President and CEO of Friendly Medical Center, to discuss the problems. Fred suggested that Kyle call in someone to audit the project, in particular to examine the project schedule care- fully. Fred also wanted the auditor to look at the project expenses to date. Fred had just received a crude spread- sheet from the CFO, and it did not reflect the progress he thought should have been made as this project was coming to an end. ALF Program Expenses as of 5/24X8 Actual as of 5/24/X8 Budgeted Remaining $ $6,743,000.00 674,300.00 600,000.00 405,000.00 $6,743,000.00 453,277.00 600,000.00 354,332.00 $0.00 221,023.00 0.00 50,668.00 400,000.00 249,679.00 150,321.00 Construction Costs: Building Contingency Land Program development & equipment costs Furniture A&E fees Financing costs Capitalized interest Site improvements Phone & IS system Kitchen equipment Subtotal Organizational Costs: Legal and accounting Initial marketing Project consultant Follow-up market survey Subtotal 202,000.00 135,000.00 125,000.00 30,000.00 30,000.00 $9,691,300.00 202,000.00 135,000.00 147,655.00 22,438.00 23,776.00 $9,278,157.00 0.00 0.00 -22,655.00 7,562.00 6,224.00 $413,143.00 $25,000.00 250,000.00 80,000.00 20,000.00 $375,000.0 $0.00 0.00 0.00 0.00 $0.00 $25,000.00 250,000.00 80,000.00 20,000.00 $375,000.00 Total $10,066,300.00 $9,278,157.00 $788,143.00 Fred asked Kyle to find out if anyone in the hospital's accounting department had experience with projects and project-management software. Kyle knew instantly who to call. Caroline Stevens had once helped him on other hos- pital projects. Kyle trusted her to act impartially and to be able to figure out what was happening. Caroline agreed to function as the Project Auditor. She began by examining the most recent project schedule from the construction company. She then created a progress-to- date report with MSP. She also did a complete analysis of the CFO's report. The expense report she reviewed and updated is found below. Using MSP, Caroline created a graphical progress report on the project as of May 24. She marked the actual progress of each unfinished activity by placing a diamond embedded in a circle on the projects Gantt chart. If the symbol was to the left of the May 24 line, that activity was late; the amount of lateness was indicated by the distance of the symbol to the May 24 line. The symbol for on-time activities rested on the May 24 line. If there had been early activities, their symbols would have been to the right of the May 24 line. Caroline's chart is shown above. Caroline then scheduled a meeting with Kyle and Fred Splient. She reported that she did see a work slowdown. She conducted interviews with the construction team, and it appeared that they were concerned about their next work assignment. They told her that in the past as projects were coming to a close they were told of their next scheduled job. They had not heard anything yet, and they were worried. She also reported that the interior designer had added seven extra days to complete the interiors (Task #6 of the project) because the carpet and wall coverings might arrive week late from the manufacturer. They actually arrived on schedule. The estimated remaining duration for the interiors to be completed was 34.6 days. The designer did tell her that the furniture had not all arrived, so they were withholding about 30 percent of the payment until it all arrived. Caroline also reported to Fred that it appeared that the expenses that were allocated to pay back Friendly Medical Center for such things as preliminary marketing efforts, legal support, and so on had not yet been expensed to the project budget. The only thing that was expensed was the original project construction budget. That budget seemed to be right on track. Kyle reported that he intended to spend the rest of the contingency budget for overtime work by the construction crews. He also intended to use the rest of the IS budget to purchase computers for the common areas of the facility and to wire those areas for access to the Internet. In addition, he was waiting for bills Assisted Living Facility Construction Project Update as of 5/24/X8 20X8 Baseline Duration ID Task Name Remaining Duration Duration Variance Mar Apr May Jun Jul Aug/Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug 3/24 76.63 days 14 days 369 days 307.47 days 1 Construction & furnishing 329 days 314.49 days 28.61 days 14 days 2 Facility construction 100% 95 days 110 days 0 days 15 days 3 Phase 1 - Foundation & excavation 100% 99 days O days -14 days 113 days 4 Phase 2 - Structure 100% 134 days 120 days 0 days -14 days 5 80% Phase 3 - Enclosure 234 days 187.2 days O days 46.8 days 6 Phase 4 - Interiors 0% O days O days 0 days O days 7 First 45 (light assisted) units turned over 0% 8 wks O wks O wks 8 days 8 First 45 units ready for residents 0% days O days O days 0 days 9 Remaining 57 units (light & heavy) turned over 0% O days 0 days O days O days 10 Construction complete O wks 8 wks 8 days O wks 11 Building ready for residents Baseline summary Milestone Task Current date shown as: % Complete is % of baseline time divided by time used to date Baseline milestone Progress Summary Baseline Project Manager: K. Nanno *Please note MSP calculates the duration variance for each step of the action plan by subtracting the actual from the baseline. The summary task baseline and actual duration are then rolled up to the summary tasks' baseline and actual duration figures. The summary tasks' duration variance is then calculated by adding the summary task actual duration plus the remaining duration and then subtracting that sum from the baseline duration. from some of the companies that supplied the required medical equipment. He was planning to spend all that was allocated for that budgeted item. He was over budget on the site improvements and under budget for the kitchen equipment. Caroline and Fred praised Kyle for his management of the Construction budget. As soon as Caroline and Kyle left Fred's office, Fred called his CFO to find out why the other items were still not reflected in the project budget. QUESTIONS 1. Estimate the final construction budget. 2. What should they do about the work slowdown? 3. Create a Gantt chart with the revisions to the dura- tion of the interiors step. When will the project be completed? 4. What is the importance of the fact that the Hospital staff expenses were not reported under the project budget? 5. Write a one-page audit report of this project. C A S E Friendly Assisted Living Facility Case8 It was a beautiful day in mid-May 20X8. The Friendly Medical Center Assisted Living Facility project was near- ing completion. As usual, the construction project man- ager, Kyle Nanno, was thinking about the construction project's schedule. It seemed to him that work on finishing the interior of the building was slowing down a bit. He knew that the final weeks of a project always seemed to take forever, but he also knew that the project was running almost 2 weeks late as a result of a problem encountered during the excavation phase of the construction project. During March and April, it appeared that they were catching up. Kyle had discussed with the construction contractor that Friendly Medical Center would pay over- time to catch up, but the speed-up was temporary, and the job continued to be late. Kyle was not quite sure why. Progress just seemed to be in slow motion. He decided to meet with Fred Splient, the President and CEO of Friendly Medical Center, to discuss the problems. Fred suggested that Kyle call in someone to audit the project, in particular to examine the project schedule care- fully. Fred also wanted the auditor to look at the project expenses to date. Fred had just received a crude spread- sheet from the CFO, and it did not reflect the progress he thought should have been made as this project was coming to an end. ALF Program Expenses as of 5/24X8 Actual as of 5/24/X8 Budgeted Remaining $ $6,743,000.00 674,300.00 600,000.00 405,000.00 $6,743,000.00 453,277.00 600,000.00 354,332.00 $0.00 221,023.00 0.00 50,668.00 400,000.00 249,679.00 150,321.00 Construction Costs: Building Contingency Land Program development & equipment costs Furniture A&E fees Financing costs Capitalized interest Site improvements Phone & IS system Kitchen equipment Subtotal Organizational Costs: Legal and accounting Initial marketing Project consultant Follow-up market survey Subtotal 202,000.00 135,000.00 125,000.00 30,000.00 30,000.00 $9,691,300.00 202,000.00 135,000.00 147,655.00 22,438.00 23,776.00 $9,278,157.00 0.00 0.00 -22,655.00 7,562.00 6,224.00 $413,143.00 $25,000.00 250,000.00 80,000.00 20,000.00 $375,000.0 $0.00 0.00 0.00 0.00 $0.00 $25,000.00 250,000.00 80,000.00 20,000.00 $375,000.00 Total $10,066,300.00 $9,278,157.00 $788,143.00 Fred asked Kyle to find out if anyone in the hospital's accounting department had experience with projects and project-management software. Kyle knew instantly who to call. Caroline Stevens had once helped him on other hos- pital projects. Kyle trusted her to act impartially and to be able to figure out what was happening. Caroline agreed to function as the Project Auditor. She began by examining the most recent project schedule from the construction company. She then created a progress-to- date report with MSP. She also did a complete analysis of the CFO's report. The expense report she reviewed and updated is found below. Using MSP, Caroline created a graphical progress report on the project as of May 24. She marked the actual progress of each unfinished activity by placing a diamond embedded in a circle on the projects Gantt chart. If the symbol was to the left of the May 24 line, that activity was late; the amount of lateness was indicated by the distance of the symbol to the May 24 line. The symbol for on-time activities rested on the May 24 line. If there had been early activities, their symbols would have been to the right of the May 24 line. Caroline's chart is shown above. Caroline then scheduled a meeting with Kyle and Fred Splient. She reported that she did see a work slowdown. She conducted interviews with the construction team, and it appeared that they were concerned about their next work assignment. They told her that in the past as projects were coming to a close they were told of their next scheduled job. They had not heard anything yet, and they were worried. She also reported that the interior designer had added seven extra days to complete the interiors (Task #6 of the project) because the carpet and wall coverings might arrive week late from the manufacturer. They actually arrived on schedule. The estimated remaining duration for the interiors to be completed was 34.6 days. The designer did tell her that the furniture had not all arrived, so they were withholding about 30 percent of the payment until it all arrived. Caroline also reported to Fred that it appeared that the expenses that were allocated to pay back Friendly Medical Center for such things as preliminary marketing efforts, legal support, and so on had not yet been expensed to the project budget. The only thing that was expensed was the original project construction budget. That budget seemed to be right on track. Kyle reported that he intended to spend the rest of the contingency budget for overtime work by the construction crews. He also intended to use the rest of the IS budget to purchase computers for the common areas of the facility and to wire those areas for access to the Internet. In addition, he was waiting for bills Assisted Living Facility Construction Project Update as of 5/24/X8 20X8 Baseline Duration ID Task Name Remaining Duration Duration Variance Mar Apr May Jun Jul Aug/Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug 3/24 76.63 days 14 days 369 days 307.47 days 1 Construction & furnishing 329 days 314.49 days 28.61 days 14 days 2 Facility construction 100% 95 days 110 days 0 days 15 days 3 Phase 1 - Foundation & excavation 100% 99 days O days -14 days 113 days 4 Phase 2 - Structure 100% 134 days 120 days 0 days -14 days 5 80% Phase 3 - Enclosure 234 days 187.2 days O days 46.8 days 6 Phase 4 - Interiors 0% O days O days 0 days O days 7 First 45 (light assisted) units turned over 0% 8 wks O wks O wks 8 days 8 First 45 units ready for residents 0% days O days O days 0 days 9 Remaining 57 units (light & heavy) turned over 0% O days 0 days O days O days 10 Construction complete O wks 8 wks 8 days O wks 11 Building ready for residents Baseline summary Milestone Task Current date shown as: % Complete is % of baseline time divided by time used to date Baseline milestone Progress Summary Baseline Project Manager: K. Nanno *Please note MSP calculates the duration variance for each step of the action plan by subtracting the actual from the baseline. The summary task baseline and actual duration are then rolled up to the summary tasks' baseline and actual duration figures. The summary tasks' duration variance is then calculated by adding the summary task actual duration plus the remaining duration and then subtracting that sum from the baseline duration. from some of the companies that supplied the required medical equipment. He was planning to spend all that was allocated for that budgeted item. He was over budget on the site improvements and under budget for the kitchen equipment. Caroline and Fred praised Kyle for his management of the Construction budget. As soon as Caroline and Kyle left Fred's office, Fred called his CFO to find out why the other items were still not reflected in the project budget. QUESTIONS 1. Estimate the final construction budget. 2. What should they do about the work slowdown? 3. Create a Gantt chart with the revisions to the dura- tion of the interiors step. When will the project be completed? 4. What is the importance of the fact that the Hospital staff expenses were not reported under the project budget? 5. Write a one-page audit report of this project