Question

Case study: The date is October 1, 2018. You are the nurse manager of an orthopedic surgery unit and today you received the previous month’s budget printout (below). The last column identifies the budget dollars that can be spent in the remaining three months of this year. A new budget year begins on January 1, 2019. 1. Your charge nurses are requesting one additional RN on each shift. This request is based on documented increased patient acuity over the last two years. (Assume each new nurse will earn $37.00 per hour) 2. Dr. Bones, a prominent orthopedic surgeon, has requested two new continuous passive movement machines (CPM) for this unit at a cost of $3,000.00 each. 3. In addition, you would like to attend a national orthopedics conference in New York at a projected cost of $1,500.00, that will be due after the next budget begins in January, 2019. The registration fee is $350.00 and is due now.

	Annual Budget	Expended in September	Expended year to date*	Amount remaining
Salaries	300,000	25,000	175,000	125,000
Overtime	50,000	3,800	50,000	0
Supplies	18,000	1,500	13,500	4,500
Travel (conferences, personal)	2,200	0	1,700	500
Equipment	5,000	0	5,000	0
Staff Development	1,000	200	800	200
Total:	376,200	30,500	246,000	130,200

Discussion Questions for Fiscal Management Case Study:

1- How will you deal with the 3 requests based on the budget printout?

2-What leadership theory guides your budget decisions?

3- Discuss why you need to involve all members of your team in your fiscal plan.

4-Using zero-based budgeting, identify the driving forces for each of your 3 decisions.

5-Using zero-based budgeting, identify the restraining forces for each of your 3 decisions.

Answer 1

Answer 1

Additional RN on each shift-

Due to excess patients the nurses have worked overtime during the last 9 month and full budget is exhausted. This clearly indicates that this is a permanent problem and requires additional resource to manage the overtime. Hence the request for additional RN on each shift would be considered since the same would also generate additional revenue to the business.

Purchase of new machines-

The current year budget for purchase of equipment is already exhausted. The same would be discussed with Dr.Bones and expended in the next year budget. This capital expenditure may not affect the revenue on immediate basis. However the matter needs to be discussed with Dr.Bones.

National Orthopedics conference

Travelling to conference falls due in the next year and could be approved as the current year budget is left over and there is no further spending in the current year. It is required for staff development and training.

Answer 2-

Participative leadership theory guides my budget decisions. This theory basically takes the inputs from all the group members and make them feel important. It is not necessary that all their inputs and requirements are met with. But hearing to the requirements and discussing with them improves the relationship and helps in taking decisions by which all the members would be content.

Answer 3-

While formulating a fiscal plan it is recommended to to involve all the team members. Involving all the team members make them feel more relevant and committed to decision making process. It also encourages participation by everyone and their contributions would add value to the organisation. This gives the team members a feeling that they are important in the decision making process.

Answer 4:

Driving forces for the decision using zero based budgeting-

In case of zero budgeting no previous data is taken into consideration, every line item in a budget would be analysed and understood why such amount is required. Hence in the case of additional RN appointment under zero based budgeting we can identify the total number patients and nurses required. Based on that the nurses required could be appointed. Similarly with equipment purchase and travel to conference. The actual requirements would be taken into consideration and the budget would be prepared. So there is no need to refuse the request just because the budget would exceed the previous years budget. There is no comparison involved here. Only the needs will be compared with the revenue unlike previous year trends and budgets.

Answer 5:

Restraining forces using zero based budgeting:

Since zero based budgeting involves budgeting from the scratch without taking into consideration the previous years budget it is quite labour intensive and requires lot of detailing which is time consuming. In the present context while taking the decision all the details regarding total patients records and nurse employed need to be considered before taking a decision on whether to recruit the nurse or not. Procuring those details would be burdensome and time consuming. The same applies to the other two decisions. It might also require additional resource for doing this whole activity and involve lot of discussion and brain storming sessions between the departments and finance team while preparing the budget. The assumptions already in place need to be revisited and checked in case of zero based budgeting which involves ample amount of time.