How Budgeted Dollars Were Obtained
The budgeted dollars were data provided by the organization at the start of the fiscal year for
budgeting purposes.
Calculations
Calculations were done to determine actual monthly salaries incurred. The department had a total
of 20 employees and 3 contract staff. Of the 20 employees, 17 were full-time employees while 3
were part-time employees. The monthly salaries and benefits were determined as follows.
For salaried Workers, Total Monthly Pay = Monthly Salary (Annual Salary/12) + Monthly
Benefits
For Hourly Staff without shift differential, Total Monthly Pay = Working Hours*Hourly Rate*4
weeks +Monthly Benefits
For Hourly Staff with shift differential, Total Monthly Pay = Working Hours*Hourly Rate*4
weeks +Monthly Benefits + Shift Differential
Shift differential is by the hour and above the hourly rate paid. The proportion of monthly salary
that is given as monthly benefits varies with different employees. The contract expenses are not
determined under employee salaries calculations since we are using the department’s records of
contracts when the expenses are incurred. Other actual data provided by the department are ROI
onsite (Revenue), ROI service, and supplies.
Difference between Revenues and Expenses
The Health Information Management (HIM) Department is not a revenue-producing department
which is why we can see expenses significantly exceeding revenues. The focus of this
department is to manage the expense and not to generate profits. The majority of the
department’s expenses are salaries and benefits (about 90% and above of total expenses),
followed by contracts (which vary from month to month), then equipment lease and supplies.
Though not revenue-generating, the department sometimes provides onsite service in addition to
the services provided by the department which earns it a little income.
Reasons for Variances
The main sources of variance are salaries and benefits and contract expenses. The variance in
salaries and benefits may be caused by hiring more or fewer employees than anticipated during
budgeting. Fluctuations in market wage rates are also a major cause of variances in salaries and
benefits expenses since the actual wage rates tend to differ from the ones used during budgeting.
Moreover, in most cases, the number of hours that will be needed to complete certain tasks will
not be the same as the estimated hours in the budget, which causes variances in expenses. The
department can hire different contractors from time to time who charge different fees hence the
variance in the contract expenses. The revenue variances are caused by the difference in the
number of services provided and the service fee charged.
Recommendations
The department had positive salaries and benefits variances throughout the twelve months, which
shows effective management of wages and salaries; the department paid workers within the
budget. The only negative cost variances experienced in some months were contract and supply
expenses. However, these expenses were not too significant to cause alarm. The department
mostly operated within the budget during the year so no major interventions are required as we
move to the next financial year.
Importance of Maintaining Monthly Budget
The monthly budget helps the department control its operations to stay in line financially and
avoid waste. A negative variance will tell the management that they are spending too much and
