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OCR for page 30
30 Sharing the Costs of Human Services Transportation What's the Right Price for Each Purchasing Agency? A Simple Situation For the moment, let's imagine a simple situation. The Burke Lake Transportation System pro- vides trips for the clients of three human service agencies and no other services to any other riders. Each agency gets essentially the same level of services, which means that the trips for each agency require the same numbers of hours and miles to produce. What is the right price for each agency that is purchasing trips? If the services received (hours and miles) are the same, then the prices charged should be the same. In this case, each agency should pay $204,306 a year, or one-third of the total annual expenses of $612,917. (Note that although each agency received the same amount of services, the number of rides received by each agency might not have been the same because different kinds of riders were being served.) Agencies Receiving Different Levels of Service A more common situation is that human service agencies purchase different levels of service for their clients. The right price for each agency then will be dependent on the level of service that they require as indicated by the numbers of hours and the numbers of miles required to produce the trips that they need. Using the chart of accounts of this report and the Cost Sharing Model, Table 8-1 shows that the total expenses were distributed as $278,584 allocated to hourly expenses, $143,226 allocated to mileage expenses, and $191,107 allocated to fixed expenses. Further use of the model shows the following results: The Fixed Cost Factor for BLTS is 1.4531. The Annual Hourly Cost of BLTS's services is $7.886. The Annual Mileage Cost of BLTS's services is $0.3536. These figures are important for calculating any potential changes or for allocating total sys- tem costs among the stakeholders. Suppose that BLTS is serving the AAA, a sheltered workshop, and the Medicaid program. The services that those organizations are receiving are those shown in Table 8-2. For each agency, their proportion of the total BLTS annual cost of $612,917 would be determined by the proportions of BLTS's overall services that they receive. The formula for calculating each agency's proportion- ate share is the following: TOTAL ANNUAL COST (for Service A) = The Transportation System's Fixed Cost Factor times the sum of Service A's ANNUAL HOURLY COST and ANNUAL MILEAGE COST. For the AAA, their share of the costs is 1.4531 times [(16,875 hours times $7.886 per hour) plus (202,500 miles times $0.3536 per hour)], or 1.4531 times [$133,082 plus $71,613], Both of which equal $297,434. For the sheltered workshop, their share of the costs is 1.4531 times [(10,000 hours times $7.886 per hour) plus (135,000 miles times $0.3536 per hour)], or 1.4531 times [$78,863 plus $47,742], Both of which equal $183,965.

OCR for page 30
Applying the Cost Model to Various Scenarios 31 Table 8-1. BLTS chart of accounts with expense assignments. Object Codes Expense Account Hours Miles Fixed Cost 501.00 LABOR 501.01 Operators Salaries and Wages $179,760 501.02 Training Salaries and Wages: Operators $1,477 501.03 Dispatchers Salaries and Wages $28,047 501.04 Administrative Salaries and Wages $67,986 501.99 Other Salaries and Wages: Mechanics $31,344 502.00 FRINGE BENEFITS 502.01 FICA 502.02 Hospital, Medical, and Surgical Plans 502.07 Unemployment Insurance 502.08 Worker's Compensation 502.09 Sick Leave 502.10 Holiday 502.11 Vacation .01 - .11 Operators $29,967 .01 - .11 Dispatchers and Administrative Staff $5,182 .01 - .11 Mechanics $15,879 503.00 SERVICES 503.03 Professional and Technical Services $2,115 503.05 Contract Maintenance Services $28,214 504.00 MATERIALS AND SUPPLIES CONSUMED 504.01 Fuels and Lubricants $43,872 504.02 Tires and Tubes $5,103 504.03 Inventory $10,788 504.99 Other Materials and Supplies $9,825 505.00 UTILITIES (e.g., telephone) $3,336 506.00 CASUALTY AND LIABILITY Insurance Premiums $44,778 507.00 TAXES (e.g., Vehicle Licensing and Registration Fees) $175 508.00 PURCHASED SERVICES 508.01 Purchased Transportation $67,380 508.09 Volunteer Reimbursements $18,723 509.00 MISCELLANEOUS EXPENSES 509.01 Dues and Subscriptions $50 509.02 Travel and Meetings $871 512.00 LEASES AND RENTALS $18,045 514.00 PURCHASE LEASE PAYMENTS 516.00 OTHER RECONCILING ITEMS Volunteer Services $18,723 518.00 INDIRECT EXPENSES TOTAL EXPENSES $297,307 $143,226 $191,107 Table 8-2. Services received by stakeholders. Agency Service Hours Miles Trips Area Agency on 16,875 202,500 28,700 Aging Sheltered 10,000 135,000 22,000 Workshop Medicaid Program 8,450 67,500 12,675 Totals 35,325 405,000 63,375