Per Capita Cost of Services: The Ultimate Operating Ratio
Defining Total Annual Operating Expenditures
In the initial discussion of Operating Expenses Per Capita we showed the importance of deducting your revenue from your operating expenditures to get a more accurate per capita cost of providing P &R Services. As was pointed out in the initial posting there are numerous variables affecting Operating Expenses and Operating Revenue. In this, Part Two, of the Per Capita Cost discussion, we will define what PRORAGIS defines as the Total Annual Operating Expenditures. In the Budget & Finance tab of the PRORAGIS
profile we ask:
1. What are your department's Total Annual Operating Expenditures
for this fiscal year?
Total operating expenses include all annual operating dollars that are expended in any given fiscal year. It does not include capital funding sources except for any function that is paid from operations but is charged to Capital funds.
The chart below shows the aggregated amount of 2011 profile operating expenditures. The median indicates the 50% mark on expenses. The FY 2011 profiles indicate slightly less than $2.8 million as the median amount of Total Annual Operating Expenses.
What sources of revenue comprise these annual funds?
Chart 1.2 (below) shows both the generic sources of revenue distribution for the profiles in the database and the percentage of each relative to the total revenues collected. Thus, collectively, the department’s average amounts for each category are shown. Note that jurisdictions may only have one or two of these sources.
The primary categories, that compiled, equal the Total Annual Operating Expenditures are the core trio of Personnel
and Operating Capital
. Almost all budgets include these three categories by some name.
Personnel dollars include:
• All salaries and benefits of employees working directly for your department, including any employee, by whatever name (contractor, intern, etc), working any amount of hours, for which the department or jurisdiction pays any FICA, Workman’s comp, or other payroll taxes.
• Contract instructors or employees of contractors hired by the contracted companies who pay their benefits are part of either the operating or capital dollars depending on the contract funding source.
• Employees under contract who are paid from Capital Dollars in a reimbursement to the operating funds are accounted as regular employees.
• Note some jurisdictions and departments may not include all of the benefits as a charge against the operating budget. Do not worry about adding those dollars, but do make a note of that so you are comparing equal amounts when benchmarking other personnel costs.
Annual Operating Expenditures include:
• Funds from any sources that provide the funding for all operating budget codes.
• Pro rata costs of long term operating contracts (e.g. 3-year contract for heating oil and similar).
• All materials and supplies necessary to provide lands, facilities and program services.
• Contracted program instructors, lifeguards, etc. would be placed in the Operating category.
• Enterprise funds that cover all costs would be part of the operating budget and would include all the personnel costs for the fund.
Operating Capital includes:
• Expenditures for capital equipment (computers, vehicles, large area mowers, tractors, boats, etc.).
• Periodic cyclical maintenance or replacements (carpets, conference chairs, push mowers, etc.).
• Debt services paid from the operating funds (unless it is accounted for in either the capital bond funds or the operations expenditures above).
There are always funding expenditures that don’t fit into any of the categories above.
Distribution of Total Operating Expenditures
Collectively the categories shown in Chart 1.3 (below) account for all the funding that will be expended during the year. The chart shows the percentage distribution of the FY 2011expenditure categories.
Our next PRORAGIS discussion post will address the definition of relevant operating revenue. Any comments or questions are welcome.
Note: All numbers provided in the attached graphs are predicated on the profiles currently completed. They are most likely to be meaningful across all types of jurisdictions at a national level.