Cost Management: Discretionary vs. Committed: Reduced Budgets

Dr. Stephanie White, the Chief Administrator of Uptown Clinic, a community mental health agency, is concerned about the dilemma of coping with reduced budgets next year and into the foreseeable future, but increasing demand for services. In order to plan for reduced budgets, she must first identify where costs can be cut or reduced and still keep the agency functioning. Below are some data from the past year.

Program Area /Administration/ Salaries:
  
*Administrator - $60,000
*Assistant -  $35,000
*Two Secretaries - $42,000
*Supplies -$35,000
*Advertising and promotion  -$9,000
*Professional meetings/dues - $14,000

Purchased Services:
  
Accounting and billing -  $15,000
Custodial - $13,000
Security -  $12,000
Consulting -  $10,000

Community Mental Health Services:
  
Salaries (two social workers) $46,000
Transportation $10,000

Outpatient mental health treatment:
  
Salaries:  
*Psychiatrist - $86,000
*Two Social Workers -  $70,000

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1. Identify which costs you think are likely to be discretionary or committed costs.

2. One possibility is to eliminate all discretionary costs. What do you think of this recommendation?

3. How would you advise Dr. White to prepare for reduced budgets?