NDIS: Ensuring Viability: Unit Costing Your Services Bringing People Together To develop responses to the community’s needs for transport, access and mobility 1 A significant factor in ensuring the viability and sustainability of service providers in the National Disability Insurance Scheme (NDIS) is the fixed/set prices paid for most of the NDIS-funded support services. The Australian Government’s Productivity Commission 2011 inquiry report underpinning the establishment of the NDIS cautioned “… The Agency [NDIA] would set prices for such reimbursement to ensure the long-run viability of efficient providers, which would include adequate returns for capital investments…” In determining these fixed/set prices, all Australian governments agreed to a framework of a “reasonable cost model” with some important modifications. This means that the set NDIS price for supports is based on estimates of “specific direct cost elements at a rate that is sufficient to cover the efficient costs of a reasonable quality support provider at a point of time”. The specific cost components of this pricing methodology is documented in the document “NDIA report on the methodology of the efficient price” (18 July 2014) This NDIA report cautions that “…Providers need to understand their genuine key components of costs in order to remain competitive in a growing market...”. It is critical that the viability and sustainability of service providers operating in the NDIS-funded support services “market” not only understand their unit costs – but actively control and manage their unit costs on a continuous basis. Each service provider must determine their specific accounting and shadow costs (identified, quantified, apportioned, monitored) to arrive at a “unit cost” for each of the relevant specific services in the NDIA pricing catalogue.

NDIS: Ensuring Viability: Unit Costing Your Services Bringing People Together To develop responses to the community’s needs for transport, access and mobility 2 WORKSHOP OBJECTIVES  NDIA’s pricing methodology – overview and components of set prices  Review of the available financial costs data of initially setting up for NDIS  Issues and solutions in calculating your real total unit costs  How to forecast and budget unit costs  Cost-coding and tracking unit costs at the individual NDIS participant level in common software packages  Tips and traps in ensuring sustainability of NDIS services.

NDIS: Ensuring Viability: Unit Costing Your Services Bringing People Together To develop responses to the community’s needs for transport, access and mobility 3 NDIA’s pricing methodology – overview and components of set prices

NDIS: Ensuring Viability: Unit Costing Your Services Bringing People Together To develop responses to the community’s needs for transport, access and mobility 4 NDIS: NSW average package funding (NDIS report to COAG ) NDIA’s pricing methodology – overview and components of set prices

NDIS: Ensuring Viability: Unit Costing Your Services Bringing People Together To develop responses to the community’s needs for transport, access and mobility 5 Example only: NDIA Funding reasonable and necessary supports Source: Price Guide (from 1 Aug 2015 Trial Site)

NDIS: Ensuring Viability: Unit Costing Your Services Bringing People Together To develop responses to the community’s needs for transport, access and mobility 6 NDIA’s pricing methodology – overview and components of set prices GENERALLY NDIS FUNDED SUPPORTS ARE FIXED UNIT PRICES AND PUBLISHED IN NDIA’S PRICE GUIDE … These prices are calculated by NDIA using the “NDIA report on the methodology of the efficient price” (18 July 2014)

NDIS: Ensuring Viability: Unit Costing Your Services Bringing People Together To develop responses to the community’s needs for transport, access and mobility 7 NDIA’s pricing methodology – overview and components of set prices EXAMPLE OF NDIA FIXED PRICE COMPONENTS

NDIS: Ensuring Viability: Unit Costing Your Services Bringing People Together To develop responses to the community’s needs for transport, access and mobility 8 Review of the available financial costs data of initially setting up for NDIS Comparison: estimated initial set-up costs per CDC package

NDIS: Ensuring Viability: Unit Costing Your Services Bringing People Together To develop responses to the community’s needs for transport, access and mobility 9 Review of the available financial costs data of initially setting up for NDIS Comparison: ongoing CDC package costs p.a.: administration costs and care planning and management costs

NDIS: Ensuring Viability: Unit Costing Your Services Bringing People Together To develop responses to the community’s needs for transport, access and mobility 10 Issues and solutions in calculating your real total unit costs What is meant by “real total unit cost” ? e.g. “… total cost represents all cash and accrual costs actually incurred in the production of an output, including full attribution of overhead and other indirect costs.” (Qld. Treasury “Output Costing Guidelines” p. 64) What costs are to be included in total cost? e.g. does “indirect costs” include valuing real “shadow costs” such as volunteers’ direct service labour hours? How are real costs identified and valued? e.g. apportioning share of all expenses; use of capital; lifecycle costs What is the level of analysis of the “unit”? e.g. organisational; function; program; activity; individual client What level of output units (critical mass) is being forecast? e.g. $35.20 unit cost at 1,200 hours per annum

NDIS: Ensuring Viability: Unit Costing Your Services Bringing People Together To develop responses to the community’s needs for transport, access and mobility 11 How to forecast and budget unit costs Example: issues in apportioning costs SEE NEXT SLIDE FOR DETAILS >>>

NDIS: Ensuring Viability: Unit Costing Your Services Bringing People Together To develop responses to the community’s needs for transport, access and mobility 12 Program 1: Occupied by four staff who work largely in the community and rarely in the office; one workbench with access to computer, minimal storage and access to communal facilities, including a dedicated conference room which they use frequently for case management meetings and client/carer interviews; occupy about 1/10 th of the floor space; annual revenues generated $100,000. Program 2: Occupied by ten staff who work solely in the office; each has a desk/workstation with extensive storage area; occupy about 6/10ths of the floor space; annual revenues generated $250,000. Corporate Services section: Occupied by six staff who work solely in the office; each has a desk/workstation with extensive storage areas; all communications/computer facilities installed in this area; a meeting room; occupy about 3/10ths of the floor space; annual revenues generated $50,000. How to forecast and budget unit costs Example: issues in apportioning costs

NDIS: Ensuring Viability: Unit Costing Your Services Bringing People Together To develop responses to the community’s needs for transport, access and mobility 13 Cost-coding and tracking unit costs at the individual NDIS participant level in common software packages General Ledger Account Codes for NDIS services revenues (NSCOA) Example - NDIS Item Assistance with self- care activities: weekday day e.g General Ledger Organisational Activity Codes (using e.g. MYOB Category Code function) e.g. 106 Mobility assistance 108 Meals assistance General Ledger Client Codes (using e.g. MYOB Job Cost Code function) e.g. 407 Chris Brown

NDIS: Ensuring Viability: Unit Costing Your Services Bringing People Together To develop responses to the community’s needs for transport, access and mobility 14 Income sources (G/L Account codes); Cost Centres (NDIS activity codes); Individual Clients (NDIS participants’ Codes) Cost-coding and tracking unit costs at the individual NDIS participant level in common software packages

NDIS: Ensuring Viability: Unit Costing Your Services Bringing People Together To develop responses to the community’s needs for transport, access and mobility 15 Tips and traps in ensuring sustainability of NDIS services. QCOSS Unit Costing Tool - example

NDIS: Ensuring Viability: Unit Costing Your Services Bringing People Together To develop responses to the community’s needs for transport, access and mobility 16 Tips and traps in ensuring sustainability of NDIS services. Shadow costing – example volunteer hours

NDIS: Ensuring Viability: Unit Costing Your Services Bringing People Together To develop responses to the community’s needs for transport, access and mobility 17 Tips and traps in ensuring sustainability of NDIS services. Forecasting future unit costs There are many bases upon which future costs can be estimated/forecasted, including: Last Year Actual plus mark-up for specific cost increases and CPI Extrapolating historical cost trend Averaging Worst-Best cases from expert-group Risk-adjusted scenarios from expert-group. By far the most common method is to take last year’s actual results and mark-up (or mark-down) for known and likely cost increases/decreases as well as likely change in price levels.

NDIS: Ensuring Viability: Unit Costing Your Services Bringing People Together To develop responses to the community’s needs for transport, access and mobility 18 Break-even analysis - example Tips and traps in ensuring sustainability of NDIS services.

NDIS: Ensuring Viability: Unit Costing Your Services Bringing People Together To develop responses to the community’s needs for transport, access and mobility 19 Tips and traps in ensuring sustainability of NDIS services. Forecasting margin of Safety – sensitivity example only

NDIS: Ensuring Viability: Unit Costing Your Services Bringing People Together To develop responses to the community’s needs for transport, access and mobility 20 Tips and traps in ensuring sustainability of NDIS services. Example: Benchmarking unit costs

NDIS: Ensuring Viability: Unit Costing Your Services Bringing People Together To develop responses to the community’s needs for transport, access and mobility 21 Final questions? Additional resources: TDSA previously supplied a CD containing additional resources (including copies of the Workbook, Handouts and Presentation Slides). Instead of CDs, the TDSA website now enables a download of all these additional resources for all TDSA Think Tank modules you attend. You will need the password to access each module – and will be provided to you (or you can obtain it directly by ing or phoning TDSA) We thank you for your participation in today’s Think Tank ! Could you please complete the Feedback/Evaluation Form and leave it face down on the desks. Thank you