1. Financial Skills

2. Objectives 1.Business strategy 2.Budget strategy 3.Calculations 4.Practice

3. One Approach to the Budget Process

4. Facility Investment Metric An Investment Strategy Based upon Health Care Mission: –JCAHO/Life Safety Assessment –Infrastructure Assessment –Functional Assessment –Space Utilization Analysis –Total installation/catchment area (business) Basic Program/Project Justification –Linchpin to Investment Strategy

5. Facility Objective Goal: “Maintain a reliable facility and installation infrastructure.” Measures: –Percent of regulatory projects funded –Percent of infrastructure projects funded –Percent of business projects funded

6. Project Prioritization Process MTF FM CEO BOD CRB Prioritized Funding List Master Planning

7. Sustainment Restoration Modernization Sustainment: Based on DOD Cost Factor Tables –Sustainment dollars = $6.1M annually Restoration and Modernization: Based on PRV and Requirements divided by FLC –Plant Replacement Value = $287M/50 –R&M = $5.7M annually Total SRM = $11.8M

8. Requirements Drivers JCAHO Codes and Standards Authority Having Jurisdiction Regulatory Compliance

9. Requirements Drivers Facility Condition Indices Facility Age & Failing Infrastructure Backlog Infrastructure Upgrade Capital Investment

10. Requirements Drivers Master Planning/Business Planning Outdated Healthcare Environments Space Utilization Analysis Total Installation/Business Drivers Business Improvements/ Initiatives

11. Critical – Considerable Mission Impact R A G Degraded – Substantial Mission Impact Enhancement – Minor or No Mission Impact Condition Codes Condition Codes match those in Automated Civil Engineering System (ACES)

12. Priority Matrix Critical – Considerable Mission Impact Degraded – Substantial Mission Impact Enhancement – Minor or No Mission Impact R A G Medical & Dental Op Research & Veterinary Administration & Support Regulatory Compliance R-1 R-2R-3 Mission Essential Infrastructure I-1I-2I-3 Business Initiatives & Improvements B-1B-2B-3

13. Current Project List Regulatory Requirements Includes Code and JCAHO issues Business Initiative Includes “Cost of doing business” Mission upgrade Facility Investment Strategy Infrastructure Upgrade Includes must-fund Infrastructure and Capital projects $ 50M $2M $34M $86M Total:

14. FY2004-2010 FY 2004 to 2010 Total CIP Outlay = $86M Critical Enhancement Degraded Regulatory Business Infrastructure

15. CIP Outlay (by Category) H/VAC Plumb & Elect A & ELSC & EOC Other Critical Enhancement Degraded Required

16. Using Facility Condition Index The next slide demonstrates the project list sorted to reflect the Facility Condition Index (FCI) The FCI is tabulated by compiling: –Life Safety Assessment (SOC) –Deficiency Tabulations (DEFTABS) –Backlog of Maintenance and Repair –Work Order History The list reflects the Top 10 projects

17. Matrix Using Condition Index

18. FY04 FCI Summary Regulatory Requirements Includes Code and JCAHO issues Business Initiative Includes “Cost of doing business” Mission upgrade Facility Condition Index Infrastructure Upgrade Includes must-fund Infrastructure and Capital projects $9.1M $950K $7.75M $17.8M Total:

19. Recommended Project List The next slide demonstrates the project list sorted to reflect the Construction Review Board recommendations The list reflects the Top 10 projects

20. Top “10”

21. FY04 CRB Summary Regulatory Requirements Includes Code and JCAHO issues Business Initiative Includes “Cost of doing business” Mission upgrade Construction Review Board Infrastructure Upgrade Includes must-fund Infrastructure and Capital projects $2.6M $200K $8.7M $11.5M Total:

22. In Conclusion Balanced Approach Weighted Investment Strategy

23. Financial Skills Review

24. Two types of budgets used in O&M Operating budget and the Project budget –Operating budget is the cost to fund personnel, supplies, equipment, and utilities –The project budget, is used for a special project or program, such as major construction projects, building additions, CMMS, or major capital equipment purchases.

25. Two methods for budget preparation: Historical Zero-based.

26. Financial Simple Payback (SP) requires little data and can be accomplished quickly SP=Investment/Annual Net Income or SP=Investment/Annual Net Savings

27. Financial Payback Period One simple method of analyzing an asset replacement is the calculation of the payback period

28. Financial Payback Period P=O/I P = the payback period in years O = the original investment to acquire the asset I = the average annual income after tax.

29. Business Case Analysis Must Include: –Initial Cost –Staffing –Lease Cost –Infrastructure Cost –Permits/Licenses –Maintenance –Utilities –Payback (In $ and Years)

30. Financial Calculation for Energy Savings Energy Savings If your hospital saved $500 in utility costs in 4 weeks. At the same rate, much will you save in 8 weeks Simply Cross Multiply – $500.00 x N = 4 8

31. Financial Calculation for Energy Savings Q: If your hospital saved $500 in utility costs in 4 weeks. At the same rate, much will you save in 8 weeks? A: Cross Multiply – Set up: $500.00 x N = 4 8

32. Financial Life Cycle Cost Analysis – to find the total LCC of a project, sum the present values of each kind of cost and subtract the present values of any positive cash flows such as a resale value LLC = first cost + M/R + energy + water + replacement-salvage value

33. “I've got all the money I'll ever need, if I die by four o'clock.” Henny Youngman

34. Questions thank you