Proportion of Budget spent on Administration – Guidelines for Health Service Providers

1. Proportion of Budget spent on Administration – Guidelines for Health Service Providers Hamilton Niagara Haldimand Brant Local Health Integration Network September 2013

2. Context • A key strategic priority for the HNHB LHIN is to ensure accessible, client-centered services that also reflect value for money. • The 2014-17 M-SAA for all Health Service Providers will reflect a focus on efficiency and a reasonable balance between administration and health service provision. • The Proportion of Budget Spent on Administration will be an Accountability Indicator in the 2014-17 M-SAA

3. Context (continued) • The Proportion of Budget Spent on Administration indicatormeasures how much an organization spends on administrative services relative to total operating expenditures. • A higher value indicates that a greater share of resources is spent on administration. • The LHIN’s expectations is that a shifting of resources away from administration will: • increase capacity to deliver services directly impacting client care • contribute to the sustainability of the local health system.

4. Calculating Administration Costs • How do you determine what goes into your Administration costs? • LHIN Funded agencies are to use Ontario Healthcare Reporting Standards (OHRS) to prepare their reports • OHRS Functional Centre frameworks are intended to separate and distinguish activity costs associated with administering a healthcare facility from the activity costs of delivery specific healthcare or community services

5. Determining Administrative Costs Step 1. Read the OHRS chapter for your sector(s) • Chapter 5 – Community Care Access Centres (CCAC) • Chapter 7 – Community Mental Health & Addictions (CMHA) • Chapter 10 – Community Support Services (CSS) • Chapter 12 – Community Health Centres (CHC) Each chapter has details on what should be included in Administration.

6. How Do You Determine What You Should Include in Administration? • Review your Trial Balance submission • Accounts beginning with “721” are part of the Administrative and Support Services functional centres • These accounts are established to record expenses, revenues and statistics, if any, of functional centres that support the overall administration of the agency

7. Administrative And Support Services Functional Centres Administrative and Support Services functional centres include items such as: 721 10 AS Administrative Services 721 15 AS Finance 721 20 AS Human Resources 721 25 AS Information Systems Support 721 30 AS Communications 721 35 AS Materials Management 721 40 AS Volunteer Services 721 45 AS Housekeeping Services 721 55 AS Plant Operation

8. Administrative And Support Services Functional Centres The following slides will cover some of the more common expenses within the Community Service Sector Not all Administrative And Support Services Functional Centres will apply to each agency The examples provided on the following slides are not a complete listing of expenses that may apply to each Administrative And Support Services Functional Centre If you have any doubt or concerns about whether an expense should be considered administrative, please contact your LHIN Finance Advisor or your OHRS contact.

9. 721 10 Administrative Services • Reflects the resources required to manage and monitor the overall activities of the agency • Expenses include: • expenses related to senior executives, board of trustees, and medical director • risk management • public relations • quality assurance • French Language Services • accreditation expenses • legal fees and • insurance fees for the overall organization

10. 72 1 15 Finance • Reflects the resources required to manage and monitor the financial resources of the agency • Expenses include: • accounts payable and receivable, • payroll, • budgeting and case costing, • accounting and auditing professional fees, • interest expenses • all bank service expenses

11. 72 1 20 Human Resources • Reflects the resources required to manage and monitor the human resources of the organization • Expenses include: • Human Resources personnel, • labour relations, • benefit management, • Occupational Health & Safety (OH&S), • Employee Assistance Programs (EAP), • advertising related to recruitment, • expenses related to the staff managing the following activities: • labour relations or benefits, • general orientation of staff, • expenses related to OH&S/EAP, • recruitment and retention, • legal fees • labour relation professional fees

12. 72 1 25 Information Systems Support • Reflects the resources required to manage, monitor and maintain the information systems of the agency • Expenses Include: • hardware and software expenses for all non-clinical information systems and the staff that develop and maintain these systems, • maintenance, • upgrades • staff supports for networks and infrastructure, • interface expenses for clinical equipment to networks and department management systems

13. 72 1 25 Information Systems Support continued • The following expenses are not included as Administrative expenses under Information Systems Support: • computers, hardware and software required for the operation clinical equipment • telecommunications equipment such as voicemail and paging systems • business machines such as fax machines and photocopiers • expenses that can clearly be identified to clinical equipment such as device upgrades/repairs and equipment specific software

14. 72 1 30 Communications • Reflects the resources required to manage, maintain and monitor the overall communication systems of the organization • In some community agencies, there may be expenses but no compensation related to these systems • Expenses include: • telephone services, • internet, • paging systems, • internal mail system, • courier delivery, • visitor information services, • expenses related to the movement of mail between sites

15. 72 1 35 Materials Management • Reflects the resources required to manage and monitor the equipment and supplies of the agency • Expenses Includes: • purchasing, • capital asset control, • receiving and shipping, • stores, • inventory management and distribution, • reprocessing and printing, • contract management for services and equipment, • request for proposal processes, • transportation of supplies between sites

16. 72 1 35 Materials Management continued • The following expenses are not included as Administrative expenses for Materials Management: • information systems expenses for software • hardware and technical support for purchasing and inventory systems • transport of service recipients • laboratory specimens, • garbage handling • materials management functions in pharmacy, food services, laundry and linen

17. 72 1 40 Volunteer Services • Reflects the resources required to manage and monitor individuals that volunteer their time • Expenses include: • compensation and expenses of a volunteer services coordinator • any expenses incurred to recruit and recognize volunteers • The expenses related to fundraising or profit generating activities of volunteers are not included as Administrative expenses. These expenses should be included under Fund Type 3.

18. 72 1 45 Housekeeping • Reflects the resources required to manage and monitor the staff providing housekeeping services • Includes: all expenses related to housekeeping such as cleaning floors, walls, furniture and non-clinical equipment and waste disposal expenses

19. 7* 1 53 Plant Administration • Reflects the expenses of administrative staff that manage and monitor more than one of the following functional centres: • Plant Operations • Plant Security • Plant Maintenance

20. 72 1 55 Plant Operations • Expenses include: • Rental or lease space • expenses related to distribution and monitoring of water, light, power, heat, refrigeration, steam, compressed air and other building service systems throughout the healthcare organization • compensation for staff that maintain and monitor plant systems, • heat, hydro, water and other utilities

21. 72 1 65 Plant Maintenance • Reflect the expenses related to the general servicing, repair and maintenance of the grounds, buildings and building service equipment of the agency. Includes all similar services purchased from an external agency • Includes: all renovations

22. FTE – Service Delivery & Administration • Within your organization, you will have employees that provide direct service and administrative services or a combination of both. • How should FTE be allocated? • Each employee’s role and duties should be reviewed to see whether they should be allocated as Administration or Service Delivery, or as a portion of an FTE under both Administration and Service Delivery Example 1: • a bookkeeper would be allocated to Administration

23. FTE Allocation (Continued) Example 2: A program assistant could be split between Service Activity and Administration • for example, the program assistant may spend part of their time booking client appointments (service delivery) and part of their time filing (administration) • The FTE allocation between Administration and Service Delivery is based on the amount of time the program assistant would normally spend on each activity • If the program assistant is 1FTE (i.e. 1,950 hours), and spends 50% of their time on client activities and 50% on clerical duties, then half the salary and FTE count would be allocated to Administration and half the salary and FTE count would allocated to a service delivery functional centre • Note that the 80/20 rule applies

24. Using the 80/20 • If an employee spends less than 20% of their time doing an activity, then they should be allocated as 100% to the activity they perform most • In Example 2, if the program assistant spent 80% of their time booking client appointments and dealing with client inquiries and 20% of their time filing, they could be allocated 100% to the service delivery functional centre

25. HSP Administrative Budget Summary Sheet • The LHIN has prepared a sample calculator to help you with calculating Administration amounts • It can be found on our website with a copy of this presentation http://www.hnhblhin.on.ca/Page.aspx?id=3296 • Note that the calculator is not an exhaustive list and some specific items you have that are administrative may not be listed • If an expense is not listed, that does not mean it should not be included. Please add it to the form when doing your calculation

26. Summary • The previous slides are an overview of Administration and Support Services costs and how to calculate them • With last year’s MSAA Refresh, the LHIN indicated a goal of 10% for Proportion of Budget Spent on Administration • The LHIN realizes that this target may not be attainable for all service providers

27. Summary (continued) • With the 2014-17 CAPS, the LHIN’s expectation is that resources shifted away from Administration and Support Services will be redirected to service delivery • The LHIN will be looking for service providers to set a reasonable Administration target with a goal to reduce Administration over the 3 year period of the agreement.

28. OHRS-further resources • OHRS Standards can be found on the Ministry of Health and Long-Term Care’s Health Data Branch Web Portal at: https://hsimi.on.ca/hdbportal/ • Chapters 1-4 of OHRS Version 9.0 covers account structures, business rules and common primary accounts • In particular, Chapter 4 outlines what should be included in the calculation of Administration and Support Services • If you have any doubt or concerns about whether an expense should be considered administrative, please contact your LHIN Finance Advisor or your OHRS contact at the Ministry of Health and Long-Term Care.