The Pyramid Methodology of Business - A Practical Accounting System

Transcription

1 Summit & Public Sorting Workshops II

2 Agenda I. Introductions & Welcome II. Vision 2030 Status III. Why a Financial Resource Allocation Philosophy? IV. The Pyramid Methodology V. 10-Step Process VI. Sorting Montgomery County Service

3 Phase 1: Information Gathering Feb-July Phase 2: Findings & Visioning July-Sept. Public Meetings, July 27 & 28 Summit #2, Sept. 15 Public Meetings, Sept. 13 & 14 Phase 3: Plan Development Oct.-Feb. Summit #3, Nov. 15, 1-3 pm Public Meetings, Jan. 25 & 26, 2011 Plan Adoption March 2011

4 Why is this Important? Shrinking tax support Organizational sustainability Greater dependence on revenue generation and alternative funding The ability to tell our story and be accountable for and responsible with resources We must make strategic and justifiable decisions based upon logical models and sound methodologies

5 Financial Resource Allocation Philosophy - benefits Establishes community and governing body buy-in for cost recovery goals, subsidy allocation and pricing methods Serves as an implementation guide Provides an effective tool for future decisions Provides a fair, equitable, and simple cost recovery and subsidy allocation structure based on agency values, vision and mission

6 Pyramid Methodology What s our cost recovery and subsidy allocation philosophy?

7 Pyramid Methodology Management tool utilized by agencies across the country Articulates the level of benefit that services provide Raises the issue of core services Justifies decisions Allows for logical determination of: resource allocation subsidy/cost recovery goals future fees and charges

8 Pyramid Methodology Provides a framework for work leading to the establishment of a cost recovery and subsidy philosophy and policies. You cannot simply adopt another agency s philosophy. The benefit is in the discussion, ownership, and buy-in staff, decision makers and the public.

9 Consensus Building Stakeholder Participation Community

10 Pyramid Methodology - 10 steps 1. Build on Organizational Values, Vision and Mission 2. Understanding the Pyramid the Benefits Filter and Secondary Filters 3. Develop the Organization s Categories of Service 4. Sort Categories of Services 5. Determine (or confirm) Current Subsidy/Cost Recovery Levels 6. Define Direct and Indirect Costs 7. Establish Subsidy/Cost Recovery Goals 8. Understand and Prepare for Influential Factors and Considerations 9. Implement 10. Evaluate

11 Distinctions $ Philosophy A common language must be spoken! $ Policy $ Price or Fee vs. Cost $ Costs direct/in-direct $ Alternative Funding

12 Step 1: Build on Organizational Values, Vision, and Mission

13 Values, vision and mission What are the organization s values, vision and mission? Why do you exist? What business are you in? Who are you serving?

14 Step 2: Understand the Pyramid - Benefits Filter and Secondary Filters

15 The Pyramid Methodology Grounded in a primary benefit filter and secondary filters Helps answer the question, Where should subsidy be used?

16 The Foundational Level of the Pyramid Mostly Community Benefit (All taxpayers) Benefits the community as a whole May increase property values and public safety, address social needs, and enhance basic quality of life of all residents.

17 The Benefits Filter in Action - example MOSTLY INDIVIDUAL - elite swimming or diving team CONSIDERABLE INDIVIDUAL - swim team INDIVIDUAL/COMMUNITY - swim lessons CONSIDERABLE COMMUNITY - pool MOSTLY COMMUNITY - spray ground, non- monitored lake

18 The Benefits Filter in Action - example MOSTLY INDIVIDUAL - marina concessions CONSIDERABLE INDIVIDUAL - boat launch or reserved camp site INDIVIDUAL/COMMUNITY - monitored nature garden or interpretive park CONSIDERABLE COMMUNITY farmer s market MOSTLY COMMUNITY - non-monitored open space park or trail

19 Secondary Filters Access/Type of Service Organizational Responsibility Historical Expectations Anticipated Impacts Social Value community building

20 Step 3: Develop Categories of Service

21 Categories of Service - Examples Non-Monitored Parks and Recreational Facilities Drop-In Monitored Access (noninstructional) Camps After School Programs Preschool Tournaments/Leagues Activities- Beginner/Novice Activities -Intermediate Activities-Advanced/Competitive Merchandise for Resale Concessions/Vending Social Services Social Clubs Trips Amusement or Tourism Attraction Special Events Partnered or City-Offered Exclusive Use Non-profit and Government Exclusive Use For-profit and Private Exclusive Use Government Leased, management services

22 Step 4: Sort Categories of Service onto the Pyramid

23 Sorting Services onto the Pyramid Causes discussion Values emerge Develops consensus

24 Step 5: Determine (or confirm) Current Subsidy/Cost Recovery Levels

25 Cost Recovery and Subsidy 60% 40% = 100% 80% 20% = 100% 100% +20%

26 Cost = Subsidy + Cost Recovery Costs are all identifiable expenses associated with a particular unit of service Subsidies are tax funding and mandatory fees Cost Recovery results from all revenue sources associated with that service $ fees and charges $ grants $ sponsorships $ donations (capital campaigns) $ other, non-taxpayer sources

27 Step 6: Define Direct and Indirect Costs

28 Direct and Indirect Costs Direct Costs Direct costs are the specific, identifiable expenses (fixed and variable) associated with providing a service or program. These expenses would not exist without the program or service.

29 Direct and Indirect Costs Indirect Costs Encompasses overhead (fixed and variable) including the administrative costs of the agency These costs would exist without any specific services and might also be attributed to facility operations (in which case they are direct expenses to the facility or park operations)

30 Step 7: Establish Desired Subsidy/Cost Recovery Goals

31 Setting Subsidy Allocation/Cost Recovery Goals It may be best to think about subsidy allocation first - cost recovery will follow Overall cost recovery/subsidy goals will be determined based upon placement in the Model Don t forget the agency s values, vision and mission It is critical to consider current cost recovery/subsidy levels - baseline

32 Setting Subsidy Allocation/Cost Recovery Goals Consider alternative funding options Market tolerance Market position Goals may have to be adjusted based upon anticipated funding allocations/projections Principle question: How should tax subsidy be used?

33 Step 8: Understand and Prepare for Influential Factors and Considerations

34 Factors and Considerations Commitment Trends Politics Marketing Cost to Provide Economic Conditions Financial Goals

35 Step 9: Implementation

36 Implementation Educate all staff on your new philosophy Develop implementation strategies including alternative funding and fee adjustments Continue to foster buy-in from staff, governing bodies and citizens

37 Step 10: Evaluation

38 Evaluation Evaluate the effectiveness of your new philosophy during the next budget cycle Make adjustments as necessary

39 Summit and Public Meeting Attendees sorted the Montgomery County services using the following values, vision, mission and categories...

40 The Values of Parks & Recreation The Departments of Parks & Recreation serve Montgomery County to: Promote healthy living through varied recreation and leisure activities Protect natural, historical, and archaeological resources Attract knowledge-based businesses and promote economic competitiveness Promote sense of community and civic pride Nurture an appreciation for our natural, cultural legacy Provide lifelong learning opportunities Shape healthy, safe, green communities Collaborate with partners to provide a wide-range of sustainable, accessible leisure opportunities Engage with the County s diverse community and proactively respond to changing demographics, needs, and trends Guide acquisition, maintenance, and management of the parks and recreation environment

41 The Vision Vision 2030 will guide the M-NCPPC Department of Parks and Montgomery County Department of Recreation to: Collaboratively lead the county s efforts in stewardship of natural, historical and archaeological resources Provide opportunities for active life-long learning, leisure, and recreation

42 DOP Mission Protect and interpret our valuable natural and cultural resources; balance the demand for recreation with the need for conservation; offer a variety of enjoyable recreational activities that encourage healthy lifestyles; & provide clean, safe, & accessible places for leisure-time activities.

43 DOR Mission To provide high quality, diverse, & accessible programs, services & facilities that enhance the quality of life for all ages, cultures, & abilities.

44 Our Community Those who live in, work in, and visit Montgomery County, Maryland

45 Montgomery County Parks and Recreation Categories of Service

46 Montgomery County Categories of Service Concessions & Vending Merchandise for Resale Amusements/Rides/Mini-golf Classes, Workshops &Clinics Introductory/Beginning/Multi-level Classes, Workshops & Clinics Intermediate Classes, Workshops &Clinics Advanced Classes, Workshops & Clinics Competitive Private Lessons Rentals Private Rentals Non-profit/civic groups Rentals Inter-governmental agency Rentals Partners Rentals Long-term leases Monitored Facility Usage Non-Monitored Facility Usage Equipment Rentals Trips Organized Parties Tournaments & Leagues Specialized Events/Activities/Camps Community-wide Events Camps/After School Care Leased Services Permitted Services Volunteer Program Work Study/Internship/Community Service Program Inclusion Services Therapeutic Recreation Services Social Services

47 Karon Badalamenti, CPRP Principal GreenPlay, LLC Anne Miller, Project Manager GreenPlay, LLC