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The Budget The Budget




EffectiveResident Services of California Inc. is a 501c3 agency that wasincorporated in 2001 to provide voluntary on-site services tolow-income families. The families are about 4,500, residing inaffordable housing developments in the state of California. Theagency offers a wide array of services, ranging from translation,case management, employment-related, after-school programs to generalcommunity building. Owners of each housing development pay theagency, but the services are offered to the residents free of charge. Activities of this organization are not subjected to evaluation.However, surveys to ascertain satisfaction of the residents areoccasionally conducted. Although there is competition in the sector,there has not been cases of other agencies eating into theircompetitors’ existing customers.

Theagency has a one hundred million dollar budget for the coming year.Effective Resident Services of California Inc. has been receiving USD200,000 from government contracts over the years. However, owing tothe new legislation scrapping government contracts with suchagencies, they are faced with a funding gap. 20 of their budgetrevenue will not be forthcoming. The budget has to be met since theagency has to continue providing services to the residents. Theprograms need to be implemented as usual. Otherwise, customerconfidence will be eroded. Failure to provide the servicessatisfactorily will lead to poor ratings in the resident satisfactionsurveys, leading to their competitors taking over their developments.The agency may also be constrained in paying salaries to employees,leading to staff attrition that is already high among the part-timeworkers. The management team may as well down their tools if they arenot paid.

Asit is with human nature, tough situations call for critical thinkingto generate solutions. In our evaluation of the agency’s case, wecame up with recommendations on revising the budget to ensure theystill meet their mission. These recommendations included reducingamounts allocated to some costs, increasing others as well as addingrevenue lines. The specific recommended changes are outlined below.

Toboost revenues, the revenue stream of private donations should beraised from the current USD 80,000 to USD 100,000. This will be a 2%increase. We recommend that fundraisings be introduced as part ofdonations. This will bring in additional revenues to bridge thefunding deficit. The agency cannot sit in the comfort zone with thecurrent property owners they need to add at least one more propertyowner to their portfolio. Aggressive marketing and value propositioncan see this closed immediately, even surpassing the one customertarget. The new client will pay for services, increasing the revenueb around USD 35,278.

Onbudget cuts, we recommend elimination of one of the full-timeemployees and twelve part-time employees. The full-time employee tobe done away with is one of the regional supervisors. As a matter offact, the fifteen part-time employees are unnecessarily expensive tothe agency. Their high turnover worsens the situation. Reduction ofthese staffs will save the agency USD 86,000. Two regionalsupervisors and three part-time workers are enough to run theservices in the regional offices. Since one regional supervisor willhave been eliminated, one regional office should also be closed down.This will result in a reduction of costs associated with regionaloffices by USD 68,334. We also recommend the removal of theheadquarter office. Since contracted firms perform most officeoperations, there is no need to have a headquarters office. Thepermanent employees can work from home, and the part-time employeesshould work in the field. Even the regional and the statewidesupervisors spend most of the time out in the field.

Unexpectedevents can result in a budget being overstretched. However, revisionsincorporating the emerging situations can make an organization stillrun smoothly. The total additions will bring revenues to USD 855,278while total costs stand at 807,799. The agency will be well withintheir revised budget.


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Johansson,T., &amp Siverbo, S. (2014). The appropriateness of tight budgetcontrol in public sector organizations facing budget turbulence.Management Accounting Research, 25(4), 271- 283.