Budgeted Actual as of 5/24/X8 Remaining $
Building $6,743,000.00 $6,743,000.00 $0.00
Contingency 674,300.00 453,277.00 221,023.00
Land 600,000.00 600,000.00 0
Subtotal 8,017,300.00 7,796,277.00 221,023.00
Other Related Cost
Program development &
equipment costs 405,000.00 354,332.00 50,668.00
Furniture 400,000.00 249,679.00 150,321.00
Financing costs 202,000.00 202,000.00 0
Capitalized interest 135,000.00 135,000.00 0
Site improvements 125,000.00 147,655.00 22,655.00
Phone & IS system 30,000.00 22,438.00 7,562.00
Kitchen equipment 30,000.00 23,776.00 6,224.00
Subtotal $1,327,000.00 $1,134,880.00 $214,775.00
Legal and accounting $25,000.00 $0.00 $25,000.00
Initial marketing 250,000.00 0 250,000.00
Project consultant 80,000.00 0 80,000.00
Follow?up market survey 20,000.00 0 20,000.00
Subtotal $375,000.00 $0.00 $375,000.00
Total $10,066,300.0 $9,278,157.00 $788,143.00
It was a beautiful day in mid?May 20?8. The Friendly Medical Center Assisted Living Facility project was nearing completion. As usual, the construction project manager, Kyle Nanno, was thinking about the construction project's schedule. It seemed to him that work on finishing the interior of the building was slowing down a bit. He knew that the final weeks of a project always seemed to take forever, but he also knew that the project was running almost 2 weeks late as a result of a problem encountered during the excavation phase of the construction project.
During March and April, it appeared that they were catching up. Kyle had discussed with the construction contractor that Friendly Medical Center would pay overtime to catch up, but the speed?up was temporary, and the job continued to be late. Kyle was not quite sure why. Progress just seemed to be in slow motion. He decided to meet with Fred Splient, the President and CEO of Friendly Medical Center, to discuss the problems.
Fred suggested that Kyle call in someone to audit the project, in particular to examine the project schedule carefully. Fred also wanted the auditor to look at the project expenses to date. Fred had just received a crude spreadsheet from the CFO, and it did not reflect the progress he thought should have been made as this project was coming to an end.
Fred asked Kyle to find out if anyone in the hospital's accounting department had experience with projects and project?management software. Kyle knew instantly who to call. Caroline Stevens had once helped him on other hospital projects. Kyle trusted her to act impartially and to be able to figure out what was happening.
Caroline agreed to function as the Project Auditor. She began by examining the most recent project schedule from the construction company. She then created a progress?to?date report with MSP. She also completed an analysis of the CFO's report. The expense report she reviewed and updated is found below.
Using MSP, Caroline created a graphical progress report on the project as of May 24. She marked the actual progress of each unfinished activity by placing a diamond embedded in a circle on the project's Gantt chart. If the symbol was to the left of the May 24 line, that activity was late; the amount of lateness was indicated by the distance of the symbol to the May 24 line. The symbol for on?time activities rested on the May 24 line. If there had been early activities, their symbols would have been to the right of the May 24 line. Caroline's chart is shown above.
Caroline then scheduled a meeting with Kyle and Fred Splient. She reported that she did see a work slowdown. She conducted interviews with the construction team, and it appeared that they were concerned about their next work assignment. They told her that in the past as projects were coming to a close they were told of their next scheduled job. They had not heard anything yet, and they were worried. She also reported that the interior designer had added seven extra days to complete the interiors (Task #6 of the project) because the carpet and wall coverings might arrive a week late from the manufacturer. They actually arrived on schedule. The estimated remaining duration for the interiors to be completed was 34.6 days. The designer did tell her that the furniture had not all arrived, so they were withholding about 30 percent of the payment until it all arrived.
Caroline also reported to Fred that it appeared that the expenses that were allocated to pay back Friendly Medical Center for such things as preliminary marketing efforts, legal support, and so on had not yet been expensed to the project budget. The only thing that was expensed was the original project construction budget. That budget seemed to be right on track. Kyle reported that he intended to spend the rest of the contingency budget for overtime work by the construction crews. He also intended to use the rest of the IS budget to purchase computers for the common areas of the facility and to wire those areas for access to the Internet. In addition, he was waiting for bills from some of the companies that supplied the required medical equipment. He was planning to spend all that was allocated for that budgeted item. He was over budget on the site improvements and under budget for the kitchen equipment.
Please note MSP calculates the duration variance for each step of the action plan by subtracting the actual from the baseline. The summary task baseline and actual duration are then rolled up to the summary tasks' baseline and actual duration figures. The summary tasks' duration variance is then calculated by adding the summary task actual duration plus the remaining duration and then subtracting that sum from the baseline duration.
Caroline and Fred praised Kyle for his management of the Construction budget.
As soon as Caroline and Kyle left Fred's office, Fred called his CFO to find out why the other items were still not reflected in the project budget.
1. Estimate the final construction budget?
2. What should happen about the work slowdown?
3. Use Gantt chart with the revisions to the duration of the interiors step. When will the project be completed?
4. What is the importance of the fact that the Hospital staff expenses were not reported under the project budget
5. What is the one-page audit report of this project.
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