• What should they do about the work slowdown? And why?
• What is the importance of the fact that the Hospital staff expenses were not reported under the project budget?
• What is missing from the budget?

A S E St. Dismas Assisted Living Facility Case6 It was a beautiful day in mid-May 2001. The St. Dismas hospital Assisted Living Facility project was nearing com- pletion. 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 for- ever, 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 St. Dismas would pay overtime to catch up, but the speed-up was temporary, and the job contin- ued 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 St. Dismas, to discuss the problems. Fred suggested that Kyle call in someone to audit the project, in particular to examine the project sched- ule 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. ALF Program Expenses as of 5/24/01 Actual as of 5/24/01 Budgeted Remaining $ $6,743,000.00 674,300.00 600,000.00 405,000.00 $6,743,000.00 453,277.00 600,000.00 354,332.00 $0.00 221,023.00 0.00 50,668.00 Construction Costs: Building Contingency Land Program development & equipment costs Furniture A&E fees Financing costs Capitalized interest Site improvements Phone & IS system Kitchen equipment Subtotal 400,000.00 249,679.00 150,321.00 202,000.00 135,000.00 125,000.00 30,000.00 30,000.00 $9,691,300.00 202,000.00 135,000.00 147,655.00 22,438.00 23,776.00 $9,278,157.00 0.00 0.00 -22,655.00 7,562.00 6,224.00 $413,143.00 Organizational Costs: Legal and accounting Initial marketing Project consultant Follow-up market survey Subtotal $25,000.00 250,000.00 80,000.00 20,000.00 $375,000.0 $0.00 0.00 0.00 0.00 $0.00 $25,000.00 250,000.00 80,000.00 20,000.00 $375,000.00 Total $10,066,300.00 $9,278,157.00 $788,143.00 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 sched- ule from the construction company. She then created a progress-to-date report with MSP. She also did a com- plete 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 indi- cated 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 sym- bols 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 slow- down. 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 any- thing 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 sched- ule. 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 St. Dismas for such things as preliminary marketing efforts, legal support, etc. had not yet been expensed to the project budget. The only thing that was expensed was the origi- nal 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 Assisted Living Facility Construction Project Update as of 5/24/01 2001 ID Task Name Baseline Duration Remaining Duration Daration Variance Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug 1 Construction & furnishing 369 days 307.47 days 76,63 days 14 days 5/24 2 Facility construction 329 days 314.49 days 28.61 days 14 days 3 Phase 1 - Foundation & excavation 95 days 110 days days 0 15 days 100% 4 4 Phase 2 - Structure 113 days 99 days days - 14 days IN 100% 5 Phase 3 - Enclosure 134 days 120 days days -14 days 100% 6 Phase 4 - Interiors 234 days 187.2 days 46.8 days Odays 80% 7 First 45 (light assisted) units turned over Odays O days O days days 0% 8 First 45 units ready for residents 8 days Owks 8 wks Owks 0% 9 Remaining 57 units (light & heavy) tumed over & Odays O days O O days days 0% 10 Construction complete O days O days days O days 0% 11 Building ready for residents 8 days Owks 8 wks Owks Task Milestone Current date shown as: % Complete is % of baseline time divided by time used to date Baseline summary Progress Baseline milestone Baseline Summary Project Manager: K. Nanno *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. 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. 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