Highlanders

Highlanders is the nationally recognized drum and bagpipers group whihc performs in parades and official ceremonies from weddings to inaugurations to funerals. Group consist of 18 bagpipers and 10 drummers plus the director and is headquartered in Lochlomond, Virginia. To be the member of this prestigious group, candidates should pass a talent recital and be able to contribute financially to general operation of the organization. There never seems to be the shortage of candidates interested in applying for membership in the Highlanders. The members should also have the outgoing personality since they are ambassadors for their organization and serve as representatives for their city and state.

In recognition of their national prominence, Highlanders have been part of governor’s inauguration for the past 40 years. They also frequently appear in Scottish festivals all through the mid Atlantic region. Many of the members have Scottish ties in their genealogy, but that is not a need for membership.

While Highlanders receive financial compensation from members, there is still the considerable amount of funds, that should be secured from other sources. The members should also pay for their own instruments, which they own, but that should comply with standards of the organization. Many of the members have at least two bagpipes or drums just in case one may break during the performance. Members also have to buy their own uniforms, that include custom kilts, shoes, socks, jackets and hats. It is also wise to include the second uniform especially if they have to do in inclement weather.

The organization has the bus and two equipment vans. They also have the rental office with a staff of two to take care of booking events, maintaining equipment, seeking financial support, maintaining a web site, and overseeing other operating activities. Vehicles are also located at this site and additional uniforms and musical equipment are stored at the office. The Highlanders often practice in the office parking lot on weekends when they are not booked for a performance.

Jake Priode has been the member of the Highlanders for 6 years as a bagpiper. He has played his instrument for over 15 years, and it took him three years of auditions before there was the vacancy and he joined the organization. Typically Jake pays $250 per year in uniform costs.  Every year he buys new uniform that last about 3 years, so Jake has 3 complete uniforms in supply at all times along with some additional items especially hats and socks for special occasions.

Jake also spends between $800 and $1,000 every year for instrument and music costs. He has 2 bagpipes and the few replacement parts.  He also has to buy music which the group would use in performances. As Highlanders perform a lot of traveling for events, many of which are not fully funded, Jake requires to pay some food and lodging costs. Last year he paid a total of $1,700 for these costs. At last,  Highlanders try to raise sufficient supplementary funds to support overhead cost of operations of organizations, but members are expected to contribute some funds if there is a budget shortfall. Last year, Jake paid $525 to the Highlanders that went to staff salaries and vehicle maintenance costs.

In spite of the costs and time commitment, Jake is totally devoted to Highlanders as are most of the members. Where else could he have the opportunity to perform with instrument he loves to play, perform at prestigious ceremonies, and have opportunity to represent his homeland of Scotland. He also enjoys chance to share with interested bystanders some of the heritage of the Highlanders and bagpipe music.

City is also very proud of the Highlanders. The city council has frequently recognized organization and credibility they bring to city and area.  Highlanders also give free publicity for city as the city name is on base drum and banner carried in parades. When Highlanders perform in the mid-Atlantic region, they have chance to advertise the Lochlomond Scottish Highland Games and Festival, that are a major tourist attraction for the city each August. The Highlanders also sponsor a drum and bagpipers marching band competition at the festival, that brings in some of best groups in the eastern United States.

Next year, Highlanders have been invited to perform in Presidential Inaugural Parade in Washington DC and also participate in the swearing in ceremony plus they have been asked to represent State of Virginia and the nation of Scotland in the Rose Parade in California. These performances are in addition to an already busy schedule, that includes at least 20 parades, and performance at 8 festivals along with numerous weddings, personal events and funerals.

Director of the Highlanders, Harry O’Leary, realizes that there can be a important financial obligation to Highlanders for coming year. They will like to get special uniforms for Presidential Inauguration and Rose Bowl parade plus travel cost to Los Angles and lodging in the area can be very expensive. Cost of going to Washington DC would not be that extensive, but, lodging cost can be expensive and scarce with all of the activities going on at the time. Budgeting and control of funds was never the talent of Harry’s, so he asked Jack, who recently received his MBA, for some assistance.

While Jake and other members were excited about opportunities for next year, they were a little concerned about extra costs, especially going to Rose Parade, which can add up to over $1,000 per member. Jake suggested that Highlanders must try to find some supplemental sources of funds to aid in the anticipated costs of these and other events. Though, the Highlanders will have to develop the good budget and financial statements to present to sponsoring organizations before requesting funding support.

Harry asked Jake if he can develop financial statements for Highlanders and the budget for the next year. Jake stated that he will require financial records for this last year and requested that staff help him in determining costs for attending the various events. Jake and Harry both felt that member support for travel and operation costs must not exceed $1,500 per member next year.

Leslye Jones, the office manager, worked with Jake in obtaining critical financial information. Organization has the 10 year old bus with 100,000 miles on it.  The bus originally cost $62,000 and has been paid in full. Jake thinks bus is half way through its useful life. One of the vans was purchased 4 years ago for $20,000 and is paid in full. It has 75,000 miles on it and must have 6 more years of useful life. The second van was purchased last year for $30,000. The van has a useful life of 10 years and has a present loan balance of $25,000. The 12% loan has 55 months remaining with a payment of $593 per month. Maintenance on these vehicles was $2,200 last year, and which is expected to increase to $2,500 for next year.

Highlanders spends $4,300 per year on music and music related supplies. Rent on the office space is $1,600 per month and which is expected to remain unmodified. Utilities total $200 per month. Leslye anticipates that office supplies presently at $100 per month would increase to $150 per month. Telephone cost would be $75 per month, that includes long distance service. The web site has the annual charge of $300 and Leslye says she annually pays the high school student $500 to update web page and add customizing features.

Highlanders also have $3,500 of musical equipment $1,800 of music supplies, and $4,200 of office equipment. These items are all paid in full.  Next year, organization anticipates purchasing $2,000 of extra music equipment. They also plan to purchase the second computer for $4,500 and some new computer software for $650. There is a cash balance in checking account of $1,000 and a certificate of deposit of $2,500.

Salary for Leslye is $25,000 plus $10,000 in employee benefits. Organization will like to give her a $1,000 raise next year. Second employee is a part time maintenance person who also drives bus to most functions. This employee is paid on the hourly basis of $14.60 per hour plus there is an extra 20% allowance for employee benefits. Last year this employee worked 1,400 hours. Next year, that is anticipated to increase to 1,600 hours. The pay rate would increase to $15.00 per hour.

Travel costs absorbed by Highlanders was $5,000 over and above that paid for by members last year. That cost is expected to increase to $8,000 next year with Rose Parade event. Other event relates costs to the organization equaled $3,500 last year and this must increase to $5,000 for the coming year. Leslye also thought it will be good to include $2,800 for miscellaneous expenses.

The Highlanders is considered as a nonprofit organization, so they do not have to pay taxes on any income. Individuals and other organizations can make charitable contributions to the Highlanders for tax deduction purposes.  When the group performs at ceremonies and other functions, they often receive an honorarium. Last year the honorariums totaled $13,000. Next year, it is hoped that that total will increase to $16,500.

Jake does not believe that honorariums and member contributions would be sufficient to balance budget, especially if group goes to the Rose Parade and incurs those extra costs. Last year city of Lochlomond gave Highlanders $37,500 for operational support, and other organizations contributed a total of $8,650.  There is going to have to be a much greater effort at fund raising or possible getting a grant or more city support if the Highlanders are able to meet budget.

Required:

1. What is the typical range in annual costs contributed by Jake into this hobby of performing with Highlanders?

2. find out a balance sheet for Highlanders as of today.  (Suppose December 31, 20x0 for today's date.)

3. Compute a budgeted income statement for the Highlanders for the year 20x1.

4. What is the projected total amount of excess funds or shortage for budget year 20x1?

5. Suggest ways Highlanders could earn additional income for 20x1.