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HomeMy WebLinkAboutAssumptions - Nonprofit for Cost Benefit Analysis.pdfNON-PROFIT COST-BENEFIT ANALYSIS ASSUMPTIONS August 23, 2012; Revised October 17, 2012 1 This analysis is a comparison of the program budgets for staying within the existing county structure and for operating as a non-profit entity for Mental Health (MH), Intellectual Disabilities (ID), and Early Intervention (EI) programs. It is intended to show the costs and benefits of changing the structure to a separate non-profit entity. The assumptions behind the figures are defined below. FINANCIAL 1. The state budget 2012-2013 carries revenue cuts and a proposed block grant program. We assumed revenue pass-thru consistent with adopted state budget and that each program will receive their share as allocated. See additional revenue assumptions below. 2. Assumed July 1, 2012 through June 30, 2013 as first year of activity. This analysis is completed for 1 year only. COMPLIANCE 1. Reduction in Civil Service requirements – This has minimal, if any impact on the cost benefit analysis, and has not been considered in the calculations. 2. Reduction in other compliance requirements. Impact is in elimination of county code purchasing and other requirements, allowing flexibility with meeting case management supervision requirements as well as assigning duties across individuals within the compliance unit. PERSONNEL 1. Table of Organization (See EXHIBIT A) a. Administrative Positions i. Add Fiscal Director – This position will replace the management consultant currently paid through the programs. The position will be responsible for general fiscal administration including financial reporting, cost settlement, fixed asset record keeping, and quarterly and annual program financial reports. ii. Eliminate one Fiscal Officer II – The current operation employs two Fiscal Officers II and one Fiscal Officer I, as well as a management consultant who performs various fiscal related tasks. It is assumed that duties related to general ledger accounting will be assumed by the Fiscal Director and that the new entity will operate with a Fiscal Director and the equivalent of one Fiscal Officer II and one Fiscal Officer I. iii. NOTE: The County has received a proposal from a management consultant to contract all current program direct fiscal operations, pulling them outside the non-profit entity, eliminating an additional three positions (Fiscal Director, Fiscal Officer II, and Fiscal Officer I). For a fee of $300,000 the contractor would assume all fiscal responsibilities and oversight with the exception of accounts payable. The total estimated A/P cost is $18,728. This proposal is more costly than using county support and hiring a fiscal director, and therefore has not been incorporated into this analysis. NON-PROFIT COST-BENEFIT ANALYSIS ASSUMPTIONS August 23, 2012; Revised October 17, 2012 2 iv. Eliminate vacant Secretary II – The position is currently vacant and it is assumed that it will not be filled. b. Casework Positions (MH/ID) i. Keep Casework Manager ii. Maintain current casework structure. c. Early Intervention i. Eliminate Casework Supervisor II in Early Intervention. ii. Maintain current Program Support, with the exception of combining a Case management Supervisor and Program Specialist into an “Early Intervention Coordinator”. d. Compliance Unit – MH/ID i. Currently known as Program Specialists or Supports Coordinators. ii. Maintain eight remaining, making one a Director. No pay adjustment is assumed for new director position. 2. Wages and Benefits a. Assumed 2012 rates remain in place through December and a 3% pay increase is effective January 1, 2013. b. Benefits i. FICA: the federal rate is 7.65%, but based on taxable vs. non-taxable benefits, we typically pay less. A rate of 7.5% was used for this purpose. ii. Medical benefits: calculated based on preliminary rates provided by our health benefits consultant and includes vision and dental coverage. The monthly estimated cost was annualized and a flat percentage was assigned to each position. iii. Unemployment compensation rate: although it will expect to be paid through the state instead of through self-insurance, the rate is assumed to be the same as Franklin County. The rate works out to approximately $135/person and is paid on the first $8,000 of wages iv. Workers’ compensation: used code 953, which applies to the largest number of staff (caseworkers) and is the most conservative. v. Life insurance: used a rate provided by our benefits consultant, annualized it and calculated it as a percentage of wages. vi. Retirement: assumed new entity will either match or pay a flat percentage of each person’s salary into a defined contribution plan. A rate of 5% of wages was used. The impact on Franklin County’s retirement ARC will depend on how many individuals leave their retirement money in the county’s plan, how many may choose to retire, vesting etc. The impact to Franklin County is not determined for this purpose. vii. Post-Employment Health Benefits: Franklin County’s annual required contribution (ARC) is distributed to each program by participating member. Since the benefit will not be part of the benefits offered by the new entity, the NON-PROFIT COST-BENEFIT ANALYSIS ASSUMPTIONS August 23, 2012; Revised October 17, 2012 3 ARC will remain a cost to Franklin County for any plan member who remains in the plan. c. Management Consultant: the existing program structure pays a management consultant to provide fiscal and administrative assistance. The amount paid for calendar 2011 was $91,530. The new entity has proposed a Fiscal Director position which will assume these duties as well as additional ones. The Fiscal Director position was added to the table of organization and is included in wages and benefits. As noted in 1.a.iii. above, the management consultant has presented a proposal to assume program related fiscal operations. ALLOCATED AND SHARED COSTS 1. Central Service Allocated Costs (CSCAP): includes the following components a. Equipment depreciation - Security and telephone systems are shared across multiple county operations and depreciation is part of the CSCAP. It is assumed that the operation will remain in its current location(s) and will therefore continue to be covered by this equipment. No change is expected with transitioning to a new entity. b. Property and Liability Insurances - These expenses will continue though they will be incurred directly rather than being passed through Franklin County through CSCAP. Assumed the rates will be the same, but included the costs under General Operating. c. Retirement Administration - The charges through CSCAP are based on total retirement administration costs and are charged based on the number of plan members. The rate used in this analysis of $3,090 is based on a quote from a service provider for the cost of 401k administrative services for the first year of operation. Fees are included with General Operating Costs. d. Commissioners’ Office - This indirect charge will no longer be applicable as oversight of the entity will be the responsibility of its board of directors. e. County Solicitor - The charges that are passed through the CSCAP are the result of an evaluation of how the county solicitors spend their time. While the new entity will not fall under the county, it is assumed that they will incur legal fees through an outside professional. The amount was assumed to be approximately the same, but included the costs under General Operating. f. County Controller and County Treasurer - These services are part of overall county operations. It is assumed that functions such as issuing vendor and payroll checks and making bank deposits will be taken over by the new entity, either directly or through contracting their accounts payable and payroll processes. g. General Administrative Costs - These services include the county’s mail courier system and assuming that the new entity will remain in its current location through June 2013, this minor cost could continue. NON-PROFIT COST-BENEFIT ANALYSIS ASSUMPTIONS August 23, 2012; Revised October 17, 2012 4 h. Central Telephone - It is assumed that the new entity will remain in its current locations and will continue to be part of Franklin County’s phone system. As such, these costs will remain the same. 2. Shared/allocated costs a. Fiscal Direct – Charges for direct Fiscal support relate to supervision from the Human Services Fiscal Manager and are based on the calendar 2012 budget. It is assumed that these expenses will remain in place for the first year of operations for the new entity. b. Fiscal Accounts Payable – It is assumed that Franklin County’s Accounts Payable function will continue to process invoices for the new entity and also print accounts payable checks and prepare annual Forms 1099. The 2012 budgeted amount for accounts payable processing was increased by 10% to cover the estimated additional services. c. Purchasing – It is assumed that the new entity will assume its own purchasing procedures rather than going through Franklin County’s Purchasing Department. d. Fiscal General – General Fiscal Support will be eliminated through use of the entity’s own Fiscal Director and through continued support from the county’s Human Services Fiscal Manager. e. Human Resources and Risk Management – It is assumed that the new entity will contract with Franklin County for its Human Resources and Risk Management functions, including personnel recruiting and management, payroll processing and benefits and risk and workers’ comp management. An additional 10% has been added to the 2012 budget to cover expenses of processing payroll through issuance of paychecks, submission of withholding and preparation of payroll tax forms and annual W-2s. f. Human Services Administration and Fulton County Oversight – The Human Services Administrators of both counties will continue to have some involvement in oversight and participation with the non-profit’s board of directors. Franklin’s share is estimated at 20% of the programs’ 2012-2013 preliminary budgets and Fulton’s is estimated at the full amount of the 2012-2013 budgets. g. Information Services (General and Direct) – These costs include software licenses, hardware and software systems, general support, and direct technical assistance. It is assumed that the new entity will continue operating on Franklin County’s networks and utilizing existing software systems as well as technical support. OTHER COSTS 1. Occupancy expense – It is assumed that the programs will remain in their existing locations in the Human Services Building and the Administration Annex during the period of this analysis. This cost is a net lease and includes utilities, maintenance and building security. 2. General operating costs – These costs include postage, employee travel, supplies, training, minor equipment, audit fees, copier leases, consultants, and general program expenses. This proposal shows them at the same level as the 2012-2013 preliminary budgets of each program, NON-PROFIT COST-BENEFIT ANALYSIS ASSUMPTIONS August 23, 2012; Revised October 17, 2012 5 except that legal fees, retirement administration and property and liability insurance have been moved from the Central Service Allocation. 3. Capital purchases – Capital includes computers and related equipment and is assumed to be at the same level as the programs’ preliminary 2012-2013 budgets. PURCHASED SERVICES Purchased services include payments to outside service providers for services to clients eligible under the Mental Health, Intellectual Disabilities and Early Intervention programs. These costs are based on budgeted services using estimated allocations for 2012-2013. REVENUE 1. Interest income – Interest income is based on each program’s preliminary 2012-2013 budget. 2. Federal – Federal revenue is based on the programs’ preliminary 2012-2013 budgets. 3. State – State revenue is based on the newly passed budget, including implementation of a Human Service Block Grant, and reductions of 7.6% and 9.2% in numerous funding categories for Mental Health and Intellectual Disabilities, respectively. 4. Charges for Services – Assumed to increase for Mental Health as certain services will now be reimbursed through managed care. 5. Other Miscellaneous Revenue – Other revenue includes miscellaneous grants and other sources. 6. County Share – County share represents the required match that is contributed by Franklin and Fulton Counties as well as any overmatch. NOTE: Additional cost-benefit analyses were completed in mid-October assuming 20% and 50% reductions in state revenues. The following assumptions relate specifically to those analyses and should be considered in conjunction with the assumptions listed above. REVENUE REDUCTION OF 20% 1. Total revenues for MH and ID would decrease by $1,311,100. No reductions were assumed for county share for either Franklin or Fulton Counties. 2. Adjustments to the programs’ operations would be subject to review and discussion with the Board of Commissioners if the programs were operating under the county structure or with the Board of Directors if the programs operated under a non-profit. 3. For these purposes, program administration has proposed reductions in personnel of one fiscal position (already reduced in the non-profit) and two program specialist positions. 4. Further reductions were made in payments to outside providers of services. NON-PROFIT COST-BENEFIT ANALYSIS ASSUMPTIONS August 23, 2012; Revised October 17, 2012 6 REVENUE REDUCTION OF 50% 1. Total revenues for MH and ID would decrease by $3,074,100. No reductions were assumed for county share for either Franklin or Fulton Counties. 2. If the programs continue to operate under the county structure, any changes in operations, reductions in personnel, operating costs, payments to providers, etc. would be subject to decision by the Board of Commissioners. If the programs move to a non-profit structure, changes would be subject to decision by the Board of Directors of the non-profit. 3. For these purposes, program administration has proposed reductions in personnel of two fiscal staff (one of which was reduced already in the non-profit), one secretary (already reduced for the non- profit) and three program specialists. 4. Further reductions are seen in facility rent and payments to outside providers of services.