Finance Committee Meeting
March 10, 2014
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MORAVIAN MANOR
Finance Committee
March 10, 2014
Attendance:
Present: Rex Knowlton, Dan Garrett, Bob Hess, Dean Easton, Dick Minnich, Tim
Roland, Cindy Meier, and David Swartley.
Excused: Ken Stoudt
Rex Knowlton called the meeting to order at 1:30 p.m. Dean Easton opened with prayer.
Approval of Minutes
The minutes from the January 27, 2014, Finance Committee Meeting were approved.
Review of 2012 Management Letter and Audited Financials
Debra Bowes and Matthew Musser, ParenteBeard, presented a review of the 2013 Audit
Report and Management Letters. Ms. Bowes transitioned into our account as a result of
the Insurance Department required partner rotation every five years. The audit was
completed during February 2014. There were no significant difficulties dealing with
management relating to the performance of the audit. The report is an unmodified,
“clean,” opinion. The financial statements present fairly, in all material respects, the
financial position of Moravian Manors, Inc., as of December 31, 2013 and 2012, and the
results of its operations, changes in net assets, and cash flows for the years then ended,
in accordance with accounting principles generally accepted in the United States of
America.
See attached PowerPoint presentation. The following were noted:
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December 31, 2009-2013 Balance Sheet: Five years of comparative information
is provided. On the Asset side, Current Assets, “current portion of promises to
give” shows a decrease, as our current campaigns are winding down.
“Investment” gains increased.
On the Liabilities side, Current Liabilities, our $4 million loan was paid off,
decreasing long-term debt. “Accounts payable” decreased, as there are no
current construction projects. Regarding Total Liabilities, “long-term debt” is the
major component. “Deferred Revenue – Nonrefundable Entrance Fees” are the
nonrefundable entrance fees; while “Deferred Revenue - Refundable Entrance
Fees” are those that are refundable.
Finance Committee Meeting
March 10, 2014
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The following compare our facility to the financial position of organizations
that have been through CARF-CCAC’s accreditation process and Fitch
Investment Grade which includes single-site and multi-site combined.
o Days Cash on Hand 2009 through 2013: This is a measure of the number
of days cash operating expenses a provider could cover with its
unrestricted cash and investments. The goal is to push toward the
CARF/CCAC level, and we are. One-hundred days is required.
o Average Age of Facility 2009 through 2013: This is a measure of the
organization’s commitment to maintaining our physical plant, including
renewal through renovations and/or replacements. Steady increasing
values are looked at as a negative trend, as it is indicative of required
upcoming significant expenditures. The analysis shows we are doing a
good job maintaining the facility.
Statement of Operations for the Years Ended December 31, 2009-2013: “Total
Unrestricted Revenues” and “Total Expenses both show an increase. Regarding
unrestricted revenues, in 2013, our “Net Resident Service Revenues” were
affected by the restrictions on admissions in the beginning of the year, as well as
decreased census in skilled nursing. Increases in expenses for “Resident Care”
were due to payroll.
Net Resident Service Revenues by Level of Care: 2013 versus 2012 are
comparable. Obviously, the majority of revenue stems from Nursing, despite
reduced census levels.
Nursing Revenues by Payor: 2013 versus 2012are comparable.
Nursing Facility – Resident Days: There was a decrease of total days, from
43,709 in 2012 to 42,446 total days in 2013.
Expenses by Type: 2013 versus 2012are comparable.
Operating Ratio 2009 through 2013: This is a measure of whether current year
cash operating revenues are sufficient to cover current year cash operating
expenses. A lower percentage is better. Operating ratios of mature CCRCs are
generally expected to drop below 100%. The analysis shows we are generating
cash from operations.
Debt Service Coverage Ratio: This measure reflects our ability to fund annual
debt service with cash flow from net cash revenues and net entrance fees. Over
time, most financial analysts look for a debt service coverage ratio to grow
between 1.5 and 2.0. Our ratio is 1.66.
Debt Service Coverage Ratio – Revenue Basis – 2009 through 2013: This is a
measure of the ability to meet debt obligations through revenues alone. Entrance
fee revenue is excluded for the analysis. A low ratio would indicate we are relying
too heavily on entrance fees to meet ongoing annual operating expenses. A value
of at least 0.75 is considered desirable by the credit community. Our ratio was
1.08 and shows we can cover our debt with operations, not relying on entrance
fees.
Statements of Changes in Net Assets for the Years Ended December 31, 2009 2013: There is an increase in unrestricted net assets, temporarily restricted net
assets, and permanently restricted assets.
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March 10, 2014
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Summary Cash flow Information Years ended December 31, 2009 – 2013,
differences between 2012 and 2013 are due to deposits for Hendricks Place
Townhomes.
Analysis of Change in Operating Income: 2013 versus 2012 shows an increase in
net revenue, as well as net expenses.
Benchmarking Data: Comparison to Other CCRCs: This chart shares comparative data
for Moravian Manor and nine other local type c CCRCs, relative to the aforementioned
ratios, on occupancy, payer mix, nursing rates, Medical Assistance case mix index, taxes
and benefits as a percentage of salaries and wages, health insurance expense as a
percentage of taxes and benefits, and pension expense as a percentage of salaries and
wages.
The presentation concluded with Industry Issues/Update.
Motion: A motion was made to receive the report and file for audit. Motion carried.
Review of January 2014 Financials
Revenue Summary: Current census in Skilled Nursing is 95%. February 2014 ended
with census at 97%; budget is 93%. Census in Personal Care is 89%; budget is 93%.
Census in The Children’s Corner is also under budget. However, we will be at full
capacity with infants be end of March.
Total operating revenue budget for the month was $1,670,418; total operating revenue
actual was $1,755,003.
Expense Summary: Regarding Operating Expenses, “Administration – Other” is over
budget, as we just paid the $15,000 invoice for the audit. This will adjust through the
year. Increases in census result in increases in payroll and agency costs. Expect to see
these expenses rise in February. Snow removal costs escalated to $75,000; budget is
$35,000. Ron Diefenthaler is reviewing all invoices for accurate charges. “Maintenance
– Other” is over budget due to turnover costs.
Total operating expenses budget for the month was $1,641,793; total operating expenses
actual were $1,703,996.
Consolidated Balance Sheet: Regarding current liabilities, long-term liabilities, “Notes
Payable-Wholsen” shows the loan has been paid off.
Line of Credit Update - Warwick Woodlands Appraisal: A three year line of credit for
preconstruction purposes was presented to the committee for consideration. The
process for the line of credit included an appraisal of the Warwick Woodlands property.
The appraisal came in significantly lower than anticipated. The primary reason is that
while we have verbal approvals of capacities (water/sewer), until a Preliminary Plan is
Finance Committee Meeting
March 10, 2014
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approved the property must be appraised as raw land. This has no short term affect;
eventually we will need to update the appraisal once the approvals have been granted.
Motion: A motion was made to recommend the line of credit proposal be presented for
acceptance by the Executive Committee. Motion carried.
Adjournment:
There being no further business, the meeting was adjourned.
Respectfully Submitted,
Jennifer Shutt
Director of Administrative Services