ResCoalition Updates - Regional Center Funded Programs

Summary of ResCoalition Report - June 2012

This week is a big week for residential care providers so it seems fitting to send out an update.  First, the governor is passing a budget giving back 3 of the 4.25% in cuts.  This is effective July 1, so congrats on the little July 4^thbonus.  Our strong advocacy both in Sacramento and at the DDS stakeholder meetings made them understand the severity of the fiscal crisis of what’s going on.  Not only did we avoid any further cuts – keep in mind $200 million in additional cuts were made to the DD system budget – but the 3% is coming back. 

The US Supreme Court just upheld the Federal Patient Protection and Affordable Care Act.  This means that it is going to become a significant issue for a lot of residential care providers and we need to begin pushing it in Sacramento.  The law states that small businesses do NOT have to provide insurance for their employees.  Small business is defined as less than 50 employees.  The kicker however is that it DOES require employees to buy health insurance or pay a tax.  So if you're self-employed or an employee you will be required to buy health insurance or pay a tax for failing to purchase it. 

Regarding the new Audit requirement:  SB1259, the audit bill, is dead for the year.  Initially, Senator Liu's staff recommended changing the bill to only allow vendors under 1 million dollars a one year waiver from the audit requirement IF they had an unqualified the previous year.  We thought there was agreement on an amendment until another group proposed an alternative that was even more flexible than ours - Senator Liu's office decided to stay with the original amendment. 

We're initiating dialogue with Senator Liu's office to consider a new bill next year that would provide relief. We're expecting late in the year that there will be some challenges to the Audits because, while there is a requirement that they be done, there is no compliance requirement.  This means you can get the audit done when you choose, not when the RC's are requesting it be done.  If/when any action is taken, we expect to challenge said action under the law.  We have some RC's saying they will not be "enforcing" any timeline, some saying within 6 months of the end of the fiscal year, and some following ARCA's recommendation which is 12 months after the end of the fiscal year.  

As some of you know, we’re encouraging members to consider whether they are going to do the Audit. We encourage members, if you're not going to do the audit, to merely say your in process.  By saying you're in process,  you are technically meeting the letter of the law, thus cannot be punished.  I understand it is controversial so below is from CDSA (California Disabilities Services Association) so you can see what other member groups (CDSA is primarily day programs, ILS/SLS) are advising as well.

With SB 1259's demise, existing law remains in force. That means that all agencies are required to secure CPA fiscal audits or financial reports beginning with the fiscal year in which your agency was operating in March of 2011.

But existing law has no deadline for those audits to be completed or turned in.

This lack of specificity means that there is no urgency for agencies to have the audits prepared and it gives us additional time to work with the department and others to try to unravel this problem and come up with a workable alternative.

There is still work to do:

• New and appropriate legislation to address the Audit issue
• Wage Order 5 issues
• Funding to cover medical insurance
• Return of the 1.25%
• Action to recommend should the Governor's tax increase not pass

CCLD Reorganization

The reorganization of the Adult and Senior Care divisions has been delayed until at least July 1, 2012.  CCLD remains committed to the reorganization by geography (not by program type) and continues training staff.  Watch this space for further developments. 

ResCoalition Notes

ResCoalition has been busy. . . 

We now have one bill moving forward in the legislature - AB1554 - this is to require regional centers to make all vendor rates public and any money given to housing cooperatives.  We defended it last week at hearing and it passed without opposition.  In addition we have a spot bill with Senator Emerson that we've finalized and the language is not getting "written" for the bill. This bill will be the new Audit bill.  Contrary to what we said LAST MONTH, Emerson has changed his mind and the bill will now state that no one under $2 million dollars in revenue will have to get an audit.  Feel free to let us know your thoughts on this change.  

Budget update . . . 

DDS has finished it's 6 stakeholder meetings.  This week they're in budget hearings with the legislature - yesterday and Wed and yes, ResCoalition is there.  It was expected that they'd tell the legislature the outcome of the dialogue of the stakeholder meetings.  This didn't happen yesterday.  DDS basically just stated the governor's proposal and that they were working on, as yet named, options.  So we still have no clue what DDS is considering regarding the return of the 4.25% cuts.  

SB 74 - News for Regional Center programs

From a position paper by ResCoalition: 

CONCERN

The Department of Developmental Services testified this new audit process was in response to the BSA audit, yet, the BSA audit was of Regional Centers, not vendors and there was no recommendation that vendors get audited. Yet, SB 74 is targeted at the providers/vendors. The way SB 74 was written requires that small entities providing direct service through multiple Regional Center contracts be required to obtain audits at their own expense, a daunting budgetary concern in this economy, especially as the majority of providers have received a 4.25% rate cut passed in the past couple of budget years. Under SB 74 requirements, entities providing residential services to as few as five individuals will fall under this requirement despite the fact that they hold five separate contracts for approximately $60,000/year, one contract per individual they serve. This has created an unfunded mandate with a cost range of six to twelve thousand dollars per year.

ResCoalition is concerned that this sweeping legislation negates the purpose of accountability and transparency both recommended by the BSA and directed by the Governor. Firstly, it is unlikely that the Regional Centers will have the ability to review audits from all the providers/vendors which will prove this requirement to be inadequate and an unnecessary financial burden. In this time of budget crisis it is important for funds to be focused on direct service to the population, this audit requirement as written, will only take money away from this effort.


Fiscal audits won’t address service issues related to improving quality of services to individuals with developmental disabilities. A fiscal audit only ensures there are adequate fiscal process to track dollars, it does not address if those dollars were spent on the correct services.

This audit requirement does, however, make sense for larger contracts/purchase of services as outlined in the BSA audit recommendations. Therefore, specifying the contract/purchase of service amounts of over $250,000 and $500,000 will be required to obtain an independent audit which will be submitted to and reviewed by the Regional Center allows for manageable loads for the Regional Center in addition to narrowing the most likely concerns for financial mismanagement of public funds as outlined in the BSA audit recommendations. This also meets the mandate for accountability and transparency of public funds which is the concern within this system.

INTENT
ResCoalition believes that the true intent of the BSA audit findings/recommendations and the Governor’s directive was to address the issues pertaining to RC contracts/purchase of service that exceed certain financial thresholds. Unfortunately, this bill currently dilutes the ability for the system to locate large pockets of misused or misappropriated public funds while creating an expensive unfunded mandate for the community.

RECOMMENDATIONS

ResCoalition recommends adding the clarification that these audits will be necessary for individual contracts or purchase of service that meet the fiscal threshold outlined in the legislation:

(A) When the contract/purchase of service amount received from the regional center or regional centers during the entity’s fiscal year is more than or equal to two hundred fifty thousand dollars ($250,000) but less than five hundred thousand dollars ($500,000), the entity shall obtain an independent audit or independent review report of its financial statements for the period. Consistent with Subchapter 21 (commencing with Section 58800) of Title 17 of the California Code of Regulations, this subdivision shall also apply to work activity program providers receiving less than two hundred fifty thousand dollars ($250,000).

(B) When the contract/purchase of service amount received from the regional center or regional centers during the entity’s fiscal year is equal to or more than five hundred thousand dollars ($500,000), the entity shall obtain an independent audit of its financial statements for the period.

QUESTIONS TO CONSIDER
As we consider the implications of this change, there are some issues that might arise. One concern that was presented was the manpower it would take to identify those contract/POS agreements over the identified thresholds. With the transition to electronic data systems including billing, it is anticipated this will actually be minimal. A second concern and legitimate question is to whether this provides adequate oversight. When one reviews the BSA audit, the problem contracts identified, would all still qualify under this modification.