Response to DBHDS 90-Day Reserves Requirement
SOAR365 is a larger provider of human services and employment opportunities for individuals with disabilities, primarily serving the Greater Richmond market. We were founded in 1954 and have provided services on an uninterrupted basis for the past 65 years. We are a financially stable and strong organization, but we are still very concerned by the Guidance Document proposed by DBHDS Office of Licensing as a Requirement for 90 days of Operating Expenses. We are specifically concerned about the statement ending the first paragraph:
"Therefore, both applicants for licensure and licensed providers must be able to provide proof, at any time when requested by a representative from the department, that they have sufficient funds for 90 days of operating expenses, whether in cash or a line of credit."
First, we agree with the Virginia Network of Private Providers comment that this statement does not reflect the language of the regulation for which this document purports to provide guidance:
"12VAC35-105-210 states "The provider shall document financial arrangements or a line of credit that are adequate to ensure maintenance of ongoing operations for at least 90 days on an ongoing basis. This amount shall be based on a working budget showing projected revenue and expenses."
Nor does this guidance reflect the spirit of the regulation. The regulation is intended to ensure that providers have the ability to meet their financial obligations. SOAR365's ability to meet our financial obligations is based upon a combination of our cash on hand (including available lines of credit), any accounts receivable on hand, and the future revenues generated in conjunction with the delivery of future services (which drive costs in the upcoming 90-day period). Your proposed guidance ignores two of three sources of liquidity over the upcoming 90-day period.
This guidance to sequester funds equal to 25% of our annual operating budget is an overly restrictive barrier to non-profit agencies, which are partners with DBHDS to meet the needs of citizens with intellectual and developmental disabilities. The inevitable consequence of this will be a degradation in the quality of services provided, which is the worst possible outcome for the citizens served by these agencies.
At SOAR365, we typically hold 30-45 days of cash on hand, we have a line of credit (which has never been drawn upon) equal to about 20 days of cash requirements, and we always have about 30-45 days of receivables on hand from dependable payers such as the U.S. Government, the Commonwealth of Virginia, Henrico and Chesterfield Counties, etc.
Ignoring both our future revenues and our accounts receivable in evaluating our ability to meet our future obligations places an additional, unnecessary burden on our organization and prevents ongoing investments in delivering high quality programs, which is how we currently deploy our excess cash.
Thank you for this opportunity to present our comments.