Preliminary 2018 Budget

1. Preliminary 2018 Budget Martha Larson, CFO October 23,2017

2. Index – Preliminary 2018 Budget • 2018 Budget: Impact on 2017-2021 Strategic Plan Objectives • Budget Process Overview • 2018 Budget Summary • 2018 Cashflow Budget • Key Budget Assumptions • DSP Wage Increase • Budget by Program • Administrative Expense Overview • Capital Expenditures • Capital Spend by Home

3. 2018 Budget: Impact on 2017-2021 Strategic Plan Objectives MISSION: Living Well Disability Services delivers exceptional services that transform the lives of people impacted by disabilities. 2018’s budget for Living Well Disability Services was developed to ensure the continuance of the mission and strives to advance many of the objectives of the 2017 - 2021 Strategic Plan while maintaining a break-even operating result. A core objective in the 2018 Budget is to achieve a meaningful wage increase for Direct Support Professionals (DSPs) despite the MN Legislature declining to increase the service reimbursement rate. The mission of Living Well, to provide exceptional services, is accomplished by our dedicated DSPs. This increase recognizes their value and is critical given the current staffing environment. • Core 2018 Budget Objective this year Strategy # 2 – Attract, engage & retain talented employees • An average wage increase of 12% for Direct Support Professionals (Increase of $1.50-$1.62/hour). This creates an overall average DSP wage of $13.66/hour. • Scheduling Software $50k to help balance staffing & reduce staff burnout • Senior Advocate Leaders – this is a new initiative started in 2017 to increase retention and engagement. To become a SA leader, a SA must propose and lead a special project for Living Well. The 2018 Budgeted Cost is $35k • Continued Recruiting and Retention bonuses totaling $85k • Volunteer Coordinator – continued full investment in the development of our Volunteer Program

4. 2018 Budget: Impact on 2017-2021 Strategic Plan Objectives continued… • Strategy #3 - Serve more people with Disabilities • Westchester – 4 additional people supported 24/7 • 27% increase in Day Services provided to ICF residents ($92k over 2017 YTD annualized) – more hours to existing people in our homes • Strategy #1 - Exceptional Services in a Dynamic Environment • Investment in Wellness: • Wellness Meal Plan– budgeted to be $700k. Significant increased costs over other providers due to the menu system with fresh vegetables, fruits and home-made, versus packaged, meals. • Wellness Activities – $174k • Nursing & Therapy – budgeted costs of $1 million • Program Coordinator(PC) – 1 dedicated PC per home • Increase Volunteer & family member involvement with people we support • Staffing – schedule changes, as needed, to align staff hours to when people we support are present. We increased the time the Senior Advocates are working when people we support are in the homes. • Strategy #4 - Increase Governmental & Non-Governmental Funding • Non-Governmental Funding increases • Fund-raising – Increase net of expenses of over $40k • Nursing Reimbursement - $25k • Governmental increases • Waivers Revenue– Westchester revenue of $450k • ICFs - Revenue increase of $92k for Day Services ($15-$25k net of expenses) • ICFs – Leave Day Legislative change July 2017 adds $30-35k annually • Waivers Revenue – Day services & Rate maximization $100k (offset by loss of Claremont)

5. Budget Process Overview • Initial Budget Planning - The CEO, COO and CFO had multiple meetings ahead of time and during the budget to discuss the objectives and identify areas of opportunities for the budget • Budget Inputs • 5 Year Historical data from 2012 thru June 2017 were used as the base data for each home • Vacancy Factors – a 5 year historical review and management discussions determined the budgeted vacancy factors • Revenue was updated for each person in each home based on their current needs • Staffing • Staffing schedules for each home are submitted by the program coordinator • Staffing Ratios schedules – show staff to person in the home ratio for every ½ hour • Actual YTD staff hours & budgeted hours are provided • Payroll – actual current rates were used and adjusted based on budget assumptions. • Wellness– the Director of Health Services & Wellness worked with each PC to determine the home activities • Nursing – the Director of Health Services & Wellness provided the nursing plan for each home • Employee Benefits are provided by the Director of Human Resources • Capital Spend – Our facility management company performed an annual inspection of each home and provided a rating on all rooms and equipment. Anything rated a 4 or higher is completed prior to the next year or included in the Capital Plan for the coming year. • All other input is based on data provided by owners of those areas.

6. Budget Process Overview continued… • Budget Compilation • The CFO maintains the core budget files. • Most data inputs link to the core file and is tied out in total to ensure all data is captured. • Revenue, payroll, nursing, therapy, central office, development etc. • Budget review • High-Level draft budget – the initial draft budget was provided to the CEO and COO for initial review • Management Drafts - The COO and Program Directors were provided with draft home budgets for each region along with Staffing Ratio files to review prior to the home budget meetings • Home Budget meetings – the CFO meets with the PC and Program Director (PD) for each home and reviews each budget item. Updates are done based on the input provided. • Home Budget Follow up – Additional review – this year with the core objective of increasing wages, the staffing ratios and options were discussed with the PC & PD during the initial meeting. The PD took the ownership of working on the staffing schedules with the PC and providing the CFO with updated staff schedules within 1-2 weeks. • Final Staffing discussions – COO, CFO and PD – a final review of most staffing schedules was done by region. The COO, CFO and the regional PD met and reviewed most staffing ratios & staffing schedules to obtain the final Organizational staffing needs. • Finance Committee meeting – prior to the wage increases, the preliminary budget was presented to the Finance Committee. Input on the budget objectives and budget results were discussed. Based on guidance from the Finance Committee, the wage increases were incorporated into the budget. • Final Budgets were reviewed with the CEO and presented to the Finance committee for approval

7. 2018 Budget Summary

8. 2018 Cashflow Budget • Living Well is projected to have a positive cash-flow of $106k in 2018 • Our Bond will be paid off at the end of 2020

9. Key Budget Assumptions

10. DSP Wage Increase • Total Investment $800k • Hiring Rate exceeds Industry Average • Tentative Increase Date –December 3, 2017 • Notes: • Since The Legislature did not increase rates, we looked to the areas that we could control for a meaningful wage increase for our direct support professionals (DSPs). This was a comprehensive review of all revenue sources and all key costs. 90% of the changes to achieve these raises, if they are not already implemented, will be implemented by the beginning of November. • LWDS starting wages lagged slightly behind the market in 2015 & 2016 but in 2017, we fell significantly behind the market rates. • The DSP Advocate wage will now exceed the industry starting wage of $12/hour which was presented at the September ARRM conference • Our Senior Advocate & Advocate rates will be above competition at the starting rate and be competitive at the overall combined average rate of $13.66 per hour.

11. Budget by Program

12. Administrative Expense Overview Standard: The Charities Review Council standard is for 70-90% of the annual costs be used for program support. Prelim Level: 89% of the preliminary budget is projected to be used for supporting our programs. Admin Level: Administrative expenses are budgeted at 11%. This is just slightly over the minimal level of 10%. Below 10%, an explanation justifying low spending would be required.

13. Capital Expenditures • The 2018 capital spend plan includes carry-over from 2017 of $50k • The 2018 plan is $200k less than the 2017 capital spend plan. • The prior year planned spend had 2 elevators ($125k) which accounts for the majority of the decrease in 2018’s capital spend plan.

14. Capital Spend by Home