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Purpose
This Policy Information Notice (PIN) describes the Bureau of Primary Health Care's
(BPHC) requirements for developing, submitting,
and reporting on a Financial Recovery Plan
(FRP). This plan will be required when it
is determined that an organization supported
with a Federal grant awarded by the BPHC
has serious financial problems that threaten
both its stability and viability. Some but
not all of the situations the BPHC may request
a FRP include:
- where a Primary Care Effectiveness Review,
Joint Commission on Accreditation of Health
Care Organizations Review or other site visit
findings that identifies serious financial
problems;
- a pattern of draw down of grant funds from
the payment management system that could result
in an organization having limited or no Federal
grant funds to support payment of operating
expenses in the months before the end of a
budget period;
- grantee has requested emergency supplemental
funding on future year's funding;
- an impending or actual financial problem;
- audit report findings; or
- the Field Office determined that significant
financial imbalances exist and there is a
need for a FRP.
A FRP serves as a short-to-intermediate-term plan to guide financially-troubled
organizations toward financial stability
and can be used as a guide for development
of long term plans needed for complete financial
recovery. It is designed to provide the
organization's staff, the Board of Directors
and the BPHC with measurable, timeframed
objectives which permit monitoring of progress.
Content
The FRP should include the following sections:
A. Analysis of the Cause of the
Current Problem.
Include a discussion of the data reviewed and the processes used in the analysis.
The causes, conclusions and recommendations
should be identified and discussed in detail
sufficient for a clear understanding of
what actions are needed. For example, a
cash flow crisis may result from the loss
of provider staff without a combination
of: a corresponding reduction in associated
overhead and direct support activities;
timely replacement of provider staff; or,
limited working capital and operating reserves.
Justification, assumptions and support for
the conclusions and recommendations should
be included in the narrative or in attachments
or appendices to the recovery plan.
B. Timeframed Description of Proposed Solutions or Corrective Actions.
Address in detail all the causes identified in section A. Describe the
actions that will implement the recommended
recovery actions in a timeframed, results
specific format. When completed, these actions
should correct the problems identified,
return the organization to solvency, and
leave the program financially stable. A
format for development of a timeframed corrective
action plan is presented in Attachment A
as an example. This format or another may
be used. However presented, the plan should
be clear and specific as to recovery actions
required, expected results, responsible
groups or individuals and when the actions
were, or will be, completed in detail.
C. Time Framed Financial Projections.
It is the BPHC's expectation that financial statements of Health Centers reflect
the following:
- net cash flow being zero or greater for
2 of the last 3 audited fiscal years,
- working capital greater than 2.0 months
of expenditures,
- long term liabilities as a percent of total
net assets are .25 or less,
- the average age of accounts payable are
60 days or less,
- positive net assets that have increased
in 3 of the last 5 audited fiscal years,
- expenditures are appropriately time phased
and according to budget,
- revenues are received as in a timely manner
and in accordance with budget,
- no other significant financial issues.
The Financial Recovery Plan must include detailed, month-by-month financial projections
to the point at which the organization has
a positive net cash flow and an increase
in net assets from operations in the financial
statements for a sustained 12-month period.
The recovery plan should include all of
the estimated time required to meet a minimum
acceptable level of recovery. The plan can
begin at any time and extend beyond the
current budget and fiscal year end. Generally,
the first month shown will be the month
of submission. If, however, the recovery
plan has already been placed into effect
and the grantee wishes to show progress
to date, an earlier month may be chosen.
Examples of a financial plan and financial
reports are attached. These examples can
be downloaded as an Excel workbook from
the BPHC web page at www.bphc.hrsa.gov.
In accordance with Office of Management and Budget Circular A-133, annual financial
audits are due within 30 days of receipt
from the auditor. Audits must be submitted
no later than 9 months after the end of
a fiscal year. The requirement to submit
the annual audit to the Office of Grants
Management within 30 days of receipt from
the auditor is established in the reporting
requirements of the Notice of Grant Award.
The BPHC will not consider financial recovery
complete until verified by the annual independent
audit. The audit should reflect:
- that there is not a deficit in net assets,
- long-term debt to equity less than .5,
- an increase in net assets from operations
for the audited financial statements,
- average age of accounts payable is 60 days
or less,
- a current ratio above 1.5 and
- no other outstanding financial issues,
- submission of the audit within 30 days of
receipt from the auditor.
To insure that all expenses requiring cash for payment and revenues reflecting
productivity for a period are reported in
the period incurred, the monthly projections
of financial operations must be accrual
based. Projected income should be specific
as to source and amount. Detail should include
gross patient service income, discounts
and adjustments to patient service revenue,
grant, contract and other income. Patient
service income, including discounts and
allowances, should be presented by payor
source; the number of visits/encounters
and capitated lives.
Expenditures should be broken down into
categories used in the BPHC grant application
guidance. The recovery plan must also include
a monthly cash flow budget projecting all
cash receipts and disbursements including
beginning and ending cash balances, cash
receipts from operating revenues, proceeds
from new loans and proceeds from sales of
assets. Monthly cash flow projections should
include debt reduction, including payments
on old payables, negotiated payments for
reduction of operating debt, and debt service
of short and long-term debt.
The narrative to the financial portion of the FRP should discuss the assumptions
used in the projections. An explanation
of projections that are different from current
experience should be provided. Some of the
more important assumptions that should be
supported by back up detail include changes
in collection rates, changes in Full Time
Equivalent provider staff and provider mix,
changes in payor mix, and other State and
local revenues. Estimated productivity by
provider, including the assumptions and
support for these estimates, must also be
included in the FRP. Fixed assets and equipment
used to secure debt should be identified
and discussed.
Board approved financials that include accrual based balance sheet and income
statement, and a cash flow statement inclusive
of the months of your fiscal year before
the month the revised recovery plan is implemented
should be included as a part of the recovery
plan documents.
D. Board Approval
The Board Of Directors (BOD) must approve the financial recovery plan. Please
indicate date of meeting at which the FRP
received BOD approval.
Monitoring Evaluation Process
It is critical that the BOD understand the substance and the implications of
the budget developed under this guidance.
The BOD function is not direct involvement
in the day to day operation of the clinic.
However, it is the responsibility and function
of the BOD to monitor and evaluate the recovery
plan both initially and on an ongoing basis,
to ensure a successful financial recovery.
The BOD monitoring should include monitoring
baseline financial and performance indicators
similar to those discussed in this document
and/or others. Briefly describe the implementation,
monitoring and evaluation process the organization
plans to use. Explain how corrective actions
will be identified and implemented if expectations
are not being met or goals must be adjusted.
Financial recovery will be monitored on a month-to-month basis by the BPHC Grants
Management and Field Office staff. Grant conditions
will require monthly submission of board approved
budget comparative financial, cash flow and
productivity reports. Grant conditions will
also require narratives to these reports explaining
significant variances between budgeted and
actual income and expenditures as well as
projected and actual cash receipts and disbursements.
The recovery process may also involve monitoring
of draw down of Federal funds using Form SF
270, Request of Disbursement. Draw downs will
be authorized based upon the organizations
approved FRP Cash Flow Budget. A justification
and updated recovery plan reflecting the change
must be submitted with any changes to the
draw down schedule in the approved FRP Cash
Flow Budget.
Other narrative, financial and productivity reports may also be required.
For additional information on the process described in this PIN, please contact
Mike Rowland, Chief, Awards and ompliance
Branch, Office of Grants Management at (301)
594-4243 or e-mail at mrowland@hrsa.gov.
ATTACHMENT A: SAMPLE PLAN FORMAT.
GUIDE FOR DEVELOPING FINANCIAL RECOVERY PLANS IN TABLE FORMAT
Problem Statements are clearly defined descriptions of major problems, as discussed
in this PIN. Assign each problem statement
a Roman numeral (I, II, III, etc.)
Column 1: Objectives -Objectives are descriptions of desired, measurable,
time-limited results or outcomes. These objectives
can be used to identify an acceptable level
of performance or establish criteria for evaluation.
Objectives can be either short-term (less
than 1 year) or long-term (1 year or longer).
Assign each objective The Roman Numeral associated
with the problem plus a capital letter (I.A.,
II.A., II.B., etc.)
Column 2: Action Steps - the major activities that must occur to accomplish
an objective - critical actions that must
be taken to attain the measurable outcome
or end result. Reference each step by corresponding
upper case letter for the objective and a
number for the action step (A.1., A.2., etc.)
The date when each action step is expected
to occur should also be stated.
Column 3: Evaluation Method - the method which will be used to evaluate
progress towards an objective or to identify
the actual outcome distinguished in the objective.
For example, working capital greater than
1.5 months of expenditures. Reference each
step by using the corresponding code for the
objective and/or action step.
Column 4: Progress/Outcome - accomplishments to date; action steps and
date thereof actually taken towards an objective;
outcomes that have been experienced, quantified/qualified
and documented. This column will not be used
in the irst submission, but will be used as
and when narrative progress reports are required.
Reference each progress statement in the same
manner as noted above for related Evaluation
Method.
PROBLEM STATEMENT I: [Brief description of problem C detail will be in
the narrative statement.]
| Objectives |
Key Action Steps Planned and Date of Implementation |
Evaluation Methods or Data Sources Planned |
Progress |
| OBJECTIVE I.A: |
I.A.1. |
I.A. I.A.1. |
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I.A.2. |
I.A.2. |
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I.A.3. |
I.A.3. |
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| OBJECTIVE I.B. |
I.B.1. |
I.B. I.B.1. |
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I.B.2. |
I.B.2. |
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