ORANJ

Highlights of 2006 Finance Committee Survey
Harry Mann, Chair, ORANJ Finance Committee, September 2006

Coverage: The survey was sent to all 24 member CCRCs of ORANJ. Fourteen responded.

Question 1. What committees or similar groups concerned with financial affairs does your CCRC have whose membership includes both residents and trustees (as well as management?

Response: Only one CCRC specifically reported having a committee whose members include residents, management and trustees. Their CEO, who is also a trustee, is a members of the RA finance Committee. Two other CCRCs have a resident who is a members of their Board’s Audit Committee or Finance Committee. In another CCRC the RA President is a non- voting member of the Board.

Question 2. During the past year, to what extent has your CCRC discussed with all interested residents any financial concerns identified by residents?

Response: 5 CCRCs reported having annual meetings which focused on financial matters and addressed financial concerns raised by residents. 5 CCRCs reported no meetings of that type. 2 CCRCs reported that Management holds quarterly or monthly meetings where any concerns can be raised. At 2 CCRCs RA officers meet monthly with Management to discuss any concerns.

Question 3. How well are the reasons for increasing monthly fees explained to residents?

Response: Responses ranged from “Very Well” to “Not Explained.” 9 CCRCs reported that management provides an explanation for monthly fee increases. Comparative statistics are provided by management at 5 CCRCs. To test reasonableness, only one CCRC reported a specific test: “Try not to exceed 4%.” 2 CCRCs use comparative analyses; 1 CCRC uses inflationary statistics, and 1 CCRC uses occupancy statistics as a reasonableness test.

Question 4. What is your CCRC’s policy regarding the setting of and limitations on monthly fee increases?

Response: One CCRC reported that it intends to limit independent living fee increases to COLA. Another intends to keep monthly fee increases to 6% or less. A third intends to keep monthly rate increases at 4% or less. A fourth reported an upper limit of 10% on annual increases. 3 CCRCs indicate that increases are set to cover operating expenses.

Question 5. What input into the annual preparation of operating and capital budgets is provided by residents, or residents’ representatives like a finance committee?

Response: Only 3 CCRCs report any substantive input by residents during budget preparation.

Question 6. What management fees are charged annually?

Response: Only multiple unit CCRCs reported having management fees.

Question 7. To what extent is your CCRC’s annual Disclosure Statement presented to and discussed with all interested residents?

Response: 2 CCRCs discuss Disclosure Statements with residents at contract signing. 9 CCRCs reported that the annual Disclosure Statement was available only for discussion if a specific question arose. 3 CCRCs never discussed Disclosure Statements with residents.

Question 8. What are your greatest financial concerns (such as, future monthly rate increases, future financial stability, lower quality of services resulting from staffing cuts, too much debt, etc.)?

Response: 10 CCRCs reported monthly rate increases and also future financial stability as their greatest financial concerns. 2 CCRCs were concerned with possible service cuts, one with tax increases, one with the possibility of residents running out of money, and one with a shortage of SNF beds.

Observations and Conclusions

Long term financial stability appears to be one area where the ORANJ Finance Committee should focus its attention. Ten CCRCs cited monthly rate increases as their greatest financial concern and half of those ten cited long term financial stability as a parallel concern. Only four CCRCs reported having some kind of a policy regarding the setting and limiting of monthly fee increases.

It may be useful for the ORANJ Finance Committee to publicize as best practices the approaches and presentation formats used by CCRCs which make comprehensive presentations of budgets, audits, explanations of fee increases, and other financial information to their residents. The opportunity is apparent to improve and enhance the manner by which key financial information is provided to residents. Only six CCRCs reported having scheduled meetings with all residents dedicated to explaining budgets and financial performance to residents and responding to their financial concerns. Only half the CCRCs reported that information substantiating the reasonableness of monthly fee increases was provided. Half of the CCRCs asked the ORANJ Finance Committee for continued exchange of information and productive ideas.