1. JSSA Financial Picture
Structural Deficit and Operating Loss for FY 17

2. March Financial analysis
September 30, 2016: 3-month operating deficit of $217,447
December 31, 2016: 6-month operating surplus of $37,654
March 31, 2017: 9-month operating deficit of $385,666

3. Budget Actual QTD YTD DESCRIPTION 9/30/2016 12/31/2016 3/31/2017
QTD
YTD
DESCRIPTION
9/30/2016
12/31/2016
3/31/2017
REVENUE
TOTAL OPERATING PHILANTHROPY SUPPORT
688,318
1,582,857
1,119,087
3,390,262
TOTAL SERVICE FEES
4,037,441
4,159,026
4,551,527
12,747,994
TOTAL PUBLIC SUPPORT AND OTHER REVENUE
1,398,630
1,402,915
1,411,488
4,213,033
TOTAL REVENUE
$6,124,389
$7,144,798
$7,082,102
$20,351,289
EXPENSE
TOTAL PERSONNEL COSTS
5,103,938
5,148,521
5,279,697
15,532,156
TOTAL OCCUPANCY
243,748
243,749
244,431
731,928
TOTAL OTPS
1,245,076
1,296,187
1,279,585
3,820,848
Depreciation
84,750
254,250
TOTAL EXPENSE
$6,677,512
$6,773,207
$6,888,463
$20,339,182
TOTAL REVENUE OVER EXPENSE before pension
($553,123)
$371,591
$193,639
$12,107
Budget
Actual
REVENUE
TOTAL OPERATING PHILANTHROPY SUPPORT
576,163
1,608,135
966,043
3,150,341
TOTAL SERVICE FEES
4,096,247
3,825,522
3,987,608
11,909,377
TOTAL PUBLIC SUPPORT AND OTHER REVENUE
1,350,749
1,378,383
1,522,317
4,251,449
TOTAL REVENUE
$6,023,159
$6,812,040
$6,475,968
$19,311,167
EXPENSE
TOTAL PERSONNEL COSTS
4,707,293
5,018,743
5,240,205
14,966,241
TOTAL OCCUPANCY
234,151
234,553
296,098
764,802
TOTAL OTPS
1,214,146
1,221,009
1,283,941
3,719,096
Depreciation
85,015
82,630
79,046
246,691
TOTAL EXPENSE
$6,240,605
$6,556,935
$6,899,290
$19,696,830
TOTAL REVENUE OVER EXPENSE before pension
($217,446)
$255,105
($423,322)
($385,663)

4. What changed? The first quarter was budgeted to be a loss.
Actual was better than budget
Hospice census exceeded targets
Personnel expenses were lower than budget due to staff vacancies
The remaining quarters have steadily increasing revenue targets (Service Fees) due primarily to the planned growth in Hospice.
Actual was worse than budget
Hospice census dropped below target and received a rate cut in the 2nd quarter
Philanthropy, though exceeding the target in the 2nd quarter, is not expected to reach its annual target

5. Causes of FY 17 Operating Loss vs. Budget
Underperforming Profitable Program Services (negative $442k variance)
Hospice $328k negative variance through March
Specialized employment $114k negative variance through March
Philanthropy is behind budget by $150k, excluding timing of event revenue
Loss Leaders are at or better than budget (not causing budget variance)

6. RECAP Program Groupings by Financial Performance before overhead allocation
Breakeven or Better
Hospice ($2M surplus)
Specialized Employment (positive margins in a growing business)
Near Breakeven, small losses
Premier (thin margins, need scale and pricing power)
Senior Services (mix of svc, financial performance varies, Holocaust Survivor largest)
Loss Leaders, require the most use of agency philanthropy as % of budget
Mental Health ($2M loss, restructuring and pursing new revenue options)
Community Outreach ($500k loss, little fee potential, primarily Jewish audience)

7. What is a structural deficit?
Definition: A deficit caused by a structural imbalance in expense vs revenue, not just due to a one-time event or a short-term issue.

8. JSSA’s Case – Structural Deficit
IF we remove hospice profits, philanthropy and endowment spending (which are all resources allocated at the discretion of the agency),
THEN our remaining service and overhead costs are $9M more than the revenue they earn.
This has been a long-term issue, sometimes masked by the Hospice program’s stellar growth and profitability.
A solution requires reducing deficits, improving profitability and making tough choices about what we will continue to deliver.

9. Year-End Forecast: Expanding Deficit $800k-1M
Negative Factors:
Hospice expected to continue to underperform by $100k monthly
Philanthropy gap will continue to grow through year end ($ k)
April productivity hit across multiple programs (holidays)
Positive Factors:
Specialized Employment and Premier: stabilized and trending positive
Hospice: recent increase in referrals outpacing discharges

10. FAQs
Q: Is this a new problem? Have we returned to the financial problems of a few years ago?
A: This is not a new problem, but the approach is different. The agency has had the problem of a structural deficit for years but there is a different strategy now to address the problem with strategic investments in growth versus exacerbating the problem with a starvation cycle
Q: Why don’t we reduce costs in the profitable programs that are lagging?
A: Investing in our “profitable” services still makes long-term sense
Q: Why can’t we scale back expenditures on loss-leaders to close gap?
A: We are restructuring in these areas to improve efficiencies and reduce deficits; but we are doing so in a way that preserves service which is slower and more complex. Remember these are the areas that serve the most people.

11. FAQs Q: Why wasn’t this problem evident the last couple of years?
A: Hospice growth and profitability mitigated the problem, but we were taking steps to address the underlying structural deficit and competitive disadvantage.
Q: Does this mean that next year’s budget will be equally challenging?
A: YES and probably more so. The answer to a structural deficit is not a quick fix. We are changing structure and business models, which will take time. Additionally, we need to make infrastructure investments to make us competitive that will add costs without new immediate revenue relief.