Minutes of Sub Committee on Working Capital
June 30, 2015 via Conference Call

Sub Committee members: Tom Spiliotis, John Klindtworth, Lourena Mellott, Phil Hubbard

Meeting convened at 3:07 PM via conference call.

Mr. Spiliotis reminded the subcommittee of the reason for the conference call, which is to reduce the risk of liability regarding working capital, which currently is approximately $1,000,000 issued to BBE vendors.  Over $400,000 has been lost over the years due to vendors leaving the program without repaying the working capital.

The policy of not allowing a licensed vendor to apply for facilities if they owe money to the Division has reduced the amount of delinquency.  Mr. Spiliotis stated that he wasn’t convinced that having working capital paid down to zero was the appropriate way to go.  He feels bringing down excessive working capital amounts to reasonable balances based upon the current situation of each facility may be a better alternative.

Ms. Mellott believes working capital should be reduced, but not to zero.  She suggested that “overages” from repayment of Type II LOFAs should be applied to that vendor’s Type I balance. She also prefers a flat payment amount versus a percentage.

Mr. Hubbard agrees working capital should be paid down.  He asked what would happen if a vendor owed the Division after leaving a Type II facility, and unable to pay the balance.  Would that amount be transferred to his Type I.  Mr. Spiliotis stated that is an issue we haven’t faced, but should be considered.  Mr. Hubbard feels that every vendor should pay the same percentage.

Mr. Klindtworth suggested a 50% pay-down at a rate of 1% of working capital (50 month repayment plan), leaving the working capital at 50% of the original amount.

Mr. Spiliotis asked if the panel felt the balance should be paid down to zero.  Mr. Hubbard felt it should.  Ms. Mellott did not feel it should.

Mr. Spiliotis agreed with Mr. Hubbard’s viewpoint of treating the money as a business loan, however he feels there needs to strict financial oversight.

Mr. Klindtworth stated the money need to go into a separate account.  Mr. Spiliotis suggested that the repayment go into an escrow account.  Mr. Hubbard agreed that the money should not just sit there, that it should go back into expanding the program.

Mr. Spiliotis stated that Florida’s BEP program cannot be compared with other states, due to the difference in the way other programs operate, including retirement, income sharing, etc.  Mr. Spiliotis also felt that the BBE should be collecting more 3rd party commission than we are realizing.

Mr. Spiliotis said that just as the blind vendors are held financially accountable, the Division needs to be held accountable as well for financial oversight.

Mr. Spiliotis stated that having the same percent rate of payback based upon net would be simpler.  He suggested 1% to 1½%.  He also said the need of higher working capital at certain facilities has been reduced over the years. 

Mr. Hubbard suggested a line could be added to the online reporting system that would allow vendors to pay extra, above the standard percentage.

Mr. Spiliotis said it is critical that we have an escrow account, as working capitals are paid down, to ensure that the facilities receive the needed amount on a changeover.

Mr. Spiliotis brought up the problem with paying working capital down to zero, stating that an outgoing operator may work the inventory to a bare minimum, leaving an incoming operator lacking needed inventory.  He suggested that the regional consultants be more proactive in inspecting inventories during the quarterly visitations. 

Mr. Spiliotis also brought up the problem with vendors being delinquent in paying sales tax, which places the facility in jeopardy.  Mr. Klindtworth suggested that each vendor show prove to the consultant with confirmation of sales tax receipt on quarterly visitations.

All agreed that there should be a working capital repayment plan.  Mr. Spiliotis asked how the panel felt with a 1½% percentage across the board.  Mr. Spiliotis brought up the fact that most vendors will look at this as an increase in set-aside. 

Mr. Spiliotis said that there are still many details to work out, but that in theory the panel agrees to some form of repayment of working capital.  The panel’s initial thought is toward the following:

  1. 1.5% monthly repayment for all vendors, based upon net profit.
  2. Keep each facility’s working capital at a minimum balance to meet the needs of the facility.
  3. Set up a working capital escrow account to ensure funds are available if needed.  

Meeting concluded at 4:06 PM.

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