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Introduction

Introduction. The following chapter will review: Overview Model assumptions The Cost Proposal & Evaluation Payments methodology Financial Incentives/Disincentives Savings Calculation & Profit. Overview. Financial Model – Objectives. Reduction of welfare expenditure

micah-mercado
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Introduction

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  1. Introduction The following chapter will review: • Overview • Model assumptions • The Cost Proposal & Evaluation • Payments methodology • Financial Incentives/Disincentives • Savings Calculation & Profit

  2. Overview

  3. Financial Model – Objectives • Reduction of welfare expenditure • Reductionin income assurance recipients • Transfer of resources from welfare payments to work support services • Allocation of risk in welfare expenditure growth to operators

  4. Financial Model – Guidelines • Ability to measure and monitor the investment and expenditure • Simple measurement of performance • Quality incentives • Enhancement of the employment test

  5. Budget Frame

  6. Financial Model – Methodology Welfare • Fixed budget frame • Financing the operation from the savings in welfare payments • Managerial flexibility • Simplicity • Performance measurement • Monitoring and control Operations and services Start up

  7. Financial Model – Methodology Cont. • Geographical responsibility • Focus on long-term solutions • Risk Mitigation • Risk mitigation for the operator • Risk mitigation for the government • Community impact

  8. Geographical Responsibility • We draw a line around 3,500 current recipients • A job center is given an area for operating • All Applicants in the area who are in the target population must claim their benefits at the job center Responsibility area 3,500 recipients

  9. Regional Risk Management For each job center: • The operator is responsible for all participants that reside in the area • All new applicants must apply for their benefits at the job center • The operator is responsible for the reduction/growth of income assurance payments to recipients in the area • Failure to meet expenditure reduction objectives will result in penalties to the operator

  10. Model Assumptions

  11. Assumptions • Population • Initial population - 3,500 income assurance recipients who are subject to employment test. • Without reform, implementation growth in recipients is - 0% annually • Welfare Payments • Calculated at approximately NIS 138 million per job center for 24 months

  12. Assumptions Cont. • The program will include the following caseload reduction ingredients: • Personal details verification • Diversion • Mandatory full work week assimilation • Compliance as a condition for eligibility

  13. Financial Model – Minimal Requirements • TheOperators of the JobCenters must: • Reduce expenditure on income assurance in region by at least 35% • Meet monthly expenditure reduction goals • Reduce the number of households dependent on income assurance in region by 40%

  14. Welfare Expenditure Reduction Graph Benefit “Inventory”= 3,500 Participants X Average Benefit in the Region 35% Minimum expenditure reduction requirement Maximum Benefits Paid NIS 4m

  15. Resources and Utilization

  16. Cost Proposal & Evaluation

  17. Cost Proposal in the RFP

  18. Cost Proposal Example

  19. Cost Proposal Evaluation • Proposed allocation of savings between operator and government (rate) • Proposed operating cost (operation + services) • Bidder will not be able to exceed the figures in the proposal

  20. Update At Contract Signature • Regional income assurance payments adjustment • Adjustment of budgeted welfare payments to match regional data • Conducted according to the average regional welfare expense of the three months preceding contract signature

  21. Update Following Contract Signature – Government Base Case Projections 5700 5358 Average expense on income assurance in the region for last 3 months= NIS 5.7 M 5,700 – 6%= 5358

  22. Update Following Contract Signature – Government Base Case Projections

  23. Update Following Contract Signature – Government Base Case Projections

  24. Payments

  25. Payments of Start Up Costs • Payments are made according to the bid • Schedule: • Down payment of 10% of the start up bid following contract signature • Six equal monthly payments start at 3rd month • Down payment reduced from the sixth payment • Payments are subject to withholding and liquidated damages should the operator fail to meet milestones

  26. Payments at Operational Period • Payments for operational costs: • Made according to the bid • Include: • Placement & training • Personnel • Overhead

  27. Payments at Operational Period Cont. • Payment mechanism: • Down payment on first month of operations - 5% of the operational bid (excluding work support services) • Equal monthly payments according to bid beginning with month three and onwards • Down payment is reduced from last three payments • Payments are subject to withholding and/or liquidation of damages

  28. Payments at Operational Period • Work Support Services reimbursement • Reimbursement for use of services (actual). • Made 45 days after receipt of the report. • Total amount capped by bid • Monthly amount capped

  29. 15/1 1/1 1/2 15/2 1/3 15/3 1/4 15/4 1/5 Payments Timeline to the Operator Submission of receipts for January work support services Submission of receipts for February Down Payment 5% of operational cost Payment for January operational Reimbursement for January services No payment

  30. Update at the End of Month 6 of Operation • Update to the operational cost proposal • Update to the welfare payments budget

  31. Financial Incentives/Disincentives

  32. Liquidated Damages • Start up period – failure to meet milestones • Operator must meet service level standards • Quality standards • Appeals that have been accepted over a certain rate

  33. Withheld Payments • Should the operator fail to meet: • Key schedule milestones during the start up period • Expenditure reduction objectives during operational period • Withheld payments during operational period: the amount of deviation from the expected income assurance payments

  34. Withheld Payments Month 4-8: over- pay of ₪ 1.4 M ₪1.4 M withheld Back to the line, full month payment Month 8-12: ₪ 1.6 M saved withheld sum (1.4) paid

  35. Savings Calculation • The following formula will apply: G = (PIA – IA) • G = Gross savings • PIA = Maximum income assurance payments • IA = Actual income assurance welfare payments • Operator will receive 10% of saving in services

  36. Saving Sharing • Savings in Welfare Expenditure Sharing Formula:

  37. Savings Minimum requirement - 35% Savings to share Welfare paid

  38. Updates • The government holds the option to top up the centers' caseload and maintain it on 3,500 ( the initial no. of participants) • A financial update will be made

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