LIFE AFTER ARRA “WZ FEE FOR SERVICES”

1. LIFE AFTER ARRA “WZ FEE FOR SERVICES” Presented by: Ken Robinette, CEO South Central Community Action Partnership Twin Falls, Idaho 2011 NASCSP Mid-Winter Conference March 3, 2011 Bethesda Maryland

2. Why consider a “fee for service” company • Uncertainty of Federal Funds • DOE Weatherization Plus~ Leveraging • States looking to expand Agencies WZ resources • Staff Retention after ARRA is done • Agency Self Sufficiency (long term goal) • Provide Energy Conservation to Middle and Upper Income Homeowners/Business’s

3. History and Experience • South Central Community Action Partnership’s (SCCAP) WZ Program started 1978 • Provided Energy Conservation to 5,500 + Homes • Trained/Certified Auditors avg. 20+ Yrs Service • Built & Rehab Homes w/Grants & Low-Interest Loans (USDA/Rural Development & HUD) • In early 1990’s WZ’d Homes for Utility Company creating Program Income (10 CFR Part 600.124)

4. Sec.600.124 Program Income (a) The standards set forth in this section shall be used to account for program income related to projects financed in whole or in part with DOE funds. (b) Except as provided in paragraph (h) of this section, program income earned during the project period shall be retained by the recipient and, in accordance with program regulations or the terms and conditions of the award, shall be used in one or more of the following ways (1) Added to funds committed to the project and used to further eligible project objectives. (2) Used to finance the non-DOE share of the project. (3) Deducted from the total project allowable cost in determining the net allowable cost which the cost is based.

5. Sec.600.124 Program Income (cont.) (c) When DOE authorizes the disposition of program income as described in paragraphs (b)(1) or (b)(2) of this section, program income in access of any limits stipulated shall be used in accordance with paragraph (b)(3) of this section. (d) In the event that the program regulations or terms and conditions of the award do not specify how program income is to be used, paragraph (b)(3) of this section shall apply automatically to all projects or programs except research. (b) Except as provided in paragraph (h) of this section, program income earned during the project period shall be retained by the recipient and, in accordance with program regulations or the terms and conditions of the award, shall be used in one or more of the following ways (3) Deducted from the total project allowable cost in determining the net allowable cost which the cost is based.

6. Sec. 600.134 Equipment (a) Title to equipment acquired by a recipient with Federal funds shall vest in the recipients, subject to conditions of this section (b) The recipient shall not use equipment acquired with Federal funds to provide services to non-Federal outside organizations for a fee thatis less than private companies charge for equivalent services, unless specifically authorized by Federal statue, for as long as the Federal Government retains an interest in the equipment. (g) When the recipient no longer needs the equipment, the equipment may be used for other activities in accordance with following standards. Equipment with a current per-unit fair market value of less than $5000 may be retained, sold or otherwise disposed of with no further obligation to the awarding agency. ( over $5000 is more restrictive)

7. Sec.600.135 Supplies & other expendable property (b) The recipient shall not use supplies acquired with Federal funds to provide services to non-Federal outside organizations for a fee that is lessthanprivate companies charge for equivalent services, unless specifically authorized by Federal statue for as long as the Federal Government retains an interest in the supplies. Fee for Service can be done using DOE equipment and supplies however, extreme caution should be exercised and check your contracts with your State Office for allowable use. Follow the 10 CFR 600’s For those purposes SCCAP chose to create our own LLC. In 2005 called: Home Energy Management

8. “FEE FOR SERVICES”Limited Liability Corporation (LLC) Home Energy Management (HEM) • Started w/Home Diagnostics ~ Blower Door/Duct Blaster • Expanded to: Insulation ~ Windows & Doors • USDA/Rural Development (loan & grant program) • Developers/ General Contractors~ Private & Federal • Idaho Power Utility Contract~ 175% to 250% OMB

9. Setting up “FEE FOR SERVICES” • Board Support and Approval • Meet the Mission of Organization • WZ Staff/ Administration Staff Buy In • Informed State Office (IDHW) • Created a Business Plan (with help)

10. Setting up “FEE FOR SERVICES” Help available to Develop Plan • SCORE (Senior Corp Of Retired Executives) is a non-profit association providing free counseling and low-cost workshops to small businesses throughout the United States. • The website hosts a “Business Toolbox” and on-line learning center that brings together the expertise of successful business owners. http://www.score.org

11. Setting up “FEE FOR SERVICES” Help available to Develop Plan • Small Business Administration Marketing Research http://www.sba.gov/starting_business/marketing/research.html Competitive Analysis http://www.sba.gov/starting_business/marketing/analysis.html

12. Before You Begin • Evaluate each of the following areas • State Office Involvement • Financial Needs • Location • Market • Customer Payment • Organization’s Accounting Capabilities

13. Financial Considerations Capitalization requirements include: • Pre-business planning and development (who pays for it) • Equipment, facilities, tools, vehicles, and other start-up “assets” • Employees, inventories, and supplies for business operation • Cash (“working capital”) to cover inventories, payrolls, and operating costs until profits accumulate

14. How Will Your Business Be Organized and Managed? • Sole Proprietorship • Partnership • Joint Venture • Corporation, Subchapter S Corporation, Tribally-chartered Corporation • Limited Liability Corporation • Limited Liability Partnership • DBA of the parent not for profit • DBA of the subsidiary for profit

15. Legal and Financial Steps for HEM • Received Board Resolution to create For-Profit dba – Home Energy Management (HEM) • Created the HEM Board of Directors • Received Board Resolution for Zero Interest Loan to HEM from Agencies non-federal cash account • HEM had signed Promissory Note for Loan & Operating Agreement • HEM applied with State of Idaho for Articles of Organization as LLC

16. Legal and Financial Steps (cont.) • HEM applied for Employer Identification Number • HEM applied for an Idaho Income Tax Withholding Account Number • HEM purchased General Liability & Workers Compensation Insurance • HEM applied for Building Contracting Licenses with Bureau of Occupational Licenses • Worked w/Agency Auditor for Financial Compliance

17. Legal and Financial Steps (cont.) • Agency set up Commercial Lease Agreement for office space, utilities, furnishings and office equipment • Set up HEM Accounting Procedures • Purchased accounting software (Quick Books Professional) • Purchased Diagnostic Equipment

18. Legal and Financial Steps (cont.) • Generated cost basis for equipment leasing with DOE and Agency owned equipment • Purchased cell phones and service • Set up new accounts with material suppliers • Competition with other contractors (perception)

19. Bids, Profits and Benefits • Bid projects timely • Bid projects to cover all cost and allow profit % • Win some – Lose some • Profits create additional income for Agency • Provides resources not allowed by other programs (building add-on) • Sustains employees and increases moral • Increases community awareness • Ultimate goal to have agency become: Become Self Sufficient & “Pay Taxes”