Government misses out on millions more in bills
A number of government agencies, including the public hospital system and several ministries and portfolios, have missed out on the collection of tens of millions of dollars, meaning significantly more than $100 million due has not been placed in public coffers over the past decade.
The largest single issue identified by the Auditor General’s Office last week existed in the Health Services Authority, which, as of 2014, had written off bad debts totaling $65 million dollars.
Heading in to 2015, the health authority expected to have amassed nearly $70 million in further bad debts – meaning bills that had not been collected within a year. However, government accounts show that figure had not been discounted, and that collection efforts for at least part of that amount were still under way.
The auditor general’s office noted in its reviews of the government’s 2013/14 fiscal year that annual provisions for bad debts were running about $15 million per year since 2010.
“If the full provision is eventually written off, the Health Services Authority will have written off at least $120 million in receivables in the last nine to 10 years,” Acting Auditor General Garnet Harrison confirmed. “Ultimately, the financial performance and position of the Health Services Authority reflect the rising cost of providing healthcare and the challenges in collecting its revenues.”
The bad debt accumulation, at least in the public hospital service, is partly due to a decision not to take debtors to court.
In June, the Cayman Compass reported that government’s estimated unpaid hospital bills rose from an estimated $30 million in 2010 to what is expected to be $80 million by the end of the current budget year in June 2016.
The unpaid debts increased to their current levels following a government decision to “scale down” collection efforts by the Treasury Department’s debt collection unit, Financial Secretary Ken Jefferson confirmed.
“Perhaps as far back as 2010, a decision was made by the then-government that … the unit was told not to pursue the collection of debts through the courts,” Mr. Jefferson told the Legislative Assembly’s Finance Committee in June.
Mr. Jefferson said other efforts were being made to collect the amounts due. He said that could be in the form of telephone calls to the debtors and writing letters to them to remind them that they are due to pay the government. The government can, in certain cases, place a charge against a property for payment of a past-due medical bill. However, Mr. Jefferson acknowledged that some of the past-due debts – dating back 10 years or more – are likely a lost cause and government needs to do something about them.
The Health Services Authority is one of many government entities that auditors reported have encountered difficulties in collecting what was owed them.
For instance, the former Ministry of Finance and Development noted it had $3 million in “doubtful debts” out of a total $7.4 million it was due during 2014.
Auditors said those expenses also related to medical bills where certain payments were made to individuals who had to go overseas to obtain treatment. Why the payments were made via the Ministry of Finance and Development was not immediately clear.
Other ministries with outstanding bills included the Ministry of Education, which reported about $1 million outstanding receivables for the year, and the former Ministry of Planning, which wrote off $1.3 million in receivables during 2013/14 and which listed an additional $2.1 million in debts that had gone more than 90 days past due.
Auditors did not state what those amounts were specifically related to.
“We have raised concerns over the effective management of accounts receivable, the potential impact on cash flow and the risk of lost revenue to the government by not taking effective action,” Mr. Harrison’s report noted.
The government has identified debt collection as a medium-term priority in its evaluation of the Ernst & Young consultant’s report from 2014.
The government’s own evaluation in relation to the unpaid debts in the public hospital system indicated: “This position is not sustainable.” The government advocated addressing the health authority debts as a “high priority” via a system redesign to ensure bad debts do not continue to accumulate.
A similar debt collection program would be proposed throughout government if it was deemed necessary, the government’s response to the consultant report stated.