Despite debts piling up for healthcare patients, garbage collection fees and other public services for years, the Cayman Islands government has not been aggressive about collecting the millions it is owed.
In the more than six years since the Finance Ministry set a policy that it would not sue debtors to collect revenue owed, that policy has not been changed by successive administrations, according to government auditors.
Meanwhile, an August 2016 report by the Internal Audit Service found that in 21 percent of the cases it reviewed, initial demand letters seeking debt repayment were never issued by the government entity responsible – the Debt Recovery Unit.
When debt collection letters were issued, they stated the government could take legal action to force payment, even though the Ministry of Finance decided in April 2011 that it would no longer do so.
By last year, the Debt Recovery Unit was monitoring more than 1,800 accounts owed to government, according to the Internal Audit Service, with the largest three types of debts being overseas medical loans, garbage fees and travel [tourism] taxes. Those three areas account for $15.9 million in unpaid bills, about 90 percent of what the debt unit seeks to recover.
Overseas medical loans totaling $12.4 million represent the largest portion of the debts. They are often the most difficult to collect.
In 2014, then-Finance Minister Marco Archer sought Cabinet approval to write off more than $14 million from 662 debts that had accumulated. The proposal also sought to reinstate the policy of suing public debtors. When the August 2016 audit was completed, nearly $16 million was owed.
In practice, no one had been taken to court for nonpayment of debts since the 2011 directive, including for overdue hospital bills. In some instances, a lien was placed on debtors’ property by the Health Services Authority in an attempt to ensure repayment.
Internal auditors looked at a sample of loans for overseas medical expenses and found that in two-thirds of the cases examined, no security had been posted for the loan. Most of the loans were for significant amounts, including $436,329 between June and August 2007, a total of $166,370 between November 2008 and December 2010 and $101,753 in May 2013.
“The Debt Recovery Unit manager stated that she could not provide an explanation or justification for the failure to obtain securities prior to her employment,” auditors noted.
The May 2013 loan was granted for urgent treatment overseas. “When loans are extended after treatment, as often occurs, the Debt Recovery Unit is not able to demand that a charge be registered,” it was explained.
“Given the nature of this particular loan scheme, individuals often enter into the repayment plans under stressful circumstances and frequently do not follow up on the commitments made,” the Debt Recovery Unit noted in its response to the audit. “It is difficult to get these individuals to comply with the terms of the repayment agreement after treatment is received.”
Since the audit, the Debt Recovery Unit noted it has amended its loan documents, allowing government to place a charge on an individual’s property before an overseas medical loan is granted.
The non-collection of fees for garbage collection has been a problem for Cayman’s government for more than a decade. A response to a recent query by the Cayman Compass revealed that $8.9 million in unpaid trash fees have been amassed – with most of that viewed as being uncollectible.
Of the current outstanding balance, about $6.1 million relates to garbage collection charges owed before July 2010 when the government agreed to exempt home owners from paying for trash collection, according to figures provided by the Ministry of Health. Trash fees are still collected from businesses and condominium complexes.
The remaining unpaid balance, just under $2.8 million, is owed between mid-2011 and this year. That means the government is not collecting more than $460,000, on average, in garbage fees owed each year – about 18 percent of the full amount it is typically due.
Department of Environmental Health officials sent out a warning notice on Aug. 1 urging businesses and condo strata to pay their outstanding fees or lose their operating licenses.