The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Public Hospitals Authority (PHA) is almost two years late in signing off on its audited financial statements, Tribune Business can reveal, and was running a $73.179 million accumulated deficit at year-end 2013.

The PHA’s financials for the year to June 30, 2013, were only signed off by the external auditors and the Board within the last several weeks, this newspaper understands, because they were essential to its current $25 million bond issue.

The private placement memorandum (PPM) for that issue, which has been obtained by Tribune Business, has ‘draft - subject to changes’ emblazoned across the PHA’s 2013 financial statements.

While the auditors’ statement is dated April 30, 2014, indicating the auditors had completed their work, no signatures from PHA Board members are visible on the financial accounts. Neither is the sign-off by the external auditors, Baker Tilly Gomez.

And a note attached to the PPM’s page 24 states: “The draft needs to be sent to Baker Tilly Gomez for their review and sign-off.”

Most Government corporations and agencies are given six months post financial year-end to file their financial statements, which means the PHA should have published and signed-off on its 2013 financial statements by the end of that year.

However, such deadlines appear to be routinely missed by government agencies and corporations.

And, even though it is 2015, the PHA produced no 20145 accounts - audited or management - to accompany the $25 million bond offering document, indicating that it is almost a year behind with these statements.

The 2013 accounts seen by Tribune Business reveal that the PHA remains dependent on government support for its financial health, with even the $200 million-plus ‘block grant’ received annually proving insufficient to cover its costs.

The ‘draft’ Baker Tilly Gomez report reveals that the PHA’s current solvency deficiency increased by 54.4 per cent year-over-year, although its accumulated deficit (total losses) remained relatively flat.

“Without qualifying our opinion, we draw attention to Note 21 to the financial statements, which indicates that as at June 30, 2013, the Authority’s current liabilities exceed its current assets by $28.77 million (2012: $18.628 million) and that it has an accumulated deficit of $73.18 million,” Baker Tilly Gomez noted.

“These conditions, along with other matters as set forth, indicate the existence of a material uncertainty which may cast significant doubt about the Authority’s ability to continue as a going concern without the continued financial support of the Government of the Bahamas.”

The financial statements, though, said they had been prepared on a ‘going concern’ basis because there was no suggestion that the Government would fail to support the PHA and cover its debts.

“It is the intention of the Government to continue to financially support the Authority as a going concern due to its role in the management of the Government-owned hospitals and delivery of health care,” the accounts said.

“The Authority continues to operate at a deficit, and financial support from the Government is essential for the continued operations of the Authority.”

The PHA’s current financial position further highlights the ongoing need for health system strengthening, and will raise questions about whether it will be able to cope with National Health Insurance (NHI) and the potential increase in patient numbers this will bring.

NHI will also introduce a major change in the way the PHA is financed, given that the reform model requires a shift from the current ‘block grant’ provided in the Government’s annual Budget to case-linked payments.

The PricewaterhouseCoopers (PwC) accounting firm, in its assessment of the NHI proposal, said: “The move to case-based payment would change the way the Public Hospitals Authority is funded for the services it delivers.

“Instead of the ‘block’ funding it currently receives to cover the costs of providing care, the PHA would receive payments under NHI associated with each case treated, which is intended to cover all expected costs from admission to discharge.

PwC warned that the switch to a new payment system would prove problematic for the PHA, as “none” of the foundations to facilitate the change - reliable information on costs, records and patient information systems - “exist within the PHA at this time”.

Proceeds from the $25 million bond offering will be used to repay the Royal Bank of Canada (RBC) construction loan, which financed the new Princess Margaret Hospital (PMH) Critical Care Block.

The first PHA bond issue, placed in late 2013 by RoyalFidelity, was oversubscribed by $3.3 million - raising $48.3 million, and exceeding the $45 million target.

The Series B bonds carry a 6 per cent interest coupon, and pay out to investors on a bi-annual basis, with the first payment set to be made on March 31, 2016.

The offer is set to close tomorrow, Friday, December 11. Investor subscriptions will be allocated on a ‘first come, first served’ basis, in a bid to generate investor demand, as the earlier they come in, the greater the chance they will receive 100 per cent of their requests.

Investor principal will be repaid in 18 equal annual instlaments, beginning on September 30 next year and carrying through to 2033.