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Huge forecast deficit fails to materialize, but red ink threat did provide backdrop for government’s cuts and privatization

A detailed analysis of the most recent audited financial statements for the Interior Health Authority shows the authority diverted $26.9 million into a special slush fund to pay for what it calls “termination” costs linked to the Liberals’ radical plan of health care cuts and privatization.

And that same review by the Hospital Employees’ Union (CUPE) shows that far from drowning in a sea of red ink, as top IHA brass had forecast last April when the provincial government rolled out their tough prescription for health care restructuring, the authority actually amassed a significant profit when the slush fund transfers are taken into account.

Both these revelations are outlined in the IHA’s financial report for the fiscal year ending March 31, 2002.

“We’re shocked that such a significant amount of money has been diverted from patient care,” says HEU spokesperson Chris Allnutt. “How many small town hospitals could have been kept open if the money had been used for much needed health care services? Or how many seniors would have been able to stay in their homes?” he wonders.

HEU uncovered the slush fund transfers in the fine print of the audited statements. Note four of the report references an accrual of $18,080,000 to fund possible future termination costs, while note six reflects that a further $8.8 million has been diverted to pay the high cost of the service cuts and privatization. But the IHA’s less than transparent approach made no mention that the money was booked as an operating expense.

While other health authorities relied on the same accounting techniques to divert cash from patient care, the IHA’s $26.9 million fund - almost three per cent of its overall budget - was the largest anywhere in the province.

Meanwhile, Allnutt is also critical of how the authority inflated its budget deficit in time for Victoria’s April 23, 2002 restructuring announcement.

Around that time, top IHA officials made public documents forecasting a $17.3 million deficit for the 2001/2002 fiscal year - which had ended three weeks earlier.

In fact, B.C.’s six health regions raised the alarm about huge shortfalls totaling more than $140 million. These “cost pressures” provided a convenient backdrop when the Liberals rolled out their agenda of cuts, closures and privatization.

But, according to the audit, the actual reported IHA deficit was only $4.5 million before special charges. “And when you take the slush fund transfers into account,” says Allnutt, “the IHA actually rang up a sizeable profit of more than $22 million.

“It strikes us as being a little odd that top health bosses would be so far off the mark predicting year-end results. We have to wonder why they would paint such a gloomy picture when the real year-end numbers were so close at hand,” he says.

Province-wide, some $75 million was transferred into worker termination funds to pay part of future severance costs, which the government estimates could run as high as $225 million. Ironically, says Allnutt, Victoria admits that all it can save from its radical privatization agenda is $70 million.

“There are a lot of unanswered questions raised about the health care budget process for the current fiscal year and in the future,” Allnutt says. “In an era of Enron-style accounting problems, we hope that B.C.’s health ministers - including Sindi Hawkins - will press the authorities to be more open, transparent and accountable.”

For a copy of HEU’s restated analysis of financial statements for the IHA and other health authorities go to http://www.heu.org/health_authority_deficits-12-30-02.doc


Stephen Howard, communications director, 604-456-7037