SDHB faced insolvency before extra funding

The Southern District Health Board was approaching the legal limit of its overdraft and facing insolvency before it received extra Government funding, documents released under the Official Information Act reveal.

In January, Health Minster David Clark approved a request for $40.3million "equity support" for the SDHB, along with funds for three other DHBs in dire financial straits.

A November 30 Treasury report on the funding request released to the Otago Daily Times under the Official Information Act painted a bleak picture of the finances of the DHBs in question.

"Officials consider that the need is urgent for three DHBS: Southern, Tairawhiti and Wairarapa, which are currently at or close to the legislative limits of their overdraft facilities," the report said.

"Without equity support to restore working capital these DHBs would become insolvent.

"A range of actions are needed to help improve their position and track progress on key financial metrics."

The report said the SDHB was $34.9million overdrawn in October last year, "with the balance deteriorating further in the next couple of days prior to receiving its December funding."

The full equity support request would clear the SHDB’s overdraft the report said.

The SDHB recorded a $21.4million deficit in 2017-18, against a budgeted $14million loss.

It has forecast a $22.39million deficit for 2018-19, although its financial position has improved somewhat in recent weeks thanks to it boosting revenue by exceeding elective surgery targets.

Dr Clark approved the $40.3million for the SDHB, along with $11million apiece for Tairawhiti and Wairarapa and $30million for Canterbury DHB.

However, Dr Clark also wrote to SDHB commissioner Kathy Grant to stress his expectation that the board would manage within its allocated funding.

The Treasury report said sector cash balances had become a serious problem, and that the Ministry of Health would undertake work with individual DHBs and across the sector to address the problem.

"Given the financial challenges facing many DHBs ... significant additional Government support will be required for the sector to maintain financial stability."

On Friday, Parliament’s health select committee released its report on its annual review of the SDHB.

The report noted its auditor’s assumption that the SDHB was a going concern was reliant on a letter of support from the Ministers of Health and Finance.

Major improvements to budgetary control and monitoring, asset management planning, IT control and contract management had been recommended, at the earliest reasonable opportunity.

"We heard that the DHB now expects that its year-end deficit to be in the millions: ‘somewhere in the late 20s, early 30s’," the report said.

"National members expressed concern that the Southern DHB is being asked to submit an annual plan with financial targets that it knows at the time the plan is approved cannot be achieved."