It should be recognized there is no one common treatment of Health Authorities in the Provinces' and Territories' financial statements. In a recent cross Canada survey of reporting entities by the Comptroller General of British Columbia, it is reported only two jurisdictions currently include Health Authorities in their financial statements. It is also reported to be currently under review in other jurisdictions.
The Canadian Institute of Chartered Accountants has authorized the Public Sector Accounting Board (PSAB) to issue guidance with respect to auditing and accounting matters in the public sector, in order to serve the public interest by strengthening and harmonizing financial reporting, accounting and auditing in the public sector. We have used PSAB as the primary authoritative voice on public sector matters.
In June 1996 PSAB published two pertinent and directive sections in its PSAB Handbook.
These are:
Given the substantial government funding of New Brunswick 's hospital corporations operations, it can clearly be determined the Regional Hospital Corporations are not government business enterprises.
The PSAB Handbook goes on to give guidance with respect to accountability, and ownership or control.
Control
"Evidence of control may be found in legislative provisions including regulations and bylaws, that provide the government with the authority to:
"A government may choose not to exercise its authority or actively participate in the implementation of its policies; nevertheless, control exists by virtue of the government's ability to do so. Further, a government does not need to manage the organization's activities on a day-to-day basis to control the organization. It is the government's existing authority to determine the policies governing those activities that constitutes control".
Ownership
It should be noted for clarification that a government entity must be accountable to, and either owned or controlled by, the government in order to be required to be included in the government's financial reporting.
A) In support of government organizations being answerable for demonstrating compliance with funding arrangements.
(a) maintain books, accounts and accounting systems and perform audits in accordance with the regulations,
(b) operate within the budget approved by the Minister under the Hospital Services Act,
submit an annual report, including a financial statement in such form and containing such information as may be required by the Auditor General and an auditor's report on the financial statement, to the Minister on or before the thirty-first day of July in each year for the proceeding fiscal year, and..."
(a) any one or more hospital corporations or hospital facilities,
(b) any one or more classes of hospital corporations or hospital facilities".
19(2) "The budget of an approved hospital corporation shall indicate, as nearly as may be calculated, the estimated cost of providing services".
19(3) "The Minister may at any time require an approved hospital corporation to furnish further statements, reports and other evidence relating to the operation of the hospital corporation and every hospital corporation shall comply with such requirements as may be prescribed by the Minister".
20. The Minister shall
(a) "approve a budget for each approved hospital corporation;
1. The Hospital Act states
The Minister may make an approval given by the Minister under this Act or the regulations subject to such terms and conditions as the Minister considers appropriate".
(b) Section 35(1) goes on to state "The Lieutenant-Governor in Council may make regulations...
3. Hospital Services Act Regulation 19(3) says "The Minister may at any time require an approved hospital corporation to furnish further statements, reports and other evidence relating to the operation of the hospital corporation and every hospital corporation shall comply with such requirements as may be prescribed by the Minister".
(A) In support of the government having the authority to determine the revenue-raising, expenditure and resource allocation policies of the Regional Hospital Corporations.
(b) Limits the services to be provided by a hospital corporation. Section 17 states "A hospital corporation shall not deliver a hospital service without the prior written approval of the Minister".
In addition section 9(1) states "The Lieutenant-Governor in Council may make such regulations as may be deemed necessary for the following purposes:
(a) establishing a hospital services plan".
3. The Hospital Services Act Regulations, section 20, states the Minister shall "approve a budget for each approved hospital corporation".
Given the above, the Province has the ability to control who establishes and operates a hospital corporation, the services provided by that hospital corporation, the establishment of a health service plan, the budget for the hospital corporation and the amounts to be paid to hospital corporations.
(B) In support of general control
The Public Sector Accounting Handbook per 1300.14 states "A government controls an organization when, without requiring the consent of others or changing existing legislation, it has the authority to determine the financial and operating policies of that organization". The PSAB Handbook goes on to say in 1300.15 "A government may choose not to exercise its authority or actively participate in the implementation of its policies; nevertheless, control exists by virtue of the government's ability to do so. Furthermore, a government does not need to manage the organization's activities on a day-to-day basis to control the organization".
(i) is not functioning effectively, or
This section clearly gives the government the authority to replace a board of trustees.
(b) Section 14(3) states "Hospital corporation by-laws have no force or effect until they are approved by the Minister". Clearly then, all Regional Hospital Corporations by-laws have no effect until approved by the Minister.
(c) Section 35(2) states "The Lieutenant-Governor in Council may declare, for such time or times as the Lieutenant-Governor in Council considers appropriate, all or any of the regulations to be in force with respect only to:
(a) any one or more hospital corporations or hospital facilities,
Section II(b)
Terms of Reference
"To provide a recommendation about the accounting treatment of Regional Hospital Corporations in the Province's financial statements".
Background
In researching the topic we have referred to the Public Sector Accounting Handbook (PSAB Handbook), the Hospital Act and its regulations, the Hospital Services Act and its Regulations, Hospital Corporations' financial statements and various correspondence.
The PSAB Handbook defines a government business enterprise as "an organization having all the following characteristics", including "it can, in the normal course of its operations, maintain its operations and meet its liabilities from sources outside the government reporting entity"
Accountability
Regarding accountability, paragraph 1300.09 states: "Evidence of accountability may be embodied in legislative provisions that require a government organization to answer for how it discharged its responsibilities. Government organizations are not only answerable for demonstrating compliance with funding arrangements, or government regulations, but also for management's overall actions, operations and administration".
Regarding control, paragraphs 1300.14 and 1300.15 state: "A government controls an organization when, without requiring the consent of others or changing existing legislative provisions, it has the authority to determine the financial and operating policies of that organization. The authority of a government to determine the financial and operating policies of an organization allows it to establish the fundamental basis for the conduct of the organization's financial affairs, as well as the deployment of its resources".
(a) determine the revenue-raising, expenditure and resource allocation policies of the organization; or
(b) appoint a majority of the organization's governing board or its senior management".
Lastly, regarding ownership, paragraphs 1300.11 to 1300.13 state "A government owns an organization when it has created or acquired the organization and, directly or indirectly, holds:
(a) a majority of the organization's shares carrying the right to appoint at least a majority of the members of the board of directors; or
(b) the organization's assets such that the government has an ongoing right to access them".Scope of Review Procedures
In order to determine whether the Province's financial statements should include the Hospital Corporations, we reviewed the Hospital Act and its Regulations, and the Hospital Services Act and its Regulations to ascertain whether the Hospital Corporations are accountable to the Province and either controlled or owned by the Province.Analysis and Conclusions
(I) Accountability
We have determined the Regional Hospital Corporations are accountable to the Province and provide the following in support of our position.
1. The Hospital Act states
(a) Per Section 25(2)
"A hospital corporation shall
(b) Per Section 35(1)(u)
"The Lieutenant-Governor in Council may make regulations... respecting books, accounts and accounting systems to be maintained and the audits to be performed by hospital corporations".
(c) Per section 35(2)
"The Lieutenant-Governor in Council may declare, for such time or times as the Lieutenant-Governor in Council considers appropriate, all or any of the regulations to be in force with respect only to:
2. The Hospital Services Act states
Per Section 4(h) "The Minister may take such steps as he deems necessary for the following purposes... to determine the amounts to be paid to hospital corporations and to pay hospital corporations for entitled services provided to persons under the hospital services plan and to make retroactive adjustments with hospital corporations for underpayment or overpayment for entitled services according to the cost as determined in accordance with this Act and the regulations...".
3. New Brunswick Regulation 84-167 under the Hospital Services Act states
19(1) "To qualify for payments under the hospital services plan, an approved hospital corporation shall submit annually to the Minister on a prescribed form not later than the date prescribed by the Minister, a proposed annual budget for the hospital corporation for the ensuing fiscal year".
(b) set the rates for in-patient services for each hospital facility operated by an approved hospital corporation to be used for charging non-entitled persons for such services;
(c) set the rates for the direct charges required under section 13;
(d) set the rates for out-patient services; and
(e) notify each approved hospital corporation of the decision and set the date from which such decision shall be implemented".
(B) In support of government organizations being answerable for management's overall actions, operations and administration.
There are many sections of the Acts and Regulations which lend evidence to the above:
(a) Per sections 34(3) to 34(5) "The Minister may establish parameters and issue directions in relation to the planning, organization, management and delivery of hospital services by hospital corporations.
j) respecting the appointment, powers, privileges and duties of officers, chief executive officers, medical staff and other staff and employees of hospital corporations;
k) respecting the establishment, construction, alteration, operation, maintenance and repair of hospital facilities;
l) respecting equipment in hospital facilities;
m) respecting safety in hospital facilities;
n) respecting the classification and grading of hospital corporations and hospital facilities;
o) respecting standards for hospital facilities and hospital services;
p) respecting the inspection, control, government, management, conduct, operation and use of hospital facilities;
q) respecting the admission, care, conduct and discharge of patients or any class of patients;
r) respecting the classification of patients;
s) respecting records to be maintained for patients, including the contents of the records, the preparation, maintenance, storage, removal and destruction of the records and the confidentiality and disclosure of the records;
t) respecting additional records to be maintained, and reports and returns to be made by hospital corporations";
(c) Section 35(2) states "The Lieutenant-Governor in Council may declare, for such time or times as the Lieutenant-Governor in Council considers appropriate, all or any of the regulations to be in force with respect only to
(a) any one or more hospital corporations or hospital facilities,
(b) any one or more classes of hospital corporations or hospital facilities".
(II) Control
2. Hospital Act Regulation 48 says "The Minister may visit a hospital facility at any time for the purpose of an inspection or any inquiry regarding the physical plant, equipment and furnishings, operations or the general administration of the hospital facility".
We have determined the Regional Hospital Corporations are controlled by the Province and provide the following in support of our position:
1. The Hospital Act
(a) Limits who may establish and operate a hospital in the Province. Section 16(1) and 16(2) state "No person other than a hospital corporation shall establish, operate or maintain a hospital facility in the Province.
A hospital corporation shall not establish, operate or maintain a hospital facility without the prior written approval of the Minister".
2. The Hospital Services Act has the ability to determine the amounts paid to hospital corporations through section 4(h) which states "The Minister may take such steps as he deems necessary for the following purposes... to determine the amounts to be paid to hospital corporations and to pay hospital corporations for entitled services provided to persons under the hospital services plan and to make retroactive adjustments with hospital corporations for underpayment and overpayment for entitled services according to the cost as determined in accordance with this Act and the regulations".
1. The Hospital Act
(a) Section 29(1) of the Act states "The Lieutenant-Governor in Council may appoint a trustee to whom and in whom shall be transferred and vested on the appointment, without further action, all rights, powers, duties and responsibilities of the board of trustees of a hospital corporation for such period as the Lieutenant-Governor in Council considers fit, if, in the opinion of the Minister, the board of trustees
(ii) fails to comply or to ensure that the hospital corporation complies with any provision of this Act or the regulations, or with parameters established or directions issued by the Minister, within the period of time specified by the Minister at the time the Minister notifies the board of trustees of the requirement to comply".
(b) any one or more classes of hospital corporations or hospital facilities".
(III) Ownership
2. Hospital Services Act
Section 4(h) states " The Minister may take such steps as he deems necessary for the following purposes... to determine the amounts to be paid to hospital corporations and to pay hospital corporations for entitled services provided to persons under the hospital services plan and to make retroactive adjustments with hospital corporations for underpayment and overpayment for entitled services according to the cost as determined in accordance with this Act and the regulations".
Because we have determined the Province has control over the Regional Hospital Corporations, and because the PSAB Handbook requires a government to only own or control, it was not necessary to continue and review ownership issues.
Summary
In summary, we conclude the Regional Hospital Corporations have significant accountability to the Province on a wide variety of financial and managerial matters. We also conclude the Province has the authority to exercise ultimate control over any Regional Hospital Corporation, particularly given the very broad circumstances available to the Lieutenant-Governor in Council in appointing a trustee to replace a board of trustees.Recommendations
We recommend the Regional Hospital Corporations be consolidated in the Province's financial statements in accordance with the Public Sector Accounting Handbook. Our recommendation is based solely on accounting principles and does not attempt to deal with issues such as governance, behaviour, or other matters.
