Total $551,764 $537, , ,065

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Marlene Beasley
8 years ago
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1 Introduction As I have indicated in previous reports to the House of Assembly, Government s systems for recording, reporting and controlling accounts receivable do not always provide timely and accurate information to users. As a result, Government does not know how much money is owed to it at any given point in time. The general exception is the amount owed as of the 31 March of each year which is determined subsequent to year end in order to prepare the financial statements of the Province. Government anticipates that this problem will be addressed with the implementation of its new accounting system. I note that Government introduced the accounts receivable function of its new accounting system in May 1999 and between May and October 1999 the accounts receivable function was implemented in 12 of the 15 departments. Our review of Government departments also indicates that a significant portion of their accounts receivable are in arrears and that their cash management program, which includes the collection of these accounts, is not adequate. Figure 1 Figure 1 provides information on amounts owed to Government for each of the seven years to 31 March 1999 along with the amount that Government considers to be uncollectible and amounts written off. These amounts owed include accounts and taxes receivable, as well as loans, advances and mortgages receivable. Accounts, Taxes, Loans, Advances and Mortgages Receivable Years Ended 31 March Total Total Receivables $531,265 $544,156 $551,764 $537,153 $474,797 $461,612 $471,466 Less: s Considered to be Uncollectible 242, , , , , , ,344 Net Receivables $288,785 $288,591 $272,699 $257,229 $259,587 $249,780 $229,122 s Written-off $80,022 $14,242 $5,398 $20,790 $69,877 $7,972 $1,855 $200,156 Source: Financial Statements Auditor General of Newfoundland 75

The general exception is the amount owed as of the 31 March of each year which is determined subsequent to year end in order to prepare the financial statements of the Province.

2 Scope and Objectives We reviewed the amounts owed to Government as at 31 March 1999 to determine whether they are collected on a timely basis. Conclusion In addition to not collecting amounts owed to it on a timely basis, Government has written off significant amounts owed to it. Findings and Recommendation Figure 2 provides details on the $471.5 million owed to Government as of 31 March 1999: Figure 2 s owed to Government 31 March 1999 Type of Receivable Balance Outstanding in Excess of One Year Considered Doubtful of Collection Crown Agencies (Note 1) $224,187 $26,050 $131,122 Taxes receivable 121,062 51,303 48,246 Commercial loans 31,656 19,527 28,240 Miscellaneous receivables 41,373 10,970 4,891 Court fines 23,114 17,235 11,255 Social Assistance overpayments 26,887 22,635 17,312 Other 3, ,278 Total $471,466 $148,110 $242,344 Note 1 Of the $224.2 million relating to Crown Agencies, $134.5 million relates to Enterprise Newfoundland and Labrador Corporation, the Fisheries Loan Board of Newfoundland and the Farm Development Loan Board. The amount owed to these entities for loans made is $47.8 million in arrears. Also, of the $224.2 million, $31.3 million is owed by the Newfoundland Industrial Development Corporation on a long-term basis with no specific repayment date. 76 Auditor General of Newfoundland

Findings and Recommendation Figure 2 provides details on the $471.

3 Our review of the amount owed to Government indicated the following: Government s average cost of borrowing in the capital market for the year ended 31 March 1999 was 5.99%. If Government had collected the $148.1 million outstanding for more than one year and the $47.8 million in arrears with the lending entities and used these funds to retire debt or to reduce current borrowing, annualized savings on debt servicing could have exceeded $11.7 million. Figure 3 During the last seven years Government has written off $200 million in accounts receivable owed to it as follows: Accounts and Loans Receivable Written Off 1993 to 1999 Entity Baie Verte Mines Inc. $47,551 Newfoundland Industrial Development Corporation 29,229 Newfoundland Enviroponics Limited 15,252 Newco Corporations 15,361 Enterprise Newfoundland and Labrador 10,894 Newfoundland Dockyard 8,065 Ocean Harvesters Limited 6,649 Cape Pine Fisheries Ltd. 6,466 Fisheries Loan Board of Newfoundland 4,421 Miscellaneous Loans and Mortgages Forgiven which are less than $300,000 individually 4,097 Court Fines 3,938 St. Lawrence Fluorspar Limited 3,919 Fisheries Loans 3,849 Social Assistance Overpayments 3,802 Notre Dame Bay Fisheries 3,762 Universal Group of Companies 3,504 Department of Health 3,339 Auditor General of Newfoundland 77

8 million in arrears with the lending entities and used these funds to retire debt or to reduce current borrowing, annualized savings on debt servicing could have exceeded $11.7 million.

4 Figure 3 (cont d) Entity Harbour Grace Fishing Company Limited 2,368 Oceana Seafood Processors Limited 2,175 St. Clares Mercy Hospital 1,993 Other Government Departments - Accounts Written Off 1,645 Superior Seafoods Limited 1,567 St. John s Metropolitan Area Board 1,475 Governor s Park Limited 1,428 Great Northern Seafoods Limited 1,414 Petty Harbour Fishermen s Producer s Co-operative Society Limited 1,316 Blue Ocean Products Limited 1,314 Gander Masonic Memorial Complex 1,240 Reid s Products Limited 931 Petty Harbour Fisheries Ltd. 926 Belle Isle Seafoods Ltd. 799 S.T. Jones and Son Limited 795 White s Fisheries Limited 770 Department of Natural Resources 667 Island Tile and Slate 513 Nordco Limited 478 Department of Fisheries 469 Reg Petten 465 Sop s Arm Fisheries (1988) Limited 341 Ocean Kist Products (1970) Ltd. 338 Department of Works, Services and Transportation 316 Trouty Seafoods Limited 315 Total $200, Auditor General of Newfoundland

John s Metropolitan Area Board 1,475 Governor s Park Limited 1,428 Great Northern Seafoods Limited 1,414 Petty Harbour Fishermen s Producer s Co-operative Society Limited 1,316 Blue Ocean Products

5 In addition to the $200.2 million, during the years 1993 to 1999 the Province wrote off $11.3 million in tax forgiveness and $19.5 million in tax remissions. As at 31 March 1999, Government anticipated that $242.3 million or 51.4% of the $471.5 million amount owed to it will likely not be collected. Prior to May 1999 there was no Government-wide system to record, control and collect total amounts owed to Government. Departmental systems ranged from manual year-end listings and other manual records, to computerized systems and there was little consistency among those systems. In May 1999 Government introduced the accounts receivable function of its new accounting system. Government anticipates that this system will address the concerns relating to its system of recording, controlling and monitoring accounts receivable. I am pleased to report that during the period May to October 1999, the new accounts receivable system was implemented in 12 of the 15 departments of Government. Recommendations Accounts receivable should be collected on a timely basis. Government should continue to implement its new accounts receivable system so that it can ensure that all amounts owing to it are properly recorded, controlled, monitored and collected on a timely basis. Treasury Board Secretariat s Response I agree with your recommendations. The departments are responsible for the timely collection of accounts receivable and the related management of their accounts. The Treasury Board Secretariat has been active in encouraging improvements in collections and related activities of the departments by sponsoring information sessions, analysis and feedback with respect to write-off requests, routine interaction with departments and provision of advice when requested, etc. Several months ago, a committee was established to focus on governmentwide matters related to collections. The committee has representation from the line departments and, as resources are available, will work towards improvements in policies and procedures identified for review. As you had noted, a government-wide accounts receivable system has been implemented to facilitate the management of accounts receivable. The system will be installed in the remaining departments. Auditor General of Newfoundland 79

Prior to May 1999 there was no Government-wide system to record, control and collect total amounts owed to Government.

Collecting Amounts Owed To Government Departments

Collecting Amounts Owed To Government Departments Introduction In previous reports to the House of Assembly, my Office has indicated that Government needs to significantly improve on its collections of amounts owed to it. Government s financial information