Audit cites bad debts, operating loss for CHCC in 2013
The Commonwealth Healthcare Corp. incurred an operating loss of $5.6 million and a massive $14.7 million in bad debts in 2013, a report from the Office of the Public Auditor said.
The OPA released Tuesday its financial audit of the corporation, which showed the dismal performance of the medical institution.
“This means that CHCC may not have the resources to continue operating in the foreseeable future. Recurring and increasing losses and negative cash flows may create an unsustainable position for CHCC that may result in its inability to pay vendors, employees, and meet other essential operating costs,” OPA said.
According to the report, CHCC’s operating revenues and expenses amounted to $29.6 million and $35.2 million respectively, with an operating loss of $5.6 million for the year ending Sept. 30, 2013.
The corporation’s operating revenues and expenses amounted to $29.7 million and $34.1 million respectively, with an operating loss of $4.4 million for the year ending Sept. 30, 2012.
The OPA report further said that CHCC’s net position decreased significantly due to bad debts of $14.7 million.
According to www.investopedia.com, a bad debt is a “debt that is not collectible and therefore worthless to the creditor. Bad debt is also usually a product of the debtor going into bankruptcy or where the additional cost of pursuing the debt is more than the amount the creditor could collect.”
For both fiscal years 2012 and 2013, CHCC has not recorded accumulated capital assets; however, it incurred machinery and equipment expense of $1.3 million, which will eventually be recorded as fixed assets, net of depreciation.
CHCC had total assets of $19.24 million and $16.64 million as of Sept. 30, 2013, and 2012, respectively, composed of cash, receivables, due from CNMI, and inventories. CHCC’s total liabilities as of Sept. 30, 2013, and 2012 were $20.9 million and $16.4 million respectively.
CHCC, meanwhile, has vowed to address its financial woes and other concerns, and one concrete step for it to take is hire a chief financial officer.
CHCC chief executive officer Esther Muña recently said they are looking to hire an individual who is a former finance chief of a hospital. She did not give further details.
The corporation earlier inked a financial management contract with the Pacific Health Officer Association, or PIHOA, to help with the corporation’s finances.
Muña said they are also looking for a controller to help with the more detailed operations of the hospital such as account payables, working with financial auditors, and assisting the finance chief.
As of now, Cora Ada is the acting CFO.