Since Riverside Health Care Facilities, Inc. was handed management of Rainycrest Home for the Aged by the province, the home’s finances have been brought under control, said Riverside’s CEO Wayne Woods and past chair Craig Sanders.
“In managing the home, we've managed to get things under control,” Sanders told representatives of district municipalities at a special meeting last Thursday night at La Place Rendez-Vous.
Shortly after being named interim manager of the home last March, Riverside ordered a financial audit of the home.
“We had to know what we were facing,” Woods remarked.
From the beginning of 2005 until March 18, when the Ministry of Health and Long-Term Care took control, Rainycrest had created a deficit of $256,000, he said.
But from March 18-Nov. 30, only a further $25,000 of debt was accrued, for a total of $281,000.
Woods said the final operating deficit for 2005 likely will be a little over $300,000.
“In the hospital, if you incur a deficit, the ministry says ‘tough.’ You have to make it up next year,” noted Woods. “I don’t know what’s going to happen with the $300,000.”
While Rainycrest remains in a deficit position, this would not have been the case were it not for the special circumstances the home was in over the last year.
For example, it owed $217,000 in retropay to the Ontario Nurses’ Association. Another $16,000 was spent on employee recruitment, as well as $22,000 for the financial audit.
“We would have had an $80,000 surplus, if you don’t count the one-time payouts that are not likely to recur,” Woods said. “In essence, we have swung the situation of Rainycrest right around from a deficit to a surplus.”
Sanders noted Rainycrest uses a different accounting system than Riverside, in accordance with ministry requirements.
Rainycrest, he said, uses modified accrual accounting while hospitals are required to use accrual accounting.
“If we spend money today but don’t pay it out for another six months, it shows up now, not when the cash goes out,” Sanders explained.
Although Rainycrest’s board of management knew it owed retropay to the ONA, the amount was not listed in its financial statements because the money had not yet come out of the account.
What modified accrual accounting also hides is the fact Rainycrest has a $1.1 million unfunded liability—the majority of which is made up of employee future benefits.
Rainycrest employees are allowed to accumulate unused sick leave and vacation time, as well as overtime and statutory holidays, which they are entitled to collect when they leave the home’s employment.
As of March 18, 2005, it is estimated roughly $870,519 has been accumulated in employee future payable benefits.
“You would have been more aware of the unfunded liabilities [with Riverside’s accounting methods,]” Sanders said.
“If the home had ceased operation on March 18, somebody—probably most of the people I’m looking at—would have been on the hook for that $1.1 million,” Woods remarked.
Riverside also has about $1 million in similar liabilities, but it is not unfunded. “We’ve got the cash to back it up,” Woods stressed.
Rainycrest, on the other hand, currently only has about $6,000 in its reserves.
“Somebody somewhere is eventually going to have to come up with a million dollars,” Sanders said, noting that is an issue to be negotiated between the municipalities and the province.
The ministry already has contributed about $500,000 to improving care at Rainycrest—paying for the services of Extendicare, a private health care company, to come in and help Riverside during the first two-three months of its interim administration.
Long-term debt aside, Woods said a preliminary budget has been drafted for Rainycrest for 2006, and said he expected the home could operate for a municipal levy increase of only one percent.
“When we set this budget, we set it pretty damn tight,” Woods remarked. “I’m trying to hold it to zero.”
Last year’s levy increase was about six percent while the 2004 hike was more than 12 percent—despite large transfers out of reserves. Without those transfers, the levy jump would have been more than 20 percent, Sanders noted.
The sharing of resources—such as payroll, purchasing, and accounting—between Riverside and Rainycrest has helped in the reduction in operating costs.
Although the financial outlook for Rainycrest in 2006 looks good, Sanders said there will be some one-time expenses, including a $35,000 fine from the Workplace Safety and Insurance Board on Ontario.
The home is being penalized for having a poor WSIB record.
“Part of the reason for a bad WSIB record is bad staff morale,” Sanders said.