Anti-Deficiency Act Violation Involving the District of Columbia Health and Hospitals Public Benefit Corporation, B-285725, September 29, 2000

B-285725 Sep 29, 2000 Jump To VIEW DECISION RELATED PAGES GAO CONTACTS Highlights Your request was prompted by published news reports that the PBC had drawn $60 million in unbudgeted cash from the District of Columbia General Fund. Such amounts are unlikely to be repaid. The "advances" to PBC are in addition to the line item amount of the transfer to PBC from the District's General Fund pursuant to the District's appropriation act. What the District has characterized as "loans" or "advances" to the PBC are in fact payments made on behalf of the PBC from the District of Columbia General Fund. Which have turned out to exceed the resources that PBC actually had available. These disbursements from the General Fund to cover services provided by the Hospital should have been obligated against. View Decision Matter of: Anti-Deficiency Act Violation Involving the District of Columbia Health and Hospitals Public Benefit Corporation File: B-285725 Date: September 29, 2000 The Honorable Ernest J. Istook, Jr. Chairman, Subcommittee on the District of Columbia Committee on Appropriations House of Representatives Dear Mr. Chairman: This responds to your letter asking whether there has been any violations of the Antideficiency Act by the District of Columbia Health and Hospitals Public Benefit Corporation (PBC) or the District of Columbia government. Your request was prompted by published news reports that the PBC had drawn $60 million in unbudgeted cash from the District of Columbia General Fund. As part of our review, we requested the views of the District of Columbia's Chief Financial Officer (CFO) and the District of Columbia's Corporation Counsel to a number of questions raised by your inquiry. We received their joint response by letter dated July 24, 2000 (D.C. submission). We also obtained the views of the PBC's General Counsel by letter dated August 16, 2000 (PBC submission). Your request raises two substantive issues: 1. Did the PBC violate the Antideficiency Act in fiscal years 1997 through 2000 by obligating more than the Congress appropriated for those fiscal years? 2. Did the PBC and the District of Columbia violate the Antideficiency Act in fiscal years 1997 through 2000 by using the District of Columbia General Fund to pay PBC liabilities during those fiscal years in excess of the resources PBC ultimately realized? For the reasons discussed below and in greater detail in the enclosed analysis, we conclude that, for fiscal years 1997 through 2000, (1) the PBC violated the Antideficiency Act by obligating more than the Congress appropriated, and (2) the PBC and the District of Columbia violated the Antideficiency Act by using the District of Columbia General Fund to pay PBC liabilities in excess of the resources PBC ultimately realized. Prior to the establishment of the PBC in 1997, the District paid the liabilities of DC General Hospital (the predecessor to the PBC) from the General Fund. To the extent payments exceeded resources available to the Hospital, the District and the Hospital treated the excess payments as "loans" for accounting purposes. By the end of fiscal year 1994 the amount of the "loans" exceeded $85 million. As of September 30, 1994, the District of Columbia accounted for the $85 million in "loans" as uncollectible in an allowance account. Thereafter, the District wrote off the uncollectible "loans" without obligating the full "loan" amount against an appropriation account. Following the District's establishment of the PBC in 1997, the District has "advanced" cash to the PBC from the General Fund to pay PBC liabilities. As with the Hospital, the District has advanced amounts in excess of the amount annually appropriated to subsidize PBC operations for nonreimbursed services. The District states that it has made short-term advances to provide the PBC with cash until the PBC could convert receivables to cash and repay the District's General Fund. However, according to District officials, such amounts are unlikely to be repaid. Since the establishment of PBC in 1997, the District has made "advances" to PBC in the total amount /1/ of approximately $99,059,000 as follows: $58,000,000 during fiscal year 2000, $29,154,000 during fiscal year 1999 and $12,261,000 during fiscal year 1998. The "advances" to PBC are in addition to the line item amount of the transfer to PBC from the District's General Fund pursuant to the District's appropriation act. What the District has characterized as "loans" or "advances" to the PBC are in fact payments made on behalf of the PBC from the District of Columbia General Fund. The District used pooled cash to make these payments, which have turned out to exceed the resources that PBC actually had available.