The Yukon Hospital Corporation’s (YHC’s) finances were apparently so dire earlier this year it almost couldn’t properly pay staff.

As a solution, management bent the rules and took $7.3 million meant for a new mental wellness unit and put it toward keeping the doors open and staff paid, according to a recently released report by accounting firm Ernst & Young.

“We note that the YHC has been under financial strain, which has caused the use of unusual measures to stay financially viable,” the report reads.

The report identified a deficit at the YHC of $7.6 million at the end of the 2022-2023 fiscal year.

“YHC was facing a deficit and was at risk of not meeting payroll and operations obligations,” the report reads.

At the time, the Department of Health and Social Services was not informed of the shifting of funds from capital programs to operations. Department officials were aware of the YHC’s financial situation, however.

This report was commissioned by the Yukon government to identify why this happened, make recommendations, and, according to the report, “prevent this from happening in the future.”

The government released the report on Friday with an accompanying news release.

In the release, it does not directly address the $7.6 million funding shortfall, or the financial maneuvering used to overcome the deficit.

“The report highlights both strengths and challenges and offers concrete recommendations to strengthen governance, planning, budgeting and forecasting, and internal controls,” the news release reads.

It continues, saying the “review was necessitated by the evolving health care landscape in the Yukon, particularly the challenges and financial pressures intensified by the COVID-19 pandemic.”

Health Minister Tracy-Anne McPhee is quoted in the release saying the government is open to change, and will be acting on the recommendations of the report.

“Embracing the recommendations will help us transform to a better health system as we build our Yukon Health Authority to be patient-centred and serve the needs of all Yukoners,” McPhee is quoted as saying.

Despite McPhee’s stated reasoning for why the government commissioned the report, Ernst & Young make it clear the financial manoeuvring regarding the mental wellness unit is the reason the government had them prepare the report.

“This situation gave rise to this report,” reads an entry under “Recent use of capital funding for operational expenses.”

Asked what the government is doing to ensure the YHC is adequately funded, McPhee pointed out in an email to the Star that the government has provided an additional $17.11 million in this fall’s supplementary budget, as well as a one-time payment in October to offset the deficiency.

She also elaborated on the causes of the shortfall, saying inflation, increased costs for agency nurses and an ageing and growing population were to blame.

‘Chronic’ problems

The report was released after almost a month of calls by opposition party members to make it publicly available.

The Yukon Party had found out about the existence of the report — though not its contents — through an access-to-information request.

It also found out that Ernst & Young were hired through a sole-sourced contract justified by the urgency of getting to the bottom of the situation.

“We are happy to see it,” Yukon Party MLA Brad Cathers told the Star.

“It does provide further proof of what we have been seeing for years and emphasizing this fall, that the Liberal government is chronically underfunding the Yukon Hospital Corporation.”

Overall, the report says change is needed to address several ongoing problems that contributed to the situation.

“It is clear from the analysis that steps need to be taken collaboratively to address the YHC’s chronic cash flow and operating shortfall,” the report reads.

Cathers said this all shows that problems go beyond just this fiscal year, noting that Ernst & Young reviewed four years of YHC financials.

“The fact that they refer to it as chronic makes it clear this was not a one-year problem,” Cathers said. “This is an ongoing problem.”

Part of the ongoing nature of the YHC’s financial problems were hidden by COVID-era funding boosts of $4.3 million in 2021 and $5.8 million in 2022.

“COVID funding provided the necessary funds to continue to operate and meet demands on services; however, this also meant that the need to address any underlying structural deficit was obscured,” the report reads.

Cathers said this illustrates that underfunding is causing delays and shortfalls in services at the hospital, including increased wait times for surgeries and diagnostic testing.

NDP Leader Kate White called the report “damning” in its depiction of how the government works with the YHC.

“It really highlights the lack of communication between the hospital corporation and Health and Social Services.”

She also said it is “disappointing” that the hospital corporation had sent representatives to appear as witnesses in the legislature, but had failed to bring forward these issues.

“By their omissions, the testimony wasn’t the full picture,” White said.

Recommendations

Because the Yukon is currently seeking to transform the health system into a new health authority, the report says that all of the recommendations are made with that in mind.

A new health authority will also carry a larger budget, meaning larger risks to be managed.

The report’s recommendations focus on governance; planning, budgeting and forecasting; and internal controls.

On governance, it says the Yukon needs to have clearer funding agreements in place, with better plans and communication in the event of shortfalls.

The report calls for better planning in budgeting and better forecasting of future operational needs.

Finally, Ernst & Young recommend better internal accounting controls so they know exactly how much money is going to specific projects, and where those funds are coming from.