McKay Healthcare situation concerns auditor

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SOAP LAKE — Auditors from the Washington Auditor’s Office urged officials at McKay Healthcare and Rehabilitation to reduce their reliance on interest-bearing warrants in an audit report issued Monday.

McKay officials said they are working on it, and had made progress toward getting out of debt. The report expressed concern, however, that the district was using warrants to pay operating costs.

The report covered operations for 2016-17, and as of the end of December 2018 McKay owed $215,118 in interest-bearing warrants. “However, as of May 2019, the registered warrant balance increased to $352,649,” the report said.

Interest-bearing warrants are issued by a county when a qualifying public entity doesn’t have enough cash on hand to meet expenses. The warrants are paid back with interest.

In their response, McKay officials said the district has been paying back its debt. “After 2015 McKay Healthcare has not relied on the use of additional registered warrants since the annual balance has declined each year.” Revenues exceeded expenses in 2016, 2017 and 2018, McKay officials wrote, and that has allowed them to pay down the balance by more than $1 million.

“As a result of actions taken under the (district’s) strategic plan, McKay Healthcare has reduced the registered warrant balance by 84 percent over the previous three years, despite the fact the state Medicaid rate grossly underfunds the cost of service provided to a majority of McKay’s residents,” they wrote.

In their reply, the auditors said the records show that while the district has made progress, it’s still relying on warrants. The district’s balance was about $140,00 higher in May 2019 than it was in December 2018, “demonstrating that additional warrants were used to cover daily operating costs. Further, registered warrant activity provided by the Grant County Treasurer’s Office showed the registered warrant balance decreasing to as low as $100,000 at certain points in 2018 but rising to nearly $500,000 multiple times throughout the year, again demonstrating that additional registered warrants were issued throughout the year to pay for operations.”

McKay officials acknowledged the district still is working to pay off its warrants. “However, the registered warrant balance during the audit period did not exceed the limit set by our county commissioners,” they wrote.

“While the county commissioners have set a limit for McKay Healthcare’s outstanding registered warrants balance, relying on registered warrants to pay for daily operating expenses is itself a concern,” the audit report said.

The auditor’s office will continue to check on the McKay’s warrant balance in subsequent audits, the report said.

Cheryl Schweizer can be reached via email at education@columbiabasinherald.com.

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