THE Auditor General’s Department says an increase in the time it is taking the National Health Fund (NHF) to pay its creditors has serious implications for its credit relations.

THE Auditor General’s Department says an increase in the time it is taking the National Health Fund (NHF) to pay its creditors has serious implications for its credit relations.

A report from the department, tabled in the House of Representatives Tuesday, stated that the Fund was taking an average 106 days to pay its creditors in 2015/16, compared to the 47 days in 2011/12.

“The increasing delay in payments to creditors coincided with the delays in NHF’s collection of receivables, thereby impacting its cash position,” according to the analytical financial review done by the auditor general.

“This has serious implications for credit relations between the NHF and its suppliers, and the ability of the NHF to maintain a consistent flow of pharmaceuticals to the pharmacies and other public health facilities,” the report added.

It said that the NHF’s accounts payable turnover exhibited a declining trend over the review period (2011/12 to 2015/16), which underscored the need to improve collections, given the adverse implications for NHF’s financial and operational performances.

“This significant fall-off in coverage [in 2015/16], when compared with 2011/12, underscored the increasing importance of the NHF collecting its receivables. Furthermore this fall-off in coverage could be a signal of future liquidity constraints, if current liabilities continue to rise at a faster rate than the fall in receivables, which is the NHF’s main source of cash.

However, the auditor general found that for the review period, the NHF maintained adequate short-term assets to cover its immediate liabilities, despite a decline in the level of coverage.

It said that the NHF was profitable over the review period, recording a net surplus in each of the five years of the review. Net income increased by $546.1 million, or 28.9 per cent, to $2.4 billion in 2015/16 relative to 2011/12, as the absolute value increase in total revenue of $3.8 billion outweighed the $3.2 billion for total expenses.

The Auditor General’s Department pointed out that the assessment was solely an analytical review of the audited financial statements of the NHF, and that no audit was done of the financial statements and disclosure.