Oh, for crying out loud
John Dalli was minister of finance, and that’s why I am reluctant to believe that he said what is reported beneath, because it just doesn’t make any sense. If he did say it, I imagine there was the loud sound of muttering from the floor.
Ministries don’t pay their own bills. They don’t have cheque-books. They don’t have current accounts. Payments are made by the central government in representation of the state through the Treasury. And that’s why, whether you’ve billed the Ministry of Health or the Ministry of Transport, your cheque comes in a white window envelope clearly marked It-Tezor.
Every year in November, ministries are allocated budgets, which they spend as they see fit. But as John Dalli knows, this doesn’t translate into real, actual flus kontanti in a current account, which they can draw upon to pay for the things they’ve bought. So John Dalli isn’t negotiating with the finance ministry for the money to pay for all those medicines the health department has bought. No. He’s negotiating for the budget to do so.
And even that is meaningless anyway, because the ministry doesn’t physically pay its own bills. All government payments go through the central clearing-house that is the Treasury. The way it works is this: an official at the ministry authorises an invoice for payment and sends all the relevant documentation through to the Treasury, which releases the cheques. Of course, the ministry is expected to stay within its budget allocation for the year, but if it runs over budget, this does not mean that it can’t pay because it doesn’t have the money. The entity doing the paying is the government, not the ministry as such, and just because the ministry doesn’t have the budget it doesn’t mean that the government doesn’t has the money.
If those who are owed the money decide to sue, it is the government of Malta they have to sue, and the excuse that the health department’s budget ran out won’t hold up in court. Let’s put it this way: if you sell a whole load of paper to the print department of a large company, and the print department tells you that it can’t authorise payment because it has over-run its budget, what do you do? You sue the company, not its print department, because the company is the client and the company has money in the bank, even if its print department has over-spent.
The minister of health doesn’t need to negotiate with the minister of finance for the money to pay for these medicines. The minister of health shouldn’t even be getting involved in the payment of medicine bills. The buying of medicines and paying for them is routine practice, and should be dealt with entirely by the civil servants at the health department, together with the other civil servants at the Treasury. God forbid we should be going back to the days when cabinet ministers behaved as though they were running things personally, managing payments and sorting out bills and invoices. OK, so this is a mess and it has to be sorted out, and sorting it out appears to require the direct intervention of a minister because the days when civil servants took care of these things is apparently long gone. But for heaven’s sake, no heroics and no behaving as though it’s the health ministry that’s settling what’s owed rather than the central government through the Treasury.
Let’s be realistic. There’s obviously a cash-flow problem here, not for the health ministry but for the central government, which can’t afford to let go of EUR30 million all at once right now. So it is not allowing the health department to authorise payment of those invoices. The minister of health needs to talk to the minister of finance, yes – not to ‘negotiate for the money to pay the bills’ but to lay down a schedule by means of which his civil servants may stagger authorisation for payment with the Treasury.
And let’s stop all this silly talk. Does the government have the money to pay those bills? Obviously, it does, yes. Can it afford to pay those bills now? Apparently not. Can payments be staggered? Yes, because a staggered payment is better than a bad debt. So as the minister, who is an accountant, knows, the only way out of this mess is the same way used by companies with large debts and a cash-flow problem: get your creditors round a table with your financial controller and thrash out a payment schedule. The blame-game doesn’t work in this case, just as it wouldn’t work if creditors hammering at the door of a private company were to be told by the manager, “Oh gosh, I’m sorry, but the financial controller won’t give me the money to pay you.” Come on now.
The Times, Wednesday, 21 January
Dalli ‘negotiating’ on money to pay for medicine
Medicine importers owed €30 million in arrears can blame the Finance Ministry for not issuing the money due for medicines bought last year, Social Policy Minister John Dalli said yesterday. “The Finance Ministry is the stopper here – we are negotiating with the Ministry to give us the money,” he said.
Interviewed yesterday during a di-ve.com business breakfast, Mr Dalli said his ministry did not have any money to pay the pharmaceutical importers: “I don’t have a mint.”
8 Comments Comment
Reply to Leo Said Click here to cancel reply
This only means one thing, that the government does not have any money at all, or all the money is allocated to other purchases or projects already. If this money was allocated, then ‘negotiate’ was the right word used. ‘Negotiate’ to transfer some money from other projects, to these over-due payments (not actual money). On the other hand, if the government has no money at all, then we have a huge problem. When private companies are in the latter position, then they either borrow money, which is getting more difficult every day, sell some of their assets, cut other costs or file for bankruptcy. I think someone here should put their hand up and let these suppliers know what the real situation is, and draw up a plan. At least they are owed that.
In my view there is some misreporting here. Whether Dalli said or meant to say he is negotiating with the Finance Ministry to give him more “money” or more “budget”. The point at issue is not whether he pays in “flus kontanti” . The point is the government adds for example free Herceptin, but does not add budget to buy it. Admittedly there is also significant wastage in patients collecting ‘free’ medicines and not using them, and Dalli did dwell on the issue of entitlement.
What baffles me is that in reality the cash-flow shortfall is a mere Euro 15 million (Lm6.5million) and the debt period is cut from 180 days to 90 days. Eur 30 million would mean cash on delivery which is obviously not being requested.
The problem is that if the Government issues a purchase order to acquire goods/services, they must allocate the budget and tie it up with the relative PO.
Standard payment terms with government entities are always in the region of 60 – 90 days which is already a burden on suppliers.
[Daphne – Payment terms in the private sector are no different. I would say they’re worse. I have invoices outstanding for payment which are a year old this month.]
Daphne, I agree with you regards the private sector; I’m in the same situation.
Personally if I work with private companies whom in my view might be problematic in regards to settlement of pending invoices, I tend to allocate that extra charge within the workings prior to the issue of quotes/invoices. With Government departments it’s completely different especially since in their public tenders they write in bold ‘cheapest compliant offer will be given preference’ and they mean it even if it is at the expense of quality.
P.S. On another note, Daphne did you send your best wishes to Joseph for his birthday?
[Daphne – You mean he’s advertising his birthday? What is he – 35 again?]
@ Christian
[On the other hand, if the government has no money at all, then we have a huge problem.]
It is better to wake up late (as your good self has just done) than never.
[The point is the government adds for example free Herceptin, but does not add budget to buy it.]
@ david s
Where, and how, did government obtain Herceptin? Did government pay in “flus kontanti” for Herceptin?
The way it works is that for example government will purchase one million euros of Herceptin in 2009 without increasing the budget for the procurement of pharmaceuticals. So it will run out of budget in 2009 earlier than it did in 2008, which means the total outstanding as at 31st December 2009 will be even greater than Euro 30 million – and it gets worse every year, until election year when extra budget is allocated.
The same happens with projects etc, and this is what causes finances to go haywire in election year, to appease contractors. The problem is that government does not work on accrual accounting so we never have an exact figure for the budget deficit. All you do is defer payment to the following year.
@ David S
Indeed, flimkien kollox possibli.
p.s.: Did government procure Herceptin directly from foreign manufacturer?