Minister: Financial Assistance Increased By $7M+

Head 55 – Financial Assistance

Mr. Chairman, I now turn my attention to Head 55, the Department of Financial Assistance.

Mr. Chairman, the current account expenditure estimates for Head 55 the Department of Financial Assistance is found on pages B-276 to pages B-279 of the Estimates Book.

The mandate of the Department of Financial Assistance is to ensure that individuals with insufficient financial resources have access to services in order to gain, maintain, or regain a minimum standard of living while encouraging personal and economic independence.

Mr. Chairman, Head 55 has been allocated forty-six million nine hundred and forty-eight thousand dollars ($46.948M) for the continued provision of services during FY 2014/15.

This represents an increase of seven million four hundred and seventy-two thousand dollars ($7.472M) or 19% over the original budget of thirty-nine million four hundred and seventy-six thousand dollars (39.476M) in FY 2013/14 (page B-277).

Mr. Chairman, The Department of Financial Assistance (DFA) is responsible for assessing applicants for financial assistance and child day care allowance, and granting benefits and awards under the guidance of the Financial Assistance Act 2001; the Financial Assistance Regulations 2004; the Child Day Care Allowance Act 2008 and the Child Day Care Allowance Regulations 2008.

Mr. Chairman, For the benefit of Honourable Members and our listening audience, and with your indulgence, I will provide a brief synopsis of historical expenditures in the Department of Financial Assistance.

Figure 1 in my brief graphically illustrates that total actual expenditures have risen steadily over the last decade and more sharply within the last few years. Figure 1 shows that the total actual expenditure has increased dramatically from around $16 million in 2005/06 and is expected to reach almost $50 million in 2013/14.

Mr. Chairman, During 2005/07 the average number of persons on financial assistance was about 680. At that time, seniors and persons with disabilities accounted for approximately 75% of the overall financial assistance client base. Several factors contributed to the observed dramatic increases in overall expenditure.

First, the closure of the indigent clinic in 2007 caused an influx of over 400 persons, with the average number of persons on financial assistance rising to over 1,100; this is an approximate 60% increase. Second, the child day care allowance programme launched in October 2008 and increased expenditures by $3.4 million and the average number of persons on assistance to around 1,360, a 25% increase.

Mr. Chairman, in 2009 there was an increase in health insurance premiums due to launch of FutureCare. This caused the average number of persons on assistance to rise to almost 1,500 persons and the total expenditures approached $32 million per year.

Mr. Chairman, the impact of the economic downturn, especially with the evaporation of the much needed second job for many Bermudians, began to be felt in earnest in Bermuda in 2010/11 and the average number of persons on assistance reached 1,575 and larger numbers of able-bodied persons and persons on low earnings applied for financial assistance.

Numbers of seniors and persons with disabilities also increased, albeit at a slower rate. These trends continued throughout 2011/12, such that by 2012/13 the number of able-bodied persons and persons with disabilities had increased to 941, with the average number of persons on assistance exceeding 2,200 and the total expenditure climbing to $43 million per year. The wave was continuing to build.

Mr. Chairman, in FY 2013/14 spending by the Department of Financial Assistance has reached unprecedented levels, averaging $11 million to $12 million per quarter. Seniors and persons with disabilities now account for some 59% of the overall client base, whilst the numbers of able-bodied persons and persons with low earnings account for over 40% of all persons on financial assistance. The average numbers of persons on assistance and the total expenditure level are now at historic levels of about 2,680 persons and almost $50 million, respectively.

Mr. Chairman, these levels of assistance and expenditure are expected to remain high throughout 2014/15, even when amendments made to the Financial Assistance Regulations in 2011, 2012 and 2013 to effect cost cutting measures are taken into account. Although the previous legislative amendments resulted in reduced individual monthly financial assistance payments, the fact remains that more people than ever before are applying for and receiving financial assistance benefits. However, we will continue the trend of reduced allowances which started in 2011, during this fiscal year.

Mr. Chairman, the current level of financial assistance expenditure is unsustainable. For the past several years, the budget allocated to the Department of Financial Assistance has not been adequate to meet the demand for financial assistance benefits. The Ministry is constantly having to play catch-up and has again been forced to seek supplementary funding in this Honourable House during this Budget session in order to enable us to just meet the current demand for assistance I spoke about a moment ago.

Mr. Chairman, at present financial assistance workers are servicing a very high caseload, averaging 225 cases per worker. This number far exceeds the amount of cases in terms of best practice for similar agencies. Given the trend of increasing numbers of persons applying for financial assistance, it would not be surprising to see the average number of persons on assistance exceed 3,000 in FY 2014/15. This number of clients would mean an average caseload of 250 per worker, and would be unacceptable and unsustainable.

Mr. Chairman, returning to page B-277 of the Estimates Book, it is clear that the bulk of the financial assistance budget is placed in Cost Centre 65050 – Grant Administration, which is budgeted at slightly less than $44 million for 2014/15 (page B-277). This cost centre includes funding for the Child Day Care Allowance Programme and the Financial Assistance Programme and also includes funding for organizational grant recipients who include: the Salvation Army, Care of the Blind; Meals on Wheels, Summerhaven, Matilda Smith Williams, STAR, Teen Haven, and Packwood Rest Home.

Mr. Chairman, in addition to assistance provided for rest or nursing home care, the Department also supports family members who qualify to enable their senior relative to remain in the household. This assistance, while cost effective to Government, provides a much needed boost for seniors to spend time with their families, and to remain in the households of their loved ones. This benefit is called Home Care Allowance and is at a cost of $2,000 monthly.

Mr. Chairman, as the majority of the clients serviced through the Financial Assistance Department continue to be seniors, disabled and persons with special needs, the Department endeavours to meet the needs of these populations in particular. Currently there are approximately 773 seniors serviced by the Department; approximately 163 are in rest/nursing homes; 103 are living in Bermuda Housing Trust properties. The remaining seniors reside alone or with family members. The Department also pays for FutureCare Insurance for all senior clients. Currently this rate is $440.00 monthly, and tends to increase yearly.

Mr. Chairman, as mentioned previously, the Child Day Care Allowance Programme was officially launched in November 2008 and is guided by the Child Day Care Allowance Act 2008 and Regulations 2008. The most recent amendments passed affecting the Child Day Care Allowance Act 2008 and the Child Day Care Allowance Regulations 2008 were made in 2013 with a view to revamp current criteria and to impose additional conditions in order to increase client responsibility and accountability.

To date, the expenditure has ranged from $267,183 to $295,192 monthly, with an average monthly award of approximately $794.00 monthly, per child, per month.

Mr. Chairman, most parents on the Programme remain single; employed and with one to two children in a child day care environment. The average savings per household could range anywhere from between $7,305 to $9,600 yearly (per child).

Mr. Chairman, the Government of Bermuda remains committed in assisting parents with the high cost of child day care. To date, the Child Day Care Allowance Programme has paid out over $15.8 million dollars towards this worthy cause which has benefitted over 2,750 children, and continues to lessen the financial burden of their parents/guardians.

Mr. Chairman, as noted above, the Department’s Financial Assistance Programme operates under the Financial Assistance Act 2001 and Financial Assistance Regulations 2004 and subsequent amendments made in 2004, 2008, 2011, 2012 and 2013.

Mr. Chairman, the most recent amendments passed affecting the Financial Assistance Act 2001; the Financial Assistance Regulations 2004; the Child Day Care Allowance Act 2008 and the Child Day Care Allowance Regulations 2008 were made with a view to revamp current criteria and to impose additional conditions, in order to increase client responsibility and accountability.

Mr. Chairman, the Department continues to assess persons based on the formula indicated in our Regulations 2004, where eligibility for an award will be established when the amount of allowable expenses of the person exceeds the amount of qualifying household income of the person/household for that period and the value of investments (whether located in Bermuda or elsewhere) owned by the person does not exceed $500 in the case of persons under the age of 65 and $5,000 for persons over the age of 65.

Mr. Chairman, as stated previously, there continued to be an increased demand for overall financial assistance within this last fiscal year. The total number of clients serviced has continued to increase, vacillating monthly, between 2,174– 2,720. This is an increase of approximately 265 more persons over this time last year.

This influx is viewed as unsustainable, and represents the continued building of the wave that started in earnest back in 2011.

Mr. Chairman, this increase in the numbers of applicants may be directly contributed to the shrinking of financial resources in our current economic climate. It also represents the unavailability of the essential second job for some, which has historically been necessary for many in Bermuda.

Mr. Chairman, due to the continued economic climate, it has been noted that the categories of able-bodied unemployed and earnings low persons, have more than doubled over this last year and tripled over the last 2-4 years. This equates to a payout of over $1.5 million, monthly, just for these two categories of clients. It should be noted, that we are seeing for the first time, people who have been out of work for two to three years, as their ‘nest eggs” are now depleted.

Mr. Chairman, the increase in this fiscal year’s budget for Head 55 of an additional $7.6 million reflects the amount required to service these increasing numbers of persons that have applied for assistance, and who are found to be in need. Expenditure over the last two years has increased from $9.7 million per quarter in the first quarter of 2012/13 to over $12 million quarter 3 of this fiscal year.

The high ticket items for payout include:
• Rents, that have topped $1.35 million monthly,
• Rest and nursing home fees, that have a pay out of approximately $630,000 monthly;
• insurance premiums, that cost over $620,000 monthly, and
• food, with a pay out of over $395,000 monthly, to name a few.

Mr. Chairman, again, this growing expenditure is unsustainable and must be addressed!

Mr. Chairman, To further encourage our able-bodied clients to shorten the length of time on assistance, the Department will continue to work with the Department of Workforce Development, other government agencies and non-governmental agencies, to increase our collaboration in empowering our clients to seek and find gainful employment with anticipation of them being able to either decrease their need for assistance or to eliminate the need all together.

Mr. Chairman, The second cost centre for the Department of Financial Assistance is 65080 – General Administration, which provides funding for the general administration, supplies of operation for the Department and includes salaries. This year just under $3 million has been allocated for salaries and general administration (page B-277). The subjective analysis shows that, despite the very high financial assistance caseloads I just referred to a few moments ago, all workers in the Department of Financial Assistance are subject to furlough days as part of the overall reduction in Government expenditure, thus the salaries object code shows a decrease of $132K for 2014/15.

Mr. Chairman, in light of this, I want to take the opportunity to salute all staff in the Department of Financial Assistance for the tremendous work that they do on behalf of the Government and people of Bermuda.

Mr. Chairman, The Department continues to provide income maintenance to Bermuda’s neediest individuals and families and does so in the most efficient and effective manner. This continues to be achieved through the commitment and diligence of the staff of the Department of Financial Assistance.

Mr. Chairman, in the upcoming year the Department will continue to focus on internal strategies to ensure that our clients can benefit from enhanced in-house services, as well as outreach services around issues dealing with minimizing or eliminating financial strife, as well as focusing on strategies for reducing the overall expenditure of the Department.

Mr. Chairman, the Investigative Officers in the Department have been successful in recovering approximately $85,000 over the last 10 months.

Mr. Chairman, abuse, misuse and fraud are committed by a small margin of recipients, however one infraction is one too many. In January of this year, the Department launched an anonymous Hotline for persons to report suspected cases of abuse of the system. The Department continues to extend an invitation to those members of the general public who may be aware of anyone who may be abusing the system, to report any possible misuse of Government funds by calling 297-STOP (7867).

Mr. Chairman, year-to-date, the 297-STOP number has generated some 38 phone calls to the Department since the first week of January 2014. This averages out to be over one call per day. Of the 38 calls: 3 have been unsubstantiated; 3 have been in reference to former clients (currently inactive); 5 were for general complaints or comments made by the public; 9 relate to open and ongoing investigations; and 18 have been substantiated. In other words, these early statistics show that some 18 of 21 anonymous calls (86%) have been found to be valid, and represent misuse of the financial assistance programme. I can confirm that steps have been taken to address the abuses that were reported.

Mr. Chairman, I have to stress again that payouts of over $12 million monthly are entirely unsustainable and we ask that members of the general public, the general community and private sector alike, all take this current situation into account. It would be prudent to ask us all to accept that the days of overspending are gone; we cannot continue to WANT what we do not absolutely NEED and that we cannot fool ourselves into thinking – that if you can’t afford it, government can. We are all in this boat together; and we must remain afloat.

Mr. Chairman, We are on a journey of social recovery. In doing so, we must continue to support those who are truly in need of financial assistance. However, we must also strive to do things differently. It is unacceptable to continue to increase spending for financial assistance year over year. We must nudge people off financial assistance and make them more accountable for financial management of their affairs. We must offer help to our people, where there are underlying social issues. We must not just give fish, but teach how to fish.

Mr. Chairman, in the very near future I will be outlining a new schedule of allowable expenses for persons on financial assistance. We intend to continue to help people in need, but at the same time we have to strive to lessen the burden on the taxpayers as a whole.

Mr. Chairman, the staff of the Department of Financial Assistance should be applauded and commended for their continued commitment and for the efficient manner in which they carry out their duties and responsibilities.

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