ONPA Releases Audit Reports on Chuuk Department of Health Services Procurement
Palikir, Pohnpei (Office of the FSM National Public Auditor): March 2, 2010 - The Office of the National Public Auditor (ONPA) announces the release of Report No. 2010-03: Audit of Chuuk State Department of Health Services Procurement and Inventory Management System. Soft copy of the report is available for public review online at www.fsmopa.fm and hard copies are available at the ONPA's offices in Palikir, Pohnpei and Weno, Chuuk. The audit was conducted in accordance with Generally Accepted Government Auditing Standards issued by the Comptroller General of the United States.
The audit was conducted to determine whether procurement funds were used efficiently and effectively to ensure that medications were available on the outer islands. The results of the audit revealed that the Department of Health Services (DHS) has not been effective in ensuring that medications are available at the outer island dispensaries. The audit also revealed that DHS has not implemented an adequate inventory management system and, as a result, funds were not used efficiently. An effective system would have resulted in better results at a reduced cost.
The audit team traveled to six of the 78 (8%) outer island dispensaries to determine whether essential medicines are being made available to the island residents. The audit team traveled to Kuttu, Lekinioch, Moch, Oneop, Satowan, and Ta and compared the medications at the dispensaries to DHS' List of Essential Medicines. The auditors found that on average the dispensaries lacked 19 of 33 (56%) of medications considered essential. Each dispensary was without at least 15 of the 33 essential medications and Moch was missing 24. The DHS List of Essential Medicines was based on a similar list prepared by the World Health Organization for this region.
Health assistants who staff the outer island dispensaries lack the medical knowledge to determine whether deaths that occurred could have been prevented by the availability of the needed medications. However, health assistants on the six islands as well as other heath assistants that the audit team spoke to while the assistants were on Weno reported several specific deaths in which the lack of needed medications may have been a contributing factor. Additionally, when medications such as those used against high blood pressure are not available, the consequences are considered long term and are not immediately noticeable.
DHS did not keep complete or adequate records of its deliveries to the island dispensaries and therefore the audit team could not determine the exact number of times each dispensary receives a shipment. Based on the available records, the audit team could only verify that 7 dispensaries received deliveries more than twice a year and that 25 dispensaries received only one delivery in 2008. Eight of twelve (66%) health assistants interviewed reported that it takes at least six months to receive requested medications.
The report cites five specific areas in which better management and oversight of the inventory and distribution functions would improve the availability of medications on the outer islands. Better planning, inventory management, distribution practices, and monitoring would have resulted in outer island dispensaries that were better stocked with essential medications. For example, DHS did not have a plan for ordering medications when quantities were reduced nor did it keep track of the inventory levels of each medication in the hospital warehouse.
The audit also revealed that medications in both the hospital warehouse and the island dispensary inventories were expired. About 15% of the medications at the warehouse were expired. On average, 27% of the medications on the outer island dispensaries were expired. Better inventory management practices are needed to ensure that expired medications are removed and not given to patients.
Several problems in the area of procurement were also revealed during the course of the audit. Approximately $700,000 in advance payments were made to five offshore vendors who never supplied the pre-paid merchandise. In 2006 DHS began pre-paying offshore vendors who required that 75% of the purchase price be paid before delivery. While this practice may be reasonable, DHS officials did not monitor the status of the pre-paid items and when goods were not received, DHS did nothing to try and obtain the goods. Based on information available to the auditors, it appeared as if DHS simply forgot that they paid almost $700,000 to the vendors.
The audit also revealed that in other instances medications and supplies were purchased from vendors related to DHS and the Department of Administrative Services (DAS) officials involved in the procurement process. In total, $2,035,402 worth of medications and supplies were purchased in instances where there was either a conflict of interest or the appearance of a conflict of interest. In one instance a DHS official with responsibility in the purchasing function was involved in the decision to purchase goods from a store in which his nephew was a key official. In another instance, purchases were made from a company owned by a consultant who, at the time, was employed by DAS.
Other concerns related to the procurement process were noted in the report. For example, in some instances DHS did not obtain the required number of bids. Moreover, in one instance the auditors found that quotations were obtained from stores that neither sell nor distribute medications. When questioned, the purchasing officer admitted to the quotes were obtained just to satisfy the requirement that three quotations be obtained. In other instances, bids had the appearance of having been falsified. Additionally, the audit team found that in other instances emergency declarations were used to bypass procurement bidding requirements.
Audit analysis also revealed that a lack of controls over fuel purchases resulted in a 70% increase in fuel spending during the two-year period reviewed. Because record keeping was lax, fuel use cannot be accounted for. For example, a $19,000 payment was made to a fuel vendor in June 2008 however there are no records to document whether the fuel was received or how it was consumed. The audit team was able to confirm that some fuel intended for the hospital generator was diverted to other Chuuk State departments and agencies and that DHS was not reimbursed for the fuel.
The ONPA discussed the contents of the report with officials from DHS and DAS and provided them with draft copies of the report. DHS and DAS were asked to provide written comments which are included as an appendix to the attached report. In general, both parties agreed with the report findings and the resulting recommendations. Their responses provide the details of how they plan to address the issues discussed in the audit report.
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