• NAO audit on Health Ministry reveals concerns over procurement of crucial medical equipment
• Recent audit of SPC reveals extensive mismanagement and financial losses
• Significant sum of Rs. 51,591.79 m due from medical supplies remain uncollected as of 31 Dec. ’22
• Need for transformation of procurement processes, financial management, oversight mechanisms
• NAO audit ongoing, necessary actions will be taken based on audit revelations: Rambukwella

Billions of rupees have been wasted annually due to a range of misappropriations, irregularities, and mismanagement within the country’s healthcare institutions, including the Ministry of Health, during the procurement of medicines and medical equipment, the National Audit Office (NAO) has revealed in a recent report.

Over the course of several years, audit reports have consistently underscored numerous incidents that have culminated in staggering financial losses running into billions of rupees. The audit reports spanning several years have laid bare the extent of the financial losses, underlining a pressing need for immediate and comprehensive reforms to salvage the situation. 

Among the primary reasons cited for the wasteful expenditures are delays in placing orders for medical supplies, inaccurate predictions regarding the required medicine supplies, and inflated costs due to emergency purchases.

The delays in procurement processes have been a persistent issue, leading to shortages and compromising the quality of healthcare services provided by State hospitals. Furthermore, inaccurate predictions regarding medicine supplies have aggravated the problem, creating a dire situation where essential medical items are either insufficient or excessive, resulting in financial losses and logistical challenges.

Equally concerning is the revelation of overpricing during emergency purchases, leading to an unnecessary strain on the health budget. Health experts have highlighted that emergency procurement, although crucial during critical situations, must be executed with utmost transparency and efficiency to prevent exploitation and financial losses. 

In the recent comprehensive audit conducted by the NAO on the Health Ministry, startling revelations have come to light concerning the procurement of crucial medical equipment. 

National Hospital of Sri Lanka 

Specifically, the acquisition of three fully-automated biochemistry analyser devices for the pathology laboratory at the National Hospital of Sri Lanka (NHSL) in 2021 has exposed a disconcerting range of irregularities and financial mismanagement within the procurement process. 

Despite claims of adherence to the national competitive bidding system, the entire process had been marred by significant misappropriations, resulting in an alarming waste of Rs. 22.2 million. This blatant misuse of substantial financial resources represents a missed opportunity to channel these funds more judiciously towards enhancing and strengthening healthcare services for the population.

Furthermore, the purchased equipment, amounting to Rs. 15 million, has not been effectively utilised to benefit patient care, revealing inefficiencies in resource allocation. The pathology laboratory had the capacity to conduct over 12,000 daily tests, surpassing the average daily requirement of 7,871. However, shockingly, two of the acquired devices remained underutilised and one is entirely inactive, falling short in meeting healthcare demands effectively. 

Moreover, the audit report highlighted critical errors within the procurement process, notably the deviation from standard technical specifications without proper authorisation. These discrepancies have resulted in substantial gaps and inconsistencies in the essential technical requirements of the equipment, severely hindering their optimal use.

Similarly, the audit shed light on another flawed procurement instance – the acquisition of a fully-automated hormone analyser, ARCHITECT i2000SR, for the NHSL’s radioimmunoassay lab in 2021 at a cost of Rs. 4.5 million. 

This procurement has deviated significantly from essential Government procurement guidelines, violating key provisions. The absence of approval from the Biomedical Engineering Division for technical specifications and the equipment’s underutilisation, conducting only 22 out of 61 possible tests from July 2021 to January 2022, point to glaring inefficiencies. 

Critical technical specifications have also been notably absent, potentially affecting reagent prices and backup provisions. Furthermore, the observed price variance from the Sri Lanka Customs clearance certificate and unmet essential training requirements for staff underscore the urgent necessity for procedural reviews and steadfast adherence to guidelines, ensuring efficient resource allocation and the provision of optimal healthcare services, as revealed in the audit. 

In the audit information submitted by 15 October 2021, concerning diverse foreign states, local and foreign institutions, organisations, individuals, as well as local and foreign Non-Governmental Organisations (NGOs), it has been revealed that non-financial aid and donations had been provided to the ministry and its affiliated hospitals and institutions in 2020.

These contributions have encompassed a range of goods, medical equipment, and supplies amounting to Rs. 1,339.28 million. Additionally, 2,444 units of unspecified value have been part of these contributions. Surprisingly, these items have not been accounted for or included in the financial statements, raising concerns about transparency and accurate financial reporting. 

State Pharmaceuticals Corporation

In the recent audit of the State Pharmaceuticals Corporation (SPC), extensive mismanagement and financial losses have been brought to light. 

Despite the corporation’s policy of recovering sale values within 30-45 days, substantial amounts have remained unpaid for several years. Notably, Rs. 28.47 million and Rs. 29.11 million have been outstanding for more than five years and between one and five years, respectively, from the trade debtor balance of Rs. 1,488.41 million as of 31 December 2022.

Moreover, a significant sum of Rs. 51,591.79 million due from the medical supplies sector as of 31 December 2022 remains uncollected. This included Rs. 211.59 million pending for 10-24 years and Rs. 3,253.05 million pending for six to 15 years. The need for writing off Rs. 211.59 million that remained unpaid for 10-24 years is evident.

Additionally, advances due from suppliers amount to Rs. 424.42 million as of 31 December 2022, with Rs. 1.05 million receivables pending for seven to 15 years and Rs. 4.31 million for three to five years.

The corporation’s efforts to establish an Enterprise Resource Planning (ERP) system since 2007 have proved futile, with substantial expenditures of Rs. 32.36 million on computer accessories remaining unused, showcasing inefficiency and wasteful spending. Payments exceeding recommended limits have been made to suppliers, totaling Rs. 525.25 million as of 2 September 2022.

Failure to collect Rs. 1,529.83 million from debit notes issued for defective and damaged medicines to the Medical Supplies Division, as well as losses of Rs. 156.50 million due to expired and damaged medicines, also underscore financial mismanagement. Furthermore, non-destruction of approved stocks and the subsequent additional costs have burdened the corporation.

The audit exposed inadequate measures and financial losses in the management of medical supplies and financial transactions, highlighting the pressing need for reforms and better financial oversight within the SPC.

AHP calls for change

In a statement to The Sunday Morning, Association of Health Professionals (AHP) President Ravi Kumudesh emphasised the critical need for a thorough transformation of procurement processes, financial management, and oversight mechanisms within the healthcare sector, as highlighted by recent audit reports.

Kumudesh stressed on the importance of streamlining procurement, improving predictive accuracy, ensuring transparent pricing, and fostering a culture of accountability to rectify the current alarming state of affairs.

Kumudesh urged the Government and relevant authorities to act swiftly and decisively in addressing these pressing issues, emphasising on the efficient operation of the healthcare system and the judicious utilisation of public funds for the nation’s health improvement. He cautioned that failure to act promptly could lead to a further decline in public trust and jeopardise the health and well-being of the populace.

Health Minister Keheliya Rambukwella, when contacted by The Sunday Morning, acknowledged the ongoing audit by the NAO and highlighted the expectation that it would reveal the reality of the situation, adding that he was committed to taking necessary actions based on the revelations from the audit.

Rambukwella also said that the audit reports were being thoroughly evaluated and appropriate instructions had been issued to the responsible authorities to act in accordance with the recommendations outlined in the reports.