'PHA funds may have gone to shell company'

Tue, Oct 7th 2014, 01:13 AM

A forensic audit into the Public Hospitals Authority's (PHA) supply of pharmaceutical drugs and medical supplies raises concern about the formation of what the auditor says appears to be a shell company "quickly established for the purpose of transacting" with the Bahamas National Drug Agency (BNDA), which is administered and governed by the PHA.
Speaking to a transaction with this particular company, the auditors say they found evidence that the invoices for a supply of pharmaceuticals were modified to reflect a different quantity of pharmaceuticals than were actually received.
"In this case, the PHA was defrauded out of over $11,500," says the audit.
According to the audit, the company apparently used a ficticious address, but there was no physical address.
It says the supplier was not listed with the BNDA and had just received the pharmacy registration from the Pharmacy Council three days prior to the ordering of the drug on an
"emergency" basis.
While the total orders of the drugs were not delivered and there was no documentation for the backorder, the supplier was issued a check in the amount of $86,557, the report says.
The auditors say the entire incident should be further investigated
"for possible ethical breaches and fraudulent purchases".
The audit raised questions about whether the company was incorporated "solely for the purposes of transacting with PHA".
A shell company is an entity that has no active business and usually exists only in name as a vehicle for another company's business operations, the audit notes.
In essence, shells are entities that exist mainly on paper, have no physical presence, employ no one and produce nothing.
A number of red flag indicators including no phone numbers, no email addresses, no physical addresses, no company logo and no contact person can often identify a shell company.
Shell companies are often associated with fraud, the audit notes.
The auditors also say that another company doing business with the PHA received an unfair advantage and was given advance payments, but there remained outstanding deliveries and a loss of funds.
The auditors say this "compromised" vendor still received high rankings on the internal control assessment of vendors by the PHA.
"Despite criticism for audit findings, vendors are still allowed to do business with the PHA," the audit says.
In one case, the audit says invoices that totaled $640,280 were processed for advance payments to one company before the generation of any purchase orders.
A total of $1,056,174 was processed as advance payments during the period in question, with over 60 percent for the benefit of this company, according to the audit.
It says $214,689 was never received.
"This is interpreted as PHA making advance payments for goods to selected vendors and, notwithstanding the advance payments, did not receive over 20 percent of the goods that were paid for," the audit says.
"Indeed, it was only after management action that an amount of $94,280 in goods was received, despite the payments in advance."
According to the audit, no punitive action was taken against the company.
The report points to a "fundamental flaw in internal controls".
It provides multiple examples of questionable practices.
The Nassau Guardian reported yesterday that the report revealed that at the end of 2013 there was a $10 million difference in pharmaceutical inventory between the physical count and what is reflected in the Princess Margaret Hospital's (PMH) computer system.
The report also details what it concludes were abuses of the tendering process.
On Sunday night, PHA Chairman Frank Smith said he had no comment on the matter.

Click here to read more at The Nassau Guardian

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