Days after The Nassau Guardian revealed the damning findings of a forensic accounting into the Public Hospitals Authority's (PHA) supply of pharmaceutical drugs and medical supplies, PHA Managing Director Herbert Brown wrote Minister of Health Dr. Perry Gomez asking for his intervention and requesting that the auditor general conduct yet another audit, National Review can confirm.
Despite multiple independent audits into the PHA, the public remains in the dark over the authority's response to the findings. Instead, it seems more public money is being used to support what many fear are stalling tactics. In the latest case of auditing the PHA, a "preferred" auditor was identified.
National Review now knows that after Brown wrote the minister last October, Permanent Secretary in the Ministry of Health Hyacinth Pratt responded in a letter to Brown. She informed him that the minister has "instructed that an independent firm be engaged to conduct an independent review of the findings of the UHY Bain report".
Pratt advised in her letter, dated November 13, that Kikivarakis and Co. "is the preferred firm". Kikivarakis' review of the PHA would be the latest in a series of independent audits that pointed to alleged abuses. Audits were conducted by the internal auditor of the Public Hospitals Authority, as well as external auditors, Grant Thornton, HLB Galanis and Co. and UHY Bain and Associates. Those are among the leading and most reputable, internationally affiliated accounting firms in the nation.
All of those audits raised red flags about the operations of the PHA. For example, Grant Thornton found that a personal bank account was opened in the name of the PHA and warned that such accounts "increase fraud risk and personal transactions can be performed using the name of the authority".
We suppose that Kikivarakis and Co., another reputable firm, will bring the kind of independence to auditing the PHA that Grant Thornton, HLB Galanis and Co. and UHY Bain and Associates could not bring. If the PHA board followed the directive in Pratt's letter, then more taxpayer dollars are being spent essentially auditing the auditors. In her letter to Brown, the PS referred to his letter dated October 17, 2014 relative to the UHY Bain report on pharmaceutical drugs and medical supplies.
Pratt wrote, "Reference is made to the last paragraph of the noted communication and your request for the minister's intervention and the service of the auditor general to conduct an independent review of the findings of the UHY Bain report."
The Nassau Guardian revealed the findings of UHY Bain on October 6, 2014. The report was completed last March and had remained shelved for many months until it was leaked. There was no evidence that the board of the PHA had taken any action seven months after the report was completed. It has been a year now.
After our initial reporting, PHA Chairman Frank Smith confirmed that the board had accepted the various audits. Among other findings, the UHY Bain report suggests a "culture of slackness and corruption".
The report reveals that, at the end of 2013, there was a $10 million difference in pharmaceutical inventory between the physical count and what is reflected in Princess Margaret Hospital's (PMH) computer system. The forensic accountant quoted a separate report produced by the hospital's Internal Audit (IA) Department.
"Sample results revealed that an excess of $10 million in inventory did not physically exist in the pharmacy during the year, but remained in [the computer system]."
UHY Bain also reported that at least one approved wholesaler took advantage of weaknesses in the materials inventory procurement process to reuse a purchase order number at least 100 times.
"This wholesaler also failed to deliver goods as contracted, was overpaid by PHA and held onto the overpayment until asked to return the funds or provide the goods. This wholesaler is still on the approved listing of PHA."
The UHY Bain report makes many other findings of alleged abuses.
Curious
The minister of health's approval of the hiring of yet another auditor is curious. When we asked Prime Minister Perry Christie about the PHA audits in January, he said the auditor general will conduct another review of the PHA before decisions are made in the wake of the various findings. He did not mention Kikivarakis and Co.
Last week, the auditor general, Terrance Bastian, told National Review that there had been talk of his department conducting an audit of the PHA, but he admitted no formal request had yet been made. The matter of the PHA audits and the apparent inaction by the authorities in their wake came into the spotlight again after The Nassau Guardian revealed two weeks ago the report of consultants on National Health Insurance (NHI).
The point we made in this column last week bears repeating: How will NHI work in a system with such profound challenges the government seems to have little interest in addressing? We noted last week that there is an important link between the report of Sanigest Internacional, which gives a comprehensive overview of how NHI will work, and the PHA audits the government has swept under the rug. One year after those reports, it has taken no serious action to demonstrate that it is indeed committed to instituting urgent reforms at the authority.
Following our statements last week, the prime minister defended his government's decision to have yet another audit.
Responding to questions from The Nassau Guardian, he said, "The government of The Bahamas has nothing to be concerned about in terms of what are the truths and the facts behind matters.
"So we would expect audit reports to be examined. If they are questioned and they do a second audit, fine. We expect the truth of the matter to inform public opinion whatever the truth is because we are only able to govern and improve governance by arriving at the truth."
Christie also said the PHA is a "work in progress" and "constant audits" are required to ensure accountability and transparency. It is commendable that the PHA board ordered the audits into various aspects of the PHA's operations. But we wonder where those audits would have remained had they not been leaked to the media months after they were turned in.
Christie's declaration on transparency in relation to PHA audits is not backed by evidence.
"We are not one to hold information back," he claimed. "...We want the truth to inform public policy. In anything we do, the motivation is good. If an accounting audit demonstrates some flaws, then we know we have to do better and we know we have to perfect it."
We remind that taxpayer money was spent on multiple audits already, all with similar findings. The HLB Galanis audit raised serious concerns regarding human resources and payroll matters. We reported last week that Philip Galanis, the firm's managing partner, expressed disappointment over reports that the government had retained the services of yet another private accounting firm to audit the UHY Bain report.
"If in fact the rumors are true that another accounting firm was engaged by the government to audit the auditors, that would be an affront to the professionalism of the initial auditors and a demonstration of gross disrespect by the government of the initial firms that were engaged to conduct such audits," he said. "If the government had sufficient confidence in initially appointing any of those firms, what justifiable reason could be given for them to spend taxpayers' money by engaging yet another firm of auditors to conduct such a re-audit?"
The permanent secretary's letter suggests the rumors of another auditor being hired are indeed true. We still do not have any explanation, though, on the justifiable reason. While Christie has said the government will move to correct "flaws", there are many instances of the government acting only in the wake of leaks, when it is pressured to act. We hope there is full accountability as it relates to these matters. However, the government's track record does not demonstrate an administration committed to accountability, though there is much talk of it.
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