By NEIL HARTNELL
Tribune Business Editor
The Public Hospitals Authority (PHA) has pledged to address deficiencies that left it "unaware" of how many supplier contracts it had in its $53.327m annual procurement budget.
The Auditor General's Office, which conducted a two-year probe of the PHA's procurement processes during the former Christie administration's final years, found that the state-owned agency "stands to lose valuable time and resources because contracts are not monitored proficiently".
Its report for the two years to end-June 2017, tabled in the House of Assembly yesterday, exposed weaknesses that could result in the waste and abuse of Bahamian taxpayer monies because the PHA may still gave been paying on expired or unnecessary contracts.
The Auditor-General's Office said its examination uncovered 183 PHA contracts that had expired, while another 25 "current" deals lacked the necessary authorising signatures. Another 14 contracts at the authority, which oversees the Princess Margaret and Rand Memorial hospitals and the Sandilands Rehabilitation Centre (SRC), were not made available to investigators.
"Public Hospitals Authority management was unaware of how many contracts existed," the Auditor General's report said. "As a result, Public Hospitals Authority could be paying for expired contracts; incorrect amounts on a contract; obsolete contracts (outlived their usefulness)."
It added that its probe had also uncovered contracts "with indefinite terms", while different areas under the PHA - such as generators - "have similar contracts".
"A contract database/register inclusive of the contracted amounts and expiry dates has not been maintained for the Public Hospitals Authority, including Princess Margaret Hospital, Sandilands Rehabilitation Centre, Rand Memorial Hospital and its headquarters," the Auditor General's report added.
"We recommend that a database should be created and maintained for all contracts. The database should contain a listing of vendors, description of contracts, expiry dates, amount, monthly payment and any other pertinent information management considers vital.
"Management should review the contracts and determine where possible, practicable and economical to combine contracts for the different sections. A registry should be implemented to house all contract documents."
In response to the Auditor General's findings, the PHA said it was "in the process" of creating the recommended supplier registry and contracts database. It added that contracts will be combined "where appropriate".
The PHA's seeming lack of knowledge on how many supplier contracts it has issued, to whom and their commercial terms is especially concerning for Bahamian taxpayers given that it is the state-owned enterprise (SOE) that receives the largest annual subsidy in the Government's Budget.
The Authority is due to receive $216m during the 2018-2019 fiscal year to finance its operations, with the $53.327m outlay on contracts with outside vendors during the 2015-2016 fiscal year equivalent to almost 25 percent of one-quarter of this taxpayer subsidy.
Any wastage, inefficiency or fraud/corruption that results from weaknesses in the PHA's procurement processes thus rebounds directly on Bahamian taxpayers through higher subsidy payments which, in turn, may fuel higher taxes.
Medicines and vaccines, and other medical supplies, accounted for more than $26m - or nearly half - of the PHA's 2015-2016 procurement spend, with another $13.67m going on facilities operation. Of the balance, some $6.257m was spent on medical services contracts, with $7.361m dedicated to "other contractual services".
The Auditor General's Office, meanwhile, found that the absence of any "whistleblower" protections - and a written policy for handling complaints over PHA tendering processes - meant private sector bidders were not coming forward with formal concerns.
The report acknowledged that many feared victimisation and/or being "blacklisted" on future PHA procurement, adding: "PHA management stated that there have been instances where vendors have verbalised alleged improprieties that occurred during the tender process.
"However, vendors are unwilling to come forth with a written statement for fear of being unfairly treated in the tender process or blacklisted for future tender. There is no documented evidence to substantiate the alleged improprieties. Management is unable to act on alleged claims without having substantiated evidence."
The Auditor General's Office called on the PHA to establish a "complaints unit" to investigate claims made by private sector vendors and/or the public, although the Authority's response indicated it does not plan to go this far and will merely establish "a process for complaints".
Elsewhere, the report found that the PHA had "no recourse" to discipline staff over "conflicts of interest" because they failed to ensure employees in the Supplies Management Agency, which is responsible for procurement, signed the annual disclosures required by its procedural manual.
And it discovered that previously-barred suppliers "could still participate" in PHA tendering processes because the Authority had no listing of those who had been prohibited. In response, the PHA said it used the Ministry of Works' list of barred contractors to determine vendor "suitability", but pledged it will create its own.
The Auditor General's Office then found that the PHA was having run its old manual tendering system alongside its new online version due to problems and "inefficiencies" uncovered with the latter's implementation.
Costs associated with the Online Tender Management System's installation had risen because of the technical problems encountered when it launched, forcing the hiring of a consultant and continued operation of manual procurement as a fall-back.
"Both systems are being run parallel due to inefficiencies found in the electronic submission system," the Auditor General's Office found. "The manual tender process took a longer time to evaluate and select the winning vendor. Hence, excess resources used during the evaluation stage could have been directed to other areas of the organisation."
The PHA, in its response, promised to "revise" the Online Tender Management System during the current 208-2019 fiscal year. It added that it will also "investigate" creation of an automated database system to monitor the use of medicines and when they expire.
"There is no effective monitoring of suppliers' contracts," the Auditor General's Office found. "Contracts for medicines and drugs are guaranteed by the PHA and must be honoured before the contract expires. Therefore, the PHA is obligated to purchase any drugs/medicines outstanding.
"We recommend that the PHA management should establish a stock and issue database. We recommend that the PHA should monitor and ensure that drugs/medicine purchased are accounted for, including those outstanding. Also, we recommend that the PHA ensure that these items are used before the contract expires."
The Auditor General's Office conceded that the PHA was in compliance with "most aspects" of established procurement policies, procedures and guidelines, but said "the scope" of its review may need to be widened to medicines and drugs contracts as this would cover the purchase and inventory management processes.