Performance audit report of the Auditor-General on the generation and management of Internally Generated Funds in public hospitals PERFORMANCE AUDIT REPORT OF THE AUDITOR- GENERAL ON THE GENERATION AND MANAGEMENT OF INTERNALLY GENERATED FUNDS IN PUBLIC HOSPITALS Table of contents Pages Transmittal letter …………………………………………. i Executive summary ……………………………………….. iii CHAPTER ONE ………………………………………. 1 Introduction ………………………………………………. 1 1.1 Reasons for the audit ………………………………... 1 1.2 Purpose and scope …………………………………… 2 1.3 Methods and implementation ……………………….. 3 CHAPTER TWO ………………………………………… 5 2.0 Descriptive chapter ……………………………………. 5 2.1 Historical background ………………………………… 5 2.2 Mandate ……………………………………………….. 7 2.3 Objectives ……………………………………………… 7 2.4 Funding ………………………………………………… 9 2.5 Organisational structure ……………………………….. 10 2.6 System description ……………………………………. 11 2.7 Key players and their activities ……………………….. 11 2.8 Current development ………………………………….. 12 CHAPTER THREE ………………………………………… 13 Findings ……………………………………………………... 13 3.1 Introduction ……………………………………………. 13 3.2 Challenges …………………………………………….. 14 3.2.1 Revenue defaulters ……………………………………. 14 3.2.2 Purchases not properly accounted for ………………… 15 3.2.3 Delays in re-imbursement of claims …………………… 19 3.2.4 Non-compliance with tariff structure by schemes ……… 20
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Performance audit report of the Auditor-General on the generation and management of Internally Generated Funds in public hospitals
PERFORMANCE AUDIT REPORT OF THE AUDITOR-
GENERAL ON THE GENERATION AND
MANAGEMENT OF INTERNALLY GENERATED
FUNDS IN PUBLIC HOSPITALS
Table of contents Pages
Transmittal letter …………………………………………. i
Executive summary ……………………………………….. iii
CHAPTER ONE ………………………………………. 1
Introduction ………………………………………………. 1
1.1 Reasons for the audit ………………………………... 1
1.2 Purpose and scope …………………………………… 2
1.3 Methods and implementation ……………………….. 3
CHAPTER TWO ………………………………………… 5
2.0 Descriptive chapter ……………………………………. 5
2.1 Historical background ………………………………… 5
2.2 Mandate ……………………………………………….. 7
2.3 Objectives ……………………………………………… 7
2.4 Funding ………………………………………………… 9
2.5 Organisational structure ……………………………….. 10
2.6 System description ……………………………………. 11
2.7 Key players and their activities ……………………….. 11
2.8 Current development ………………………………….. 12
CHAPTER THREE ………………………………………… 13
Findings ……………………………………………………... 13
3.1 Introduction ……………………………………………. 13
3.2 Challenges …………………………………………….. 14
3.2.1 Revenue defaulters ……………………………………. 14
3.2.2 Purchases not properly accounted for ………………… 15
3.2.3 Delays in re-imbursement of claims …………………… 19
3.2.4 Non-compliance with tariff structure by schemes ……… 20
Performance audit report of the Auditor-General on the generation and management of Internally Generated Funds in public hospitals
3.3 Inadequate and poor maintenance of existing
infrastructure …………………………………………. 23
3.4 Insufficient maintenance of equipment and machinery … 27
3.5 Summary and conclusion ……………………………… 30
CHAPTER FOUR ………………………………………….. 34
4.0 Recommendations ………………………………..…….. 34
4.1 Revenue defaulters ……………………………………. 34
4.2 Non-compliance with store procedures ………………… 35
4.3 Delays in reimbursement of claims ……………………… 35
4.4 Non-compliance with tariff structure by the schemes …… 36
4.5 Inadequate and poor maintenance of existing
infrastructure and machine ……………………………….. 37
APPENDICES ………………………………………………… 38
ABBREVIATIONS …………………………………………… 52
Performance audit report of the Auditor-General on the generation and management of i Internally Generated Funds in public hospitals
TRANSMITTAL LETTER
Ref. No. AG/01/109/Vol.2/32
Office of the Auditor-General
Ministries Block “O”
P. O. Box MB 96
Accra
Tel. (021) 662493
Fax (021) 662493
30 January 2011
Dear Madam Speaker,
PERFORMANCE AUDIT REPORT ON THE AUDITOR-
GENERAL ON GENERATION AND MANAGEMENT OF
INTERNALLY GENERATED FUNDS IN PUBLIC HOSPITALS
I have the honour to submit to you for presentation to Parliament my
performance audit report, in pursuance of Article 187(5) of the 1992
Constitution of the Republic of Ghana and Section 13(e) of the Audit
Service Act 2000, Act 584. The Audit Service Act mandates my office
to audit programmes and activities of public offices to ensure
economy, efficiency and effectiveness in the use of resources.
Performance auditing was introduced to the Ghana Audit Service in
2001, as part of a capacity building project funded by the European
Union. Officers who have been professionally trained in conducting
performance audits to internationally recognised standards prepared
this report. The team that carried out the audit comprised Ms.
Victoria Akordor, Assistant Director of Audit (Team Leader), Ms.
Mary Arthur, and Mr. Kplorm Dovlo, both Auditors, under the
supervision of Mr. Augustine R. K. Boadu, Deputy Auditor-General.
Performance audit report of the Auditor-General on the generation and management of ii Internally Generated Funds in public hospitals
In a rapidly changing society such as ours, there is a need for
performance auditing, since the inherent incentives for improvements
are limited in the public sector compared to the private one. The
performance audit process results in recommendations, which initiate
a process of renewal and change, leading to greater efficiency and
effectiveness in government administration. Depending on the extent
of coverage and complexity, it normally takes between six and 12
months to complete one performance audit, thus making it more
expensive than the traditional audits. Effective performance audits
can lead to better use of resources by public bodies and provide
support to democratic governments by bringing about accountability,
transparency, improved operations and better decision-making.
I would like to thank my staff for the preparation of this report and the
staff of the various hospitals for the assistance offered to my staff
during the period of the audit.
I trust that this report would meet the approval of Parliament.
Yours sincerely,
AUDITOR-GENERAL
THE RT. HON. SPEAKER
OFFICE OF PARLIAMENT
PARLIAMENT HOUSE
ACCRA
Performance audit report of the Auditor-General on the generation and management iii of Internally Generated Funds in public hospitals
PERFORMANCE AUDIT REPORT OF THE AUDITOR-
GENERAL ON THE GENERATION AND MANAGEMENT OF
INTERNALLY GENERATED FUNDS IN PUBLIC HOSPITALS
EXECUTIVE SUMMARY
Internally Generated Fund (IGF) is non-taxable revenue that is
generated through the activities of public hospitals as an additional
source of funding. The aim of introducing IGF into public hospitals in
1985 is to help alleviate financial difficulties confronting the health
sector in delivering quality health care.
2. Public hospitals have the legislative mandate (FAR 2004, L.I.
1802 part II) to collect and retain all IGF for its operations. IGF has
now become the major source of finance to public hospitals
constituting about 77% of total receipts. The audit set out to ascertain
whether the public hospitals are:
strengthening financial management and revenue generation
managing prudently resources available for the provision of
health service through the use of IGF, and
maintaining equipment and infrastructure to enhance
revenue generation.
3. The audit was carried out in four public hospitals comprising
Volta, Central and Greater Accra Regional hospitals and Korle-Bu
Teaching hospital. The audit covered the period 2005 to 2008.
Performance audit report of the Auditor-General on the generation and management iv of Internally Generated Funds in public hospitals
4. The audit team examined the generation, collection and
disbursement from IGF. All the hospitals the audit team visited have
shown an increase in revenue generation for the period reviewed.
Although revenue generated over the past four years has shown an
increased trend due to increase in patient attendance, improvement in
internal control systems and increase in tariffs, some difficulties have
to be overcome to run the hospitals smoothly as government
assistance and donor funds have dwindled over the review period.
Challenges
Revenue defaulters
5. Total IGF generated over the four year period for the hospitals
amounted to GH¢56,069,100 with Korle-Bu generating the highest
and Ho the least. However a total amount of GH¢4,819,975
representing 7.95% was not realised due to defaulters.
Purchases not properly accounted for leading to leakage of store
items
6. Disbursement of IGF over the period is quite satisfactory as
payments for drug and non-drug consumables were made within laid
down rules and regulations. Total amount expended was
GH¢41,951,871.72.
7. We however noted that over 46 types of drug consumables and
non-drug consumables purchased for use were not duly accounted for
Performance audit report of the Auditor-General on the generation and management v of Internally Generated Funds in public hospitals
due to improper record keeping and negligence on the part of schedule
officers and supervisors.
Delays in reimbursement of claims
8. The audit revealed that it takes a year or more for scheme
mangers to fulfil their financial obligations to the hospitals. The total
amount owed as at 31 December 2008 was GH¢3.6 million.
9. The delay in reimbursement of claims has affected the four
public hospitals which are owing their creditors to the tune of GH¢2.9
million as at 31 December 2008.
Non-compliance with tariff structure
10. The audit team found that scheme managers at times failed to
comply with their tariff structure. Claims are also rejected on the
grounds of fraud and misunderstanding. Total amount rejected was
GH¢225,492.23.
Inadequate and poor maintenance of existing infrastructure
11. Korle-Bu and Ridge hospitals have infrastructure problems
while Ho and Cape Coast are operating under capacity. This problem
has resulted into overcrowding of health facilities especially in the
wards.
Performance audit report of the Auditor-General on the generation and management vi of Internally Generated Funds in public hospitals
Insufficient maintenance of equipment and machinery leading to
frequent breakdowns
12. All the four hospitals complained about broken down
equipment and machinery due to inadequate funds and lack of human
capacity.
13. Despite the difficulties what is generated should be
safeguarded and managed prudently to improve health care delivery.
There is the need to improve economy and efficiency in the collection
and disbursement of IGF.
The way forward
14. In light of the findings we recommend as follows:
Revenue defaulters
15. To increase revenue generation and improve revenue
collection, we recommend that management ensure that;
claims submitted to NHIS managers for re-imbursement
are validated before submission to avoid the incidence of
rejections on the grounds of fraud and other irregularities
staff debtors should not be given any new salary advance
until previous ones are settled
salary advances should be deducted from allowances given
to staff after the three month period given for refund
elapses, and
Performance audit report of the Auditor-General on the generation and management vii of Internally Generated Funds in public hospitals
for absconders and paupers, security men around the wards
should be vigilant to prevent them from absconding
without paying for services rendered.
Purchases not properly accounted for leading to leakage of store
items
16. To improve on efficient disbursement of IGF, we recommend
that hospital management should:
ensure that details of all items received into stores are
taken on ledger charge before issues are made
emergencies notwithstanding, every effort should be made
by the store keeper to enter all items purchased into store
records
plan its procurement ahead of time to avoid emergency
cases which are normally characterised with higher prices
and sub-standard items
procurement officer should ensure that items acquired and
paid for, are supplied in full, and
monitoring and Internal Audit unit should check store
items purchased into store ledgers to avoid instances of
understating and/or omitting store items from store ledgers.
Delays in reimbursement of claims
17. To quicken the reimbursement process we recommend that
hospital managements:
Performance audit report of the Auditor-General on the generation and management viii of Internally Generated Funds in public hospitals
ask for half the claims submitted pending thorough
evaluation of claims by scheme managers to avoid
instances of total cash shortages for day-to-day operations
and activities
computerise operations to speed up documentation process
to address cumbersome manual procedures, and
train personnel working on NHIS for requisite skills and
provide incentive package for any overtime work done to
motivate staff.
Non compliance with tariff structure by schemes
18. To avoid the incidence of schemes not paying the correct tariff,
we advise that management teams should:
have co-ordinators to represent them when Health
Authorities and NHIA are meeting to set tariffs. This will
give them the opportunity to justify the amount to be
charged, among others
insist on reviewing tariffs structure within the stipulated
six months by agreeing on a date with scheme management
prior to the beginning of each year, and
in consultation with National Health Authority change the
four week review period to suit their operational needs.
Performance audit report of the Auditor-General on the generation and management ix of Internally Generated Funds in public hospitals
Inadequate and poor maintenance of existing infrastructure and
machinery
19. To improve revenue generation and health care delivery,
management teams should:
put aside a percentage of total IGF, within a specified
period to improve the condition of existing infrastructure
have a proper maintenance schedule and follow it to the
letter, and seek the assistance of NGOs, Corporate Bodies
and other key players in the health sector to, at least, help
improve physical condition of existing infrastructure where
the cost implication is beyond them.
Performance audit report of the Auditor-General on the generation and management 1 of Internally Generated Funds in public hospitals
CHAPTER ONE
INTRODUCTION
1.1 Reasons for the audit
Government funding of public hospitals in Ghana has become
increasingly difficult, due to increase in population size and cost of
treatment. Accordingly, policy makers and researchers in the health
sector have looked to other countries to find new ways of organising
and paying for healthcare.
2. Internally Generated Funds (IGF) was therefore introduced in
1985 as an additional source of funding for public hospitals. IGF has
now become the major source of finance to public hospitals. Total
revenue accruing to the four hospitals (Korle-Bu Teaching Hospital,
Ridge Hospital, Central Regional Hospital and Volta Regional
Hospital) over the audit period was GH¢ 73,262,222.38 and out of
this, IGF‟s contribution is GH¢ 56,069,100.01 representing 77% of
the total income.
3. Over the years, huge financial supports have been given to
hospitals to enable them provide quality health care services to
citizens. In the last four years, about 15% of the national budget has
Performance audit report of the Auditor-General on the generation and management 2 of Internally Generated Funds in public hospitals
been allocated yearly to the health sector to provide high quality and
affordable health care service to all Ghanaians.
4. However, the Auditor-General‟s Report on the Public Accounts
of Ghana (Ministries, Departments and Agencies) 2005 in respect of
public health institutions identified the following lapses:
non-compliance to procurement procedures
improper record keeping
IGF not properly accounted for
indebtedness of Institutions and National Health Insurance
Scheme to public hospitals , and
embezzlement of drug revenue. The lapses impact
negatively on the generation of revenue of the hospitals.
1.2 Purpose and scope
5. The purpose of the audit was to ascertain whether public
hospitals are:
strengthening financial management and revenue generation
prudently managing resources available for the provision of
health service through the use of IGF, and
maintaining equipment and infrastructure to enhance
revenue generation.
Performance audit report of the Auditor-General on the generation and management 3 of Internally Generated Funds in public hospitals
6. The audit was carried out in four public hospitals comprising
Volta, Central and Greater Accra Regional hospitals and Korle-Bu
Teaching hospital. The audit covered the period 2005 to 2008. Korle-
Bu was chosen because it is a teaching hospital. Volta and Central
regional hospitals were chosen because they were built in 1995 with
new infrastructure and equipment with the opportunity to generate
more revenue. Greater Accra Regional Hospital (Ridge) was chosen
because of the increasing number of patients visiting the facility over
the years.
1.3 Methods and implementation
7. The audit team used interviews, review of documents and
physical inspection to collect data for our detailed examination.
Interviews
8. We interviewed key officials for all the hospitals visited. The
interviewees were officials either involved in decision-making or
policy implementation as regards the generation and management of
IGF. The interviews were to enable us understand the processes and
procedures involved in the management of IGF. Refer to Appendix „1‟
for details of key persons interviewed.
Performance audit report of the Auditor-General on the generation and management 4 of Internally Generated Funds in public hospitals
Documentary review
9. The rationale for the documentary review was to enable us to
have an insight into the legal mandate for IGF as well as to understand
the system description and activities of the audit object. Refer to
Appendix „2‟ for details of documents reviewed.
Physical inspections
10. The team inspected the Out Patients Department (OPD) and the
wards of the four hospitals visited to ascertain the condition and
adequacy of infrastructure and equipment used in health care delivery.
We also inspected some of the projects undertaken with funds from
IGF.
Performance audit report of the Auditor-General on the generation and management 5 of Internally Generated Funds in public hospitals
CHAPTER TWO
DESCRIPTIVE CHAPTER
2.1 Historical background
11. Internally Generated Fund (IGF) is non-taxable revenue that is
generated through the activities of public hospitals. Public hospitals
have the legislative approval to collect and retain all IGF. Revenue is
generated through the following activities:
Medicine
General Surgery and Anaesthesia
Paediatrics
Obstetrics and Gynaecology
Dental Services
Psychiatry
Accident and emergency services
Ear, Nose and Throat
Ophthalmology
Dermatology
12. The concept of IGF was introduced in 1985 when it became
necessary to find additional sources of funding to support the
Performance audit report of the Auditor-General on the generation and management 6 of Internally Generated Funds in public hospitals
activities and operations of public hospitals. Basically, the major
sources of IGF are cash received from patients for services rendered.
13. The National Health Insurance scheme (NHIS) was introduced
in 2005 to enable citizens have access to health care by paying a
premium yearly. After rendering healthcare services to insured
patients, management of public hospitals submit claims to scheme
managers of the NHIS for re-imbursement.
14. Public hospitals are in six categories:
i. Teaching hospitals
ii. Regional hospitals
iii. Municipal and District hospitals
iv. Poly Clinics
v. Health Centres, and
vi. Health Post
15. Teaching hospitals provide all services ranging from primary1
to tertiary2, while the regional hospitals, municipal and district
1 The care a patient receives at first contact with the Health care system.
2 Treatment given in a health care centre that includes highly trained specialists and often
advanced technology
Performance audit report of the Auditor-General on the generation and management 7 of Internally Generated Funds in public hospitals
hospitals and Polyclinics provide primary and secondary3 services,
Health centres and Health posts provide only primary services.
2.2 Mandate
16. Regulation 18 of Financial Administration Regulations 2004
(LI1802) gives Public hospitals the legislative approval to collect and
retain all IGF.
2.3 Objectives
17. The objectives of the public hospitals in relation to IGF are to:
strengthen financial management to improve revenue
generation and collection
manage prudently resources generated for the provision of
quality health care, and
maintain equipment and infrastructure used in generating
revenue.
2.3.1 Functions
18. For the purposes of achieving their objectives, public hospitals
are to determine charges and fees with the Minister‟s approval and are
tasked with the:
3 Treatment by specialists to whom a patient had been referred by primary health care
providers
Performance audit report of the Auditor-General on the generation and management 8 of Internally Generated Funds in public hospitals
management and administration of health resources
receipt, custody and the judicious disbursement of public
funds, and
keeping accurate financial management and accounting
information in acceptable formats for audit and decision
making purposes.
2.3.2 Vision
19. The vision of a public hospital is that of a society in which
preventable diseases and avoidable deaths are kept to the barest
minimum and everywhere every citizen has access to a quality driven,
result oriented, close to clients, focused and affordable health service
run by a well motivated work force.
2.3.3 Mission
20. The Mission of a public hospital is to work in collaboration
with all partners in the Health sector to ensure that every individual,
household and community is adequately informed about health and
has equitable access to high quality health and related intervention.
Performance audit report of the Auditor-General on the generation and management 9 of Internally Generated Funds in public hospitals
2.4 Funding
21. Public Hospitals receive revenue from three main sources,
namely Government of Ghana budgetary support, Donor Pool Fund
and IGF. Table 1 shows the sources of funds and amount generated
for the period 2005 to 2008 for the four hospitals visited. Total income
for the four hospitals amounted to GH¢ 74 million. Figure 1 also
shows IGF as a major source of funding for the hospitals, contributing