The long-awaited Commission of Inquiry into the process for procurement of pharmaceutical and medical supplies at the Karl Heusner Memorial Hospital (KHMH) began this morning in Belize City with the reading of the recently completed general audit report into the record.
Chair of the Commission, Justice Adolph Lucas, former Auditor General, Orvin Nicholas, and former senior nurse and health official Julia Castillo presided in front of a sparse audience at the Belize Institute of Management, as the first witness, Deputy Auditor General, Wayne Simon, was sworn in and began his testimony around 9:30 a.m.
Simon, who holds an executive MBA from the University of the West Indies and has 27 years’ experience as an auditor, headed the audit team that probed into the hospital’s records for the period September 2006 – June 2009. (The period under question by the Commission is from January 1, 2007 to June 30, 2009.)
Simon told the commissioners that he and fellow auditors Mark Jones, Charles Flowers, Randolph Young and Arlington Fraser, who have, respectively, 19, 17, 20 and 10 years of experience in the Audit Department, were tasked to conduct an audit into the hospital’s affairs after Prime Minister Dean Barrow decided to have the audit conducted by the office of the Auditor General, as opposed to the private auditors previously agreed upon.
(Note that Young and Flowers, along with Donna Crawford-Smith of the Ministry of Finance, participated in the initial audit ordered by the Prime Minister on the heels of the KHMH doctors’ industrial action that was released at the end of June.)
All of the first day of proceedings was spent going over the lengthy report, which is divided into two sections: a review of the process between September 2006 and January 2008 (the first part of the period under question), and January 2008 to June 2009 (the second).
What both periods seem to have in common, the auditors found, was lax procedure for the acquisition of medical and pharmaceutical supplies, whether under the tender process of the Ministry of Health, or on the open market, where the hospital was forced to pay at often higher prices, only to find that the Central Medical Store (CMS) in Ladyville, run by the Ministry of Health, had the wanted product on hand but was late delivering it.
The report also noted several instances in which private suppliers were apparently overpaid by thousands of dollars for supplies delivered to the hospital.
In October of 2008, the Belize National Health Information System (BHIS) was formulated to serve, according to Simon, as “a focal point for distribution of requisitioned supplies from CMS.” Prior to this date, the process of recording acquisition, distribution and usage of drugs was manual, with input from QuickBooks accounting software and bin cards.
For the period between September 2006 and January 2008, the Director of Finance was Cecil Knowles, who emerged from obscurity at the height of the standoff between the KHMH Board of Directors and officers of the Belize Medical and Dental Union (BMDU) earlier this year, alleging he had vital information about the processes at the hospital.
Carlos Perrera, who remains in that post, replaced Knowles in March of 2008.
The auditors found that there was no tender process between 2005 and 2008, as the Ministry of Health used the list of existing suppliers and added new suppliers as necessary, despite the call for an annual tender process.
Further, there was an apparent lack of communication between CMS and KHMH over the availability of supplies. Often, the hospital, despite having certain (usually limited) medicines and supplies in stock, felt they would have to go out on the open market and buy, without waiting for CMS to deliver the supplies they requisitioned.
Repeatedly, said Simon, the Audit Department found no reason why KHMH could not have waited for the requisition instead of incurring added expense by buying stock already in the CMS. Several senior officials, including Dr. Francis Longsworth, Ms. Laurel Grant, Dr. Khalid Ghazy (who resigned in August of this year), and chief pharmacist Eugene Echegi, would routinely sign on in any combination, on various requisition forms, invoices and cheques, for payment.
Confirming allegations made by the BMDU at the start of the standoff, the audit found that in the case of two employees, Dr. Jose Guerra and Dr. Ricardo Fabro (whose wife is the registered owner of MC Pharmaceuticals in Orange Walk Town), the hospital did business with them to the tune of thousands of dollars. (Dr. Fabro resigned as chair of the KHMH board in July of this year at the end of the BMDU standoff, per resolution engineered by Labour Commissioner Ivan Williams).
Dr. Guerra was part owner of PharmaBiz International, whose name was called numerous times this afternoon by Simon in connection with a series of questionable purchases in 2007, where the hospital would purchase medicines and supplies from PharmaBiz, only to have CMS provide the same supplies a few days later.
Only in one case – six Labitol 5mg vials purchased from a distributor called Gillian Campos in June, 2007 – was it explained that the item was “urgently needed at Accident and Emergency,” but even so, the hospital had 250 vials in stock and had been sent 240 more by CMS as requisitioned six days earlier. PharmaBiz and related companies also were involved in a scheme to introduce a new brand of tests for diabetes, when it was found that the equipment the hospital was using had become obsolete. KHMH radiologist, Freddy Mansoor, also a part owner in PharmaBiz according to the Companies Registry, provided supplies to the hospital according to the audit report, and a cashier, one Tiffara Anderson, allegedly deprived the hospital of some $28,021.50, which she has partly paid back, the report alleges.
Between January 2008 and June 2009, the situation persisted, despite the introduction of the BHIS and the revival of the tender process. The auditors found that in the interest of savings, Ministry of Health CEO, Dr. Peter Allen, who had the final say on what bids would be approved for the provision of medical and pharmaceutical supplies, would reject one bid at a higher price in favor of a lower bid proffered by the Tender Committee, which met to review bids in March and April of 2008 and 2009.
This saved money in the short run (over a million dollars in 2008 and over six hundred thousand in 2009 so far), but opened up the ministry to the possibility of their preferred supplier producing inadequate goods, which happened on two occasions noted by the auditors.
Simon, in summarizing some of the recommendations to improve the process, said there had to be synchronization of the BHIS’ and KHMH’s QuickBooks systems. In numerous instances, the numbers did not agree, and the hospital went out on the tender market to buy when it appeared they did not have to, or they could have waited for CMS.
And in this period, the supplier the hospital went to most often in a jam was De La Fuente Pharmacy of Orange Walk Town, owned by Antonio De La Fuente (brother of Orange Walk Mayor Phillip De La Fuente, who owns a pharmacy with a similar name, but which has no connection to this scandal), who had told Amandala in July that his company was an “occasional” supplier to the KHMH, as well as to other hospitals.
De La Fuente, like PharmaBiz before it, was quoted numerous times as selling supplies to the hospital, generally for prices higher than the price quoted by CMS. This was true, said Simon, for all drugs, whether specially authorized or regular.
Nothing offered in today’s reading of the audit report, however, linked De La Fuente to anyone at the KHMH.
KHMH operated on a budget of some $4.48 million in this period for supplies, despite receiving $23 million in subventions from Government. Some $1,264, 858.41 in purchases were made in the open market in 2008 from 60 retail vendors, many of them, such as Commerce Limited, Union Distribution, Belize Chemicals, Bradley’s Imports, and James Brodie and Company, also participating in the tender process.
The audit’s findings suggest that the hospital’s administrators and senior officials at the Ministry of Health may have, by their actions, contravened Section 19 (2) of the Finance and Audit (Reform) Act, and defeated the purpose of having an open tender process, said Simon.
According to Simon, CEO of the hospital, Dr. Francis Longsworth, admitted to investigators during interviews for the audit report that there is currently no policy in place at the KHMH to discourage conflicts of interest between employees’ businesses and the KHMH.
Simon added that there is no law in Belize currently prohibiting such conflicts of interest, but Justice Lucas cited the KHMH Act, which governs the conduct of the hospital’s administrators, and prohibits “governors”, or directors, from holding a position on the hospital board while associated with any business that does business with and through the hospital.
Simon noted that both Dr. Guerra and Dr. Fabro’s companies are no longer doing business with the hospital, at the KHMH’s request.
Wayne Simon is expected to continue his testimony tomorrow, Friday, at 9 a.m. Ms. Laurel Grant, currently Director of Human Resources and a former acting CEO, is expected to testify next. Justice Lucas told the press at the start of the hearing this morning that while anyone, particularly those with information that can assist the Commission, is invited to attend, the list of subpoenaed witnesses will not be revealed immediately, for reasons of privacy.
Nevertheless, today’s Guardian, the ruling media party organ, says Dr. Longsworth is expected to testify as early as Monday.
Dr. Fabro, Dr. Longsworth and two other members of the KHMH Board, Laura Longsworth and Maria Elena Sylvester, attended proceedings all day, and Dylan Reneau, president of the National Trade Union Congress of Belize (NTUCB) and Elena Smith of the Belize National Teachers Union, were present in the afternoon. The NTUCB had nominated Orvin Nicholas to the Commission.
Smith told us this evening that she is looking forward to hearing more of the “revelations” to come out of the audit report, and the response of the KHMH.
None of the KHMH reps would comment to the assembled press today.