The hospitals are spending beyond their budgets, have failed to recognise their internally generated revenues and have significant errors in their books, a fresh audit shows.
Details reveal how irregularities in the management of cash have taken root in the hospitals.
Of the 58 Level 4 (50) and Level 5 (8) hospitals that were audited, only Homa Bay and Kisii teaching and referral hospitals had clean books of accounts.
Governor Gladys Wanga upon assuming office upgraded Homa Bay Teaching and Referral Hospital after many years of neglect.
Auditor General Nancy Gathungu in her review for the financial year ended June 30, 2022, indicts 12 hospitals with an adverse opinion, meaning their books did not balance.
They include Nyeri, Thika, Kiambu, Tseikuru, Lusigetti, Wangige, Kigumo, Ruiru, Gatundu, Chulaimbo, Nyakach and Muhoroni county hospitals.
Cases of low levels of compliance could be widespread, considering that only 58 of the expected 372 hospitals presented their financial statements for review.
This implies that 314 (or 84 per cent) of the Level 4 (308) and Level 5 (six) hospitals broke the law by not submitting their financial statements for audit.
Of those that reported, 40 had a qualified verdict – audit queries not widespread - while four were given a disclaimer of opinion owing to inadequate information.
An over-expenditure of Sh2.2 billion was reported in the 58 reporting facilities – an increase of 40 per cent above the Sh5.7 billion budget.
“The over-expenditure indicates that some of the hospitals were not adhering to budgetary controls,” Gathungu said.
It has also emerged that hospitals have weak controls to safeguard assets, with many of them lacking titles for the land they occupy.
Most facilities did not maintain records of assets owned, which should be done through fixed asset registers.
In addition, the controls over cash, banks and debtors were found to be weak – pointing to possible loopholes which unscrupulous staff are using to siphon cash.
“This is due to failure to record, bank and reconcile the bank and M-Pesa accounts and failure to follow procedures for waivers and write-off of debts,” Gathungu said.
The Auditor General's report further revealed that most hospitals lacked boards of directors and where present “they were not well constituted with competent board members.”
Gathungu said her review further showed widespread failure by the hospitals' compliance with the infrastructure and staff requirements.
“Most of the services that should have been provided were unavailable and the infrastructure, both physical and equipment, was inadequate for the delivery of quality health services,” she said.
The details come at a time the health sector is under severe strain following a doctors’ strike, which has paralysed services.
In the wake of the clamour by health workers for better terms of service, the audit invites scrutiny into whether those charged with managing the health sector are playing by the rules.
At least 14 hospitals had unaccounted for revenue amounting to Sh327 million, with the highest being Igegania Level 4 hospital which did not account for Sh159 million.
More than Sh36 million was not accounted for at Msambweni county referral, Sh19 million at Kisumu’s JOOTRH, Sh32 million at Sigowet, Sh22 million at Kwale, and Sh24 million at Nyeri PGH.
While this prevailed, five hospitals failed to collect Sh127 million revenue, the highest being at Kihara Level 4 where Sh65 million remained uncollected for five years.
The audit further revealed that 20 hospitals had unsupported expenditure to the tune of Sh1.9 billion. Kiambu Level 5 did not explain Sh912 million.
Nyeri PGH managers failed to explain a Sh211 million expenditure, Sh207 million in Kihara Level 4, Sh127 million at Wangige, and Sh166 at Igegania Level 4.
Also on the spot are Kitui County Referral Hospital, which couldn’t back spending of Sh64 million, Gatundu Level 5 (Sh34 million), Tigoni Level 4 (Sh80 million), Ruiru Level 4 (Sh35 million), Londiani (Sh29 million), Migwani (Sh25 million), and Longisa (Sh19 million).
The audit further cited irregularities in the procurement of goods and services to the tune of Sh155 million at eight hospitals.
Also highlighted is that 15 hospitals failed to carry out a stock take in the year, hence had expired medicines and inappropriate storage facilities for medicines.
Revenues due to many hospitals, the report shows, were also at risk of pilferage as a result of inadequate controls in collection systems.
Gathungu cited cases at Nyeri PGH, Kwale, Lunga Lunga, Chulaimbo, Kihara Level 4, Kisumu County Referral, Karuri, Nyakach, Migori, Wangige, and Nyathuna Level 4 hospitals.
“Transactions were handled in cash, staff duties were not segregated, there was inability to capture all event logs, inadequate billing of services, unauthorised bill reversals, inability to generate system user reports and failure to maintain revenue cash books,” the auditor said.
County hospitals also suffer serious staff shortages, the audit shows, with nearly all the Level 4 and 5 facilities falling short of the recommended staffing.
Whereas the Kenya Quality Model for Health Checklist recommends 101 staff for every Level 4 hospital, most of the facilities were found short of the threshold.
A shortfall of 2,382 workers was reported at most of the 47 hospitals (Level 4), which reported their staffing capacity during the year under review.
On the flip-side Kitui, Homa Bay, Migori, Longisa, Iten, Kapkatet, Karatina and Kapsabet were found to have staff beyond the establishment of 101.
Level 5 hospitals are required to have 323 medical professionals, but data from eight hospitals revealed a shortage of 1,049 staff.
Shortages were cited in Msambweni (221), JOOTRH (132), Kiambu Level 5 (101), Nyeri County Referral (66), Thika Level 5 (114), Kisii (16), Gatundu (216), and 183 at Kericho referral.
Gathungu also flagged hospitals that have failed to offer essential services including surgical (18), paediatric (10), gynaecology (16), radiology (24), renal dialysis (40), and TB management (9).
The report further shows that top county hospitals – JOOTRH, Kiambu, Thika and Gatundu Level 5 - did not have high-dependency unit beds.
The auditor recommended that the national and county governments assist hospitals obtain titles for their land and appoint competent boards to enhance performance and efficiency.
Gathungu also directed that the governments fund and equip the hospitals with the required medical staff and equipment “to enable them to offer prescribed services for Level 4 and Level 5 hospitals”.
Several hospitals also failed to remit statutory deductions including NSSF (Sh2 million) and Pay as You Earn (Sh6.3 million), with the audit flagging instances of possible cash losses in unchecked payrolls.
At least 28 hospitals had not established risk management policies and strategies which include fraud prevention mechanisms and a system of risk management and internal controls.
