27 November 2002

CONCERNS OVER HOSPITAL ACCOUNTS – PROCESS IS FLAWED BUT NO EVIDENCE OF IMPROPER USE, SAYS AUDITOR GENERAL

The Auditor General’s much-anticipated audit of hospital special purpose accounts (sometimes incorrectly termed ‘trust accounts’) has restored some confidence in the use of monies held in those accounts.

After more than six months of intensive fieldwork by a large team of experienced auditors no evidence was found of categoric improper use for personal benefit, fraudulent purposes, or non-hospital activities.

However, in his report tabled in Parliament today, Mr Pearson is highly critical of the operating framework for these special purpose accounts, warning that inconsistencies and “significant weaknesses” which put public funds at risk needed to be urgently addressed.

Those weaknesses had resulted in transparency, accountability and compliance with relevant legislation over the use of the funds not always being at the level expected for public money.

And whilst the some $37million involved may have been “small” in relation to total hospital expenditures, they were still public funds and warranted the same standards of accountability as all other public funds, said Mr Pearson.

Serious concerns are raised by the Auditor General regarding a lack of sound financial management and adequate controls in relation to both the receipt of moneys into special purpose accounts and their eventual expenditure.

In regard expenditure the report finds that 80% was of a routine nature and subject to comprehensive approval processes – however, the remaining 20% contained grey areas where expenditure did not comply with hospital or government policies, lacked adequate supporting documentation, or was often processed unchallenged.

In these instances the hospitals were unable to demonstrate that expenditure from the accounts was in accordance with any restrictions or specified purposes placed upon them – and the report observes that in such an unacceptable situation it was most likely the integrity of hospital staff that was effectively the only safeguard against abuse.

Concern too was expressed over a lack of controls in the receipt of donations, grants and fees, with hospital mail containing moneys often forwarded unopened and unsecured to individuals and hospital departments without necessary controls to ensure that those moneys were ultimately receipted and banked into hospital bank accounts.

This had led to some moneys belonging to the hospital being placed in ‘unofficial bank accounts’ outside the hospitals’ financial systems and records, and whilst the amounts were small and some of the accounts tightly controlled, for others audit was unable to provide reasonable assurance that expenditure was appropriate or for official hospital purposes.

Commenting today Mr Pearson said: “The audit reported today was conducted against the background of serious concerns about the management of what are commonly referred to as ‘hospital trust accounts’ at the State’s four teaching hospitals.

“After more than six months of intensive fieldwork by a large team of experienced auditors from my office, I am happy to report that the vast bulk of those concerns are misplaced and no evidence of categoric improper use was found.

“The report though highlights the need for sound financial management when dealing with public funds, be they millions in grants or simply a few dollars donated to a worthy cause.

“The absence of effective management controls puts such funds at risk, while also making it difficult to readily satisfy any stakeholders that improper use has not occurred.

“In this case, given the sums involved and speculation surrounding the accounts it was inevitable that questions would be raised about their management, and unfortunately the absence of clear policies and strong controls left those responsible unable to conclusively respond to any allegations.

“In recommending the urgent need for the Department of Health to ensure that a comprehensive policy and administrative framework exists for the management of both trust and special purpose accounts, I am encouraged by the actions that the Department and individual hospitals are now taking to address the issues raised in this report.

“My primary concern, however, is the obvious need for unequivocal direction and coordination to be provided to ensure these initiatives are effective in practice and meet the test of time.”

Ends/.

Media Contact: Peter Villiers, Manager Reporting and Communications
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