Auditors have detected Rs 7 billion-plus irregularities and mismanagement in Punjab healthcare funds for the financial year 2021-22.
Fraudulent practices, shows the audit report of the director general audit Punjab, were committed in the purchase of medicines, medical devices, surgical dressings, gloves, syringes, facemasks etc, and disbursement of funds to TB, Hepatitis control programs, different NGOs, and trust hospitals during the tenure of Usman Buzdar as chief minister, Dr Yasmin Rashid as health minister and Dr. Haroon Jahangir as the DG health services. The latter retired on November 4.
The audit noted irregular procurement of rabies vaccine at exorbitantly high rates of Rs.401 million plus, irregular payment of grant-in-aid of Rs722 million plus to different NGOs, and non-account of performance against KPIs (key performance indicators) and terms of the contract before payment of grant-in-aid of Rs two billion to Recep Tayyip Erdogan Hospital Trust Muzaffargarh.
It noted non-proceeding against the firm for blacklisting despite clear instruction from PPRA, fraudulent waiver of LD charges amounting to Rs1,274,340, non-blacklisting of the firm on non-performance of contract, and non-forfeiture of bid security for Rs246,000, irregular expenditure on the repair of transport for Rs.6,513,989, doubtful/ irregular expenditure of Rs17,760,743 on POL, irregular acquiring of security protected Warehouse on rental basis for Rs143,932,000, non-surrendering of savings Rs.384,294,902, irregular procurement of services of data entry operators and support staff for Covid-19 vaccination centers for Rs126,439,507, unlawful retention of funds in bank accounts for Rs499,286,129 and non-deposit of profit to govt of Rs306,631 and doubtful drawl of daily allowance by a senior clerk for Rs586,560.
It mentioned irregular combined operation of pre-audited and non-pre-audited expenditure accounts, fraudulent payment for procurement of CCTV camera services on a rental basis with Rs.56,591,100 and fraudulent prequalification of DKT Pakistan Private Limited for the supply of Medical Devices at DGHS and all District Health Authorities of Punjab, irregular award of work order for printing of security featured documents amounting to Rs61,005,000.
The preliminary observation of the audit team made during the audit of DG health services (primary and secondary healthcare department shows fraudulent prequalification of local manufacturer for medicine supply of Rs145,810,724. The audit noted: as per clause 8 of the purchase order dated 24-02-2021 issued to M/S Lisko Pakistan (Pvt) Ltd, the delivery period is 75 days including a grace period. It was observed an amount of Rs145,810,724/- has been paid to M/s Lisko Pakistan (Pvt) Ltd for the purchase of 10,000,000 paracetamol bottle of 120 ml. Following irregularity has been observed in this regard:
M/s Lisko Pakistan (Pvt) Ltd was not prequalified for Paracetamol Syrup 120 mg or above /5 ml for packing volume of 60 ml with the remarks that “Production Capacity not provided”. Furthermore, it did not apply for the packing volume of 120 ml in the prequalification process at all. As per page 102 of minutes of the meeting of GRC for prequalification of pharmaceutical manufacturing units and sole agents of foreign principals for drugs/medicines 2020-2021, the firm was prequalified for Paracetamol Syrup 120 mg or above /5 ml for packing volume of 60 ml with the remarks that “The firm provided the undertaking of “daily production capacity of each quoted item” Rs100 notarized stamp paper as per item-wise clause no. 7, which was accepted.”
The M/s Lisko Pakistan (Pvt) Ltd was declared prequalified in above said medicine for packing of 60 ml at Sr. No 904 vide notification No. 11492-11502 dated: 27-11-2020. As per the Technical Evaluation Report of RFP for purchase of medicine for 2020-21, M/s Lisko Pakistan (Pvt) Ltd, the quoted price for 120 ml for which it was not prequalified earlier. The GRC on its meeting dated 22-01-2021 prequalified the firm for the packing of 120 ml without the 1-year product experience as required under the knockdown clause mentioned above and obtaining of DRAP registration certificate just before the GRC meeting. Furthermore, the pre-emptive grievance of GlaxoSmithKline Pakistan Limited and NabiQasim Industries (Pvt) Ltd. against the declaration of Lisko Pakistan (Pvt) Ltd. as responsive for 120 ml packing was also rejected.
“The firm miserable failed to deliver the purchased product within the allowed delivery period i.e. 75 days and the last supply was made on 15-12-2021 in approximately 12 months.” The audit was of the view that an unprecedented deliberate favour was extended to Lisko Pakistan (Pvt) Ltd. by declaring it responsive in the packing category of 120 ml of Paracetamol 120mg/5ml. The said irregularity/ fraud occurred due to malafide on the part of the authority.
Audit recommends that the matter may be got enquired at the administrative level, and responsibility be fixed besides strengthening financial and supervisory controls. It was observed that pre-qualification of manufacturing units and sole agents of Foreign Principals for Medical Devices was carried out. Page number 2 of the letter issued for the Pre-qualification Evaluation report, M/s K.M Enterprises submitted forged/ edited fake ISO 13485 and CE Certification of its Principal M/s Changzhou Medical Appliances General Factory Co, Ltd. Submitted certificate is forged/edited/ fake. The scope mentioned on the online website of issuing organization (TUV Rheinland) is different from the certificate submitted in the bid. Auto-Disable Syringes, face mask and burette type infusion set are mentioned in the submitted certificate while the online certificate does not contain Auto-Disable Syringes, face mask and burette type infusion set in its scope.
After the statement, the report abruptly moves to the annexure of the evaluation report while the page numbering of the letter has been forged by overwriting “Page 2 of 3” with “Page 2 of 2”. The said technical evaluation report was uploaded on the department’s website excluding the covering letter part. Furthermore, no procedure to blacklist the aforementioned firm was initiated till the date of audit. Moreover, the firm has also been pre-qualified for the supply of the ‘disposable Syringe 10 ml with needle (Blister Pack) at Sr. No 100 of Technical Evaluation Report of Medical Devices and disposable Syringe 20 ml with needle (Blister Pack) at Sr. No 101 of Technical Evaluation Report of Medical Devices. Later on, the firm filed its grievance in the GRC (Sr. No. 65 to 76) wherein the decision of the GRC has been maneuvered. The Decision does not make a mention of the already prequalified status of the firm in the above two categories and declared it non-prequalified in all the categories except the following two:
Examination Gloves Latex (S.M.L), Brand BioMax, of the item category 34, at Sr. No 54 of the Final Prequalification of Medical Devices Notification. Examination Gloves Latex (S.M.L), Brand MaxPro, of the item category 34, at Sr. No 54 of the Final Prequalification of Medical Devices Notification.
Surprisingly, audit said, the firm did not file representation against the disqualification of already pre-qualified items. Hence, a deliberate attempt has been made to save the firm from the consequence of its forgery of documents by not initiating the legal proceedings under PPRA, forging the evaluation report document and pre-qualifying the firm against all odds. The audit was of the view that connivance of departmental authority with the firm aligned with weak supervisory controls led to fraud. Audit recommends that the matter may be got enquired at the AS level besides strengthening supervisory and internal controls.
The audit pointed out irregular purchase of commercial packing of medicine instead of identifiable government purchase of 75 million Paracetamol 500mg Tablets. The product was procured from Glasko Smith Kline Consumer Healthcare Pakistan Limited. It also noted doubtful/fraudulent purchase of IV Cannula at exorbitant rates of Rs56,394,925. The procurement of product IV Cannula worth Rs192,909,400/- has been made from M/s Usman Co International and M/s Lab Link Enterprises in the Financial Year 2021-22 from the firms prequalified in the Financial Year 2020-21. The following findings of the audit made the transactions doubtful:
The firms were pre-qualified for purchases in the financial year 2020-21 however, purchase orders were issued to them on 03-08-2021 i.e. in the financial year 2021-22 irregularly. Financial Bids were opened in the office of DGHS on 16-06-2021 wherein rates quoted and accepted against the category of IV Cannula 20G, 22G and 24G were Rs57, Rs57 and Rs79 respectively. As per the rate comparison of the purchases made subsequent to prequalification of the firms, the minimum rate offered by the firms in DHAs in the category of IV Cannula 20G, 22G and 24G were Rs44.44, Rs44.44 and Rs50.5 respectively. However, DG Health Services procured the same items at an exorbitant price of Rs57, Rs57 and Rs79 even though the quantity procured by DGHS is much greater than those procured by DHAs. The issuance of the purchase order of these three items was delayed for an unknown reason even though purchase orders of all the other items included in the tender were issued within the same financial year. Lab Links Enterprises supplied IV Cannula 24-G in DHA Nankana, DHA Gujrat, DHA Chakwal and PHFMC at Rs56.90 whereas the DGHS procured the same item in bulk quantity at Rs79/ unit. The purchase of the item at exorbitant rates instead of discounted price owing to economies of scale make the credentials of the financial transaction highly doubtful.
The procurement at exorbitant rates caused a financial loss amounting to Rs56,394,925 to the government exchequer, said the audit. It pointed out low deduction of income tax of Rs38,686,654 during the process of different biddings. It observed that tender for procurement of medicine, medical devices and surgical dressings were executed requiring submission of technical bid online two days earlier than the deadline for submission of technical and financial bid in hard copy as evident from the bid advertisement. Audit observed that the department intentionally never quoted in any bid document that only technical bids will be received online shows malafide on its part of it.
To audit the said procedure seems to be a deliberate attempt to jeopardize the integrity of the bidding process as the pilferage of information on the details of vendors participating in a particular tender item could lead to a higher/ non-competitive financial quotation two days later, especially in a scenario where only one technical bid is received against an item; or technical bids of some known non-compliant firm is received. This lapse could lead to a financial impact of millions of rupees.
Audit recommends that the matter may be enquired at the administrative level, quoted rates of all the items where single bidder qualified technically be analyzed in the light of market survey besides implementation of PPRA in true letter and spirit for future procurements. The department processed multiple tenders for the purchase of Medicines, Medical Devices, Surgical Dressings and Insecticides for DGHS, Rescue 1122, CD EP&C, TB Control Program, Hepatitis Control Program etc worth billions of rupees. A conservative estimate of the amount of bid securities and performance guarantees received by the DGHS is around Rs600 million in FY 2021-22. 98 CDRs/ bank Guarantees out of 197 total recorded in the CDR register were retained by the department despite the execution of almost all the tenders.
It was noticed that the CDRs issued by Meezan Bank do not mention the name of the company to which it has been issued. This very fact has been exploited by the contractors in connivance with the department and several such CDRs were found against multiple bids without authorization by the original company.
The department has neither maintained any CDR record in excel sheets nor it prepared it for the audit team despite multiple requests. Without soft data, and with such paucity of time, item-by-item comparison of all the received securities and Performance Guarantees was not possible.
The audit is of the view that the CDRs of the companies were being deliberately retained to manipulate the same. Weak financial and supervisory control over the management of Bid Security and Performance Guarantee led to the fraud. Audit recommends that owing to the magnitude of the fraud being committed with manipulation of the received CDRs of other vendors, a regular enquiry at the level of PAO for fixing responsibility within the department may be made. The companies that are getting benefits in the fraud may be blacklisted as they are the ultimate proven beneficiary of the fraud. Audit pointed out fraudulent procurement of face shields and long shoes using forged technical bid at exorbitant rates of Rs 125,500,000 from ZR Engineering.