Georgetown Public Hospital Corporation (GPHC) Chief Executive Officer (CEO) Michael Khan has refused to comment on a recent audit into the operations of the hospital that has recommended that he be sanctioned for allegedly cheating the Guyana Revenue Authority (GRA) of over $1.4 million in income tax.
A special investigation into financial operations and functioning of the GPHC over the period January, 2012 to May, 2015, conducted by the accounting firm Ram and McRae, found that Khan received a responsibility allowance from January, 2011 to September, 2014 and that it was paid without the deduction of taxes, in contravention of the Income Tax Act.
According to the report on the audit’s findings, Khan instructed the hospital’s Director of Financial and General Services to pay him the allowance tax free. This directive, according to the report, is both “a serious breach of the law and an abuse of his authority, warranting some sanction by the Board of Corporation,” since “Khan must have been aware that the Board made no decision on the tax implications of the payment to him of a responsibility allowance, that the payment by law is subject to pay As You Earn (PAYE), and that the tax is deducted from responsibility allowances paid to other members of staff of the corporation.”
It explains that after a request was made by Khan, the hospital’s Board of Directors decided to pay Khan a responsibility allowance of $100,000 per month for managing the Department of Administrative Services after the transfer of Leslie Cadogan to the New Amsterdam Regional Hospital.
Over the period of January 1, 2011 to September, 2014, Khan was paid $4.4 million, which would’ve attracted taxes of approximately $1.4 million since such payment falls within the definition of gains or profits from employment and is therefore taxable under the Income Tax Act on the PAYE basis.
However, in a handwritten note affixed to the memo to the Director of Financial and General Services, Khan instructed that the allowance be paid tax free.
Contacted for comment on the matter, Khan said that he had “no comment on that,” and directed Stabroek News to speak with his lawyer on the matter.
The report also raised questions about the failure of Khan, the GPHC board, the Guyana Police Force and the Director of Public Prosecutions to pursue a cashier at the GPHC who had been implicated in fraud.
According to the report, during 2013 allegations of fraud by a cashier were investigated by the Auditor General, who found “misappropriation totalling $5.1 million.” The only evidence of action taken on the matter however was a copy of the minutes of the October 24, 2013 Board meeting, where directors debated action against the CEO. However, no decisions were made or actions taken.
Further, the auditors were provided with a nine-page unsigned document which was sharply critical of Khan. However the team was unable to meet or communicate with the writer to obtain any evidence to support the allegations.
“To the extent that we could check the allegations, we found no evidence of wrongdoing on Mr Khan’s part or support for some of the assertions,” they concluded while at the same time stating that they found a number of the recommendations quite useful, supporting many of the recommendations in the report.
In that vein, the establishment of an array of policies and procedures for all functions and departments and the computerisation of the finance department and materials management has been recommended, since the auditors say the absence of these, inclusive of Standard Operating Procedures for departments, especially Finance and Pharmacy, overall has led to micromanagement of the GPHC by the CEO in areas such as all payments of petty cash, payroll, payment to suppliers.
The CEO is also responsible for the signing of all contracts, handling the purchasing and mailing of bank drafts to overseas suppliers and approving all requests for purchases.
The report concluded that Khan holds many of these responsibilities in part because of his failure to see the vacancies of Director and Assistant Director of Finance filled. Though the post of Director of Finance has been vacant since April, 2014 it was not until August, 2015 that the receipts and payment supervisor was instructed via letter to act in the position. ‘”It was his [Khan’s] duty to address the staffing situation in a more timely manner by bringing it to the attention of the board thus the extended time during which the vacancies for these critical positions existed not only reflect poorly on the Board and the CEO but had the effect of increasing the risk of losses and improper or inaccurate accounting,” the report observed.
