The Public Health Ministry entered into rent-free arrangements to have drugs and medical supplies temporarily stored at four off-site facilities, including a hotel where a termite infestation and damage to some of the items were evident.
This is according to the 2017 Auditor General’s Report, which has recommended that contracts be entered into to ensure that there are ideal storage conditions and to protect the government from potential financial losses. The period of assessment was January 1st to December 31st, 2017.
The report, which was presented to the National Assembly, singled out the Ocean View International Hotel and included photographs to show the poor storage conditions there. The other off-site facilities utilised by the ministry during 2017 were New GPC Inc, ANSA McAL Trading Limited and a Princes Street site.
According to the report, the drugs were stored in seven rooms at the hotel and the manner in which the items were packed made it difficult to conduct a stock count, as they were not arranged in the manner that made them easy to access and check.
“In addition there was evidence of termite infestation in the rooms and damages to the boxes and items stored…The extent of the damage could not be determined at the time of physical count,” it said.
The report added that the ministry’s response to these observations was that a decision was taken to utilise the hotel to store medical supplies rather than pharmaceuticals, which need air conditioning to maintain potency. “The proprietors have treated the rooms against termites and rodents to avoid damage to the items,” the ministry said in response.
The Auditor General has recommended that immediate steps be taken to ensure that the Stores Regulations are complied with, as it relates to the accounting of stores.
The report said that there is no evidence to show that the ministry paid rent to the owners of the offsite facilities and audit checks have revealed that it did not enter into contracts with them.
As a result, the Audit Office could not determine the duration for storage of the items, remedies in place for a breach by both parties, the conditions under which the items must be stored and the minimum security standards required at the facilities to protect the items from fire, theft and flood.
The ministry, in its response, indicated that it sought “assistance from corporate citizens” to store the items temporarily since construction of the Materials Management Unit (MMU) and Central Supply Unit (CSU) bonds are ongoing. “As soon as the works are completed the Ministry will no longer use these offsite [facilities] unless it deems it necessary,” it said.
The Audit Office recommended that action be taken to ensure that contracts are put in place that meet the requirements of the Procurement Act, especially as they relate to the terms and conditions that would indemnify the government from financial loss.
It was noted that while the ministry provided a list of items stored at the facilities, with the exception of the New GPC Inc., which had drugs to the tune of US$3.213 million (approximately $663.485 million) stored, there were no prices attached to the items listed at the other three facilities. As a result, the cost of the items at those facilities could not be determined.
The ministry informed the Audit Office that the Management Accounting Computerised Software (MACS) system is currently being implemented to retrieve information relative to the quantity and costing for the storage facility, be it MMU or off-site locations. The ministry was advised to take appropriate action to get the information.
The audit also found that at the New GPC Inc. facility, three items – Clindamycin, Benzathine Penicillin and betamethasone valerate cream—were counted on August 9th, 2018 but there is no evidence that the quantities were brought to account in the Warehouse Management System (WMS). The ministry in response said that at the MMU, the MACS is fully operationalised to have the relevant information available for auditing.
During a validation exercise conducted on August 9th, 2018, at the Princes Street facility, the report said, the stock of urine bags could not be counted due to the manner in which the items were stored.
Rentals
With regard to the rental of buildings, the report said that the sum of $228.926 million was spent on this during 2017. This sum includes amounts totalling $137.5 million spent on the rental of the Sussex Street warehouse for the period February to December, 2017. The rental contract was dated June 1st, 2016 and was signed on July 20th, 2016 for a period of three years with an expected end date of June 30th, 2019.
It was explained that a letter, dated October 3rd, 2017, was sent to the landlord in reference to Notice to Quit with effect from October 31st, 2017. This indicated the Ministry’s intention to quit and surrender the premises from November 1st, 2017. “It could not be determined the reason for paying rent in the sum on $25M for the months of November and December, 2017, when the Ministry clearly indicated that the premises would have been surrendered from 1 November, 2017 ,” the report added.
It noted that at the time of reporting, the ministry has paid sums totalling $100 million as rental for the period January to August 2018 but the authority for this payment was not provided for examination.
In response, the ministry said that it had quit and surrendered the premises from August 14th, 2018. “During the period October, 2017 to 13th August 2018, the Ministry was still using the premises; hence, payments were made, since the contract was still active,” the ministry said.
The disclosure that government was paying businessman Larry Singh, of LHI, the monthly rental of $12.5 million for the building to store drugs had attracted significant criticism.
A Cabinet subcommittee was convened after former Public Health Minister Dr. George Norton was found to have misled the National Assembly on the rental of the bond.
The subcommittee’s report had stated that the lease should be revisited and strengthened and if there was a refusal by landlord LHI, government should give a year’s notice of a termination of the lease and build its own facilities in the intervening period. “With respect to the rental sum of $12,500,000, it is the subcommittee’s considered opinion that the value should be re-assessed as it is likely that a similar facility could be obtained at a lower rate,” the report had said.
The government, in response to the subcommittee report, said that the lease was “undoubtedly undesirable” and that it would consider shortening it, while expediting the search for another facility.
The rental was only made public following questions posed by opposition parliamentarian Anil Nandlall in the Committee of Supply in August, 2016. At that time, he reminded that over $50 million had already been paid in rent but the bond was never used.
Rental of the bond also formed the basis of a private criminal charge, which PPP/C MPs had brought against Norton earlier this year. The charge was later quashed by the Chambers of the Director of Public Prosecutions.
In December of last year, Norton’s successor, Volda Lawrence, confirmed that budgetary allocations were made for the rental of the bond for the entirety of 2018. This was despite the ministry having indicated prior that there were intentions to end the contract for the building’s rental.
