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Corruption, transparency failings alive and kicking in private sector

Wednesday June 26 2019

The Nairobi Hospital

Entrance to The Nairobi Hospital. PHOTO | DENNIS ONSONGO | NATION MEDIA GROUP 

ROBERT SHAW
By ROBERT SHAW
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Corruption and mismanagement dot the landscape of the public sector to the extent that we often think that is where it starts and finishes. No.

First, a lot of public sector corruption has a component input from the private sector. The unholy alliance of public and private sector entities is a lethal combination in mega, grand and petty corruption.

FORENSIC AUDIT

Secondly, corruption and corporate malfeasance, often in the form of white-collar crime, is alive and kicking in the private sector. It may not be as pervasive as in the public sector but it is prevalent, especially where the pickings are rich.

One reason why it does not necessarily get the oxygen of publicity and exposure is because, essentially, private business does not often need to account to the public. Where there are accountability requirements, they can often be kept under wraps with the usual excuses about the need for confidentiality and so on.

Let me turn to one of the more venerable institutions: the former European Hospital, now known as Nairobi Hospital. At the outset, I have to admit that I have a soft spot for the hospital as I spent nine years on its board of management at a time when it was struggling.

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This institution has a credible trailblazing past and contributed to the upholding of standards in the wider medical arena. For example, the Cicely McDonnell School of Nursing has often set the pace in nursing education and standards in Kenya over the past half a century and many reputable medical practitioners cut their teeth there.

Nairobi Hospital is owned by the Kenya Hospital Association, a company limited by guarantee, and is ultimately answerable to its members, who are also shareholders and stakeholders.

Of late, Nairobi Hospital has been going through a rough patch. But this is not unusual and the name of the game is to learn what is wrong and confront and resolve the issues.

ACCOUNTING ISSUES

In the past few years, it has had three forensic audits, which have thrown up a myriad governance and accounting issues. The latest audit report exposes a number of sloppy accounting practices: Procurement procedures were not followed and some suppliers not qualified; advance payments were made to suppliers before work commenced; invoices to the tune of Sh1.7 billion were submitted before LPOs; and project variations were often in excess of 50 per cent and totalling Sh1.72 billion.

Other highlights were that initial contract values, revised contract amounts and final payments were all different when the latter two should, in theory, be the same. Cash payments totalling Sh72,159,329 in 2013 alone were not banked, along with a number of unrepresented cheques. Clients often exceeded their credit limits, hence leaving the hospital with unpaid millions.

If Nairobi Hospital were not endowed with such strong reserves, these transgressions could have brought it down.

The management, under the stewardship of its board, went on a construction binge that exceeded its needs to the extent that it has a number of underused or unused spaces, which cost a veritable fortune. The commercial launderette works at around a quarter of its capacity! There are examples of specifications that would probably not comply with WHO hospital guidelines and even the smell of sewerage in one area.

MEDICAL MANDATE

Some have argued that Nairobi Hospital has spent too much on non-core activities at the expense of its core medical mandate. Some doctors go as far as complaining that some of the medical facilities are in need of upgrading and even repair.

The board must conduct itself with probity and clean up its act. The tender for 2019 insurance policies shows at least two companies linked to board members competing. That is conflict of interest and is against the Companies Act 2015.

Nairobi Hospital must get firmly back on the rails, regain its medical heights and make its healthcare more affordable and less elitist for its many patients.

Mr Shaw is a public policy and economic analyst. [email protected]

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