Over half of Level Four hospitals fail to submit financial reports - Auditor General

Level Four Hospitals across the country have been put on the spot for failing to submit financial statements for audit, as required by law.

Appearing before the Senate's County Public Investments and Special Funds Committee, Auditor General Nancy Gathungu raised concerns over the deteriorating financial accountability and transparency, as evidenced by the increasing number of modified audit opinions.

The committee chaired by Senator Godfrey Osotsi was told that common issues include non-submission of financial statements, errors, non-adherence to reporting standards, procurement violations, and lack of integrated development plans.

"Only 46 out of 110 municipalities had submitted financial statements for audit by June 2023," Gathungu said.

In her report, 193 out of 358 Level 4 facilities did not provide their financial statements for the Financial Year 2021-2022.

The report further reveals that in the Financial Year of 2022- 2023, 163 Level Four hospitals failed to submit their financial statements.

"In addition, only 33 counties have submitted at least one financial statement in respect of their hospitals for the financial year 2021-22 and 2022-23," Gathungu stated in her report.

According to the Public Finance Management Act, 2012, failure to submit financial statements is a violation of Section 164 (1) which requires the accounting officer for a county government entity to prepare financial statements in respect of the entity at the end of each financial year, in formats to be prescribed by the Public Sector Accounting Standards Board.

Also, Section 164(4) (a) of the Act requires the accounting officer to within three months after the end of each financial year to submit the entity's financial statements to the Auditor-General.

Auditor General Nancy Gathungu appearing before the Senate Committee on County Public Investment and Special Funds on September 4, 2024 at Parliament Buildings, Nairobi. (Photo: Senate)

County Governments assumed the management of hospitals within their jurisdictions, comprising Community Facilities (Level One), Health Dispensaries (Level Two), Health Centres (Level Three), County Hospitals (Level Four) and County Referral Hospitals (Level Five).

Facility services

A Level 4 hospital is a county hospital and has the same services as the Level 3 hospitals, plus X-ray services.

The facility also includes specialist standalone medical centres, medical-surgical, diagnostic and clinical laboratory centres.

It offers holistic services and is run by a director who is a medic and at best a doctor by profession.

The Kenya Medical Practitioners and Dentists Council says these facilities act as the principal primary referral hospitals and offer services that complement primary health care services to allow for the delivery of more comprehensive care.

According to the Kenya Master Health Facility list by the Ministry of Health, there are a total of 358 Level Four hospitals and 14 Level Five hospitals in the country.

The first audit of hospitals as self-accounting entities took place in the financial year ending June 30, 2022.

Before this, Level Four and Five hospitals were audited under the County Department of Health.

According to the Auditor General, failure to submit financial statements is disrupting her office's annual operational plans.

The growing audit backlog is adding to both the workload and the audit scope.

"During the financial year 2021- 2022, only 58 hospitals, comprising 50 or 14 per cent of Level Four hospitals and eight or 53 per cent of Level Five hospitals submitted their financial statements for audit," Gathungu stated.