System Audit for Small Hospitals: Suggestions for Using a Purchase System

The Purchase System

The objective of the purchase system is to make sure that the requirements of hospitals are purchased at the best possible prices, are available and are always accountable. The various aspects of a purchase system include planning, allocating funds, preparing, purchasing, receiving, storing and distributing the purchased materials.

Although NABH might not give too many guidelines about the purchase system (1), it is important for the organization. The profitability of the organization is dependent on a good purchase system. NABH standards ROM 3 a,b,c,d and ROM 4 a,b are some of the standards given. At the end of this article are forms that you can use as templates for implementing your purchase system.

The process is as follows:

1. The various departments of the hospitals prepare a detailed budget of their needs (Form 1). To start with, this could be obtained from the previous year’s audit reports. Departmental meetings and meetings with the administrative staff are also useful for this.
2. A senior person of the administration then allocates the money that is available for the department (Form 1).
3. Indents are placed for the weekly requirements, as the need arises. This simply means telling the administration or the stores that these items are needed (Form 2).
4. The person in charge of the stores checks these indents and gives the materials if they are available in the stores, and if they are budgeted for the particular department (Form 3).
5. If the items are not available, then approval for purchase is obtained (Form 4) from the purchase manager, if budget and allocation are available. The finance manager decides on any new allocation. The person approving should have all the data that are necessary for approval, like the previous purchase price (if previously purchased), 3 quotes independently obtained, the convincing need of the item in the department, etc., all as solid proof.
6. The purchase order is then prepared. (By the way, purchase orders need to have a number!) Prior to preparation of the purchase order, home work is required for getting information about the prices from various places through independent sources, as mentioned in point no. 5. They are recorded, and with that information, the telephone is used for negotiating the prices for purchase. Two copies of a purchase order are prepared, one with the price and the other one without the price, with the name of the item, place for purchase, etc. This way, the person going for purchase could get the item at a lower price, if he/she can (Form 5).
7. Any material (including courier) which comes in to the clinic/hospital should be entered at the gate. The entry should have the details like the courier’s name, parcel number, entry time, invoice number, etc.

After the entry, the security will seal the back side of the invoice and write the Gate Inward No. behind it, and then send the material along with the sealed invoice to the stores. (Some meaningful work for the gate keeper, at last!) One usual excuse is that the invoice was inside the parcel. In such case, the gate keeper shall open the box in the stores, under the supervision of stores in charge, and get the necessary details.

A sample gate seal:

8. The purchased goods are then kept at the quarantine stores (Form 6). After verification with the purchase order and checking the quality (QC), the items are then accepted to the main stores and given Goods Received numbers (GR No). Any items to be returned should be sent back from the quarantine stores, even before giving the GR No. In other words, any item you find inside your campus with a GR No. is an approved item which can be traced back to its purchase approval, and even to its request.
9. Even in the same bill, different items will have a different GR No. For example, say Life Buoy soap and Lux soap, even if they come in the same bill, will have two different GR Nos. (It may sound useless, but when the system starts running and you need fine tuning, you will need it! Trying to change at a later stage is really hard, and it’s hard even in corporate.)
   All the items will have the GR number labeled/painted/stuck on the item.
10. The items purchased are listed and presented during the weekly administrative committee meeting of the officers (or heads of the department) for transparency and ratification (Form 7).
11. The various departments would have a stock consumption register that indicates how the items were used and how much is remaining. This register should have the details shown below (Form 8).
12. The above system is for non-medical items, and the system used for the Pharmacy is slightly different.

For the Pharmacy, the indenting starts with generation of a ...