Audit Report on the Inventory Controls of Harlem Hospital Center over Noncontrolled Drugs

AUDIT REPORT IN BRIEF

This audit determined whether Harlem Hospital Center of the Health and Hospitals Corporation (HHC) has adequate internal controls over its inventory of noncontrolled drugs. The scope of the audit was Fiscal Year 2005 and July 2005 through September 2005. Harlem Hospital Center has approximately 400 beds and is the largest health facility in Harlem. During Fiscal Year 2005, the total cost of drugs (controlled and noncontrolled) purchased by the Pharmacy Department at Harlem Hospital Center was approximately $8.4 million, and the value of the inventory of all drugs in the Pharmacy Department stockroom at the end of Fiscal Year 2005 was reported to be $240,957.

Audit Findings and Conclusions

Overall, Harlem Hospital Center’s Pharmacy Department has adequate inventory controls over noncontrolled drugs. Based on our observations and testing, we found that access to the Main Pharmacy, stockroom, satellites, and Out-Patient Pharmacy (OPD) is restricted to specific employees. Cameras are installed in all Pharmacy areas to observe their activities. Vendors deliver noncontrolled drugs directly to the stockroom where an employee counts and signs for the number of cases received. Noncontrolled drugs are delivered to OPD and the four satellites in locked containers. Documentation for noncontrolled drugs that were issued from the stockroom is maintained in the stockroom files, and inventory records had only minor inaccuracies.

However, we identified some issues at the Pharmacy Department that must be addressed. Specifically: the count sheets used by Harlem Hospital Center staff members to perform their year-end inventory listed the quantities for each item, contrary to good inventory control practice; adjustments made to the computerized Other Than Personal Services (OTPS) procurement management system did not always have back-up documentation; the Pharmacy did not adequately segregate the duties of the stockroom employees; procedures for purchasing of drugs were not always followed; and the credits and checks for returned expired drugs were not reconciled.

Audit Recommendations

Based on our findings, we make 10 recommendations including those listed below. Harlem Hospital Center Pharmacy officials should:

• Remind all Pharmacy personnel who have access to noncontrolled drugs after the stockroom is closed that they are required to prepare an issue sheet for all noncontrolled drugs removed from the stockroom.
• Ensure that all count sheets used for the year-end inventory do not have balances listed on them.
• Investigate and document all adjustments made to correct inventory balances in OTPS.
• Adhere to their own purchasing procedures and ensure that all purchase orders are prepared, approved, and authorized before drugs are ordered from vendors.
• Perform reconciliations to ensure that they receive all credits and moneys they are entitled to.