Auditing Not-for-

Profit Entities
and Hospitals
by
SAUZA, KIRCHIMAE E.
VELASCO, KIYEL B.
VILLEGAS, JANELLE N.
 Overview
Not-for-Profit Organizations (NPOs)
Not-for-profit organizations are types of entities that do not earn
profits for its owners.
All of the money earned by or donated to a not-for-profit
organization is used in pursuing the organization's objectives and
keeping it running.
It plays a vital role in building healthy communities by providing
critical services that contribute to economic stability and mobility.
They also strengthen communities in a variety of important ways.
 Overview
Healthcare Systems and Hospitals
According to the World Health Organization (“WHO”), a healthcare
system consists of all organizations, people and actions whose
primary interest is to promote, restore, or maintain health.
The goal of a healthcare system is to improve health and health
equity through ways that are responsive, financially fair, and best
or most efficient use of available resources, while achieving
intermediate goals such as greater access to and coverage for
effective health interventions and making sure that provider quality
and safety are not compromised.
 Overview
As many countries experienced economic downturns and threats to
public safety due to pandemic outbreaks and emerging infection
diseases, many realized the growing importance of NPOs and
healthcare – now more than ever, improving the health of a nation's
citizens can directly result in economic growth, as there will be more
people able to conduct effective activities in the
workforce.
 Nature, Background, and Overview of
Specialized Industry
Healthcare Systems and Hospitals
A complex network of organizations providing health services, divided
into two main sectors:
1. Public Sector 2. Private Sector
Department of Health (DOH) – Profit
Local Government Units (LGUs) – Non-Profit
WHO Health Systems Framework
 Nature, Background, and Overview of
Specialized Industry
Leadership & Governance: Department of Health (DOH)
Mandated by the law to:
Provides national policy direction and develops plans, technical
standards, and guidelines.
Offers technical assistance, capacity building, and advisory services
for disease prevention and control.
Supplies medicines and vaccines.
 Nature, Background, and Overview of
Specialized Industry
Branches and Scope of DOH
 Nature, Background, and Overview of
Specialized Industry
Role of Local Government Units (LGUs)
Republic Act 7160 (Local Government Code of 1991) mandates LGUs
to provide basic services, including health services.
Management and delivery of health services are devolved from DOH
to provincial, city, and municipal governments. This includes four
essential health system functions:
1. Service provision
2. Resource generation
These services are classified into:
3. Financing
(1) Clinical Services
4. Stewardship
(2) Ancillary Services
As just important as leadership and governance, healthcare financing also
plays a pivotal role in the success of the healthcare industry. It encompasses
effective allocation of finite financial resources to different types of public
and personal health services and pooling financial resources across population
groups and sharing financial risks. The goal of this area is to:

1. Raise adequate funds for health to ensure that people get to use needed
services; and
2. Make people who use health services are shielded from financial
catastrophe or impoverishment associated with having to pay for them.
Based on 2012 statistics, the main fund sources for this industry are
the government, social health insurance, private sources (OOP, HMOs,
life insurances, etc.), and grants. Notably, there is a very high
proportion of out-of-pocket (*OOP") spending and Filipino households
continue to bear the heaviest burden at 57.6% OOP.
There are known geographic disparity in the availability of public health
workers: (1) Doctors to the Barrios (DTTB); (2) Nurses Deployment
Program (NDP); and (3) Rural Health Midwife Placement Program
(RHMPP).

Currently, the workforce is hospital-centric. Midwives compose the

majority of employees at 91% (public), then nurses (61% on private
sector), medical technologists (53% in public sector), and doctors (50% in
both sectors).
Only 30% of the entire healthcare workforce are in the public sector causing a
market- oriented brain drain phenomenon, while newly licensed nurses are unable to
find employment and there is underproduction in other medical professions, i.e.
doctors, dentists, med-technologists, etc.

Meanwhile, on the access to medicine and technology, the country has a supply-
driven distribution scheme through drugstores (80.1% of supply), hospitals (9.7%),
and other distributors (10.2%) such as government agencies (0.3%). There is a lax
regulation on strong pharmaceutical/nutraceutical companies' lobbying influence
and market-orientation is strong. Generics Act of 1988 is in force but compliance to
it still needs to push further. Health information and research is no exception to the
areas for development in the healthcare industry.
Updates & Statistics of the Specialized Industry in the Philippines:

As of December 2019, there are around 843 private hospitals in the

Philippines and 429 public hospitals, totaling to 1,272 hospitals
nationwide.
Among these figures, there are 13 known specialty hospitals in NCR as listed
below.
1. Government specialty hospitals
a. Dr Jose Fabella Memorial Hospital
b. Lung Center of the Philippines
c. National Center for Mental Health
d. National Children’s Hospital
e. National Kidney and Transplant Institute
f. Philippine Children’s Medical Center
g. Philippine Heart Center
 g. Philippine Heart Center
h. Research Institute for Tropical Medicince
i. San Lazaro Hospital

2. Private specialty hospitals

a. Quezon Institute
b. St Christiana Hospital
c. Urology Center of the Philippines
d. VT Maternity Hospital
As of 2012, these institutions are dominantly funded through private
sources at P325.5 billion. According to World Bank, 4.6% of the Philippine
GDP is attributable to healthcare industry, but global average is at 10.2%.

In 2020, the household final consumption expenditure for health in the

Philippines was valued at approximately 548 billion Philippine pesos. The
household spending on health has increased overall and was highest in 2020
.
The majority of funding for universal healthcare comes from the DOH and PhilHealth budgets, the
former of which has fluctuated in the last half decade. The department’s total budget jumped
from P87bn ($1.73bn) in 2015 to P112.3bn ($2.23bn) in 2016, but then fell to P95.3bn
($1.90bn) in 2017. Funding recovered to P106.1bn ($2.11bn) in 2018, before dipping once again
to P97.7bn ($1.94bn) in 2019 and recovering slightly to reach P100.6bn ($2.00bn) in 2020.

The 2020 figure accounted for 2.5% of the entire federal budget and some 0.5% of GDP.
PhilHealth, for its part, saw a budget of P71.4bn ($1.4bn) for the year, on par with 2019. In light
of the Covid-19 Pandemic, the federal budget for 2021 – approved in December 2020 – raised the
DOH’s allocation to a record P203.1bn ($4bn), while the budget for PhilHealth remained at
P71.4bn ($1.4bn).
 Key Market Trends
• •The impact of COVID-19 on demand and information dissemination

An important part of the pandemic response was the adoption of technology solutions,
facilitating access to care and knowledge sharing. Towards that end, the use of smartphone apps
to monitor and contain the virus increased during the crisis. In April 2020 the Department of
Science and Technology (DOST) developed an app that provides information on Covid-19-related
research and services, including efforts to secure and distribute test kits, personal protective
equipment and disinfectants. The private sector and universities also deployed apps for contact
tracing, voluntary symptom logging and community monitoring. For example, WeTrace was
created by a DOST- funded start-up and is used for patient mapping, case reporting and location
tracking. The government of Cebu has made it mandatory in the province.
 Telemedicine/Remote consultations

With many Filipinos now concerned about their health but unable to go
to hospitals because of the lockdown or fears exposure to the
coronavirus disease there, a number of medical companies and individual
doctors have offered their services online or through phone calls.
(ABSCBN News, 2020)
 Health Insurances and Government Subsidies

a. The Bayanihan to Heal as One Act, also known as Republic Act No. 11469, has provided
critical support to healthcare workers (HCWs) valiantly containing the spread of the coronavirus
pandemic, in the forms of urgently needed equipment and hazard pay, as well as additional
colleagues to bolster their ranks. Officially enacted from March to June 2020, the Bayanihan to
Heal as One Act is a crucial core initiative of the Department of Health (DOH) to respond to the
needs of HCWs.

b. The Department of Health (DOH) reported that it has delivered checks to the families of
healthcare workers who perished due to COVID-19, or those who contracted a severe form of the
disease, pursuant to the Bayanihan to Heal As One Act. Said law grants public and private
healthcare workers who contract severe COVID-19 infection while in the line of duty to a
P100,000 compensation, and one million pesos (P1,000,000) to the family of any health worker
who may die while fighting the COVID-19 pandemic.
 • Internet of Things (IoT) and Blockchain on Healthcare Information Management Systems

One of the major problems that a national health system face is the lack of a unified clinical
data management. There is not the appropriate technological and administrative
infrastructure for a unified patient medical history, prescriptions, laboratory tests or
therapeutic plan. The integration and implementation of a blockchain network as a
complementary technology to the existing information systems is proposed by several studies,
so reliable and effective information management could be provided by a healthcare
organization or the national healthcare system.
 AUDIT
CONSIDERATIONS
 Industry Challenges
Impact of COVID 19 pandemic on healthcare workforce

Leadership and governance - Prevalent inherent risks

that we include in our objectives (or assertions) are:
o prevention of lost revenues,
o to protect against fraudulent claims in the billing activities,
o to guard against reimbursements deficiencies on documentations and,
o to check frequencies or opportunities for reimbursables.
 Industry Challenges
On health insurances: Corruption allegations on the
Philippine Health Insurance Corporation, which has been
helping finance COVID-19 testing and treatment in the
country, has been rocked with allegations of fund
mismanagement and overpricing.

Accounting for donations, grands, and subsidies

 Industry Challenges
Both a challenge and an opportunity, risk on disruption
of blockchain technology can be counted as one of the
industry challenges as well. Existing DOH Information
Gathering Systems are allegedly computerized but are
still highly reliant on outdated paper and pen systems
in the frontlines. Blockchain technology’s applications
on healthcare systems has a great potential in
disrupting eFHSIS, PIDSR, SPEED, ClinicSys, and
PhilHealth dashboard.
 Key Audit Procedures:
1. Healthcare Financing
a. Secure/determine/inquire about the "rate structure of fees" and expenses, plus its sharing scheme
with Medical Professionals, resident or consultant (non-resident), including specialists.

b. Ascertain/inquire about the "discount policy" for in-house/out-patients and how it affects the
billing and settlement.

c. Review concessionaire agreements and sharing schemes.

d. Procedures for SSS/Phil health claims/deductions, application of credit card payments and
utilization of medical insurance/HMOs
2. Medical PPE, Products, and Technologies

a. Establish or check internal controls on procurement / purchasing of assets, medicines, importation

of sophisticated (state-of-the-art) medical equipment, storage of inventory items and its issuances,
policy on clothing & provisions and consumables.

b. Procedures on the [year-end] observance of inventory count.

3. Information and Research - Determine sources of funds for

the purpose assessing the efficacy of a particular medication
4. Leadership and Governance - secure Minutes or excerpts on
financial transactions relating to PPE, Investments, and
financial powers (signing authority and limits).

5. Service Delivery
a. VAT & EWT impact on medical professionals concerning professional fees, room rentals (for clinics)
and segregation / set-up entries in billings and settlements, sale of medicines both to in-patients
administration and out-patient purchases.

b. For proper orientation, visit the hospital client and observe how each section operates. Observe
procedures. c. There is always a document-trigger point before the procedure is performed
6. Operational audits, safety & compliance audits, and other
considerations
Is The Group Is The Cute

Kirchimae Kiyel B. Janelle

E. Sauza Velasco N. Villegas
Thank is You!