Abstract:
Internal audit is an important part of hospitals to strengthen internal management standardization, normalize risk prevention and control, and make scientific economic decisions. How hospitals can fully leverage the value of internal audit to address issues such as weak timeliness, insufficient coverage, and difficulties in rectification in audit supervision is worth discussing. This article analyzes the effectiveness of an application case from J Hospital, focusing on risks and key management weaknesses, embedding internal audit into the entire process of economic management, discovering and correcting problems in a timely manner, and creating a new model of internal audit in hospitals using “problem checklist + rectification checklist”.
Keywords: Embedded Audit; Checklist Supervision; Internal Audit;
Fund: Youth Scientific Research Start-up Fund Project of Jinhua Central Hospital “Research on the Evaluation Index System of Internal Control in Government Procurement of Public Hospitals Based on Risk Orientation (JY2020-2-15)”;
In June 2020, the National Health Commission and the National Administration of Traditional Chinese Medicine issued a notice on the “Economic Management Year of Public Medical Institutions”. The notice requires reforms and innovations to strengthen supervision, enhance internal control supervision of various business activities, and strengthen the supervisory role of internal audits to improve long-term supervisory mechanisms. The “Opinions of the General Office of the State Council on Promoting High-Quality Development of Hospitals” (Guo Ban Fa [2021] No. 18) requires hospitals to improve internal control systems, focusing on major risks, significant events, and important processes in business and economic management, and to conduct risk assessments and internal control evaluations. In June 2021, the “14th Five-Year Plan for the Development of National Audit Work” proposed the main goal of “striving to build a comprehensive audit work pattern”. In the face of adverse impacts such as a decrease in patient visits, declining income, and increased prevention and control costs, how internal audit can adapt to the current new situation and new requirements to assist hospitals in high-quality development is a key issue. As an important component of the national supervision system, internal audit has the advantage of being familiar with the internal management of the unit. However, the traditional audit model, which mainly focuses on special audits, emphasizes post-event audits and cannot provide timely, effective, and comprehensive supervision of hospital economic activities, leading to issues such as insufficient coverage, weak timeliness, and difficulty in rectification. Therefore, this article proposes a new model of internal audit checklist supervision in hospitals under embedded audit.
I. Model Connotation
The hospital internal audit checklist supervision model under “embedded audit” refers to: being risk-oriented, focusing on key links and management weaknesses, embedding internal audit into various business departments and important control activities from both horizontal and vertical dimensions, proactively and in real-time auditing and supervising budget, procurement, engineering construction, assets, contracts, and other business activities, discovering problems and identifying potential risks simultaneously. When problems are found, responsibilities are clarified, rectification suggestions are made, immediate rectification is required, and a “problem checklist” and “rectification checklist” are formed for real-time dynamic tracking. If serious problems are discovered, they are reported to the hospital leadership immediately, submitted for discussion at the hospital party committee meeting, and a rectification notice is issued. At the same time, a quarterly summary analysis of the discovered problems and rectification situations is conducted, forming a quarterly audit report submitted to the hospital party committee for discussion and decision-making. Problems and risks exposed are sorted out, and relevant internal control working meetings are convened, establishing long-term mechanisms through a series of measures such as revising systems, optimizing processes, and information control to achieve continuous improvement. At the same time, cooperation with disciplinary inspection and supervision is strengthened, submitting clues of violations and breaches of discipline.
By using the hospital internal audit checklist supervision model under “embedded audit”, on one hand, internal audit is embedded in the entire process of business management, focusing on key links and management weaknesses, embedding internal audit into important control activities, discovering problems and risk points simultaneously, improving audit timeliness, and expanding the breadth and depth of audit supervision, assisting in comprehensive audit coverage. On the other hand, using “problem checklist + rectification checklist” increases the intensity of rectification, promoting effective and in-depth rectification work. Through the innovation of the internal audit model, the supervisory service function of internal audit is fully utilized, continuously promoting the improvement of internal control, risk prevention, and quality enhancement in hospitals.
II. Implementation Steps
(1) Sort Processes to Identify Risks
Analyze and sort out the internal control processes of budget, procurement, engineering construction, assets, contracts, etc., to identify risk points. For different business activities, formulate corresponding “risk checklists”, clarifying the key links for audit supervision and responsible departments for risks.
(2) Embed Audits to Identify Problems
Using the “risk checklist” as an entry point, the audit department embeds itself into the management processes of budget, procurement, engineering construction, assets, contracts, etc., to conduct real-time supervision and regular inspections, identifying problems and risk points, and requiring immediate rectification. Serious problems discovered are reported to the hospital leadership immediately, submitted for discussion at the hospital party committee meeting, and a rectification notice is issued.
(3) Checklist Supervision to Promote Rectification
Summarize the problems discovered through embedded audits into a “problem checklist”, clarifying responsible departments for each item, making rectification suggestions, forming a “rectification checklist”, and issuing it to each responsible department, requiring them to develop effective rectification measures and ensure rectification is implemented. At the same time, a quarterly summary analysis of the discovered problems and rectification situations is conducted, forming a quarterly audit report submitted to the hospital party committee for discussion and decision-making.
(4) Optimize Internal Control to Promote Improvement
For the internal control risks exposed by the problems discovered during embedded audit supervision, relevant internal control working meetings are convened, and internal control rectification optimization plans are determined and implemented in line with internal control norms and relevant laws and regulations. By improving relevant rules and regulations, optimizing internal control processes, and utilizing information technology tools such as PDCA cycles, continuous improvement of internal control is promoted. At the same time, targeted training on government procurement knowledge, internal control of contract management, and study of typical cases are organized to enhance the professional competence of personnel involved, continuously improving hospital management standards.
Economic contract management is an important aspect of hospital management work and one of the key focuses of internal control. The following section introduces the specific practices of the hospital internal audit checklist supervision model under “embedded audit” using contract management as an example.
Before conducting embedded audit supervision on contract management, the internal audit department sorts out the main risk points existing in contract management. Using risk points as entry points, audits are focused on the contract business process, specifically including supervision of contract negotiation, auditing of contract text drafting, contract signing, contract acceptance, contract performance, contract settlement, etc.
From 2020 to 2021, the internal audit department audited 189 bidding documents and supervised contract negotiations over 370 times. A total of 1622 economic contracts were audited, including 128 major contracts, and over 80 contract acceptances were supervised, with more than 200 problems and risk points identified. For the problems found, responsibilities were clarified, rectification suggestions were made, and responsible departments were required to rectify within a specified time. For issues causing economic losses to the hospital, recurring problems, and significant risk hazards, reports were submitted to hospital leadership immediately, discussed at the hospital party committee meeting, and rectification notices were issued.
Through analysis and summary of discovered problems, the internal audit department identified the main internal control risks in hospital contract management in the following six areas:
(1) Non-standard clauses in bidding documents and contract texts
Audits of bidding documents found that their content clauses may not comply with policy norms or may be detrimental to the unit. Contract texts are drafted according to bidding documents, especially substantive content such as specifications, payment conditions, and technical and service requirements, which if unreasonable, can severely harm the interests of the hospital.
(2) Long contract signing times and inefficient processes
Contracts signed by the hospital take more than 30 days from text drafting to completion in over 20% of cases. Personnel spend a lot of time in the contract signing process, affecting work efficiency. Furthermore, low signing efficiency and untimely signing severely impact contract performance, bringing risks.
(3) Non-fixed contract content, with risks of alterations
There are risks and loopholes in contract circulation as the entire approval process is completed by the personnel carrying written materials to sign in each department. During this process, there may be instances where contract clauses are modified, leading to inconsistencies between the final signed contract text and the text reviewed by various departments, posing significant legal risks.
(4) Contract information not shared, making inquiries difficult
Hospitals deal with various types of contracts, with varying durations and payment methods. Review departments rely on manual entry of contract information, leading to incomplete records and inability to promptly identify issues, resulting in an inability to conduct comprehensive inquiries and tracking management of contract information. For contracts that need to be traced, personnel must apply for inquiries from the responsible department or even from the archives, which is time-consuming and labor-intensive.
(5) Expired contracts not processed, leading to contract period disconnection
Responsible departments rely on manual registration of contract information, making it easy to have situations where contracts expire but procurement continues without timely organization of bidding, leading to risks such as over-contract procurement and disconnection of equipment maintenance periods.
(6) Contracts not signed according to processes, with seal management needing enhancement
In hospital contract management, there have been instances where external contracts were not strictly reviewed and signed according to hospital management processes, and situations where the hospital seal was affixed without the signature of the hospital’s legal representative.
In response to the above internal control risks, the internal audit department urged or organized relevant departments to hold targeted internal control working meetings to optimize the contract management business process and implement the following measures:
(1) Hire specialized legal consultants for contract review
Through public bidding, the hospital has confirmed a service unit for contract management legal consulting, responsible for reviewing the legality and compliance of economic contracts and providing legal advice, as well as representing litigation and arbitration non-litigation businesses. By hiring professional legal consultants, the legality and compliance of hospital economic contracts are guaranteed, reducing risks.
(2) Establish a review mechanism for bidding documents and major contracts
The review mechanism for bidding documents and major contracts refers to the responsible contract department organizing legal consultants, using departments, finance department, disciplinary inspection and supervision office, and other relevant departments to conduct on-site discussions and reviews of bidding documents and major contracts, forming meeting minutes. On-site discussions by various departments enhance the quality of bidding documents and ensure control over the drafting of contracts, effectively avoiding or reducing risks.
(3) Formulate contract templates
The responsible contract departments, legal consultants, finance departments, and other departments have formulated templates for sporadic engineering contracts, clinical trial contracts, etc., significantly shortening the time for contract drafting and improving contract quality.
(4) Strengthen information technology construction for contract management
The hospital has gradually increased efforts in contract management information technology construction. After phases of demand research, plan implementation, business simulation, and revision tests, the hospital contract management information system went live on October 14, 2021. The system enables online contract approval, real-time tracking, mobile operation, automatic generation of contract ledgers, process retention, expiration reminders, electronic signatures, report analysis, payment registration, efficiency analysis, engineering management, audit management, etc., improving hospital contract signing efficiency and effectively preventing internal control risks in contract management.
(5) Organize internal control training for contracts and study typical cases
Legal consultants and experts in procurement have been organized to provide business training on contract review points and legal issues to the hospital leadership and personnel involved in government procurement, significantly enhancing the professional competence of personnel involved. In addition, typical case study discussions have been organized to raise awareness and alert personnel.
III. Model Value
By establishing an “embedded audit” mechanism and utilizing “problem checklist + rectification checklist”, a new model of internal audit in hospitals is created. The value of this model lies in:
(1) Implementing process supervision to assist comprehensive audit coverage
By utilizing the “embedded audit” mechanism, real-time and proactive audit supervision of economic matters is conducted throughout the process, discovering and correcting problems in a timely manner as business implementation progresses. This ensures early intervention in audits, catching issues early, and expanding the breadth and depth of audit work, effectively eliminating blind spots in supervision and assisting in comprehensive audit coverage.
(2) Utilizing checklist supervision to strengthen audit rectification
By employing the “problem checklist + rectification checklist” supervision model, on one hand, the “problem checklist” serves as a carrier for embedded audit supervision, preventing risks and comprehensively revealing problems and hidden risks; on the other hand, through clarifying the “rectification checklist”, accountability is enforced, immediate rectification is required, significantly reducing the difficulty of rectification, enhancing the responsibility awareness of personnel involved, effectively addressing issues of weak timeliness and difficulty in rectification in internal audit supervision, and promoting effective and in-depth rectification work.
(3) Enhancing internal audit effectiveness to improve internal control quality
Audit supervision is an important guarantee for the effectiveness of internal control execution. By utilizing the “embedded audit” mechanism, with process supervision as a key focus and checklists as carriers, timely loophole closure, system revision, process optimization, and information technology measures are implemented for exposed internal control risks, establishing long-term mechanisms to achieve continuous improvement. This fully demonstrates the effectiveness of internal audit and significantly enhances internal control quality, safeguarding high-quality hospital development.
IV. Application Effectiveness
With the support of the hospital party committee leadership and relevant departments, the internal audit department of J Hospital actively explores the establishment of a risk-oriented, control-mainline, and checklist-based internal audit model. Through innovative implementation of “embedded audit” and checklist supervision models, internal audit supervisory and service functions are fully performed. Not only are problems discovered, and improvement suggestions proposed, but audit rectification is also actively promoted, internal control is improved, audit effectiveness is expanded, and long-term mechanisms are established.
From 2020 to 2021, the internal audit department identified 398 problems, revealing over 30 million yuan that could be further standardized in management, issued 10 problem and rectification checklists (including 2 annual checklists), formed 8 analysis reports, and issued 10 rectification notices, facilitating the establishment and improvement of 8 rules and regulations. A total of 413 audit suggestions were adopted. Significant achievements have been made in promoting hospital system construction, contract management, internal control, audit rectification, etc., effectively ensuring hospital development.
(1) Further improvement of the institutional system. In response to identified internal control risks, the internal control system is continuously improved. The hospital has established and improved 8 rules and regulations, including “Supplementary Provisions for Payment Management of Engineering Progress”, “Management Regulations for Basic Construction Engineering Verification”, and “Special Fund Usage Methods for Key Discipline Construction”, among others.
(2) Further enhancement of contract management refinement. In terms of contract content quality, mechanisms such as major contract review mechanisms, drafting of contract templates, and issuance of contract problem checklists have been implemented to continuously standardize contract content. In terms of information technology construction for contract management, through the establishment of the contract management information system, functions such as linking procurement budgets, real-time tracking of approval progress, automatic generation of contract ledgers, retention of contract modifications, expiration reminders, and searchable information have been improved. Risk point prevention is embedded in information processes, effectively preventing issues such as lack of modification records, post-audit changes, contract period disconnection, non-sharing of contract information, and difficulties in contract inquiries, significantly enhancing hospital contract signing efficiency and improving hospital contract management standards.
(3) Further improvement of internal control. The number of problems continues to decrease, risk hazards are effectively prevented, and responsibility awareness gradually enhances. In response to identified internal control risks and weaknesses, the effectiveness of the internal control work mechanism is continuously utilized, urging the convening of internal control working group meetings, including optimization meetings for medical equipment procurement bidding document review processes, internal control meetings for hospital emergency procurement processes, and discussions on high-quality promotion of contract signing work, further improving the hospital’s internal control level.
(4) Further strengthening of audit rectification efforts. By employing the “embedded audit”, checklist supervision models, and issuing rectification notices, problems and risk points are promptly identified, accountability is enforced, immediate rectification is required, significantly reducing the difficulty of rectification, and greatly enhancing rectification efforts. From 2020 to 2021, the quarterly rectification rate reached over 92%, and the annual rectification rate reached 100%, achieving effective results in rectification work.
Authors: Chen Nu, Shao Haiying, He Xuan, Jinhua Central Hospital
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