Report Finance Follow Up FINAL

Private & Confidential
Middle East Healthcare Company (MEAHCO)
Internal Audit Follow-up Report on the Report Issued in 2015

Finance Function
March 2017
March 2017 Page 1

Finance Function – Internal Audit Follow-up Report
1. Contents
1. Contents ............................................................................................................................................................................................................................... 2
2. Executive Summary ............................................................................................................................................................................................................. 3
Scope and Objectives ................................................................................................................................................................................................................... 3
Our Approach ............................................................................................................................................................................................................................... 3
3. Implementation Status.......................................................................................................................................................................................................... 5
4. Observations’ Status Summary............................................................................................................................................................................................ 7
5. Follow-up on Observations ................................................................................................................................................................................................ 10
March 2017 Page 2

2. Executive Summary
Scope and Objectives

Saudi German Hospitals Group (SGHG) has engaged Ernst & Young (EY), to perform internal audit activities for Finance function covering the hospital’s located
in Jeddah, Riyadh, Aseer and Madinah.
The objective of the internal audit activities was to review the existence and effectiveness of the key controls and to provide recommendations for improvements.
The internal audit activities for the Finance function was carried out for the period from 1 January 2015 to October 2015, covering the following below listed areas:
 Accounts Payable
 Accounts Receivable
 Budgeting
 Cash Management
 Fixed Assets
 Financial statement closing & reporting
 General ledger
 Revenue recording
Our Approach
While carrying out the internal audit activities, we have undertaken the following approach:
 Conducted meetings with key personnel involved in the process.
 Obtained understanding of various related tasks and activities.
 Identified key business risks and related controls to the processes.
 Verified and tested the internal control environment in place to mitigate the identified risks.
 Reviewed / tested relevant data and information provided to us.
 While performing our procedures, we have relied upon information provided to us by the employees of the company.
This internal audit finding & recommendation report includes detailed findings, risks and recommendations that have been identified based on our review of the
process.
Specific risks have been identified within each scope area, assessed along with the associated mitigating controls. The findings are intended to improve existing
controls over these risks and to improve the efficiency and effectiveness of current operations. The review carried out during the course of this internal audit
execution was designed to detect control weaknesses in the processes under scope, which may have existed during the review period. However, due to the
nature of the review, there is no warranty that all process related weaknesses, faults and irregularities have been highlighted during the course of the internal
audit.
March 2017 Page 3

The Company’s management and the Audit Committee are ultimately responsible for the Company’s system of internal control and internal audit function
including risk assessment, audit plan, and audit priorities.
The Company’s management recognizes its responsibility in addressing the findings and recommendations outlined in the report. The finding, risks, and
management comments (agreed action plan) column on the following pages are intended to improve existing controls over risk and to improve the effectiveness
and efficiency of current operating procedures
March 2017 Page 4

3. Implementation Status
The chart depicts the implementation status of observations by Branch.
Finance Department's Observation Implementation Status

35
30
12
25
20
20
21
9 18
15
10
11 6
5 4 4
3 3 3
0
Jeddah Riyadh Aseer Madinah
Implemented Partially Implemented Not Implemented
March 2017 Page 5

Jeddah Branch Implementation Status Aseer Branch Implementation Status
10%
38% 34%
Implemented 21% Implemented
Partially Implemented Partially Implemented
Not Implemented Not Implemented
69%
28%
Riyadh Branch Implementation Status Madinah Branch Implementation Status
11%
12%
14%
Implemented Implemented
16%
Partially Implemented Partially Implemented
Not Implemented Not Implemented
75% 72%
March 2017 Page 6

4. Observations’ Status Summary
Applicability Implementation Overall Implementation

No. Observation
J R A M J R A M Status
Absence of IFRS convergence roadmap for compliance with financial
1     I I I I Implemented
reporting requirements
2 Procedures for Finance Department are not up-to-date     I I I I Implemented
Revenue reconciliation between HIS and ERP System are not sorted out
3   I I Implemented
properly
4 Inadequate controls on manual entries in ERP system   P P Partially Implemented
5 Delay in depositing cash into bank account  I Implemented
6 OPD Cash transactions procedures are manual     N N N N Not Implemented
7 Inactive Bank Accounts     I I I I Implemented
8 Lack of reconciliation of un-invoiced receivables.    N N N Not Implemented
9 Reconciliation of current inpatient receivables / unbilled receivables    P P P Partially Implemented
10 Long outstanding receivables     P P P P Partially Implemented
11 Inconsistency in closing of Package Deals procedures     N N N N Not Implemented
12 Full discounts not being interfaced to ERP system   I I Implemented
13 Long aged Capital Work In-Progress   P N Partially Implemented
14 Improper procedures for Tagging of Fixed Assets   I I Implemented
15 Non-compliance with Fixed Assets Disposal procedures  I Implemented
16 Accounting of rental income on cash basis    I P I Partially Implemented
17 High outstanding amounts of rental income    N N N Not Implemented
18 Inadequate awareness about IT Risks and IT Training     N N N N Not Implemented
March 2017 Page 7


No. Observation
System interface issues requiring repeated manual interventions to
19  P Partially Implemented
reconcile cash in hand account
20 Absence of alternate signatory for petty cash cheques  I Implemented
21 Absence of system control to prevent Vendor payments prior to due date   I I Implemented
22 Incentive Payments not linked to Payroll     N N N N Not Implemented
23 Lack of documentation of Sub Ledgers to General Ledger reconciliations     I P N P Partially Implemented
24 Unreconciled balances in Cash-in-hand account  P Partially Implemented
25 Outstanding cheques for more than 180 days (6 months)     I I P P Partially Implemented
26 Long outstanding unapplied customer receipts     N N N N Not Implemented
27 Invoiced Revenue Reports and Reconciliation     N N N N Not Implemented
28 Surprise physical verification of Cash Balances are not conducted     I I I I Implemented
29 Long outstanding unreconciled items in 0500 account  N Not Implemented
30 Delays in crediting SPAN collections to Bank account   I I Implemented
31 Cash Advances from Charity sponsored Customers  N Not Implemented
32 Incomplete physical verification of Fixed Assets     P I P P Partially Implemented
33 Long outstanding Account Payables     N N N N Not Implemented
34 In-correct accounting of non-operating income and expenses  N Not Implemented
35 Delays in renewal of Rental Shop Agreement   N N Not Implemented
36 Enhancement of Budgeting Procedures     P P P P Partially Implemented
37 Financial Statement Closing Procedures  I Implemented
March 2017 Page 8


No. Observation
38 Delay in Monthly Closing Process     P I P P Partially Implemented
39 Unavailability of Reports from ERP system     P N N N Partially Implemented
40 Absence of Policies and Procedures for Petty cash usage     P P P P Partially Implemented
41 Non-compliance with Transfer of Fixed Assets procedures  I Implemented
March 2017 Page 9

5. Follow-up on Observations
Location Overall
Applicable
Observation Implementation Observation
No Title Observation Locations Remarks
Significance Status Implementatio
J R A M J R A M n Status
As per Saudi Organization for Certified Public Accountants

(SOCPA) requirements, by 2017 all listed entities other than
Absence of banks and insurance companies should report under new
IFRS applicable International Financial Reporting Standards (IFRS).
convergence
roadmap for As per SOCPA’s IFRS convergence roadmap, listed entities are
1 High required to prepare balance sheet as per new standards starting     I I I I Implemented
compliance
with financial from 01 January 2016, and complete IFRS convergence process
reporting by 31 December 2017, including non-listed companies.
requirements
However, during our review we noted that to-date management
has not commenced planning for the upcoming challenges arising
due to convergence to new SOCPA / IFRS standards.
We have noted that the Finance Department does not have an up-
to-date procedures manual, to guide departments’ operations.
Procedures for The manual was last reviewed and updated in 2010 prior to
Finance implementation of ERP system. Hence the process changes
2 High Department resulting from ERP implementation have not been reflected in the     I I I I Implemented
are not up-to- manual.
date Further, we noted that the revisions to the assets capitalization
policy, imprest account balances, provision for slow moving
inventory and medical rejections are also not reflected in the
manual.
Revenue
reconciliation We have noted a few differences in revenue as per ERP system
between HIS vs revenue as per Hospital Information System (HIS) in spite of
3 High reconciliations carried out by the management.     I I Implemented
and ERP
System are Further, we noted that these differences were neither investigated
not carried out nor resolved.
March 2017 Page 10

Location Overall
Applicable
For manual accounting entries recorded by Accountants there are

no documentary evidence to confirm that it has been reviewed by
an authorized personnel.
Inadequate A parking and posting system has not been implemented to
controls on ensure review of the accounting entries. E.g. manually created Partially
4 High accounts payable invoices, receipts, debit memos, credit memos,     P P
manual entries Implemented
in ERP system and journal vouchers are being entered by the accountants,
without any evidence of review and approval by an independent
senior personnel.
Note: In Aseer and Madinah Journal Vouchers are approved by
FM / Chief Accountant in the system
Delay in
depositing
5 High We have noted that, in certain cases, there is delay in deposit of     I Implemented
cash into bank cash into the bank account.
account
We have noted the following observations in relation to the cash

transaction procedures for Out Patient Department (OPD):
► Span machine collections for OPD are not interfaced from
Hospital Information System (HIS) to ERP system, as a
OPD Cash result Cash management officer has to manually enter
transactions span collections on excel file to reconcile with bank credits Not
6 High (around or more than 200 span slips on a daily basis for     N N N N
procedures Implemented
are manual each location).
► HIS system does not segregate mode of payment between
Cash and Card payments. As a result, Cash Management
Office creates manual JVs on daily basis for each location.
Additionally, receipts are not linked with invoices, which increase
the risk of misappropriation of cash by custodians of cash.
We have noted that SGHG has inactive bank accounts, whereby
Inactive Bank the last transactions were carried out, ranging from one year to 8
7 High years in the past.     I I I I Implemented
Accounts
Despite no utilization of these bank accounts, a decision has not
been made to close these bank accounts.
March 2017 Page 11

Location Overall
Applicable
We noted negative balances in un-invoiced receivables accounts.

We also noted that management does not reconcile un-invoiced
receivables balances captured in the ERP (back end – financial
accounting system) with HIS (front end – Hospital Information
System)
Upon investigation, we were informed by the management that
reasons for the above noted observations are:
► System generated billing adjustments reports are not
available for both ERP and HIS system. In absence of
these reports uninvoiced reconciliation cannot be
performed.
► System generated IP exclusions report is not available in
Lack of HIS system.
reconciliation ► Prior to December 2012, all un-invoiced receivables were
Not
8 High     N N N
of un-invoiced booked under Un-invoiced Direct Companies accounts Implemented
receivables. (4120151000 for Inpatient – IP and 4120152000 for
Outpatient - OP) except Un-invoiced Insurance
Companies receivables. In 2013 the accounts were
adequately mapped to their respective head however
management did not reallocated account balances to
correct accounts.
► For charity account, due to HIS system limitations billing
department cannot split bill between charge and cash.
Therefore, in order to issue cash bill to the patient they
charge unbilled IP receivables to un-invoiced OP
receivable instead of un-invoiced IP receivable. As a result
un-invoiced receivables-IP balances are understated and
un-invoiced receivables-OP balances are overstated.
Reconciliation We noted huge differences between actual unbilled receivables
of current as per HIS and unbilled receivables posted in the ERP. We also
inpatient noted instances where unbilled receivables balances were Partially
9 High negative.     P P P
receivables / Implemented
unbilled We were informed by management that this is due to system
receivables interface issues that require manual rectification on regular basis.
In absence of these reports un-invoiced reconciliation cannot be
March 2017 Page 12

Location Overall
Applicable
performed. As informed to us, currently the management is

rectifying these matters on a quarterly basis.
Long On review of the receivables ageing balances, we observed long Partially
10 High outstanding outstanding receivables amounts for up to more than 360 days,     P P P P
Implemented
receivables as at 30 June’15.
SGHG provides some services as package deals, whereby an
agreed set of services is performed for a pre-agreed price with the
customer. Upon discharge of patients, the actual bill amount is
recorded, and any differences in comparison to the charged fixed
price are recorded and reported in the accounts as gain/loss on
Inconsistency the package deal.
in closing of We noted inconsistency in procedures for closing the package Not
11 High Package deals, whereby certain package deals were closed by Billing/AR     N N N N
Implemented
Deals Section, instead of Admission & Discharge Section, leading to the
procedures above mentioned gain/loss being recorded as billing adjustments,
and not being reflected in correct account as gain/loss on package
deals.
We were informed that the above inconsistency in procedures was
due to lack of sufficient information with the respective sections,
in relation to the package
Full discounts We noted that due to ERP system limitations 100% discounts on
not being services rendered under OP Charged are not being interfaced
12 High from HIS to ERP. For example, at Jeddah, for six months ending     I I Implemented
interfaced to
ERP system on 30 June’15 the value is SR 15,645. As a result understatement
of revenue and discounts expense in ERP system.
During our review of Capital Work In-Progress (CWIP) process,
we noted the following:
► There are assets lying as CWIP for more than 3 years old
Long aged which will have an impact on depreciation, profitability and
Partially
13 High Capital Work fairness of the financial statement;     P N
► There is no documented evidence that the CWIP accounts
Implemented
In-Progress
has been reviewed by authorized personnel on a periodic
basis;
► Further, we noted aged CWIP balances pending
management decision for capitalization.
March 2017 Page 13
Location Overall
Applicable
Improper We have noted as per current management practice fixed assets

procedures for are tagged upon physical verification exercise instead of issuing
14 High assets to the custodian.     I I Implemented
Tagging of
Fixed Assets As a result all assets purchased subsequent to last physical
verification exercise are untagged.
Non- During our review of fixed assets disposals, we have noted that
compliance authority limits were not adhered to, for authorizing the disposal of
with Fixed fixed assets.
15 High     I Implemented
Assets
Disposal Further we noted 2 instances where fixed assets were sold
procedures without, competitive bidding and use of Fixed Asset Disposal form
as required by the Finance Manual.
During our review of SGHG shop rental income for all locations,
we noted that the rental income was booked on cash basis instead
of accrual basis, as a result, revenue will be overstated in one
Accounting of period and understated in another period. Partially
16 High rental income In addition to this, at Jeddah finance departments does not have     I P N
Implemented
on cash basis access to rental contracts, currently maintained by legal
departments. As a result finance department cannot ensure the
accuracy and completeness of rental revenue booked in
accounting records.
High
outstanding Not
17 High During our review of SGHG shop rental income, we noted     N N N
amounts of instances of high outstanding amounts of rental collections. Implemented
rental income
During our review we observed an absence of information security

awareness amongst staff. An AP staff received a spam mail that
Inadequate was unintentionally opened by the staff and, had resulted in
awareness corruption of data on local machine as well as the server.
Not
18 High about IT Risks Further to above it should be noted that there may be further     N N N N
information security control lapses within the organization such as Implemented
and IT
Training Lack of Anti-spamming technical controls deployed at Email
Exchange, operating system layer, antivirus/anti-spam endpoint
layer and network layer to preventing spam to be sent to users.
March 2017 Page 14

Location Overall
Applicable
We observed that there were no compensating controls to prevent

data corruption i.e. there was an absence of routine backup which
lead to a loss of critical data.
Review of cash reconciliation statement of GL Account Number:
4180151000 as on 30 June 2015 indicated several system
interface issues requiring repeated manual interventions to
System reconcile cash in hand account as detailed below:
interface ► In some instances for recording patient refunds, upon
issues cancellation of service cash account is being credited
requiring instead of patient refundable clearing account. Therefore,
repeated Partially
19 High upon actual refund to patients cash account is credited     P
manual twice. Thus understating cash on hand account by SAR Implemented
interventions 68,860.
to reconcile ► System interface errors also resulted in duplicate
cash in hand recording of cash receipts by SAR 229,076.
account ► For recording of transaction for transfer of Outpatient to
Inpatient receipts, Cash account was wrongly credited
instead of Receptionist clearing account. The amount of
the reconciling item noted was SAR 39,600.
We were informed that an alternate signatory in place of the CEO
to sign petty cash imprest reimbursement cheques has not been
Absence of appointed.
alternate We noted that collections for two days (i.e. for 17 August 2015 and
20 High signatory for 18 August 2015) amounting to SAR 186,765 and SAR 131,483     I Implemented
petty cash respectively were deposited only on 23 August 2015. We were
cheques informed that the cash collections were used by the cashier for
petty cash payments due to non-availability of an alternate
signatory to the CEO to sign petty cash reimbursement cheques
during his leaves/absence from office.
Our review of vendor payments indicated that system control does
Absence of
not exist to prevent Vendor payments prior to due date.
system control
21 High ► In Aseer, we noted two instances totaling SAR 6,496     I I Implemented
to prevent
where vendor payments were made up to 2 weeks before
Vendor
the stipulated due date resulting in inefficient use of the
payments
credit period provided by vendors.
March 2017 Page 15

Location Overall
Applicable
prior to due ► In Madinah, we carried out Demo and noted that there is a
date possibility to process payment before the due date,
however no instances were noted.
On our review of incentive payments we noted the following
observations :
► Expenses relating to non-operating income BARED were
Incentive paid to employees in cash instead of transferring through
Payments not Not
22 High employee payroll account.     N N N N
linked to ► Symposium incentives were paid to staff in cash through
Implemented
Payroll petty cash
► Imprest Collection incentives are not linked to employee’s
payroll instead they are paid in cash through petty cash
imprest.
Lack of
documentation We have noted that the respective module owners carry out the
of Sub reconciliation between sub ledger and general ledger. However,
Partially
23 Medium Ledgers to there is no documentary evidence of the reconciliation performed.     I P N P
For example in Riyadh we have noted that there were differences Implemented
General
Ledger between the Sub Ledger and General Ledger balances of
reconciliations Accounts Payable and Accounts Receivable respectively.
Unreconciled
balances in We have noted long outstanding unreconciled balances as of 30- Partially
24 Medium Apr-2015 in the Cash-in-hand account.     P
Cash-in-hand Implemented
account
Outstanding
cheques for While reviewing the Bank Clearing accounts, we noted that there Partially
25 Medium more than 180 are cheques uncleared and outstanding for more than 180 days     I I P P
Implemented
days (6 as at 31 October 2015.
months)
March 2017 Page 16

Location Overall
Applicable
We noted long outstanding unapplied customer receipts due to

the fact that the invoice references are not available to relate
incoming transfers.
Long Similarly, we have noted long outstanding unidentified patient

outstanding deposits, as there were no sufficient information available to relate Not
26 Medium unapplied these deposits to a particular patient.     N N N N
Implemented
customer
receipts For Jeddah and Aseer, we noted that the unidentified patient
deposits (liability account – unaccrued revenue) is incorrectly
mapped to unapplied customer receipt account i.e. contra balance
account reducing account receivable balance. As result, account
receivables and unaccrued revenue balances were understated.
We noted that the HIS and ERP system does not support
management in preparing some of the below listed revenue
reports and their reconciliations:
► Category wise revenue
► Company wise revenue
► Medical department wise
► Revenue center wise
► Procedure-wise
Invoiced ► Doctor-wise
Revenue Not
27 Medium We were informed by the management that the aforementioned     N N N N
Reports and reconciliations cannot be performed because of the following two Implemented
Reconciliation reasons:
► Firstly, the existing system needs to be enhanced to
generate the above reports to facilitate such
reconciliations.
► Secondly, during data interface the dummy revenue
created due to package deal in incorrectly reversed from
pharmacy revenue. This leads to understatement of
pharmacy revenue and overstatement of revenues
created by other medical departments.
March 2017 Page 17

Location Overall
Applicable
We noted that no petty cash surprise count is carried out on the

Surprise cash balances held with imprest holders in order to ensure that
physical petty cash is adequately safeguarded and not misused.
verification of
28 Medium     I I I I Implemented
Cash We were informed that cash counts are conducted by the Chief
Balances are Accountant to confirm the physical balance with the balance in
not conducted records. However these counts are not documented, and any
records for the same were not available for reference.
We have noted long outstanding unreconciled items in 0500
Long account (collectible from cash customers).
outstanding
Not
29 Medium unreconciled We were informed by the management that collections have been     N
Implemented
items in 0500 made against the receivables. However, due to system error
account Accounts Receivable officer is unable to apply collections to the
relevant receivables.
We have noted quarterly follow-up was conducted for delays for
Delays in more than 5 days in crediting collections via SPAN to bank
crediting account, instead of weekly.
30 Medium SPAN ► As a result at SGH Riyadh amount worth SAR 142,118     I I Implemented
collections to was not credited to Company account as on 18-Aug-2015.
Bank account ► As a result at SGH Aseer amount worth SAR 71,385 was
not credited to Company account as on 30-Aug-2015.
We have noted that for some charity sponsored customers, where
half the payment is collected as cash advance, and the balance is
Cash charged to charity organizations, the cash advances are not being
Advances applied to the respective transaction, because system cannot split Not
31 Medium from Charity bills between charge and cash.     N
Implemented
sponsored
Customers This has resulted in large balance of unapplied cash advances
resulting in overstatement of liabilities, and un-invoiced revenue in
the accounts.
Incomplete With regard to the fixed assets physical verification, we have
physical Partially
32 Medium noted that the company has not conducted a complete physical     P I P P
verification of verification for all locations. Also there are no documented Implemented
Fixed Assets evidence of any formal physical verification plan.
March 2017 Page 18

Location Overall
Applicable
Furthermore, physical verification of assets is conducted by staff

responsible for maintaining the Fixed Assets Management
System.
Long
outstanding Not
33 Medium On review of account payable ageing report we have noted long     N N N N
Account outstanding payable balances, as at 31 August 2015. Implemented
Payables
BARED Income is training fee collected from medical / para-

medical students of BAB Medical Education Company limited
(previously known as Batterjee Academic and Research
Department – BARED). We have noted the following observations
in relation to the accounting of bared income and expense in
SGHG:
► BARED income (SAR 149,375) related to 2013-14 was
In-correct accounted in 2015.
accounting of ► We noted that the fee is initially recorded as liability. Upon Not
34 Medium non-operating completion of training, 50% of the fee was recognized as     N
Implemented
income and income, while the remaining half is reversed from the
expenses liability account, as it is distributed to the trainer staff as an
incentive. As a result non-operating income and expenses
related to BARED were understated by SAR 149,375
(each).
► We noted that as a result of late distribution of incentives,
due to delay in finalizing the incentive distribution policy,
incentives worth SAR 20,440 were not distributed to the
beneficiaries as they already left SGHG.
At SGH Riyadh we noted that rent agreement is not available for
Mini Mart. On our discussion with the responsible officer we were
Delays in informed that agreement for Mini Mart is currently under
renewal of Not
35 Medium negotiation. As a result Mini Mart shop is rented without any legal     N N
Rental Shop agreement in place. Implemented
Agreement
At SGH Aseer we noted that valid legal agreements were not
entered into with two of the Company's tenants i.e. Al Rajhi Bank
March 2017 Page 19
Location Overall
Applicable
in respect of the Bank's ATM located in the SGH Aseer Building

and the Flower shop tenant.
► We were informed that there was no current or previous
rental agreement with Al Rajhi Bank.
► We noted that the agreement with flower shop vendor
expired on 15 May 2010 and since then no new contract
was signed.
We have noted the following observations in relation to the
Budgeting process in SGHG:
► The policy document does not clearly mention the type of
Enhancement budgeting the Group should adopt. (such as zero based Partially
36 Medium of Budgeting budgeting or incremental budgeting, fixed or flexible     P P P P
Implemented
Procedures budgeting)
► No evidence of a Budget calendar was available
mentioning the timelines for different activities in the
budgeting process.
Financial On review of the Financial Statement Closing Procedures, we
Statement observed long outstanding entries in the parked status.
37 Medium     I Implemented
Closing
Procedures Moreover, we noted that a period can be closed in the system,
with existence of parked entries related to the period.
There is no documented evidence that the monthly closing
deadline, as set by the Senior Management was complied with
General Ledger (GL) module were re-opened to enter the
accounting entries.
Delay in Monthly closing checklist currently used by the management is

Monthly Partially
38 Medium brief and does not cover in detail all month end closing activities     P I P P
Closing performed by finance staff. Implemented
Process Monthly closing checklist not used by the management.
Further the checklist does not contain time schedule by which
each month closing activity should be completed.
System activity log report, to review the dates when various

accounting modules were opened and closed, is not available.
March 2017 Page 20

Location Overall
Applicable
During our review of Finance process, we have noted that the

Unavailability ERP system needs enhancement to generate some of reports in
of Reports a customised format for further analysis purposes: Partially
39 Low ► JV listing in MS Excel format for as defined period of time     P N N N
from ERP Implemented
system ► System log for changes in Chart of Accounts modules
► List of system access rights
► Fixed Assets Register in MS Excel format
Absence of We have noted that the Finance department does not have an up-
Policies and to-date policies and procedures manual to guide the petty cash
Partially
40 Low Procedures for operations     P P P P
► Absence of policy stating the maximum petty cash
Implemented
Petty cash
usage expense/purchase.
► No defined petty cash usage guidelines.
Non-
compliance As per the fixed asset manual (Ref FA 15.8) transfer of fixed
with Transfer assets should be approved by Finance Manager or Chief
41 Low Accountant. During our review of transfer of fixed assets, we have     I Implemented
of Fixed
Assets noted that approval requirements as per fixed asset manual were
procedures not adhered to, for authorizing the transfer of fixed assets.
March 2017 Page 21

Report Finance Follow Up FINAL

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Report Finance Follow Up FINAL

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Middle East Healthcare Company (MEAHCO)

Internal Audit Follow-up Report on the Report Issued in 2015

March 2017 Page 1

March 2017 Page 2

Scope and Objectives

March 2017 Page 3

March 2017 Page 4

Finance Department's Observation Implementation Status

Implemented Partially Implemented Not Implemented

March 2017 Page 5

Jeddah Branch Implementation Status Aseer Branch Implementation Status

Riyadh Branch Implementation Status Madinah Branch Implementation Status

March 2017 Page 6

4. Observations’ Status Summary

Applicability Implementation Overall Implementation

5 Delay in depositing cash into bank account  I Implemented

6 OPD Cash transactions procedures are manual     N N N N Not Implemented

7 Inactive Bank Accounts     I I I I Implemented

8 Lack of reconciliation of un-invoiced receivables.    N N N Not Implemented

9 Reconciliation of current inpatient receivables / unbilled receivables    P P P Partially Implemented

10 Long outstanding receivables     P P P P Partially Implemented

11 Inconsistency in closing of Package Deals procedures     N N N N Not Implemented

12 Full discounts not being interfaced to ERP system   I I Implemented

13 Long aged Capital Work In-Progress   P N Partially Implemented

14 Improper procedures for Tagging of Fixed Assets   I I Implemented

15 Non-compliance with Fixed Assets Disposal procedures  I Implemented

16 Accounting of rental income on cash basis    I P I Partially Implemented

17 High outstanding amounts of rental income    N N N Not Implemented

18 Inadequate awareness about IT Risks and IT Training     N N N N Not Implemented

March 2017 Page 7

Applicability Implementation Overall Implementation

22 Incentive Payments not linked to Payroll     N N N N Not Implemented

23 Lack of documentation of Sub Ledgers to General Ledger reconciliations     I P N P Partially Implemented

24 Unreconciled balances in Cash-in-hand account  P Partially Implemented

26 Long outstanding unapplied customer receipts     N N N N Not Implemented

27 Invoiced Revenue Reports and Reconciliation     N N N N Not Implemented

28 Surprise physical verification of Cash Balances are not conducted     I I I I Implemented

29 Long outstanding unreconciled items in 0500 account  N Not Implemented

30 Delays in crediting SPAN collections to Bank account   I I Implemented

31 Cash Advances from Charity sponsored Customers  N Not Implemented

32 Incomplete physical verification of Fixed Assets     P I P P Partially Implemented

33 Long outstanding Account Payables     N N N N Not Implemented

34 In-correct accounting of non-operating income and expenses  N Not Implemented

35 Delays in renewal of Rental Shop Agreement   N N Not Implemented

36 Enhancement of Budgeting Procedures     P P P P Partially Implemented

37 Financial Statement Closing Procedures  I Implemented

March 2017 Page 8

Applicability Implementation Overall Implementation

38 Delay in Monthly Closing Process     P I P P Partially Implemented

39 Unavailability of Reports from ERP system     P N N N Partially Implemented

41 Non-compliance with Transfer of Fixed Assets procedures  I Implemented

March 2017 Page 9

As per Saudi Organization for Certified Public Accountants

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For manual accounting entries recorded by Accountants there are

We have noted the following observations in relation to the cash

March 2017 Page 11

We noted negative balances in un-invoiced receivables accounts.

March 2017 Page 12

performed. As informed to us, currently the management is

Improper We have noted as per current management practice fixed assets

During our review we observed an absence of information security

March 2017 Page 14