New Delhi: With murder of two health officials in Uttar Pradesh bringing to focus misuse of central funds under National Rural Health Mission (NRHM), a Union Health Ministry audit found irregularities to the tune of hundreds of crores in the scheme in the last two years.

A 20-member team, constituted by the Ministry in May this year following complaints of misuse of NRHM funds in Uttar Pradesh, also found anomalies in procurement and civil construction work.

In its 400-page report to the Ministry, the team's audit says "irregularities in procedures were noticed during awarding of contracts for mobile medical units, hospital waste management, hospital cleaning and gardening, safe  drinking water (RO System) etc".

The report also pointed out that "of the Rs 334.62 crore available with the state Director General (Family Welfare) for procurement during 2009-2011, expenditure of only 53 per cent of the funds (Rs 178.65 crore) had been reported till May 12, 2011 (a day before the central review team landed)".

"No open tender system was followed to ensure competitive cost-effective bidding and full payments amounting to Rs 244.26 crore were made to project implementing agencies (PIA), without any formal agreement entered into with them in 2010-11," the central audit also points out.

The audit report also noticed "poor monitoring of progress of civil construction and absence of penal action against defaulting firms for delay in completion of works".

The review team report also points to lack of advance planning prior to procuring vehicles under the Emergency Medical Transport Services (EMTS). "The state procured 779  ambulances from Tata Motors at a cost of Rs 56.36 crore, of which 159 vehicles were stationed in the districts while 620 ambulances remained stored in the Tata Warehouse at Lucknow as the state was unable to take their delivery. The vehicles lying in districts were also lying idle."

The report points out that "the state was not in a position to utilise the EMTS vehicles and should not have laced the order for 988 ambulances without coordinating the other components like HR support, call centre, IEC and basic equipment, necessary for utilisation".

Since no further purchase of vehicles was allowed, it also came to the fore during the audit that there were three different rates for procuring the vehicles and no monitoring was done, Health Ministry officials pointed out.

The audit was conducted in 11 districts of Faizabad, Rae Bareili, Unnao, Hardoi, Mirzapur, Chandouli, Sonbhadra, Sitapur, Kanpur Dehat, Barabanki and Sultanpur of Uttar Pradesh, during the period May 13 to 15, 2011.

The team was constituted in the wake of a complaint from Congress general secretary Rahul Gandhi to Health Minister Ghulam Nabi Azad, alleging gross irregularities in NRHM funds,

The allegations of corruption in use of NRHM funds had led to murders of two chief medical officers in the state – V K Arya and B P Singh. A deputy CMOs Y S Sachan, held as an accused in the murders, was also killed in Lucknow jail and the state had only last week ordered a CBI probe into the murder of Sachan.

The report has since been sent to the state government for its reponse and action taken thereof, which Health Ministry officials say "is still awaited". The Ministry also asked the state to institute a special audit/investigation into the anomalies found in procurement
and civil construction cases and accountability may be fixed.

The Health Ministry has, meanwhile, stopped release of further grants to Uttar Pradesh under the NRHM Flexible Pool meant for procurements and infrastructure development, it is learnt.

UP NRHM Mission Health Director Mohammad Mustafa claimed "the state has taken a lot of action on points raised in the central review team report and an action-taken report has been sent to the Health Ministry," without specifying the actions.

With management of NRHM funds the responsibility of the state government, in Uttar Pradesh "the release and utilisation of funds was characterized by a diffusion of responsibility", the central report stated.

"The Executive Committee decisions for procurement and civil work construction in particular led to the funds being routed to the DG (Family Welfare), who was responsible for
awarding contracts to firms, usually as directed by the EC."

"DG (FW) had the responsibility of awarding the contracts and monitoring progress but no authority to determine the vendors in most cases and as such the award of contracts was predetermined by the Executive Committee. The EC did not regularly obtain any feedback or specific utilization reporting on funds routed by it to DG (FW) or other offices."

The report also mentions lack of monitoring of work, which it recommended for strengthening, and pointed out that "no minutes of Programme Implementation Committees and monitoring reports/decision were made available to the review team" and that "there was no regular Mission Director for the period under review and Principal Secretary (Health & FW) also held the post of Mission Director NRHM".

The report also found the District Programme Management Unit in most districts in the state as "relatively weak" and said "their financial and programme management inputs were limited".

"Many basic issues like the manner of maintenance of scaling books of accounts and the procedures to be followed in procurement at field level were charactereised by adoption of either incorrect procedures or a lack of knowledge," the report points out.

"Besides, the Rogi Kalyan Samitis (RKS) at district level were punctuated by maintenance of multiple bank accounts and cash books, which led to mixing of unrelated funds in the RKS account. In some districts, the release of untied funds was being booked as expenditure which was at variance with the state's own directions and Government of India guidelines."

The report also states that the state should emphasise on submission of utilisation certificates for all untied funds expenditure and the functioning of village Health and Sanitation Committees (VHSCs) may be reviewed quarterly and the manner of fund utilisation by panchayats may be checked periodically.