Multiple Violations Discovered in Hemodialysis Equipment Procurement: State Audit Office

The State Audit Office has presented a report detailing its main activities carried out during the first half of 2019. This report includes the findings of ongoing monitoring conducted by the State Audit Office regarding the procurement of hemodialysis equipment.

As a result of these audits, several violations in the procurement procedures for hemodialysis equipment have been identified. Consequently, on December 26, 2018, the State Audit Office sent relevant letters to the regional administrations and the Ministry of Health, proposing necessary changes in the procurement procedures aimed at liberalizing the sector.

The need for liberalization stemmed from the findings that from 2015 to 2018, hemodialysis machines and supplies were imported by eight organizations, with two companies, “Frezen” and “Natali Pharm”, accounting for 82.9% of the total—with 41.7% and 41.2% market shares, respectively. Three out of nine state medical centers in Armenia, including “Saint Gregory the Illuminator Medical Center”, “Vanadzor Medical Center”, and “Kapan Medical Center”, received supplies from Frezen, while the others were supplied by Natali Pharm.

During an examination of the procurement competition for hemodialysis supplies at the Saint Gregory the Illuminator Medical Center, the State Audit Office discovered several violations of the Law on Procurement. The results of the study, initiated based on the head of the Service's order No. H/001-19 dated February 11, 2019, have been summarized and sent to the Prosecutor General’s Office for legal assessment, resulting in criminal cases being initiated.

Under the orders No. H/017-18 dated October 1, 2018, and No. H/003-19 dated March 19, 2019, examinations were also conducted at the water user companies in “Armavir,” “Ejmiadzin,” “Artashat,” and “Ararat.” The studies revealed unsubstantiated expenses, understated revenues, inaccurate accounts receivable, and poor quality renovation work, along with statutory and regulatory violations. The assessment concluded that the violations caused damage amounting to approximately 1.099 billion AMD at the Armavir water company, 1.123 billion at Ejmiadzin, 1.071 billion at Artashat, and 644.2 million at Ararat.

Reports on these violations have been compiled and submitted to the Prime Minister and subsequently forwarded to the Prosecutor General’s Office for legal evaluation of the identified breaches, leading to the initiation of criminal cases.

In another instance, an investigation into the “Yerevan State Medical University” revealed issues concerning procurement procedures, additional salary calculations, and the execution of construction work. It was discovered that the Foundation acquired property valued at 222.0 million AMD without following any purchase procedures, well above market value, and some high-ranking officials had received salaries multiple times higher than their base pay.

Findings from investigations were forwarded to the Prosecutor General’s Office and subsequently sent to the National Security Investigative Department for verification related to ongoing criminal proceedings.

Similar investigations occurred at the Ministry of Justice’s penitentiary service, where numerous procurement processes conducted between 2016 and 2018 did not comply with legislative norms regulating the sector, leading to ineffective state resource usage risks. Findings were presented to the Prime Minister and subsequently sent to the Prosecutor General.

The audits undertaken under various orders identified a systemic trend of violations, including those in educational institutions, law enforcement agencies, and local governance, that collectively demonstrated significant mismanagement and financial misconduct.

The State Audit Office received a total of 489 petitions and complaints from citizens during the reporting period, with supervision established over 222 of them. Ninety-five citizen receptions were conducted, providing clarifications and written responses to 62 individuals’ inquiries.