Days after the Nairobi Hospital lost its acting Finance Director, the late Eric Maigo through macabre killing having sustained 25 stab wounds to the face, chest and neck, the facility is now reeling in a financial quagmire.
In what is shaping up as a two-fold nightmare for a facility that is grappling to overcome sharp decline of patients, the hospital recorded a deficit of Sh564.7 million according to the latest annual report covering the financial year ending December 2022 down from a surplus of Sh320.3million a year earlier.
Nairobi Hospital is also battling a Sh403million tax bill from the Kenya Revenue Authority (KRA) and has since filed an objection with the Tax Appeal Tribunal at Times Towers.
In its latest annual report, Nairobi Hospital says that KRA in May 2022 issued an assessment notice to Kenya Hospital Association, its trading company spanning 69 years.
The hospital says the initial assessment was higher than Sh403million and only dropped to the current level after the matter was referred to the Tax Appeals Tribunal. Nairobi Hospital is, however, still objecting to this revised tax claim.
The hospital says that the taxman issued the assessment notice under section 31 (1) of the Tax Procedures Act 2015 which empowers the commissioner to amend an assessment by “making alterations or additions, from the available information and to the best of the Commissioner’s judgement.”
“The management disagrees with this opinion and has filed an objection with the Tax Appeal Tribunal within KRA.” Nairobi Hospital says.
As a standard operating procedure, issues such notices in the case of a deficit carried forward or in case of an excess amount of input value-added tax or in any other case.
An amended assessment is usually aimed at ensuring taxpayers pay the correct amount of tax.
The Sh403 million KRA claim is equivalent to 24 per cent of the Sh1.68billion that was in the hospital’s operating fund at the end of last year.
“The (lawsuit) claims have not been provided for in the financial statements. The hospital, based on advice received from the company’s legal advisers, is of the opinion that no significant claims will crystalise from the pending suits.” The hospital says.
And on the dipping balance sheet, Nairobi Hospital returned a deficit of Sh564.7million in the financial ending December 2022, down from a surplus of Sh320.3million recorded in the year ending December 2021.
According to hospital records, the facility cut its investment in fixed income from Sh1.94 billion to Sh1.39 billion as the effective interest rate fell from 8.85 per cent to 8.78 per cent in an environment where rates on government paper were rising.
The hospital cites fall in patient numbers, especially at its United Nations wing where bed occupancy dropped from 33 per cent to 3 per cent after diversifying and tripling its investments in government paper to Sh1.19 billion after purchasing an infrastructure bond.
According to the hospital, it increased its investments in Treasury bonds three-fold from Sh355.4million to Sh1.19billion translating to a 3.4 times rise.
The increase came in the period the hospital purchased a Sh856.2million infrastructure bond. This is compared with Sh360.3million Treasury bonds that had been added in the previous year.
“The government infrastructure bonds are for an expected tenure of 20 years at an interest rate of 13.44 per cent.” The hospital says.
To forestall further dip, Nairobi Hospital says it intends to convert the 135-bed facility exclusively assigned for Covid-19 patients to a research centre.
“The hospital is currently engaged in the process of repurposing the facility.” The hospital adds.
