The hearing on the Annual Reports and the Financial Statements of the National Department of Health (NDH) was encumbered by the discovery of several errors that were a source of consternation for the Committee.
The Acting Director General of the National Department of Health came under fire from the Committee as member after Member demanded an explanation for various errors in the calculations of important statistics, for example, on figures for expenditure on employment and vacancies.
The Committee also queried under expenditure of the budget and Members expressed concerns about the lack of prioritisation of the budget in light of inadequate health facilities and personnel at health institutions throughout South Africa.
National NT submitted to the Committee that the Department did not have a proper balance of expenditure on goods and services and expenditure on personnel. The department had a higher proportion of its expenditure committed to goods and services as opposed to personnel, despite opportunities to prioritise this budget in a way that promoted more expenditure on personnel and less on goods and services.
A Member found it alarming that that there was a very high number of performance related rewards to senior management and questioned the criteria for determining performance related rewards to employees. The Member was also concerned about the relatively high vacancy rate in human resources, which the member speculated could be the reason for an error ridden report.
Another Member highlighted the Department’s lack of compliance with standard accounting procedures and administrative systems reported by the Auditor General, who had been unable to verify the accuracy and classification of revenue amounting to R29.7 million from the Medicines Control Council. The Member noted with concern that the Department had received qualified audits by the Auditor-General in 8 out of the past 9 financial reporting periods.
The Committee discussed the role of the audit Committee and the need for proactively identifying problems in the Department in reports to the Executive and the Legislature.
The annual report of the Compensation Commissioner for Occupational Diseases was also considered.
[PMG was unfortunately not able to record the initial part of the hearing as a result of a technical problem]
The meeting queried the expenditure related to human resources in the National Department of Health.
Dr Kami Chetty, Acting Director General: of the National Department of Health (NDH or the Department) responded that the Department went through a long process of looking at these reports. The reports were sent around to all of the senior managers and the accounting officers, who looked over them in detail.
Dr Chetty also responded that there was an error in the amount and the total amount should have been the R3.9 million.
Mr R Ainslie (ANC) commented that hundreds of thousands of rand had been spent on compiling glossy annual reports. The Department should have proof read the annual report before it had been presented to Parliament. The Department was dealing with very important issues here and the comment could not go forward on the basis of incorrect information. This was not the first time that the Committee had picked up such errors and this was because the members of the Committee were attentive to details. He was very concerned that these only had only come to light after the reports had been presented to Parliament.
Mr D Steele (DA) submitted that an average, in mathematical terms, was a very simple concept. It was not the total but it was an average per individual. If the Department could not calculate an accurate average then, quite frankly, the administration left a lot to be desired. He had a serious problem with a department that presented an average as a total, as if it did not know the difference. This left a serious lack of confidence in the management of the Department. He asked the team to reflect on how the Department intended going to restore that confidence.
Ms M Mashiane (COPE) commented that she was concerned that the document was a public document and not a document that was privy only to the Committee. She wanted to know, therefore, how the Acting Director-General (DG) would be able to correct what was now being pointed out in the meeting.
The Chairperson asked the presenters to continue, hoping that Members’ concerns had been noted. This was not the first time that, in the course of interrogation, errors had been discovered.
Mr Steele referred to an anomaly on page 101, Table 3.2, in the salary band column under “Senior management (levels 13-16)”, where the number of positions filled was reflected as 97. On Table 5.1, on page 104,in the corresponding category, there was a figure of 68 for employment at the beginning of the period. Further on, this table referred to 8 appointments and 4 terminations. This meant that the total had to be 72 in the table on page 101, in respect of the number of posts filled at the end of the period. The figures of 72 and 97 did not tally. It was not clear which of these figures was wrong.
Dr Chetty responded that the annual turnover at the beginning of the period was the figure in Table 5.1, whereas Table 3.2 was at the end of the period. She responded further that she would have to check as to what posts had been created between April 2008 and March 2009. She probably had these figures on her computer, but it was not easy for her to provide them off the cuff. She accepted the input from Members completely and noted that one of the things the Department wanted to correct was to have an explanation for each of the tables.
Mr N Singh (IFP) stated that he had questions on expenditure. Firstly, he understood that the administration was new and that the former Director-General had resigned recently. However, Ms V (Tiny) Rennie had informed the Committee that she was Acting Deputy Director-General (DDG): Corporate Services, and now she was being referred to as an Acting Chief Financial Officer (CFO). His question was for how long she had been an Acting DDG: Corporate Services and for how long she had been an Acting CFO. He also wanted to know why there was an Acting CFO and not a full time CFO.
Mr Singh asked a question relating to under-expenditure, which occurred despite media reports that highlighted the deplorable state of facilities at health institutions around the country. There was a situation where the funds were there, but the Department were not being spent. He enquired what interventions were in place to ensure that those monies were spent. Parliament could not allow the public to be short-changed because someone in the Department did not spend money adequately.
Ms V Rennie responded that she had started acting as both Deputy Director General for Corporate Services and Acting Chief Financial Officer on 1 November 2008, after the retirement of the former CFO.
The Chairperson asked if she had been acting in both positions.
Dr Chetty responded that it was one post. The new organogram of the Department would establish a CFO at Chief Director level. There had also been a DDG post which had been created that operated Corporate Services. The Department had decided to split the CFO post from the DDG Corporate Services post and had advertised it as such, and had received applications to begin the process of appointing a CFO.
Dr Chetty responded to the issues around the under expenditure. The Department had put in place very strict monitoring of conditional grants and had very strict processes with regard to the business planning and project implementation process. On the issue of whether there was money for infrastructure that was not being used, she said that one of the difficulties was that once the Department had allocated funds for a particular project, it did not have the ability to move those funds. This was something the Department was discussing with National Treasury (NT), as to whether and how, should the Department find under spending on a particular project, those funds could then be utilised in another project.
Mr M Mbili (ANC) referred to a question that was alluded to on the vacancy rate. It seemed that there had not been very much success in acquiring funds to fill those vacancies. He asked what NT’s response was to what the Department was doing wrong, since NT had clearly not been convinced to give the Department the necessary funding.
Dr Chetty responded that NT officials were present and the Department would be able to respond appropriately. NT had indicated to the Department that the structure had been unaffordable and NT would therefore not be able to provide funding for it. NT had limited resources to spread within the different departments.
Ms Mashiane asked how the Department could proceed without having a discussion with NT and come to Parliament with the excuse that there had been no funding. Even though she herself was not an accountant she thought that if she was asking for staff, she would find out first if there were sufficient resources to pay them.
Dr Mark Blecher, Director: Health and Social Services, National Treasury, responded that the Department had allocated an additional R25 million for that in the current budget. Each year, the Department did have additional funds available and that was why the Department had been able to fill an additional 70 to 80 posts in the current year. However, the Department had its own discretion to budget and had been under spending by over R300 million per year. Over the past few years, the Department had spent over R100 million on goods and services, although it had had the opportunity to budget differently so that it allocated less of the budget to goods and services and more to personnel. Goods and services was taking up two to three times what was given to personnel. It had to be recognised that there was a lot of attention being given to increasing frontline health care workers. If there were, for example, 1 370 positions within the National Department, the question must be asked whether those 1 370 people were functioning to optimum effectiveness and whether the Department was recruiting to optimum effectiveness. Although the Department continued to increase its allocation for personnel there were also some genuine constraints.
Dr Chetty responded that the Department was fully aware that there was this type of resource constraint throughout government. Some of the figures that had been given needed clarification. The Department managed quite a number of conditional grants and a lot of the under expenditure was not under expenditure in the National Department of Health. She had requested that the Human Resources unit (HR) begin a process to complete a work function analysis of all the staff, so that the Department could see what the workload was, with respect to each particular position.
The Chairperson asked why this process was only being done now, rather than several years previously.
Dr Chetty responded that she had been Acting DG since October 2009.
The Chairperson responded that the Department had always been in existence prior to her appointment, and she had to account institutionally, and not as an individual.
Dr Chetty responded that the Department fully endorsed the need for more frontline staff in the Department. The Minister had echoed the same sentiments and suggested that the Department needed less administrative staff. The Department’s new strategic plan incorporated that idea.
The Chairperson asked for an explanation as to why the Department had not addressed these problems in its planning. The Committee’s area of concern was the apparent lack of forward planning by the Department.
Mr P Pretorius (DA) made two further points in relation to Table 7.4 on performance related rewards. Performance rewards did not need to be seen as a grey area. These were normally given for exceptional services, beyond the requirement in someone’s job description. 43.4% of the senior staff had received performance rewards and this, in his opinion, was rather high. He asked for Dr Chetty’s view on that. He asked how the Department measured performance, to determine that a person was justified to receive a performance related award.
Dr Chetty said that all public service members had to sign performance agreements and monitoring was done against those agreements. So it was also a question of compliance. Supervisors conducted monitoring, on a quarterly basis, of performance as measured against the performance agreements. There was an annual process also where a committee with all the Chief Directors and other Senior managers would go through all the assessments, to decide whether the performance as a whole Department had been adequate, and the assessments would be referred to the Director-General for sign-off. There was a strict process against those performance agreements. With respect to whether the number of performance related rewards was too high, she noted that the Department had looked at the amount of money allocated to performance related rewards, felt it was too high, had wanted to normalise the distribution curve; however, rather than taking people off, the Department reduced the amount given to the different individuals.
Mr Pretorius referred Dr Chetty to the last column on Table 7.4, which stated that the average cost per beneficiary was R1 655. He pointed out that this amount was wrong, which highlighted his point about the reliability of this data. The total cost for Band A was R546 and there had been 33 beneficiaries. The average cost per beneficiary should have been shown as R16 045 and not R1 655. All the calculations for the average cost per beneficiary were wrong. He also asked for clarification on Band C, saying the figure for total employment was 5, but 7 of them were beneficiaries and discrepancy was also unclear to him.
Dr Chetty responded that she could only accept that the tables pointed out could be incorrect.
The Chairperson commented that the Department had problems with numbers.
Mr Pretorius added that on Table 9.3, bearing in mind that the total number of personnel in the current establishment was 1 373 (as shown in Table 7.3), it was strange to see that 1 490 employees had taken leave.
Ms Mashiane added that she did not know what the Department was doing, because the figures provided were wrong. It was either that this had been done deliberately to mislead the Committee, or that someone needed numeracy lessons. Something serious had to be done. People’s lives depended on the essential services offered by this Department.
Mr Pretorius commented that the category where the vacancy rate was highest was in HR, at 29.2%. This could point to a problem, because HR was responsible for compiling these reports.
A Member asked whether Dr Chetty had looked at this report before it had been brought to Parliament or if perhaps this had been done by other officials. The discoveries of all these errors in the report were disheartening.
The Chairperson responded that the report had been signed off by the former Director General and that qualified as an endorsement of the report. He was interested to know how the Department processed these reports because it generated its own figures.
Dr Chetty responded that the reports were generated via Vuli’ndlela. She asked if she could make an undertaking to the Committee that with regard to the HR section, where she accepted the point about the vacancy rates, she would look into the matter.
The Chairperson asked why the Department had not looked at the reports earlier on. Senior management of the Department held regular meetings. He asked why these errors had not been detected.
Dr Chetty responded that she accepted that comment. These were reports that the Department generated through a particular software and programme. It was obvious that the Department also needed to have manual verification of that information.
Mr M Mbili (ANC) requested, on a point of order, whether Members could engage with what had been established as an inaccurate report. He believed that the Department should be sent away. He emphasised that this was a perfect example of why Parliament wanted Ministers to be present at such meetings, and this should be the case when the Department next appeared.
Mr Mbili commented that it would be doing an injustice to the Committee if Members were expected to continue their work, based on inaccurate information. He also suggested that the Department be sent back to study its report, and, in the next meeting, could then begin by highlighting the areas in which inaccuracies had been found, so that the Committee could continue to interrogate the matters.
Mr Steele said that he had asked how the Department could restore public confidence. It had not restored his confidence in the Department. He also asked that a spell-check be done, as he had noticed a spelling mistake on the Contents page.
The Chairperson mentioned that he had forgotten to indicate that the Department had invited the Minister to attend, but he was unable to do so, as he was out of the country.
Ms Mashiane commented that in the event of the Minister not being able to attend, the Deputy Minister could have been asked to attend on behalf of the Minister.
The Chairperson commented on the proposals by Members, but suggested that the Department should be allowed to proceed, because so far the areas of contradiction in numbers emanated from HR. There were still two other items to be dealt with. If, at that level, difficulties also became apparent, then he would propose that the Department cease its explanations.
Mr Mbili questioned the legality of continuing to question an inaccurate report. He asked for the meeting to adjourn so that Members could caucus on this point.
Mr Singh submitted that Members could decide whether to proceed or not. The line of questioning that Members were putting to the Department clearly showed the type of answers that this Committee expected. He asked if the Department was comfortable with providing the type of answers required. If the Department was not comfortable, then there was no point in proceeding.
The Chairperson briefly adjourned the meeting so that the Committee could caucus on this matter.
On resumption of the meeting, the Committee announced that it had resolved to continue with the hearing, notwithstanding Members’ displeasure around the human resources issues.
Mr Steele submitted that the Committee had been given an explanation from Dr Chetty concerning a R34 million donation to LoveLife. He wanted to know, from the Department, what monitoring and control procedures the Department had in place regarding LoveLife, so that the Department would ensure that the money was well spent.
Dr Chetty responded that LoveLife had quarterly reports, showing how it had used the funds, and this was strictly monitored by the Department. The Department had not been happy with compliance on certain instances, and in the last quarter, for example, the Department had withheld funds from LoveLife. There was constant interaction to ensure that the programme was in line with the Department’s priorities, and the Department continued engaging down to the small details. The Department was looking at strengthening the monitoring over non-government organisations (NGOs).
Ms Mashiane raised the issue of under expenditure and admonished Dr Chetty for this, reminding her that under expenditure constituted financial misconduct in terms of Section 81 of the Public Finance Management Act (PFMA). She asked why, upon realising that Mpumalanga and Western Cape were under spending, an adjustment budget had not been drawn, bearing in mind the poor conditions of health facilities at hospitals around the country.
Dr Chetty responded that the under expenditure was a problem for the Department. Since in this particular conditional grant the Department had the ability to withhold funds, the Department had become a lot stricter. If there was not good compliance, the Department would inform the provinces of the National Department’s intention to withhold funding until compliance.
The Chairperson asked why, in this case, the Department had not re-directed the money.
Dr Chetty responded that the Department had considered either diverting the money to other provinces.
The Chairperson remarked that the Department had not done so nonetheless.
Dr Chetty responded that the Department had done this previously.
The Chairperson repeated his question why the Department had not done so in the present situation.
Dr Chetty responded that with the amount of time left in the financial year, the Department could not in any event spend any money on capital projects. There was a request made to NT, but in the Western Cape there had been clear plans for the funds to be used in the next financial year.
Mr Ainslie commented that this report had cost over f R180 000. This was a huge waste of expenditure, especially if this was the kind of information being gleaned from the report. Over the last nine financial years, the Department had received eight qualified audit reports. It had been noted that the Department was “a serial offender”.
Mr Ainslie wanted to deal with page 138, detailing the Auditor-General’s (AG) report, where a serious qualification related to departmental revenue. He wanted some straight honest answers from the Department on the findings of the AG. The AG had identified an amount of R27.9 million, relating to revenue from the Medicines Control Council (MCC). He said that he was unable to verify the accuracy and classification of the revenue, due to the Department not having the correct system in place. He wanted to formulate some practical and basic questions around that observation.
Firstly, in classifying this item, the AG identified four weaknesses. Mr Ainslie wanted the Department to respond to each of those four weaknesses. The first was the lack of approved policy and procedures to ensure that fees paid to the MCC’s bank account, for the registration of medicines, were reconciled to application forms for the payer. This also involved non-compliance with NT regulations.
Dr Chetty responded that there had been an action plan presented, which addressed each of the issues raised by the AG. The policies were in place and the bank accounts were being reconciled.
Mr Ainslie asked why the Department only identified these problems, and only began implementing these matters when either the AG or Parliament had identified them. Part of the reason for consecutive qualified audits was a lack of leadership. Such discrepancies should have been discovered long before the AG or Parliament interrogated these issues. The Department was not being proactive, but only responded when Parliament or the AG highlighted matters.
Dr Chetty explained that one of the difficulties was the lack of clarification between the role of the Department and the MCC. The MCC was a juristic body with independent finances and revenue. When problems arose, there was usually no paper trail to show when the money went into the finance section.
Mr Ainslie asked if Dr Chetty was disputing the findings of the AG, which had said clearly, and in plain English, that there were no systems in place.
Dr Chetty responded that she was not disputing what was in the AG’s report. She was giving an explanation as to why the Department had such a situation, which was due to the lack of clarity between the different roles. The Department had put systems in place in order to rectify this issue. The Department had met with the AG recently, when the parties agreed that there were still certain outstanding issues to be clarified, to reach a common understanding.
Mr Ainslie added that the second issues around this matter was that there had been no accounting records maintained on the basic accounting system. This basic accounting system was intended to bring uniformity across all government departments and all government entities, so that all departments spoke the same language of basic accounting. The MCC was apparently acting independently, and ignoring the attempts to bring uniformity to accounting systems. He asked what the problem was with regard to this financial accounting system.
Dr Chetty responded that the situation which had existed in the past was that the funds from the MCC were transferred to the Basic Accounting System (BAS) at the end of the financial year. The Department had now requested that this be done on a monthly basis.
Mr Ainslie commented that if the Department was not using the Basic Accounting System, then he would like to know what was being used, because it would not be adequate.
Mr Ainslie noted that the AG’s findings repeatedly made reference to ineffective accounting procedures and systems. The basic accounting system was designed to overcome some of the problems that the Department was experiencing.
Dr Chetty responded that MCC had a separate bank account, but the reconciliation had been done annually on BAS. There were separate bank accounts because the MCC generated its own revenue from clinical trials and application fees. This, however, had not worked. The Department was now making sure that the systems spoke to each other.
Mr Ainslie submitted that the third weakness identified around the R29 million was again the lack of proper documentation, which was a basic issue. There was no proper filing and the AG had been unable to verify certain transactions. He asked the Department to explain what the problem was in that regard.
Dr Chetty responded that the issue of documentation had been rectified. Filing had been a big problem. She wanted to assure the Committee that all the filing that had formerly been conducted in a non-secure way had been sorted out, and there was now confidentiality of information being maintained. The Department was having ongoing interaction with the AG, and she was aware that this problem around compliance and documentation had been noted. The Department was rectifying these issues.
Mr Ainslie commented that the problem he had with the Department’s Annual Report was that the Committee had to go and conduct its own research as to what the problems were, as they were not apparent from the Annual Report itself, nor in any reports to the Executive or Parliament.
Mr Ainslie noted that the Department had an audit Committee. He asked whether the Department was reporting these kinds of problems on a regular basis about to its audit committee.
Dr Chetty responded that she took the point that the Department would have to include a lot more detail in these reports.
Mr Ainslie thought that it would be useful for the Committee to obtain a response from the Department’s audit committee, and that the Department should also be present.
Members discussed the role that the Committee envisaged for an audit committee.
The Committee then discussed the Compensation Commissioner for Occupational Diseases: Annual Report for 2008/2009. The report on this section will be available shortly.
The meeting was adjourned.
- SCOPA: Hearing on the Annual Report & Financial Statements of the Department of Health & Compensation Commisioner Part2
- SCOPA: Hearing on the Annual Report & Financial Statements of the Department of Health & Compensation Commisioner
- SCOPA: Hearing on the Annual Report & Financial Statements of the Department of Health & Compensation Commisioner Part1
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