Public Hearings with National Treasury, Department of Health on under-expenditure of Hospital Revitalisation, Comprehensive HIV and AIDS, and Forensic Pathology Grants

NCOP Appropriations

03 May 2010
Chairperson: Mr T Chaane (ANC, North-West)
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Meeting Summary

The National Treasury, the national Department of Health, and the KwaZulu-Natal, Mpumalanga, Limpopo, Northern Cape and Free State Provincial Departments of Health briefed the Committee on under-expenditure of Hospital Revitalisation, Comprehensive HIV and AIDS, and Forensic Pathology Grants.


The National Treasury reported that the health sector had been under tremendous pressure as a result of compensation budgets. As of 31 December 2009 the average spend by provinces of their Comprehensive HIV and AIDS grants was 62.3%, with the lowest expenditures being noted by Mpumalanga and the Free State. Expenditure of the Forensic Pathology Services Grant was just below 74%. Spending of this Grant had d compared to same time period the previous year by 9.4% and there had been several rollovers of funds – both national and provincial.  The poor expenditure in relation to the Hospital Revitalisation Grant made this the worst-performing Grant with a total under-expenditure of R813.614 million. The National Treasury advised that the health sector needed to ‘live within its means’. The national Department of Health should also support and guide provinces in the implementation of major policy initiatives. The number of violations of the Division of Revenue Act was higher than any other governmental sector and involved both provinces and the national Department. Proper planning would improve the performance of grants in this sector.

 
Members asked why North West province had performed so much better than KwaZulu-Natal in relation to the Hospital Revitalisation grant; how were next year’s budgets for the underperforming provinces adjusted;
for National Treasury’s comments on coordination of work between the different levels of government; what National Treasury did when it detected problems with the expenditure performance of the provinces; and what the consequences were for breaching the Division of Revenue Act.


KwaZulu-Natal Provincial Department of Health reported that at the end of the fourth quarter the Department’s expenditure percentage stood at 49.95%. There were serious supply chain management problems. Challenges included minimal control over implementing agents, a lack infrastructure monitoring capacity, erratic reporting and an ineffective centralised finance management system. It had therefore centralised its finance management system and established a joint task team of representatives from the Department of Health, the Department of Public Works and the implementing agents which met monthly in order to address delays around reporting.


A member asked why the Department had noted over-expenditure in relation to its Forensic Pathology Services Grant.


Limpopo Provincial Department of Health and Social Development reported with regard to its Hospital Revitalisation Grant that it was able to fast-track implementation of infrastructure development when it did not depend on the Department of Public Works. Its dependency required possible revision in order to improve service delivery. The province had under spent its budget by 20%. Challenges included slow construction progress on site, and delay of civil and building contracts. The Department reported improvements to performance monitoring and evaluation.

 

Mpumalanga Provincial Department of Health reported that it had under-spent its total budget of R296 million by R6.5 million, because of late receipt of one invoice. Challenges included the heavy burden of disease, demand for services outweighing the budget, shortage of monitoring and evaluation services, poor infrastructure across the province, and slow accreditation of sites which delivered HIV-related services.  The Department had sought to align its budget with the demand, strengthen monitoring and evaluation, and rehabilitate and upgrade facilities. The Department had recorded an under-expenditure of 31% of its Hospital Revitalisation Grant. Its rollover application of R153.5 million was conditionally approved in November 2009, subject to an audit, still awaited, of how funds were used.  National Treasury had since withheld this money. Poor planning and contract management, limited capacity of appointed contractors and consultants and an inability to recruit and retain professional staff presented additional challenges.


The Free State Department of Health reported that the alliance between the Department, National Treasury and the Department of Public Works needed to function effectively in order for service delivery in the hospital revitalisation programme to be effective. Apparent problems with expenditure resulted from using the additional allocation for such items as antiretrovirals, and laboratory tests. Under expenditure was caused by non-appointment of contractors leading to delays in the execution of projects, and poor contractor performance. The additional rollover of R34 million had further aggravated problems. Challenges included lack of capacity in planning, supervision of the appointed contractors, and monitoring and evaluation. The Department was reviewing its organisational structure and functions, appointing technical experts who would assist with the planning, implementation and monitoring and evaluation of contracts, and strengthening its reporting mechanisms.


The Northern Cape Provincial Department of Health reported with regard to its Forensic Pathology Conditional Grant a legal dispute with a service provider, but committed itself to resolve this dispute expeditiously and to construct mortuaries in its bid to enhance service delivery to the people of the province. It analysed the 2009/2010 rollover of R11.1 million as R10 million for the building of mortuaries and R1.1 million committed for goods and services commitments previously.


The national Department of Health acknowledged challenges facing the sector regarding capital expenditure. It had initiated a programme to equip each province with an engineer to protect the interests of the sector, to ensure necessary internal capacity and technical knowledge, and to advise the Department and assist in the awarding of tenders.


Members asked who, the national Department of Public Works or the various Provincial Departments of Public Works, was to be held accountable for a provincial department’s poor performance, and what impact the treatment of non-South Africans had on Human Immunodeficiency Virus.


The National Treasury representative agreed with the various Provincial Departments that issues concerning the Department of Public Works needed to be addressed as this was a major barrier to effective service delivery.


The Chairperson said that the Intergovernmental Relations Framework Act 2005 (Act No. 13 of 2005) required the Committee to call Departments before it in order to facilitate a more effective working relationship between the various stakeholders. In addition, the record of contractors needed to be examined before the awarding of tenders.



Meeting report

National Treasury Presentation
In his presentation, Mr Edgar Sishi, Director, Provincial Budget Analysis, National Treasury, said that the health sector had been under tremendous pressure as a result of compensation budgets. The provinces which experienced the biggest pressures were Eastern Cape, Gauteng and KwaZulu-Natal.


The Comprehensive HIV and AIDS grant had been adjusted upwards by R9 million. As of 31 December 2009 the average spend by provinces stood at 63.2%, with the lowest expenditures being noted by Mpumalanga and the Free State. Provinces had struggled to spend the additional funds which went into the adjusted budget, with under-expenditure in this regard at R225 million.


Expenditure in relation to the Forensic Pathology Services Grant was, at 31 December 2009, just below 74%. Though there had been no significant under-expenditure of this grant, spending had slowed down compared to same time period last year by 9.4%. There had, for this grant, been several rollovers of funds – both national and provincial.  As this was a purpose-specific grant, the over-expenditure noted by KwaZulu-Natal implied that there was either poor cash flow management or reporting errors which needed to be fixed.


The poor expenditure in relation to the Hospital Revitalisation Grant made this the worst-performing grant in Government. Total under-expenditure here stood at R813.614 million. The health sector had under spent on its capital creation budget by more than R1.3 billion. Although every province had under spent their budgets in this regard, the most significant under-expenditures were noted by the KwaZulu-Natal, Mpumalanga and Free State provinces.


The health sector needed to ‘live within its means’ in respect of personnel, good and services and capital expenditure. The processes used for determining salary adjustments should involve provinces and be tied into available resources. The national Department should also support and guide provinces in the implementation of major policy initiatives. The number of violations of the Division of Revenue Act was higher than any other governmental sector and involved both provinces and the national Department. Proper planning would improve the performance of grants in this sector.

 

Discussion
Mr T Harris (DA, Western Cape) asked what why North-West province had performed so much better than KwaZulu-Natal in relation to the Hospital Revitalisation grant. How were next year’s budgets for the underperforming provinces adjusted, if at all?


Mr Sishi replied that KwaZulu-Natal had experienced many difficulties in this regard, many of which were not the Department’s fault. One issue faced by most provinces was that, as the refurbishment of hospitals often had to take place in different stages, contracts were awarded to different companies. If there was a delay – or problems around the quality of work delivered – this had the knock-on effect of delaying the completion of the rest of the project. The poor coordination of funding instruments also played a role here.


Mr S Mazosiwe (ANC, Eastern Cape) asked what National Treasury’s comments were on coordination of work between the different levels of government.


Mr Sishi answered that it had a number of initiatives in place to assist national departments with capital budgeting and planning as well as the delivery of infrastructure. Departments presented their plans and these were looked at by the Treasury’s Capital Budgets Committee. Problems, however, set in when plans changed – most often due to technical considerations. It also had the Infrastructure Development Improvement Programme which was being rolled out to the different provinces and aimed to improve the way in which provinces executed plans and managed processes in the delivery of capital projects. In addition, it also conducted annual visits to the various provinces. It was, however, ultimately the sector’s duty to ensure that projects and finances were managed effectively.


Mr J Gunda (ID, Northern Cape) asked when National Treasury picked up that there were problems with the expenditure performance of the provinces and what it did to correct this.


Mr Sishi said that although it had various initiatives in place to address this issue this responsibility was ultimately that of the sector. It had also made it clear to provinces that proper plans had to be submitted in order for them to receive the under spent money.


Mr Harris asked what the consequences were for breaching the Division of Revenue Act.


Mr Sishi answered that Section 49 of the Act stated that if funds were not spend for the purposes of the grant that would constitute financial misconduct. Parliament would then have to recommend what actions were to be taken against the relevant official(s).


KwaZulu-Natal Presentation
Dr Sibongile Zungu, Head of Department, KwaZulu-Natal Department of Health, said that at the end of the fourth quarter the Department’s expenditure percentage stood at 49.95%. The bulk allocation of the grant in the province was across three different projects. There were however serious problems with all three these projects around supply chain management. The Department faced challenges around having little control over its implementing agents, a lack infrastructure monitoring capacity, erratic reporting and an effective centralised finance management system. To this end it had centralised its finance management system as well as set up a joint task team made up of representatives from the Department of Health, the Department of Public Works and the implementing agents which met monthly in order to deal with delays around reporting.


Discussion
Mr Harris asked why the Department had recorded over-expenditure in relation to its Forensic Pathology Services Grant.


Ms Zungu replied that the Department had faced challenges when the transfer occurred as there was maladjustment between the Department’s planning and the funding flow. Due to under spending it had had funds withheld with the understanding that it would be rolled over. As a result of this understanding it continued with its expenditure. This had resulted in the noted over-expenditure. The Director-General for Health had been informed of the prospective over-expenditure as a result of the funds not being returned.


Limpopo Presentation
Ms Miriam Segabutla, Member of the Executive Council (MEC) for Health and Social Development, Limpopo, said with regard to the Hospital Revitalisation Grant that the Department was able to fast-track implementation of infrastructure development when it did not depend on the Department of Public Works. The Department’s dependency on the Department of Public Works needed to be examined and possibly revised in order to improve service delivery. Although the province had under spent its budget by 20%, this was an improvement on the last financial year by 4.5%. Some of the challenges the province faced included: slow construction progress on site, civil and building contracts being delayed at Thabazimbi hospital due to the finalisation of an environmental impact assessment and dependencies within the sites having the ripple effect of delaying subsequent projects. Improvements to performance monitoring and evaluation comprised appointment of resident clerks of works to assist in ensuring performance of contractors per site on a daily basis, measurement of construction works to be undertaken and paid for twice per month, and projects to be monitored closely by the Department of Public Works and professional teams.  


Mpumalanga Presentation
Dr Johnson Mahlangu, Head of Department, Department of Health, Mpumalanga, said that the Department had under spent its total budget of R296 million by R6.5 million. This under-expenditure was however due to one particular invoice for this amount arriving after the set cut-off date of 26 March 2010. The challenges included: the burden of disease being very high, demand for services outweighing the budget, a shortage of monitoring and evaluation services, poor infrastructure across the province inhibited the delivery of effective services, slow accreditation of sites which delivered HIV-related services.  To address these challenges the Department had sought to align its budget with the demand on the ground, strengthen the monitoring and evaluation component of the programme and rehabilitate and upgrade its facilities, mainly clinics and primary healthcare structures.


In terms of its Hospital Revitalisation Grant the Department had noted an under-expenditure of 31%. The confirmation of its rollover application of R153.5 million was conditionally approved in November 2009, subject to an audit of the utilisation of funds. As the audit was done only in January 2010, the Department was still awaiting a final audit report. This money has since been withheld by National Treasury. It had made an application for a rollover of funds based on existing commitments in the previous financial year. Challenges it faced in this regard included poor planning and contract management, the limited capacity of appointed contractors and consultants to deliver health infrastructure, and an inability to recruit and retain professional staff in relation to the upgrading of services.


Free State Presentation
Ms Sisi Mabe, MEC for Health, Free State, said that the alliance between the Department, National Treasury and the Department of Public Works needed to function effectively in order for service delivery in terms of the hospital revitalisation programme to be effective.


Dr Sipho Kabane, Acting Head of Department, Department of Health, Free State, said that the apparent problems with the Department’s expenditure resulted from the additional allocation being used for items such as antiretrovirals (ARVs), and laboratory tests. Its under-expenditure of its Hospital Revitalisation Grant was because of the non-appointment of contractors leading to delays in the execution of projects, and poor contractor performance. The additional rollover of R34 million given in December 2009 had further aggravated its problems. The Department had a lack of capacity in the areas of planning, supervision of the appointed contractors, monitoring and evaluation. The Department was reviewing its organisational structure and functions, appointing technical experts who would assist with the planning, implementation as well as monitoring and evaluation of contracts, and strengthening its reporting mechanisms.


Northern Cape Presentation
Mr Mxolisi Sokatsha, MEC for Health, Northern Cape, said that the Forensic Pathology Service was transferred from the South African Police Service (SAPS) in the 2006/07 financial year. The facilities which were handed over to the Department were in a state of disrepair and not to the standards required. Thus, in order to ensure effective and efficient services, identified mortuaries were to be refurbished or constructed as priority projects, namely, Kimberley, De Aar, Kuruman, Keimoes, Kakamas, Pofadder and Postmasburg.

Refurbishment of the facilities will ensure accessibility and services are rendered in a dignified manner.

 

Mr Sokatsha analysed the 2009/2010 rollover of R11.1 million as R10 million for the building of mortuaries and R1.1 million committed for goods and services commitments previously. The Department faced a legal dispute with a service provider. The Department had requested a rollover of R12 million to be used for the payment for forensic vehicles, payment for goods and services, continuation of the construction of several mortuaries and the procurement of medical and information technology (IT) equipment for new mortuaries.  The Department was committed to the expeditious conclusion of the legal dispute and to the construction of mortuaries in its bid to enhance service delivery to the people of the province.

National Department of Health Presentation
Ms V Rennie, Acting Deputy Director-General, Corporate Services (and Chief Financial Officer), national Department of Health, said that the Department acknowledged the challenges that the sector faced with regards to capital expenditure. As a result the Department had initiated a programme which would see each province equipped with an engineer. These engineers were to protect the interests of the sector, to ensure it had the necessary internal capacity and technical knowledge, and to advise the Department as well as, where possible, assist in the awarding of tenders.    

Discussion
Mr Harris asked who, the National Department of Public Works or the various Provincial Departments of Public Works, was to be held accountable for a provincial department’s poor performance.

Ms Rennie answered that the Provincial Departments of Public Works had the constitutional authority in the respective provinces. The National Department could, however, intervene in matters which it deemed necessary to do so.


Mr Mazosiwe asked what impact the treatment of non-South Africans had on human immunodeficiency virus (HIV).


The Department responded that its approach was firstly to treat the person in need of treatment and consider other matters, such as legal issues, at a later stage.


Mr Sishi agreed with the concerns expressed by the various provincial departments that the issues around the Department of Public Works needed to be addressed as these was a major barrier to effective service delivery.


The Chairperson said that the Intergovernmental Relations Framework Act 2005 required the Committee to call Departments to appear before it in order to facilitate a more effective working relationship between the various stakeholders. In addition, the track record of contractors needed to be examined before the awarding of tenders for work to be done.


The meeting was adjourned.

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