Department of Health: 4th Quarter 2009/10 Expenditure Report

Standing Committee on Appropriations

12 August 2010
Chairperson: Mr E Sogoni (ANC)
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Meeting Summary

The Department of Health (the Department) briefed the Committee on its fourth quarter expenditure in the 2009/10 financial year. At the request of the Committee, the Department focused on the spending on the Hospital Revitalisation Grant (HRG), noting that there had been 495 projects, of which 210 were cancelled and 89 were handed over to the Department and National Treasury. The Department was monitoring all projects to prevent wasteful expenditure. The final appropriation for the Department for the 2009/10 financial year was R18.4 billion, but actual expenditure was R17.9 billion, an underspend of 2%. The Department described where the underspending occurred, and the reasons. Particular reference was made to the underspending of R402 million on the Conditional HRG, with funding having been withheld from three provinces. Although National Treasury had given conditional approval to a rollover for Mpumalanga, the conditions were not met and the Department had therefore not approved that rollover.

Members were particularly concerned with the particular rollover request in Mpumalanga, but this led on to a general discussion on the reasons why rollovers were requested and the planning. Although some Members attempted to question provincial issues in Mpumalanga, which had been visited by the Committee, the Chairperson noted that a subsequent meeting would interrogate these issues, and that all relevant departments would be called in together, so that a comprehensive response was obtained. Members also asked about the debates concerning the H1N1 vaccines, whether the Department was planning on producing vaccines locally. They questioned the impact of the Occupation Specific Dispensation, questioned if anyone had not been paid, and the plans around nursing colleges, and also asked if the Department was satisfied that all Primary Healthcare facilities were fully operational. Members stressed that when the rollovers were not approved, this resulted in prejudice to the public who still needed service delivery, and asked whether “revitalisation” meant that existing facilities would be refurbished, or new structures built. They pointed out that delays in spending were directly attributable to lack of planning. The Department conceded the point and outlined the steps taken to appoint engineers, to attend to refurbishment and to undertake integrated planning, amongst other initiatives, and stressed that it was attempting to obtain value for money. National Treasury commented that the problem was still large, and there was a need for collective thinking as to how to address this Department’s weaknesses. The Committee would monitor the Department’s interventions, offered support and hoped that the targets were not unattainable.

Meeting report

Department of Health Expenditure Report, 4th quarter of 2009/10 financial year
The Chairperson welcomed the delegation from Department of Health (DoH or the Department) and stated that the Committee would be concentrating on the issues around that Department’s expenditure. Although the Department was not necessarily spending badly, it must remember that resources were limited. He was particularly concerned about the Hospital Revitalisation Grant (HRG) and the question of infrastructure expenditure. The Committee had supported the restructuring of the Department, and hoped that this Department could come to a positive solution on salary negotiations.

Ms Precious Matsoso, Director General, Department of Health, stated that the Hospital Revitalisation Grant for 2009/10 focused mainly on 56 projects, but that there were 495 projects in total for the whole period. An assessment had been done on these projects. 210 were cancelled and 89 were handed over to the DoH and National Treasury (NT). The Department was monitoring all projects to prevent wasteful expenditure. Apart from this, spending for other programmes was going very well.

The final appropriation for the DoH for 2009/10 was R18.4 billion. Actual expenditure amounted to R17, 9 billion and there was thus under expenditure of 2%. Under spending of R4.7 million in Programme 1 (Administration) was due to delays experienced in the relocation to the newly upgraded Civitas Building. Programme 2 (Strategic Health Programmes) had underspent by R24 million, due to the delayed delivery of a portion of the H1N1 and polio vaccines. Programme 3 (Health Planning & Monitoring) underspent by R11 million, owing to initial slow spending by the new Office of Standards Compliance. Programme 4 (Health Human Resource Management & Development) had underspent by R7.3 million, due to late payment of the costs for an audit of the Nursing Colleges. This project was since completed and payment was made in the 2010/11 financial year. Programme 5 (Health Services) had underspent by R402 million and this was attributable to funds from the Conditional HRG having been withheld, as follows: R66 million from the Free State, R160 million from KwaZulu-Natal and R154 million from Mpumalanga.

For Mpumalanga, National Treasury had approved a rollover of R153.5 million to the next financial year, subject to a favourable audit showing that the funds could be spent. The audit had however been unfavourable, and the National Department thus did not approve the rollover. For the Free State, there was a problem with payments that should have been made from the suspense account, which resulted in the delay of the whole process of payments to contractors. There was also a delay in the advertisement of tenders. In KwaZulu-Natal there was under-performance due to the non-approval of critical posts. The award of for the tender to the Hlabisa hospital had been delayed due to the Independent Development Trust (IDT) not following the correct tender procurement procedures. The Rietvlei Hospital access road tender was delayed, due to the need for consultations with the Department of Transport. Under Programme 5, there were also delays in the finalisation of the Primary Health Care (PHC) audit tender. There was also a late commitment for the 2010 Emergency Medical Services capital equipment.

Underspending of R5.2 million in Programme 6 was attributed to outstanding amounts to be claimed from the Department of International Relations, and the delay in establishing the new South African Health Products Regulatory Authority Body.

Ms V (Tiny) Rennie, Acting Chief Financial Officer, DoH, reiterated that the HRG rollover for Mpumalanga was approved on condition that the audit showed that Mpumalanga could spend the funds. When the audit showed that this could not be done, the rollover was withheld.

Mr M Swart (DA) said that he did not think that the correct representatives were appearing before the committee. The National Department was controlling expenditure by the provinces and therefore the provincial departments should also be called in, as it was important to know exactly what was happening in regard to provincial issues, especially in Mpumalanga. During the Committee’s oversight visit it was found that a number of clinics had electricity and water problems, and in some of these clinics solar electricity panels had been installed, but were now not working. He presumed that the provinces were dealing with this, but asked whether the DoH could assist the Committee in finding out who had installed these solar panels and who was supposed to maintain them.

The Chairperson asked Mr Swart not to ambush the Department. It had been agreed by the Committee that it would call in the Departments of Water and Environmental Affairs (DWEA) as well as National Treasury to deal with specific problems, in conjunction with the DoH. He noted that Mr Swart was referring to the Division of Revenue grants. He asked the Department not to respond to Mr Swart’s question at this stage, as everyone who was responsible for these issues would need to be present when they were addressed. He assured Mr Swart that these issues would soon be tackled soon. It was clear that the situation as described to the Committee was in fact very different on the ground, as evident from the oversight visit.

Ms Matsoso replied that that the Department was compiling a report on the electrification of facilities, and that R900 million was earmarked for water and electricity. The Department was also following up to find out which areas had not been dealt with. Only half of that R900 million had been spent.

Dr P Rabie (DA) said that the DoH had summarised the reasons for under expenditure in April or May, but that there was a big debate around the H1N1 vaccine availability during this period. It was important for the private and public health sectors to come to agreement over vaccines, in order to avert a situation like this.

Ms Matsoso replied that the H1N1 vaccines were donated by the World Health Organisation and that money was spent on supply lines. Polio vaccines were linked to the DoH’s expanded vaccine campaign, due to the recent increase in measles. Seasonal influenza vaccines were a different matter. It was not possible for the DoH to budget for these in the same way as it could for Expanded Public Immunisation (EPI). In South Africa, there had not been reported cases of adults contracting measles but if this campaign failed then this would be seen in future. She agreed that, in regard to seasonal influenza, the private sector was an important partner.

Mr G Snell (ANC) said that on the oversight visit the Members had picked up issues of provinces setting policy and the National Department not having any teeth. He asked if the Public Finance Management Act (PFMA) enforcement of standard policy had a negative effect. He noted that large portions of the infrastructure grant were used to pay for staff costs, and that this was both incorrect and illegal. He asked how the national department was ensuring that this would not happen again.

The Chairperson stated that he had already asked Members not to refer to issues arising from the oversight visit as yet, as he did not want to get answers that were incomplete. It was necessary to get a comprehensive response to these questions, and so he appealed again to Members not to ask any questions about matters arising from that oversight until such time as all the relevant people were present to ensure that a holistic answer could be given.

Mr N Singh (IFP) said that it was encouraging that the first quarter provincial budgets were at 23.7% of expenditure, which was almost on target. He asked what overall impact the Occupation Specific Dispensation (OSD) was having on the finances of the Department. He asked if there were people who had not been paid.

Ms Matsoso replied that there were two categories of health workers who had not been paid yet. The costing came to R351 million, and gave a break-down of what the provinces needed to spend. National Treasury did not trust the DoH calculations and wanted to verify it. Allied health workers now wanted to be included in the OSD, so the DoH was costing this as well.

Mr Singh asked what attempts the DoH was making to manufacture vaccines in South Africa.

Mr Singh asked which nursing colleges the DoH was looking to open or re-open and whether DoH was looking at a partnership with private institutions in order to save costs. 

Ms Matsoso said that the problem of nursing in South Africa was that there had been a switch from an on-site training model to an academic one. The current private sector training did not have an on-site, bedside training function. The DoH was trying to reintroduce this. Academic training trained and created nurses with an academic approach, but staff and student nurse who provided bedside care were needed.

Mr Singh asked whether the National DoH was satisfied that all PHC facilities built were fully operational.

Ms Matsoso responded that the DoH had conducted studies on 18 districts to see if they were properly staffed and equipped. They were going to use this study as a norm to determine the extent of staff and equipment that were needed for each district.

Mr Singh noted that the audit in Mpumalanga had shown inadequate results to allow for the HRG to be approved, but stressed that there was still a need for service delivery and infrastructure. He asked whether revitalisation meant building new facilities or refurbishing existing ones, as the media had indicated that the hospital had no money for maintenance.

The Chairperson said that Members were correct that expenditure on infrastructure was not happening. He added that in terms of Section 26 of the Division of Revenue Act (DORA), provincial departments had the responsibility of spending the conditional infrastructure grants, and that they had to submit detailed plans to their Provincial Treasury, which would then submit them through to National Treasury by August. This section was included to ensure that people planned properly. Delays indicated that there was a problem with planning.

The Chairperson added that the Medium Term Expenditure Framework (MTEF) ensured predictability of spending. The fact that there were requests for a rollover pointed to planning challenges. It could not be said that the National Department was not responsible, as the DORA said that the responsibility of a national department was to provide guidelines and approval of business plan proposals. This issue would not have arisen if everyone had done his or her job properly. He asked how Parliament could endorse budget increases if the Department was underspending. The issue of withholding funds in terms of the DORA was problematic, as the people on the ground suffered. The issue directly affected the people who needed medical treatment and were being punished because of provincial departments’ failings. He asked what the Department was doing about the problematic provinces, as it was not enough simply to say that their funds would be withheld.

Ms Matsoso replied that from February 2010 the Department had appointed an engineer, who had been central to reviewing all the projects. Specific teams had been formulated, and they were going further to determine what was expected of the National Department and the provincial departments, and the contractual and legal relations between the two. The DoH had formulated some institutional arrangements as to how it were going to monitor projects and was using the HRG programme to help the Department to improve and manage other grants. She added that she would circulate a document on this to Members. The DoH wanted the teams, amongst other things, to reinforce accountability procedures at provincial levels and raise strong norms and standards.

She added that although, historically, the DoH did not have an integrated approach to planning, it was now changing this and was doing a technology audit. In the past the DoH had workshops where equipment could be repaired, but these had largely been closed down, and currently DoH would tend to buy new equipment when the old equipment broke. The DoH needed to have clinical engineers on site, to avoid the situation of having to outsource for the fixing or replacement of broken equipment, at around eight times the cost of in-house engineers. The DoH could not simply spend for the sake of spending, but needed to ensure that there was also value. The Department was working with the Development Bank of Southern Africa (DBSA) to evaluate the capacity of the Chief Executive Officers in every hospital, as it had noticed that some did not have the skills to deal with such large sums of money. The deficiency in the HRG projects was that provinces needed engineers on their teams to correct problems.

Mr Ndina Mphaphuli, Chief Director: HRP, Department of Health, added that the rollover had not been granted in Mpumalanga because the Department was not convinced that this province could spend and account properly. There had been only one month left to spend the money and on this basis the DoH decided not to grant a rollover. When the province was ready, the national Department would fund all the projects of the province, so it did not intend to penalise Mpumalanga.

He added that there were two types of grants to deal with maintenance. If refurbishment would cost more than 60% of the value of the item, then the Department would purchase new items. He agreed with the Chairperson about spending in time, and that a failure to do so in the past did indicate that there had been failures to ensure proper planning.

The Chairperson said that the Committee would monitor the Department’s interventions and said that it offered its support to the Department. The problem until now had been decentralised planning.

Dr Mark Blecher, Acting Chief Director: Health & Social Services, National Treasury, observed that the biggest problem was the R2 billion underspending, and that the R800 million tied to revitalisation spending was a large portion of this amount. However, the Department was getting engineers appointed and seemed to be doing some innovative things to build capacity. Despite this, the size of the problem was quite large. Even when spending was good it did not reflect good value for money. The DoH faced a major challenge and there was a need to think collectively about how the Department could strengthen its weaknesses.

The Chairperson said that when the Committee invited the other departments to attend, it was necessary to have everyone present together so that they could tell the Committee exactly what the problems were. He reiterated that the Committee would support the DoH’s endeavours to improve. The need for building of facilities could not be over-emphasised, especially where there were none. Although this Committee was tasked with essentially dealing with finances, it must also ensure that there was provision of service. He was pleased that there was now better structuring to ensure compliance.

The Chairperson noted that the status of the other grants had not been reflected. The Department obviously needed to be able to monitor expenditure on these grants as well, as they were not provincial but national grants.

Mr B Skosana (IFP) said that while it may seem that the Committee was concentrating on the negative, Members nonetheless had to ask these questions to determine what was happening. He asked whether the DoH was ensuring that grants were being spent on the proper purpose. He noted that it was a pity that the comprehensive plans that Ms Matsoso was now showing had not been in place years ago.

Ms Matsoso replied that the DoH believed that the initiatives that it was putting in place to fast-track projects, by ensuring that National Department officials did spend time in the facilities, would be successful. The Department would furnish reports on the state of facilities at a future meeting. She agreed that the issue had not only to do with planning, but said that the new integrated way of planning would help the Department to reach service delivery targets. The targets were ambitious, but the Department would do its utmost to realise them.

The Chairperson hoped that those targets were not unattainable.

The Chairperson noted that the Committee would shortly call the provinces to appear before the Committee.

The meeting was adjourned.



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