Adjustments Appropriation Bill: submissions by National Department of Health and Department of Water Affairs

Standing Committee on Appropriations

04 November 2010
Chairperson: Mr E Sogoni (ANC)
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Meeting Summary

Hearings on the Adjustments Appropriation Bill were held with the National Department of Health and the Department of Water Affairs making submissions. The National Department of Health was requesting an adjustment from R21.5 billion to R21.6 billion due to an increase of R164.5 million. An amount of R49.8 million was for funds rolled over and the Department explained the reasons for this. Part of the adjustments was due to a salary and housing allowance increase of R9.7 million based on the new wage agreement. Adjustments were also made due to unforeseeable and unavoidable expenditure to the amount of R105 million. This was broken down into R40 million for the comprehensive HIV and AIDS Grant, R60 million for national distribution of condoms and R5 million for the Medicines Control Council to support its turnaround strategy, mainly on staffing and to address backlogs in medicines registration.

The Health Director General presented the current expenditure as at 30 September 2010. Expenditure had been targeted at 50% for end September 2010 and 49.30% had been achieved. The reasons for under expenditure were provided. A report was given on Conditional Grant spending (averaged at 43.7%) which included the Comprehensive HIV and AIDS (41,3%), Forensic Pathology Services (49%), Health Professions Training and Development (45,8%), Hospital Revitalization (37%) and the National Tertiary Services Grants (48,3%). Plans to deal with under expenditure were given. The Director General concluded the submission by saying that the challenge for the Department was ensuring that the grant expenditure achieved the intended objectives, targets and goals and this was part of performance measurement.

The Committee asked why the grants for electricity to Eastern Cape clinics were stopped when most clinics relied on solar systems. Was the budget geared to address such gaps? Members asked what caused the under expenditure in the Hospital Revitalization Grant. It was unacceptable that business plans had to be revised as money was supposed to be ‘flowing’ freely.

The Department of Water Affairs informed the Committee that its Director General and Chief Financial Officer had been put on precautionary suspension. The submission covered
Expenditure Trends, Quarterly expenditure for 2010/11, Reasons for under expenditure, Rollover of funds, Self Financing Amount, Virement and Additional Funds. There had been an improvement in expenditure trends from 92% in 2007/08 to 93% in 2008/09 and most recently 98% in 2009/2010. However, the mid year 2010/11 expenditure was only 38%. Programs lagging behind were Water Sector Regulations (24%) and Regional Management (34%). Reasons for under expenditure included Public Works late submission of invoices totaling to R44 million for office accommodation and unspent funds allocated for the Change Journey and Master Systems Plan (MSP).

The Department of Water Affairs had requested a rollover of R123.6 million and R79 million was approved. The Acting Director General outlined the funds that had been shifted and the reasons for the virement. In terms of the Public Financial Management Act the Financial Officer could not take more that 8% of the funds meant for one program and use it for another. If the amount exceeded 8% a request needed to be made to Parliament for approval. It was for this reason that the Department was approaching Parliament. Additional funds of R122.6 million were recommended by the National Treasury for a wage agreement settlement and for drought relief in the Western Cape.

The Committee asked which adjustments had not been approved by Treasury and why. The Committee asked if the delay in the expenditure was affecting achievements and if this would eventually lead to an increase in costs.


Meeting report

Chairperson's Introductory Remarks
The Chairperson welcomed the Directors General of the National Department of Health and Department of Water Affairs and their entourage. The Committee would engage with the departments to ensure that funds that were requested for adjustment were justified and that these funds would be utilized.

Department of Health submission
Ms Malebona Matsoso; Director General, National Department of Health (NDOH) made the submission. The Committee was informed that
the budget for NDOH would be adjusted from R21.5 billion to R21.6 billion due to an increase of R164.5 million. The Director General explained the details of the adjustments. An amount of R49.8 million was for funds rolled over and part of this amount was R11 million for the installation of information technology infrastructure in a newly refurbished building. R3.2 million as part of the R49.8 was for 2010 FIFA World Cup unspent funds which were however committed. A further breakdown of the R49.8 roll-over revealed that R17 million was for hospital revitalization for improved program management (R12 million) and health technology and management audits (R5m). Part of the adjustments was due to a salary and housing allowance increase for R9.7 million based on the new wage agreement. Adjustments were also made due to unforeseeable and unavoidable expenditure to the amount of R105 million. This was broken down into R40 million on Comprehensive HIV and AIDS Grant, R60 million for national distribution of condoms and R5 million for Medicines Control Council (MCC) to support its turnaround strategy, mainly on staffing and to address backlogs in medicines registration,

The Director General presented the current expenditure as at 30 September 2010. The target of expenditure for end of September 2010 was 50%, the NDOH achieved 49.30%. There was under spending of 1.7 % which was attributed to compensation of employees due to delays in finalizing wage agreement. The expenditure would pick up at the end of November as the matter was now finalized. The Committee was informed that accruals amounting to R30m were still to be paid which would influence the actual expenditure percentage positively, once paid. Capital expenditure funding was also being reviewed to address the turnaround strategy for the current IT challenges in the Department. Ms Matsoso also presented the Conditional Grants Report. Conditional Grant spending (averaged at 43.7%) which included the Comprehensive HIV and AIDS (41,3%), Forensic Pathology Services (49%), Health Professions Training and Development (45,8%), Hospital Revitalization (37%) and the National Tertiary Services Grants (48,3%). Plans to deal with under expenditure were given. Management and monitoring of conditional grants included monthly meetings being held within the Department with the Director General and the grant managers to review progress and to advise and make suggestions for interventions where applicable. More work still needed to be done at grant level to monitor performance and the grant indicators in terms of the approved business plans. The Director General concluded the submission by saying that the challenge for the Department was ensuring that the 91% grant expenditure achieved the intended objectives, targets and goals and this was part of performance measurement.

Discussion
The Chairperson asked why the grants for electricity to clinics in the Eastern Cape were stopped when most clinics relied on solar systems. Was the budget geared to address such gaps?

Ms Matsoso replied that part of the adjustment that had been requested was meant for district health facilities. These facilities would also be beefed up with support teams to improve conditions. Special attention would also be given to those centres that were struggling. The Department had also embraced an outcomes based approach and this was part of the service delivery agreements that had been signed by the Minister.

The Chairperson asked on the progress and effectiveness of AIDS awareness interventions.

Ms Matsoso replied that the impact of HIV had affected the mortality rate among women and children. There was also a need to deal with the social determinants of health such as clean water. The health systems failure had also affected the ability to appropriate and spend adequately. There was also need to streamline statistics on mortality rates as stakeholders had conflicting statistics which affected planning for intervention.
 
Ms R Mashigo (ANC) asked what caused the under expenditure in the hospital revitalization grant as usage of funds was important in ensuring primary health care. It was unacceptable that business plans had to be revised for this purpose as money was just supposed to be ‘flowing’ freely.

The Director General replied that there were some problems that had been identified which included poor management and oversight of grants at provincial level. Engineers had been recruited in all the provinces to assist with the implementation of projects.

Department of Water Affairs submission
Mr Trevor Balzer; Acting Director General, Department of Water Affairs informed the Committee that two senior officials in the Department had been put on precautionary suspension. This had affected the position of Chief Financial Officer and Director General where other people were now acting, which included him. The Acting Director General made the submission which covered aspects on
Expenditure Trends, Quarterly expenditure for the 2010/11 financial year, Reasons for under expenditure, Rollover of funds, Self Financing Amount, Virement and Additional Funds. On expenditure trends the Committee was informed that there was a gradual improvement in expenditure trends from 92% in 2007/08 to 93% in 2008/09 and most recently 98% in 2009/2010. The second quarter actual expenditure for the period ending 30 September 2010 revealed that only 38% of total funds had been spent. Programmes lagging behind were Water Sector Regulations where R48.2 million out of 194.5 million had been spent representing 24% and Regional Management where R1.5 billion out of R4.4 billion had been spent representing 34%. Reasons for under expenditure among other was the late submission of invoices by Public Works totaling R44 million for office accommodation. The action taken to remedy this was that Public Works had been requested in writing to provide outstanding invoices. Another reason for under expenditure was the unspent funds allocated for the Change Journey and Master Systems Plan (MSP). The action taken was that funds would be re-allocated to other activities.

The Committee was informed that R123.6 million had been requested as rollover of funds and that R79 million was approved. Furthermore a self financing amount of R5 million was approved by the National Treasury for training and development as requested by the Gauteng region to the Local Government
Sector Education Training Authority. The amount was meant to assist the department with capacity building in municipalities over a two year period. The Acting Director General outlined the funds that had been shifted and the reasons for the virement. The Committee was informed that R47.6 million was shifted to Administration to mainly fund expenditure for IT services and the new institutional realignment unit. R34 million was shifted to Water Management mainly to cover operational activities due to structural changes. Furthermore R3 million was shifted from National Water Resources Infrastructure to cover the payment of office accommodation for Gauteng Region as part of Administration. Another R46 million was shifted to Water Sector Regulation mainly to fund Water Management and Institutional Governance (WMIG). These funds were incorrectly allocated under Regional Management. Further, R124 million was shifted from Regional Management due to the reallocation of funds (R200 million) which were provided for the replacement of donor funding. Lastly R45.6 million was allocated to Water Sector Regulation mainly for the eradication of water use licenses, water management and institutional governance projects.

The Department concluded the submission saying
total additional funds of 122.6 million were recommended by the National Treasury. This consisted of an adjustment of R30.6 million due to a wage agreement settlement and R92 million due to drought relief for the Western Cape.

Discussion
Dr P Rabie (DA) asked what was being done to stop sewage spillage in dams within catchment areas.

Mr Balzer replied that information would be provided on the pre directives and directives that had been made and cases taken to court against municipalities.

Mr J Gelderblom (ANC) asked for more clarity on the
R124 million shifted from Regional Management due to the reallocation of funds (R200 million) which provided for the replacement of donor funding.

Mr Balzer replied that the Department had a schedule of how donor funds were utilized which would be tabled to the Committee.

The Chairperson asked for the adjustments that were not approved by Treasury and why they were not approved but referred to Parliament.

Mr Philip Botha, Acting Chief Financial Officer, replied that in terms of the Public Financial Management Act (PFMA) the Financial Officer could not take more that 8% of the funds meant for one program and use it for another. If the amount exceeded 8%, a request needed to be made to Parliament for approval. It was for this reason that the Department was approaching Parliament.

The Chairperson asked why only 1% of funds allocated for payments for capital assets was used.

Mr Balzer replied that this was the expenditure to date. However there was expenditure that was capital asset in nature that was covered in Transfer payments.

Ms Mashigo asked who was responsible for the ‘Jojo’ tanks in the Eastern Cape as they were empty forcing schools to go without water.

Mr Balzer replied that municipalities were responsible for the water in tanks. The work of the Department was limited to financing and erecting the tanks.

Mr L Ramatlakane (COPE) asked if the delay in the expenditure was affecting achievements and if this would eventually lead to an increase in costs.

The Acting Director General replied that in terms of expenditure the Department was sitting at 38% at the moment which was 12% behind a straight line target. This would reflect against the outputs in terms of achievements. As the Department closed in on the expenditure gap more targets would be met. Costs would not be increased as the Department was required to perform within the budget.

The Chairperson thanked the departments for coming and appreciated the challenges they were facing were. Departments were reminded that virements could be done but there was a need to show that they were necessary. Virements also raised questions about the credibility of the budgets and strategic plans of departments.

The hearing was adjourned.

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