Health Budget Review and Recommendations Report

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Health

27 October 2015
Chairperson: Ms M Dunjwa (ANC)
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Meeting Summary

BRRR 2015-2010: Budgetary Review & Recommendations Reports

The Budgetary Review and Recommendations Report of the Portfolio Committee on Health provided an assessment of the performance of the Department of Health (DoH) on its budget allocation and service delivery performance for the 2014/15 financial year.

The Auditor General (AG) expressed opinion with emphasis of matter related to material under spending on conditional grants to the amount of R312.5 million (R257 million in 2013/14) on the Health Infrastructure Grant (Indirect) and R305.7 million (R279 million in 2013/14) on the NHI Grant (Indirect), as well as under spending R337.5 million on Programme 2: Health Planning and System Enablement.

The Financial and Fiscal Commissioner (FFC) reported improvement in expenditure in all grants except Infrastructure related grants.

The Department received a budget of R33.9 billion in the 2014/15 financial year, up from R30.5 billion in the 2013/14 financial year.

On service delivery performance, for the financial year 2014/15, the Department achieved 64 (63%) of its 102 targets.

The Committee recommended, amongst others, that the Minister of Health should present to the Committee a turnaround plan to address the recurring issue related to quality of data as reported by the AG.

Members observed a discrepancy in what the South African Medical Research Council reported to have received from the Department (R391 million) as opposed to R446 million reported by the Department in its annual report. Members wanted the Department to report on the recommendations that the Committee had given it the previous year to make sure that the Department did what it was supposed to. Members were also concerned that the DoH was taxed when other government departments were not. A further concern was whether the White Paper for the Transformation of the Health System in South Africa was going to be presented by the end of the financial year, and how far the Committee was in drawing up the White Paper.

The report was adopted with amendments.
 

Meeting report

Budgetary Review and Recommendations Report of the Portfolio Committee on Health

The report provided an assessment of the performance of the Department of Health on its budget allocation and service delivery performance for the 2014/15 financial year.

In 2013/14 the Committee recommended that the Department adopt strategies to ensure improved spending on the Infrastructure and National Health Insurance (NHI) Grants.

The Auditor General (AG) expressed opinion with emphasis of matter related to material under spending on conditional grants to the amount of R312.5 million (R257 million in 2013/14) on the Health Infrastructure Grant (Indirect) and R305.7 million (R279 million in 2013/14) on the NHI Grant (Indirect), as well as under spending R337.5 million on Programme 2: Health Planning and System Enablement.

The Financial and Fiscal Commissioner (FFC) reported improvement in expenditure in all grants except Infrastructure related grants.

The Department received a budget of R33.9 billion in the 2014/15 financial year up from R30.5 billion in the 2013/14 financial year.

With regard to programme performance:

  • Under-expenditure in Programme One: Administration - declined in the 2014/15 financial year to R11.2 million from R41.5 million in the 2013/14 financial year.
  • In Programme Two: National Health Insurance, Health Planning and Systems Enablement - under-expenditure increased to R337.5 million compared to the 2013/14 financial year amount of R295 million.
  • Programme Three: HIV and AIDS, Tuberculosis, Maternal and Child Health - spent R13.028 billion (up from R10.9 billion for the 2013/14 financial year) which is a 99.8% expenditure rate, with an under-expenditure of R18.7 million.
  • Programme Four: Primary Health Care Services - showed a 95.5% expenditure outcome, representing 4.5% (R4.8 million) under-expenditure.
  • Programme Five: Hospitals, Tertiary Health Services and Human Resource Development - spent 98.3% (R18.482 billion) of its R18.809 billion allocated funds, resulting in under-expenditure of R326 million or 1.7% compared to the under spending of R244.842 million, or 1.4% in the 2013/14 financial year.
  • Programme Six: Health Regulation and Compliance Management - was allocated R886 million and spent 94.7% of its appropriated funds, amounting to R839.2 million (up from R735.1 million in 2013/14), with under expenditure of R46.8 million.

In terms of service delivery performance, for the financial year 2014/15, the Department achieved 64 (63%) of its 102 targets.

On performance of its entities:

  • The total revenue for the South African Medical Research Council (SAMRC) increased by 2.5% from R651 million in 2013/14 to R667.4 million in 2014/15. In 2014/15 SAMRC reported on ten targets, of which nine (90%) had been achieved.
  • The National Health Laboratory Services (NHLS) generated a surplus for the year amounting to R180 million compared to a loss of R152 million in the previous financial year. In terms of achievement of targets, only 8 of the 25 targets set were achieved, meaning that 32% of targets were achieved and 68% were not achieved.
  • The AG observed that during 2014/15, the Council for Medical Schemes (CMS) incurred irregular expenditure, which was mainly related to lack of compliance to supply chain management regulations.
  • The Compensation Commissioner for Occupational Diseases (CCOD) was not audited again in 2014/15 as the entity did not submit annual financial statements for the fourth consecutive year (2011/12 to 2014/15).
  • The Office of Health Standard Compliance did not table its annual report for the year under review.

The Committee observed that the Department achieved an unqualified audit report for the fourth consecutive year.

Having considered the 2014/15 annual reports of Entities, the Committee made the following observations with respect to financial and service delivery performance:

  • The Committee noted a discrepancy in what SAMRC reported to have received from the Department (R391 million) as opposed to R446 million as reported by the Department in its annual report.
  • The NHLS had material irregular expenditure as a result of the accounting authority not taking effective steps to prevent irregular expenditure (amounting to R341 million from the R7.9 million in the previous financial year).
  • The Committee noted with great concern that CMS procured services to a value above R500 000 without inviting a competitive bid as required by Treasury Regulations 16A6.1.
  • The CCOD’s continuous non-submission of annual reports and financial statements remains a concern.

Amongst other recommendations, the Committee recommended that the Minister of Health should present to the Committee a turnaround plan to address the recurring issue related to quality of data as reported by the AG.

Discussion
The Committee considered the Budgetary Review and Recommendations Report of the Portfolio Committee on Health page by page.

Mr H Volmink (DA) wanted the irregular expenditure detailed on page four of the report to be presented in a table format.

Mr P Mahlalela (ANC) wanted to know why the Department of Health was the only government department being taxed and what the law said regarding that issue.

Mr Mosala said that the Department had not indicated in its report that it is taxed.

Ms L Lindokuhle, Committee Content Advisor, responded that the Department had in fact mentioned this in its presentation.

Mr Mosala said that while the question might be a bit unfair to the Department, he wanted the DoH to explain why it was taxed when other Departments were not.

Mr Mahlalela said that the Department of Health (DoH) needed to indicate in its annual report that it was taxed on the amount that it received. Even if the full transfer to it was R446 million, it could not reflect that amount and needed to indicate that it had received R446 million, which was taxed and left an amount of R391 million.

The Chairperson said that the Committee could flag that in its observations as a very valuable observation. The Committee also needed to know why the DoH was taxed while other government departments were not.

Mr Mahlalela said he did not remember the Department discussing taxing in their report.

The Chairperson asked if it was appropriate for the Committee to reflect on this in its report.
Mr Mahlalela said that it was only when the Committee observed the discrepancy between the R446 million that the Department stated in its annual report was transferred to it, and the R391 million it spoke of in its presentation, and the Committee phoned the Department to query this that the Department raised the tax issue. The Committee needed to act from the understanding that there was a discrepancy between what the Department said it had been transferred in its annual report and what is said it had been transferred in its presentation.


The Chairperson asked if all members were in agreement.

Mr Mahlalela, relating to irregular expenditure of provinces, said the main issue was non-compliance with legislation and that irregular expenditure and non-compliance with legislation were the two biggest challenges.

Mr Volmink suggested that ensuring management accountability and effective leadership is included under Committee recommendations, as the AG had indicated that this was an issue in its report.

The Chairperson asked the members if they were all in agreement.

All members were in agreement.


Mr Mahlalela asked if the point under the Committee’s observations, relating to a dramatic increase in irregular expenditure should read “This was as a result of a payment of R391 million) made to the NHLS to assist the entity with cash flow constraints”, or if it should read “This was as a result of non-payment”, because his understanding of the issue was that it was not only money from Gauteng and KwaZulu-Natal (KZN). He did not understand this issue as Gauteng and KZN were a separate matter altogether. The Committee had even asked the Department’s special committee that the Minister had set up about this issue. The Department was not addressing the matter of money, that matter was still being addressed separately. He was not sure if the statement that the dramatic increase in irregular expenditure was as a result of a payment made to the NHLS to assist the entity with cash flow constraints was correct, as Gauteng and KZN were not related to this.

Mr Mosala said that Mr Mahlalela was on course with his comment.

The Chairperson asked if members had picked up the foundation of that.

Mr Volmink wanted the Committee to consider two additional points under the recommendations from the committee. With regard to the recommendation that the Department monitor under spending under programme two, as well as high expenditure and inadequate performance against set targets under programme three, he wanted the report to add programme four; as primary health care was very important. On the recommendation that provincial departments have skilled personnel to address continuous findings on compliance with legislation, he proposed that the Committee add “appropriate accountability mechanisms” so that the recommendation read that “provincial departments have appropriate accountability mechanisms and skilled personnel to address continuous findings on compliance with legislation”. He thought that it was important that the report included accountability.

Relating to ensuring that the CMS submit a transformation plan with clear timeframes, Mr Volmink proposed that in addition to this, the CMS present this plan to the Committee. Lastly, the Committee knew that there was a huge challenge around the compensation of the workforce and also the availability of the workforce. He wanted the Department to implement a workload indicator of staff members, before the end of next quarter, so that when the Department next presented to the Committee it could their report on its analysis of the workforce, as this was potentially quite critical to the health service.

Mr Mosala wanted to know whether the White Paper was going to be presented by the end of the financial year, and how far the Committee was in drawing up the White Paper.
 
Mr Mahlalela said the Department needed to indicate the under spending in programme two separately to performance in programme two, so that the two would not be conflated, as they were not related to each other in this case as there was no relationship between what was being spent on the programme and what the programme was achieving. The Department had to use donor funding to continue doing work under programme two. In relation to programme three, the budget was high, but the performance was below 50%. The budget was fine as the Department was spending the budget, but the achievement was low.

The Chairperson asked if members were happy with the modifications of 3 and 4.

Mr Mahlalela asked about the Department’s commitment to the White Paper for the Transformation of the Health System in South Africa; as it was not reflected in its report. In its report, the Department had indicated that it had been unable to achieve its targets. He suggested that the Department give the Committee a plan of how it was going to go forward and achieve these targets in the next financial year, so that it did not give the Committee the same story in the next annual report.

The Chairperson asked if she could get a formal movement on the BRRR.

Mr Mahlalela suggested that the wording “and its entities” be included in the last paragraph of page one, so that it reads, “In order to enable the Committee and its Entities to take an informed decision on the Department of Health for the financial year 2014/15”.

The Chairperson asked if all members were in agreement.

Mr Mahlalela said that the Department was supposed to have presented the White Paper to Parliament but it was still engaging National Treasury.
The Chairperson asked for a formal movement on the report.

Mr Mahlalela asked that before the adoption of the BRRR, the Committee have an understanding of what would happen to the report after it was adopted. Would it go to National Treasury, or the Department? He asked how the Committee could trace that report once it had been adopted. He raised this issue because there was no clarity in this regard. He wanted to know whose responsibility it was to take care of this report. So while the Committee would adopt this report, at the end of the day it would just be business as usual, which was a problem.

Mr Maesela said that the Minister of Health dealt with other issues that were not financial, but that the Committee needs to make sure that those recommendations are implemented. The Committee indicated that it had not achieved its targets because it did not have enough personnel and yet it was overspending. He did not want the Department to come back again at the end of the next financial year and say it had quadrupled its spending without achieving its targets. This was not acceptable to the Committee and the Department should correct this issue.

Mr Mosala suggested that the Committee give the Department a three-month timeframe to respond to the Committee’s recommendation that the CMS submit a transformation plan with clear timeframes.

The Chairperson responded that even if the Committee instituted timeframes for the Department to adhere to, that the Committee would still have the responsibility of monitoring the Department’s adherence to these timeframes.

Mr Mahlalela asserted that in its presentation to the Committee in April the Department had said that it had not seen the BRRR that the Committee had submitted the previous November, which was why he wanted to know where the BRRRs went after submission and who was responsible for them.  He wanted to know what happened to the recommendations that the Committee had made in that BRRR, because it had provided recommendation on a whole range of issues. The process of providing recommendations in reports then just becomes a vicious cycle with no results. In order for the Committee to ensure that the Department was complying with their recommendations, when the Department presented the following year it needed to first indicate what it had done about the previous report’s recommendations so that the Committee could at least see if the Department was making progress and if it was moving forward. Currently, when the Department did not achieve the targets of a particular programme, in the annual report for the following financial year that programme would have disappeared. He wanted to know why this was and how the Department could just drop an existing programme and start something new if they have not achieved one or two targets. A Parliamentary process was lacking that ensured that, once the House has taken decisions there was implementation of those decisions beyond the recommendations provided in the report. The Department should provide the Committee with a report of their progress on these decisions on a quarterly basis. When the Department met with the Committee, the first point that it addresses must be progress on issues that the Committee had recommended.

Mr Maesela said that in the first quarter of the next financial year, the Department should report on the recommendations that the Committee had given it the previous year to make sure that the Department does what it is supposed to do. That was part of the Committee’s oversight work. He said that the Committee should demand that the Department remedy its existing programmes before starting new ones. The Committee needed to tell the DoH to conclude all aspects of one programme first, before starting something new.

The report was adopted with amendments.

Ms Dunjwa said that while it had been a long process, the Committee had done well in discussing and adopting the BRRR.

The meeting was adjourned

 

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