National / Provincial Health Departments audits: Auditor General & FFC input; Medical Research Council on its 2015/16 Annual Report

Meeting report

Auditor General of South Africa: presentation

Mrs Jolene Pillay, Senior Manager: Auditor General of South Africa (AGSA), said the audit outcomes of the health portfolio over three years showed that none of the entities had received a qualified audit report with findings. The Medical Research Council had received an unqualified report with no findings in the three year period.

The quality of performance information had been audited, based on the usefulness and reliability of the annual performance information. The health sector had received unqualified reports with no material findings, with the National Department of Health’s performance dipping in the 2014/15 and 2015/16 financial years.

The most common material findings on usefulness and reliability were that the reported information was not complete or valid, or that it was not accurate. There had been an improvement in compliance with legislation, with auditees striving to attain an audit report with no material compliance findings. There had been a slight improvement with legislation and quality of financial statements. These were in the areas of strategic planning and performance management and procurement management. There had been uncompetitive or unfair procurement processes. The quality of financial statements had slightly improved, and this had been due to auditees avoiding qualifications due to correction of material misstatements during the audit process.

Irregular expenditure in the health sector had been largely due to automated overtime by medical doctors and dentists. This expenditure occurred in contravention of key legislation, sometimes taking the form of goods delivered but with the prescribed processes not being followed. Four of the auditees had lodged investigations to determine the root cause and consequences of Unemployment Insurance Fund (UIF) incurred expenses. The irregular expenditure in the health sector had amounted to R7 358 069 for the 2015/16 financial year.

There had been a slight improvement in controls, largely due to leadership, governance, and financial and performance management. There had been improvements in assurances provided by key role players, with the first level of assurance provided by the management and leadership of organisations, the second level of assurance provided by internal independent oversight, and the third level of assurance provided by independent external assurance and oversight. This involved a robust budget vote process, review of the annual report (including the audit report), quarterly reporting, follow-ups on progress made by the auditees to address poor audit outcomes, and recommendations made in relation to key audit matters.

The key recommendations for improvements to be overseen by the Portfolio Committee were that the National Department of Health (NDoH) and the Office of Health Standards Compliance (OHSC) should strengthen their processes and controls to create and sustain a control environment that supports quality financial reporting, the Compensation Commission for Occupational Diseases (CCOD) must submit quality financial statements for audit, and the NDoH must implement in a timely manner an appropriate information system to support the reliable recording of health data.

The follow-up on committees by the Minister was in progress, and showed that the NDoH and OHSC would strengthen their processes and controls to improve the quality of financial reporting. The NDoH had started a process to develop and implement an information system that would support the reliable recording of health data. Significant progress had been made in addressing audit findings for the CCOD. A commitment had been made that the financial statements for 2010/11 and 2011/12 would be submitted for audit before the end of the year.

The National Health Laboratory Services (NHLS) was an entity that was included in the portfolio, but which had not been audited by AGSA. This was in terms of the Public Audit Act, section 4(3), on audit entities.

The overall audit outcomes for the health sector in terms of provinces showed that the Limpopo and North West Provinces had regressed, the Western Cape, Free State, Kwa-Zulu Natal, Mpumalanga and Northern Cape provinces had remained unchanged, and Gauteng and the Eastern Cape had improved.

The top four qualification areas were irregular expenditure; property, plant and equipment; expenditure; and other disclosure items.

The top three issues that should be addressed were the slow response by the political leadership and senior management in addressing the root causes of poor audit outcomes, the lack of consequences for poor performance and transgressions, and instabilities and key positions remaining vacant. The recommendations given for these was that leadership and senior management must take ownership of service delivery weaknesses and poor audit outcomes, foster a culture of accountability, and ensure that they address the weaknesses in controls reported by the AGSA and internal auditors. All unauthorised and irregular expenditure must be investigated promptly, and all service delivery failures must be followed up. Key positions should be filled as soon as possible with officials who have the appropriate competencies to improve service delivery and financial outcomes.

Discussion

Mr H Volmink (DA) asked what could be done by the Committee in terms of oversight to ensure that the audit findings in the health sector could be improved.

Ms D Senokoanyane (ANC) asked about the automated overtime, and what could be done to reduce the high amounts involved.

The Chairperson requested that at the next meeting, there should be an explanation as to what constituted wasteful expenditure, irregular expenditure and unauthorised expenditure, and the differences between the three.

Mrs Pillay responded that AGSA would note the request by the Chairperson.

She responded to Mr Volmink’s question by saying that the Committee could ensure that what was contained in the reports by the Department was reflective of what was actually happening on the ground, and that the performance was directly linked to the leadership’s abilities and vacancies in key positions.

She told Ms Senokoanyane that proper systems needed to be put in place to record the overtime clocked in by the medical professionals.

Financial and Fiscal Commission: presentation

Dr Ramos Mabugu, Head of Research and Policy, Financial and Fiscal Commission (FFC), explained the relationship between health care performance and the economy, and said that South Africa had consistently improved against all the key Millennium Development Goals’ (MDGs’) health indicators. However, the speed of improvement was not enough to meet the goals for infant and child mortality under five, and life expectancy.

The National Development Plan (NDP) targets acknowledged the huge health challenges facing the country, and that achieving the key health indicators would take longer than initially predicted. The main challenges in the health sector included suboptimal quality of care, a heavy disease burden, a growing uninsured population, and a private sector that served only 17% of the population. Wasteful expenditure and inefficiencies in the system, such as long average waiting times, had also been identified as challenges.

The Department of Health had taken steps through its programmes to address many of these challenges, although there still remained the challenge of uneven implementation at the provincial level.

The medium term expenditure framework (MTEF) analysis showed that the Department consisted of six programmes -- administration, National Health Insurance (NHI), health planning and systems enablement; HIV and Aids, Tuberculosis and Maternal and Child Health; and Primary Health Care services; Hospitals, tertiary health services and HR development; and health regulation and compliance management. There were five entities that fell under the budget of the Department and reported to it. 85% of its budget was spent in the area of sustainably expanding the treatment and prevention of HIV-Aids and tuberculosis, revitalising public health care facilities and ensuring the provision of specialised tertiary hospital services.

There had been a decline in the compensation of employees due to Cabinet-approved budget reductions to lower the expenditure ceiling. The Department had improved its spending performance from 98% to 99% in the 2015/16 financial year. The largest under-spending had taken place in the NHI and health planning and systems enablement, which had, however, significantly improved from 49% in 2014/15 to 90% in 2015/16. Other reasons for under-spending in 2015/16 had included delays in the mass media campaign on HIV and Aids, which had been postponed to the next financial year, under-spending on the Human Papilloma Virus (HPV) vaccine, and delays in the signing of service level agreements, which had led to no transfers to universities for pharmacovigilance taking place.

The Department had achieved 63% of its performance indicators, although many of those that had not been achieved were implemented at provincial level. The Department’s indicators were generally well specified, and related to key service delivery areas and measured the quality of health service provision. The provinces, however, had inadequate systems to report performance information reliably. The recruitment turnaround time of five months was still too long for a Department that was providing a critical public service.

Access to TB treatment had improved, but the TB treatment success rate remained a concern. Fatality rates of children under five from malnutrition, pneumonia and diarrhoea had declined from 11% to 8.9% in 2015/16. Neonatal mortality rates remained an ongoing challenge and the Department had not provided a clear explanation about the reasons for the increase. Many primary health care facilities were not providing adequate service quality, and only 322 out of 500 clinics had achieved ideal clinic status. The sector was experiencing challenges with the refurbishment and repairing of facilities, as only 70% of targeted facilities had been revamped.

Most of the health grants had achieved close to 100% spending, with the exception of the NHI and HPV grants. The reasons for under-spending included delays in the execution of planned projects, procurement challenges, and the appointment of specialists in the provinces.

Health audit outcomes had improved since 2008/09, and none of the provinces had received a disclaimer or adverse opinion in 2014/15. Most provinces had spent on average 100% of their total budget, although some uneven spending had been noticeable. Kwa-Zulu Natal had, on average, overspent its budget, and Gauteng had spent only 97% of its budget.

The Commission recommended that provincial governments increase their allocation levels and that inefficiencies in the health sector be minimised in line with international best practices, with particular reference to clinical, operational and behavioural waste. The Committee should require more information from the Department about the under-spending on the HPV vaccine and the turnaround time for the filling of vacant positions.

Discussion

The Chairperson thanked the presentation and invited members to ask questions.

Ms Senokoanyane (ANC) asked what could be done to reduce the high infant mortality rate. She also asked why the target for ideal clinics was not being met and, if a budget had been allocated for infrastructure development, why the targets were not being met.

Mr Volmink (DA) asked what the progress with the NHI was, considering that only 17% of the population was receiving adequate and quality health care services from the private sector. Why had the HPV vaccine not been rolled out as per target?

The Chairperson asked why the budget on health planning and systems enablement was being under-spent, and if the Commission conducted field research itself or relied on the reports provided by the Department to generate its findings.

Dr Mabugu responded that the Commission did not have adequate funds and human resources to conduct field work. It relied on the reports from the departments and the Auditor General to generate its findings. The Commission had been making efforts to bridge the gap between the public and private sector by holding colloquiums that would hopefully bring information that would provide solutions.

The under-spending had been largely due to the procurement processes and appointment of service providers. The Commission could not provide a response regarding the unmet targets for the rolling out of HPV vaccines and the infant mortality rate, and the Committee should request answers from the NDoH.

South African Medical Research Council: presentation

Professor Mike Sathekge, Chairperson: South African Medical Research Council (SAMRC), said that the SAMRC was celebrating its fourth consecutive year of a clean audit, and achievement that was largely due to the journey of revitalisation that it had gone through during the period from 1997 to the current year.

The SAMRC’s strategic goals were to administer South African health research effectively and efficiently, lead the generation of new knowledge and facilitate its translation into policies to improve health, support innovation and technology development to improve health, and build capacity for long-term sustainability of the country’s health research.

The SAMRC’s baseline budget allocation was expected to decrease by 7% in the 2017/18 financial year and this would have a negative impact on the projects that the Council runs. It had had a surplus of R60.7 million in the 2015/16 financial year due to a 27.3% increase in revenue, from R667 million in 2014/15 to R849 million in 2015/16. Operating expenditure had increased by 18%, from R697 million to R823 million, largely due to an increase in collaborative research and staff costs. The Council had reserves amounting to R303 million as at 31 March 2016. The baseline allocation for 2016/17 would increase by only 5% and this, together with the approved rolled-over reserves, would enable the Council to continue to operate as a going concern.

The SAMRC had established a new transformation committee which had a consultative process that included all the staff and aimed to translate all the research conducted and strengthen Corporate Social Investment (CSI) programmes within the communities. The Council had a research capacity development programme which funded interns, and Masters and PhD students. It also focused on talent management and retention, to respond to the country’s health needs.

There had been a nine-year increase in life expectancy since the low of 2005, and this was due to the meeting of actual performance targets. There had been a decrease in respiratory mortality by gender, and this could be attributed to the new tobacco restrictions and legislation. The Council had achieved its target of publications in peer-reviewed articles, as 680 articles had been published. It had also increased the amount of scholarships given to young black emerging researchers, and supported the national TB research strategy, the national cancer research strategy, and self-testing HIV guidelines development. However, it still required a violence, injury and peace research strategy.

The Council had awarded 112 research grants in 2015/16, funded 47 research units, and had introduced the first ever HIV vaccine trial site(s) to South Africa. The innovation of changing the point of care was being done through the development of the Umbiflow ultrasound device, which was aimed at decreasing the stillbirth rate, the induction rate and the caesarean section rate. Preliminary results from a pilot study conducted in Mamelodi Township had shown that this innovation greatly reduced the number of abnormal births.

The Council was involved with the Walter Sisulu research development programme, which was aimed primarily at developing research and research management capacity at Walter Sisulu University (WSU). It further had the SAMRC self-initiated research (SIR) grants, which funded novel investigator-initiated research in the health arena for an amount of R200 000 for three years. The criteria had been adjusted to accommodate entry level researchers and afford them the opportunity to study further and contribute positively to the research environment.

The council had signed Memoranda of Understanding (MOU) agreements with Senegal, China, Sweden, Sudan, the Gambia, Italy, India, Madagascar and the Global Antimicrobial Resistance and Research Development Partnership. These partnerships were aimed at increasing the international awareness and stature of the organisation to ensure an improvement in the research it conducted, and increased innovation in projects.

Discussion

Ms C Ndaba (ANC) commended SAMRC for achieving an unqualified audit report and clean audit with sound financial management operations. She was worried about the leave accruals amounting to R17.6 million -- was it because they were withholding leave payments to individuals? She also asked about the contribution of the SAMRC towards national health insurance in the 2015/16 financial year.

Mr H Volmink (DA) asked what research had been conducted into the deep structural inequalities and social injustices that drove the mortality rate indicated in the report. What were the social determinants of health? The issue of translation of research in the area of policy implementation raised a risk of duplication with the National Public Health Institute of South Africa (NAPHISA). The neonatal mortality rate had increased. Why were babies dying? The presentation had shown a set target of 12 publications in high impact journals -- why such a low target? The turnover rate painted an uncertain picture. Why were people resigning at such a high rate at the SAMRC? It had also reported delays in milestone projects -- what impact would this have on the financial performance of the SAMRC? What were the forward plans to curb the decrease in funding? Should the Committee advocate for an increase in the budget?

Dr P Maesela (ANC) asked what the cause of the high mortality in Kwa-Zulu Natal was, and what was being done about it? What had been achieved with the Umbiflow that could be claimed as “proudly South African”? What causative agents had been removed from tobacco products to lower the rate of lung cancer? TB was the greatest killer. What campaigns to screen mine workers were being conducted and what role was the MRC playing in this? He asked whether black people were dying in such large numbers because of a lack of access to medical aid, or because the health system was failing?

Ms Senokoanyane asked why there had been such a huge decrease in the baseline budget. Referring to the budget variance, she asked if that meant that if delays had not taken place it would have resulted in unauthorised expenditure. She requested clarity on employment equity -- where were the black employees, specifically women, located in terms of the organisational structure? Were they in senior or junior positions?

The Chairperson requested information on the type of cancer which had been identified in the eastern part of the Eastern Cape. She requested research on the impact of mental health on both adults and children, and the impact of substance abuse in Western Cape and Gauteng on mental illness. She reflected on issues of e-health, working together with the Departments of Science and Technology and Health. She asked about collaboration with countries within the Southern African Development Community (SADC) region, the challenges they faced, and how it was affecting the health system in SA.

Professor Sathekge said the SAMRC appreciated the efforts by the Committee to source additional funding for the Council, considering the country’s current fiscal environment. It would continue to source other funding to leverage the amount that was received from government. There was a project that the Council was about to embark on regarding mental illness and substance abuse, and the preliminary results would be presented at the next meeting. The Council was working together with countries in the SADC region, but it was often unfortunate that these countries did not always have an official organisation such as the SAMRC, and it was often individuals conducting research who were seeking the expertise of the Council.

The type of oesophageal cancer found in the Eastern Cape was still being researched, as scientists have not yet found the cause. The Council was working together with scientists in China who were facing the same problem, to try to find a diagnosis and treatment plan. The mining sector was largely privatised and as such, access to the facilities was often limited. However, a consultative process had been established to ensure that research could be conducted in those areas and among those companies. The employment equity relating to the number of blacks in senior and top management still required attention and it was a matter that would be taken into consideration. The high rate of resignations was not alarming, because science was a moving career and after an incubation period at the SAMRC, scientists needed to move forward and be employed at universities so that they could come up with other innovative ideas.

The Council would provide in writing all the answers that were not given during the course of the meeting.

The meeting was adjourned.