Department of Health 2020/21 Audit & Annual Report; with Provincial Minister

Meeting report

The Chairperson opened the second part of the meeting to the public after Auditor-General South Africa (AGSA) briefed the Standing Committee on Public Accounts (SCOPA) on the audit outcomes in camera. He said that once members of the provincial legislature (MPLs) had asked their questions, the public present at the meeting will be given the opportunity to raise questions. The notice for this public meeting was advertised in three newspapers in three separate languages.

Western Cape Department of Health 2020/21 Annual Report
Dr Nomafrench Mbombo, Western Cape Minister of Health, said that the period under scrutiny dated from 8 April 2020 to 31 March 2021. She emphasised the difficulties of COVID-19 and paid respect to the staff who were lost during the pandemic. The loss of close ones during this period has negatively impacted the mental well being of the staff.

Circumstances altered the initial annual performance plan for the healthcare system and the financial and clinical plans were changed. The change in finances was influenced by the directives of National Treasury which included the purchase of Personal Protective Equipment (PPE). It was difficult to purchase PPE when service providers were not on the Central Supplier Database list. Further, the Treasury directives were issued too late as the impact of COVID-19 was already felt and lives needed to be saved. There were issues of [inaudible 00:46:00:39] and confusion on what procedures should have been implemented and what materials procured to combat COVID-19.

Dr Mbombo said that when National Treasury directed there be COVID-19 PPE audits in addition to the main audit, WCDOH was faced with increased pressure. The Chief Director of Strategy will detail the challenges faced. The province was expected to build a hospital with 850 beds within a month which was not included within the ordinary frameworks of the Public Finance Management Act. Dr Mbombo was surprised by the clean audit produced under these circumstances and thanked the Head of Department, Dr Kevin Cloete, and his team for their work despite the difficulties of constrained finances worsened by the allocated budget. It was not until late March that it was confirmed that WCDOH will receive increased grants from National Treasury. In closing, she recalled those that passed away due to the COVID-19 pandemic and acknowledged the perseverance required to endure this.

Dr Kevin Cloete, Head of Department, introduced the senior managers and their teams: Head of Corporate Services, Mr Simon Kaye, with its four branches: Dr Laura Angeletti du Toit, in charge of Infrastructure and Facilities Management; Ms Esmereldah Isaacs in charge of Supply Chain. Dr Cloete briefly paused to pass his deepest sympathies and condolences to the supply chain team for the loss of a team member whose memorial service was held today; Head of the Finance team Ms [inaudible 00:53:08]; Ms R Shade standing in for Ms Bernadette Arries, Director for People Strategy.

Dr Cloete introduced Dr Saadiq Kariem, Chief of Operations, and thanked him for his agile response to the increased need for service provision across the province. He introduced Dr Krish Vallabhjee Vallabhjee, Chief Director: Strategy and Health Support, and thanked him for his role in the internationally recognised Data Dashboard, Data science team, and Epidemiology team which have provided invaluable information and data.

Dr Cloete was pleased to provide an account of the hard work done by individuals within and outside the Department during a year that has encouraged them to get in touch with their humanity. He thanked the audit committee for the guidance and mature leadership provided; the internal audit team for the good relationships they developed. Amongst others, he also thanked the AGSA team for their involvement.

Dr Cloete assured the Committee that the senior management team take its governance responsibilities extremely seriously. Despite the past year's turbulence the team stayed committed to clean and ethical government and safeguarded resources because it has a duty of service to the people of the Western Cape. The Western Cape Department of Health is honoured to serve the people of Western Cape and aims to serve with dignity, integrity, honesty, to safeguard the resources entrusted to it.

Discussion on Part C of Annual Report
The Chairperson thanked the Minister and HOD and asked for questions on part C of the Annual Report first followed by Part E.

Ms D Baartman (DA) congratulated the Minister, Head of Department, and the entire Department for producing a clean audit. She recalled last year that Western Cape Department of Health was the first health department to produce a clean audit and it is phenomenal that it has kept the audit clean despite the difficulties of the pandemic. She noted the 11 risks outlined on page 102 of the Annual Report and eight of them are considered high risk. She asked how the interruptions in medicine supply will be managed and how load shedding will be mitigated. The risk of staff burnout is a concerning risk so what provisions will be implemented to mitigate this risk.

Ms Baartman said that during the strict COVID-19 lockdowns, WCDOH implemented innovative procurement methods to bring services to people. She is concerned that National Treasury will not adopt a similar procurement methodology once there are no longer COVID-19 lockdowns which may hinder innovation. How will WCDOH sustain the innovation they displayed during the height of the pandemic. Intellectual property has not been identified as a risk. South Africa and the Western Cape particularly have been at the forefront of COVID-19 research and asked how the Department will ensure that South Africa and the Western Cape will benefit from the outcomes of the research which has been conducted.

Ms A Bans (ANC) asked for details of the open and closed cases listed on page 103 of the Annual Report. She asked for the Committee to be granted access to the Broad-based Black Economic Empowerment (BBBEE) compliance report for 2020/21 and 2021/22.

A Committee member [name inaudible 1:03:16] asked for the level of categories and nature of the closed cases and the level of management involved in each of these cases.

A Committee member [name inaudible 1:06:01] asked for the cause of the irregular expenditure on page 105 of the Annual Report and the measures in place to prevent further irregularities. She asked if the vacancies on page 106 have been filled and for the profiles of the individuals filling the vacancies. She asked why so much was spent on the non-compliant companies listed on page 112 and for the details of the suppliers' debt.

Department response
Dr Cloete directed the Committee to look at the performance report which explains how WCDOH mitigated medicine supply. There was a shortage of medicine ingredients as the ingredients were all supplied from India and China. With the aim to minimise the percentage of items out of stock in its depository, WCDOH worked with National DOH to set up tenders with predictable suppliers which mitigated this. Its performance was 5% better than in the year prior to the pandemic. He attributed this success to the proactive nature of the teams working on tenders and contracts with reliable suppliers. WCDOH aims to continue the proactive engagement with the pharmaceutical industry to ensure predictable supply.

Dr Cloete said that WCDOH is working with NDOH because this relationship will allow suppliers to benefit from the predictable forecasts on the use of medicines. The National Department invited the WCDOH to become part of the process to stabilise and to strengthen the medicine procurement strategy for the country. He said that Dr Angeletti and her team have addressed load shedding by ensuring there are generators with an adequate supply of diesel at all facilities. The Department has investigated electricity usage in the facilities, and it is currently looking for alternative sources of energy as part of a climate change endeavour. WCDOH has worked closely with Eskom and City Power to develop ways to protect hospitals and continue mitigation on an ongoing basis. The situation with Eskom remains uncertain, however, WCDOH is developing mitigation strategies and contingency plans to mitigate at any given time in multiple ways.

Dr Cloete replied about the staff burnout concern by firstly acknowledging the 18 month period of turmoil and personal trauma healthcare workers have endured. During the second wave of COVID-19, the Department created the space for healthcare staff to voice their experiences and the trauma they have faced. It has launched intentional grieving and mourning as a first step in opening the space for becoming an increasingly caring organisation. Clinics have been opened on site to destigmatise conversations about trauma and vulnerability among healthcare staff. This has created a culture of care and acceptance which has been encouraging for the staff. The staff are the most precious commodity and WCDOH will continue to work and invest in people.

Dr Cloete replied about Treasury's adopted methodology and said the disaster regulations made provision for procurement enhancement. Ms Isaacs and the SCM team have set benchmarks which he believes will not go back to what they were prior to the pandemic. Irrespective of the disaster regulations, the SCM team has already launched itself into a new way of being which is effective and compliant. It has established a benchmark centralised system for PPE.

Dr Cloete noted the Department's multilateral agreement with four universities within the Western Cape and said the Western Cape Minister of Health and the Premier are expected to chair a joint governance structure with all four Vice Chancellors of these universities. Bilateral agreements with each one of the four universities have been signed. WCDOH has sophisticated measures in place for signing contracts with an entity in terms of preserving intellectual property rights. He is proud of the scientists included in the multilateral agreements with the universities in terms of due recognition for intellectual property.

Dr Cloete apologised for forgetting to mention [inaudible 01:18:00] and the provincial forensic team under the guidance of [inaudible 01:18:02]. Mr Kaye will provide the details on the open and closed cases, the BBBEE report and irregularities in expenditure. Dr Vallabhjee will provide greater detail on the Information Compliance Unit (ICU) which has been instrumental in producing a clean audit in terms of data management.

Mr Simon Kaye, Chief Financial Officer, replied about the fraud and corruption cases. Seven cases during April involved the alleged fraudulent administration of doctors at Tygerberg Hospital. There were two cases open on that and there was an alleged collusion with a service provider for a tender for servicing of autoclaves. There was an alleged corruption of an award in the maintenance contracts in the Cape Winelands District office. There was an allegation of irregular appointments of service providers servicing and maintaining air conditioning. There was an alleged fraud on a housing subsidy claim. The final case involved the theft of old age pensions at [inaudible 01:20:52].

Mr Kaye said that the four new cases during the year were allegations of fraud and theft at the Western Cape College of Nursing. There was a referral on alleged fraud for the sterilisation of business premises. The fourth case was an alleged fraud with government vehicle fuel cards. There was an additional referral involving a fuel card in George.

The irregularities in the closed cases included a suspension for a fronting case involving the generators which was reported to the police. In the case of maladministration by doctors in Tygerberg Hospital no criminal activity was identified but non-compliance with certain internal controls was uncovered. In the case of the fraudulent housing claim subsidy, there was found to be non-compliance in the recommendation for recovery. There were no adverse findings in the case involving the alleged theft of old age pensions to substantiate that allegation. The sterilisation fraud case was referred to the South African Police Service. In the George fuel cards case, findings have been made and action is to be taken against individuals as well as the contractor.

Mr Kaye assured the Committee that they will be provided with the BBBEE reports received from the Provincial Treasury. For the non-contributors, he estimated that R1 billion was put towards what he referred to as intergovernmental and municipalities and where suppliers did not declare a BEE status. He estimated that R2.2 billion accounted for suppliers that had declared a BBBEE certificate but recorded a score of zero. The higher level of non-contributors was as a result of emergency procurement and unusual prices and scoring mechanisms. He referred the Committee to page 227 and 228 of the Annual Report which detailed the irregular expenditure.

Mr Kaye had network connectivity difficulties and so Dr Cloete continued that the details about irregular expenditure are found on page 226 and 227 of the Annual Report. Page 228 contains details about suppliers not registered in the database and lack of declaration of interest mainly linked to pharmaceutical supplies.

Dr Krish Vallabhjee, Chief Director: Strategy and Health Support, replied that the Information Compliance Unit (ICU) was established in 2014 and consists of a team of 12 individuals. Most of these posts have been filled except for the role of team manager. The aim of the Information Compliance Unit is to ensure compliance with the PDO [inaudible 01:27:10] and the information management prescripts. The team is largely devolved to work in the districts and at facility level and that they play a critical role in creating tools and producing a clean audit. There is separate unit of six people that focus on the record management aspect of the facility.

Dr Cloete referred the Committee to page 228 of the 2020/21 Annual Report which contains details of the current and prior irregular expenditure.

Discussion on Part E of Annual Report
Ms Bans asked about local travel and service subsistence on page 216. Did WCDOH contribute towards the Red Dot Taxis? She asked why the debts on page 217 were written off and for details about the incidents noted on page 228. She asked how suppliers unregistered on the database obtained tenders and what they supplied. She asked for details of the irregular expenditure on page 228. Why was the procurement process not followed, who were the suppliers who benefited, for whom was the PPE procured and was the R5 million reimbursed?

A Committee member [inaudible 01:33:31] asked about the identified misstatements on page 162. How many clinics in poor communities have been shut down and if there was a link between the underspending and the closing down of clinics. She asked for details of the recoverable amounts written off on page 199; why the earmarked R550 million was and surrendered and not rolled over on page 200; and for details of the fruitless and wasteful expenditure.

Mr M Xego (EFF) asked if the Department retrieves the funds already transferred to non-profit institutions if the funds are not utilised. On page 216, why was R1.5 million written off due to damaged government vehicles and what action was taken against those who damaged the vehicles. On page 217 why was R2.3 million written off for overpaid salaries? He stressed the severity of the incidents listed on page 228 and asked for an update on the disciplinary hearings and criminal cases and how the Department plans to prevent this reoccurrence. Why has Provincial Treasury condoned such incidents?

Department response
Dr Cloete noted that the bulk of the questions was on the irregular expenditure outlined on page 228 of the Annual Report and the CFO will respond to those. On the Red Dot Taxis, WCDOH has a relationship with the Department of Transport and Public Works which the CFO will explain for healthcare workers to ensure their safe transport. WCDOH has contractual agreements with non-profit organisations (NPOs). There is meant to be [inaudible 01:39:20] is compensation paid for community health workers for specific activities which they are supposed to perform. There is a reporting mechanism between the NPOs and the Department. Part of the expenditure arose from health workers not performing their designated activities. When healthcare workers do not perform activities, the money is withheld for work not done. The process of condonement is a specific process by Provincial Treasury and the bulk of the irregular expenditure arose from the purchase of pharmaceuticals.

The CFO, Mr Kaye, replied that there are different layers of internal control throughout the organisation some of which are either internal or external. The first layer is management control which defines the duties of the managers. The second layer is internal control specialists who conduct audits of transactions after the fact. The third layer includes internal audit which functions outside of the Department but within the Provincial Government to provide assurance. The final level of assurance is the Auditor General. The Auditor General conducted three audits in 2020/21 – the statutory audit and two special audits to review COVID-19 expenditure. Some of the irregular expenditure can be attributed to mistakes. It is clearly within the mandate of Department for MQ pharmaceuticals and [inaudible 01:39:20] to procure antiretroviral (ARV) drugs for R11.2 million rand and R1.2 million respectively. This was the route required to ensure the supply of ARVs and there were numerous transactions of relatively low values.

Mr Kaye said that it is possible for action to be taken when there are criminal cases which involve theft and theft is disclosed as fruitless and wasteful expenditure or under debtors where the money will be recovered from particular individuals. Provincial Treasury has an independent committee which considers all the evidence of each case on the appropriate action taken in response to each case. Provincial Treasury decides if it will condone the action taken in response to each case.

Mr Kaye told the Committee that fruitless and wasteful expenditure is in relation to specific contracts undertaken by the implementing agent which was reviewed by WCDOH. The R5 million of irregular expenditure under assessment was provided by the Provincial Government towards the Ubuntu mask initiative. The vehicle used was the Health Foundation and the money was voted away from the Health Foundation and redistributed to WCDOH in last year's adjustment budget. The reason it is sitting under investigation is in terms of correct disclosure. Masks were created for the benefit of public health benefits and to stimulate small and medium-size enterprises (SMEs).

Mr Kaye said WCDOH approached the Department of Transport and Public Works about the need to transport individuals and staff between home and the workplace which caused the Red Dot taxis to be devised. Subsequently, WCDOH transferred R5.19 million to the Transport Department for the Red Dot Taxi service for the whole year which has been reduced significantly. The healthcare staff felt safest on the Red Dot Taxis as the number of people allowed in each vehicle was reduced significantly. WCDOH is self-insured for damages for government vehicles. However, each case is assessed independently. Where damages are directly attributable to an individual, they will be liable for damages.

Mr Kaye said that WCDOH has a process in place to recover undue salaries from former officials which in some instances is a tedious process. Suppliers’ debt arises when the contracted suppliers are unable to provide stock and WCDOH is then forced to purchase items from another supplier at a higher rate. If the supplier is unable to procure at the contracted value, there is then a penalty because WCDOH is forced to procure at a higher cost. WCDOH raises this as a debt and deducts that against the creditor at the next available stage.

He explained that when there is under expenditure WCDOH is required to surrender it to the Provincial Revenue Fund and then apply for a rollover in the adjustment budget process of the following year. There was an over estimation for COVID-19 related expenditure which contributed to the under expenditure. However, the under expenditure is now considered savings that will be used to combat the expected fourth wave of COVID-19.

Dr Cloete told the Committee that no clinics were closed in any of the rural areas.

The Chairperson asked the Audit Committee if they had any comments.

An Audit Committee member [name inaudible 01:57:55] commented that WCDOH has been very thorough in its preparation and commended it for the clean audit.

Dr Cloete thanked the Committee for the questions raised as part of its oversight function which promotes accountability and transparency within WCDOH. He told the Committee that combined assurance is extremely important to the Department to ensure the resources entrusted to it are our used responsibly and with due diligence and oversight.

A Committee member [name inaudible 02:02:43] noted that a clean audit is an accomplishment that must be recognised. The internal audit committee and the Auditor General were thanked for their contributions despite the difficulties faced in the year under review. COVID- 19 lockdowns caused frustration as they hindered the oversight process. Although the clean audit is a noteworthy achievement there are grey areas about the impacts of the programmes implemented..

The Chairperson thanked WCDOH for the presentation and cooperation and noted it is the Committee's responsibility to conduct oversight by holding the executive accountable.

The meeting was adjourned.