Vaccine Audit Report; Health Sector APP review, BRRR response

Meeting report

The Chairperson reminded Members that the virtual meeting was deemed to be a precinct of Parliament and therefore constituted a National Assembly committee meeting for official purposes. He noted the rules for virtual sittings. He was aware that the Minister of Health and the Deputy Minister of Health were attending a TB programme in one of the provinces with the Deputy President, and thus he accepted the apologies from the Ministry.

Mr T Munyai (ANC) asked if the Committee could move without the Minister or Deputy Minister, as this meeting was with AGSA. He was sure that the Committee would have a meeting with the Department of Health after the Committee was clear about the AGSA 2020/21 findings.

Ms M Clarke (DA) noted that Health draft regulations had come out and requested the Committee discuss the changes and the impact they would have as she felt that it was very important.

The Chairperson noted Ms Clarke’s request so it could be minuted.

Auditor-General South Africa introduction
Mr Andries Sekgetho, AGSA Business Executive, said that AGSA had been invited to brief the Committee on the three topics. He noted that Ms Thabelo Musisinyani, AGSA Deputy Business Executive, who was responsible for the Health portfolio, had progressed within the organisation and would no longer be primarily responsible for Health. Her role would now be assumed by Ms Mmule Thipe, AGSA Health Sector Engagement Manager.

COVID-19 Vaccine Programme Special Audit Report for Management
Mr Sekgetho said AGSA had developed a value chain based on the processes and risks DOH would have to embark on to acquire vaccines and administer them to citizens. The value chain consists of 42 steps consisting of nine primary activities: 1. Budget Planning; 2. Procurement; 3. Warehousing; 4. Transportation; 5. Distribution/Demand; 6. Receiving medical depot/clinic/hospital; 7. Administering vaccines; 8. Follow up/aftercare; 9. Data Capturing & Stats Reporting.

AGSA embarked on a real-time audit from January 2021 until the audit cut-off time of August 2021. After this AGSA embarked on concluding and evaluation procedures, ultimately preparing the Special Management Report. The report was not made public, so there was no tabling because of the numerous changes as the vaccine programme was rolled out and the slow vaccination uptake. The report was issued to the NDOH Director-General on 28 January 2022 and was subject to the normal quality assurance process and rules of engagement. Certain key risks, process gaps, and observations were flagged in the report.

Review of Health Annual Performance Plan (APP) 2022/23
Ms Thabelo Musisinyani, AGSA Deputy Business Executive, presented AGSA's review of the draft 2022-2023 APP for the National Department of Health (NDOH). The review of the provincial health departments is still in progress and the planned date for finalisation is end of March 2022.

The NDOH programmes reviewed were – Programme 1: Administration; Programme 2: NHI; Programme 3: Communicable and non-communicable diseases; Programme 4: Primary Health Care; Programme 5: Hospital systems; and Programme 6: Health Systems Governance and Human Resources for Health. The focus was on Programme 2: NHI. The review conclusion was that there were no material findings. All findings raised were discussed with NDOH and corrected.

See document for details

Budgetary Review and Recommendations Report - November 2021
Ms Musisinyani discussed the Portfolio Committee's BRRR highlighting its messages:
- Leadership not implementing recommendations leading to a lack of improved audit outcomes; Ms Musisinyani agreed that leadership is not taking AGSA’s messages seriously, resulting in stagnant audit outcomes for the sector. While the North West improved its outcomes from qualified to unqualified with findings, the anticipated audit outcome for Limpopo will result in a regression. The biggest concern remains KwaZulu-Natal and the Northern Cape, whose audit outcomes have been qualified for the past five years with little improvement. On the Audit of Performance Information (AOPI), should AGSA start issuing audit opinions on performance information [in addition to financial information], a lot of disclaimers would be seen in provinces. The sector needed to work on record keeping which was the main request under Programme 2: NHI. There needed to be reconciliation between the source documents and registers within the health facilities, to the system. If the basic reconciliation does not work correctly, it resulted in the reported limitations.

- Large increases in UIFW expenditure due to disregard for legislation; Ms Musisinyani agreed about management’s disregard of laws and Treasury regulations. In the current year, the Eastern Cape was the biggest contributor to unauthorised expenditure as a result of payment to medico-legal claims and interest not budgeted for. Gauteng was the biggest contributor to both irregular expenditure and fruitless and wasteful expenditure due to non-compliance with procurement regulations for personal protective equipment and supply chain management. Lack of consequence management prevailed throughout the sector.

- Pressure of current medico claims and confirmed material irregularities on financial health due to poor prior performance and inadequate record keeping;
This situation is concerning in the health sector given its critical role to ensure South Africans have access to healthcare. The pressure was aggravated by the COVID-19 pandemic as the sector had to expand and reprioritise to deal with the pandemic. Total appropriation set for 2021/22 was R88.2 billion, however R15.4 billion (17%) was already committed to accruals. The current claims against the Department amounted to R123.9 billion, with medico-legal claims being the biggest contributor. The sector needed to work on budgeting for the current medico-legal claims, as the sector would not be able to render services should all claims materialise. The impact is also noticeable in infrastructure projects where projects are finalised but cannot be utilised as there is no budget for medical personnel at these facilities. Of the 33 possible material irregularities identified in the 2020/21 audit, 15 were confirmed as material irregularities and a R94 million loss has already occurred. The majority of the confirmed material irregularities are from interest charged due to late payment of accounts as well overpayments due to extension of contracts.

- Infrastructure assets
During the 2020/21 financial year, 23 projects were audited across nine provinces. The main findings were categorised as: 1 Time; 2 Cost and 3 Build Quality. Significant delays were experienced in the delivery of these projects in seven provinces, and not completed by planned completion date. Some provincial departments failed to manage projects effectively, resulting in potential fruitless and wasteful expenditure amounting to approximately R18.5 million. Site visits of the selected key projects identified a number of build quality deficiencies. Common causes across the categories included poor management of milestones, poor performance of contractors, poor project planning by departments, poor project management, and poor workmanship.

See document for details

Key Messages of COVID-19 Vaccine Programme Special Management Report
Ms Musisinyani presented the key messages on the COVID-19 Vaccine Programme Special Management Report. The focus areas concerned: Planning; Funding and Good receipt; Procurement; and Implementation (including EVDS).

The planned key messages under planning included if the Department developed and implemented adequate plans for the implementation of the vaccine rollout and if government efficiently coordinated and communicated between all spheres of government. The conclusion was that the COVID-19 vaccination programme was planned and managed effectively, as management’s response was agile enough to continually amend plans to align with the environment's constant changes.

The planned key messages under funding included if sufficient budget was made available by National Treasury for vaccines and related services, and if all monies spent on vaccines sold to the private sector were recovered. The planned key messages under goods receipt included if the goods and services procured and paid for were received and if the appropriate vaccine for South Africa was received. The funding conclusion was that there is sufficient budget being made available to continue with the procurement of the required vaccines and related services. The goods receipt conclusion was that not all vaccines paid for had been received to date. Management needs to strengthen contract management controls to ensure vaccines are indeed delivered and there is no loss suffered due to non-delivery or undue exposure to fluctuating exchange rates from the contract rates.

The planned key messages under procurement included if procurement for vaccines and related services was in line with applicable laws and regulations, if all contracts were effectively managed to ensure that goods/services are delivered in accordance with the contract, and if the performance of suppliers were monitored and appropriate steps taken to address non-performance. The procurement of vaccines and related services was in line with applicable laws and regulations, except for certain matters at the national Department. The conclusion was that the responsibility of the procurement process vested within the “Affordable medicines” division. As this unit has limited understanding of SCM prescripts, certain principles of the procurement regulations were not complied with. The decentralised approach was also the root cause of reported irregular expenditure. Some contracts were, however, effectively managed. The Department should implement mechanisms to ensure adherence to prescripts and establish a contract management unit to ensure all contracts are effectively managed.

The planned key messages under implementation (including EVDS) included if the vaccine rollout was implemented as planned and if government implemented reliable technological tools that supported an efficient rollout and accurate and reliable reporting. On implementation, 45 vaccination sites were visited, and it was observed that some areas worked well, and others required improvement. On data capturing and reporting, certain gaps were identified. The conclusion was that the Department had sufficient resources, technological tools, and certain controls systems to ensure the vaccine programme is best implemented as planned, and as far as practically possible. However, areas of improvement were noted in the areas of storage conditions and practices, stock management, healthcare waste management, shortage of ICT equipment, and poor connectivity.

See attached document for details

Discussion
Mr Munyai welcomed the report especially the intervention to support the Department and provinces. He saw a lot of performance information disclaimers in the Eastern Cape, Free state, North West, and KwaZulu-Natal, which was concerning. On the UIFW, there had to be consequence management as urgently as possible. The Committee should not wait for the AG report the following year. Where problems were raised, he asked that AGSA ensure the Executive intervenes in those areas. The Committee had to hold the Executive to account to ensure that they really took action against those who disregarded the PFMA and Treasury regulations. It seemed that there was progress in Gauteng regardless of the adverse finding. However, where there were disclaimers, the Committee had to zero in. How do people spend such a lot of money and not spend it on vaccines or core health services? The bad infrastructure also needed to be attended to.

Mr P Van Staden (FF+) agreed about the infrastructure problems in hospitals currently. Members had seen in the news the problems in hospitals in Gauteng, especially the Charlotte Maxeke Johannesburg Academic Hospital which was very concerning. Although the Committee had numerous times had meetings with the Gauteng MEC and said they needed reports, the MEC had responded that they had sent the reports to the Committee. To date, the Committee had not seen the reports. The Ministry had to start intervening in the problems occurring in Gauteng. However, intervention did not only have to start in Gauteng which was in the news because of big problems with infrastructure, overcrowding in hospitals, and so forth. The Committee knew what the standard of hospitals was across the country, and it needed to be addressed. He had asked the Minister a written question a month ago on the total number of state hospitals built or replaced from 1994 to 2021. The Minister’s answer was 34 hospitals. He asked AGSA if infrastructure work was done to the hospitals reported to the Committee today?

On 4 March 2022, the media reported that government would have to destroy 100 000 doses of vaccines because their expiry date was 31 March 2022. Even more vaccines would expire by June this year. AGSA spoke about possible overspending due to the unforeseen impact of exchange rate differences and price negotiations that were not performed. Did this not happen because government planning for vaccines was poor? What is the government doing now to see to it that the money paid for the millions of doses of Pfizer vaccines is not flushed down the drain?

Ms Clarke said that provinces like KwaZulu-Natal and the Northern Cape health departments had to appear before them as they did not comply with AGSA recommendations year on year. She had done a couple of oversight visits on the ground in the previous weeks, and what she did discover was poor working conditions, shortage of staff, inability of management to advise, advertise, and fill funded posts, chaotic record-keeping with old manual filing systems. These were the sort of critical challenges that AGSA had also mentioned in the report. Smart technology was needed for record-keeping. They had to come to the Committee to account for the UIFW, especially Gauteng. Year in and year out no consequence management was put in place. These provinces needed to come with a plan to the Committee on how they were going to mitigate it.

She asked if the medico-claims formed part of the annual budget of Health. Are there set lawyer fees for those appointed by the state to deal with these claims? It seemed these costs were incredibly inflated. On the infrastructure contracts, are there no performance indicators within these contracts where if contractors do not perform, they are not paid or are slapped with hefty penalties for delays? Does the Health sector check to see if the contractors were blacklisted? Are the contractors screened before they are appointed? She had a construction company for 35 years and if they did not perform within the requirements in the contract, then they were slapped with penalties for that. They were not kicked off site and then millions had to be spent to redo the contract – they were screened, verified, and penalties were imposed on them. Did this not happen with the contractors that built the infrastructure for government?

Ms H Ismail (DA) did not see any report on the CoVID-19 Vaccine Injury No-Fault Compensation Scheme. This was something that should have been in the report on vaccines. Communities out there did not know how to access this information and the Committee was not getting a full report from the Minister and the Department.

Infrastructure challenges had a terrible effect on service delivery all over the country not only Gauteng. There was shortage of beds and staff, and these were critical issues. There needed to be consequence management and leadership must be taken to task. The impact was on the ground.

There were challenges with the Electronic Vaccine Data System (EVDS) as she was inundated with calls and emails from people who had been vaccinated but could not get their electronic certificate. This has had a major impact on people travelling in and out of the country who were stranded. She was worried that the statistics were incorrect as it was announced at times that due to a backlog suddenly there was a difference in the statistics. AGSA had stated that it highlighted matters to the Department and some had been corrected but she was just not sure to what extent.

She had not seen anything in the AGSA report on vaccines that spoke to monies spent on vaccination awareness campaigns and the concerns about vaccines and the need to vaccinate. These vaccination education campaigns and programmes had been in place. So much of this money had been stolen or there were allegations of theft, especially the Digital Vibes contract, but there was no mention of this. She wanted AGSA’s view on that.

She had seen the AGSA report where those that had adverse findings were clearly stated. It provided recommendations to address these but there needed to be consequence management strategies in place for leadership to effect the necessary changes. AGSA would say that the Committee was the oversight portfolio committee and they should be holding the Executive to account, but these poor outcomes could not be going on for more than five years. There had to be some tool that could be implemented to get change on the ground from leadership to ensure.

She was concerned that too much AstraZeneca was bought with a short expiry date and it had to be sold to another country. Now 100 000 Pfizer vaccines were going to reach their 31 March expiry date. This was wastage of funds that could be utilised elsewhere in the health sector. The Committee was meeting with hospitals on their oversight visits and they really needed the community service doctors but they were laid off and it was really impacting service delivery.

Dr S Thembekwayo (EFF) said that every year AGSA presented a number of repeat findings, especially non-compliance in contracting with inadequate evidence to support awarding contracts to the bidders who did not obtain the highest score as well as inconsistent functionality. What is AGSA’s recommendation on what should happen to hold the Executive accountable? It was high time that something strict be recommended and a turnaround time provided. The incomplete infrastructure projects were handed over to new contractors – as easy as that. What are AGSA’s recommendations for the recovery of the money paid to previous contractors; for those not disposing of used vials as prescribed and the recommended turnaround time for improvement of the EVDS?

Ms N Chirwa (EFF) requested through the Chairperson if it was possible for the Committee to gain access to the August 2021 COVID-19 Vaccine Programme Special Management Report that was not made public. How soon can this happen? She was happy that AGSA had raised the procedure that the Department should have ideally followed, particularly the budget aspect. AGSA captured the concern about educating communities on why vaccines should be taken as part of strategising the rollout of the vaccine programme. The Department failed dismally as vital questions by people were not answered such as the relationship between Bill Gates and Johnson & Johnson, trials not being correctly termed as trials, nondisclosure agreements between Pfizer and government, and other concerns which culminated in vaccine hesitancy and lack of trust in government.

She appreciated that particular aspect of the presentation. Whatever attempts the Minister and his Department would try to evade accountability on vaccine uptake, would fall squarely on their shoulders. Vaccine mandates will not necessarily save them from their poor, lazy work. The Department had failed to educate and inform people on all of the information. It willingly withheld some of the information on agreements with pharmaceutical companies to protect these companies. People were bullied to monopolise the vaccines from Bill Gates who also funded the South African Health Products Regulatory Authority (SAHPRA). These matters were raised and were particularly important in this discussion against the backdrop of sustained hesitancy and mistrust towards government and the Executive. Too much misinformation and lack of transparency have dire consequences.

The Minister and the Department were well aware of the situation in the Eastern Cape. The Committee had already prompted the Minister when he was still deputising Dr Zweli Mkhize, to put the province under administration and address it in that province and in other provinces as well. There was just no political will or commitment. The Minister had to come to the Committee and appraise them on why he and the Department had not intervened in the Eastern Cape after years and years of regression, as well as other provinces, that was raised by AGSA and that had been the case for over five years. This was absolutely unacceptable. Issues were not being resolved when there was capacity to resolve them and there were recommendations and solutions from both the Committee and AGSA.

What audit findings on Programme 2: NHI are able to be resolved? The recommendations were repeated each and every year. Although AGSA was doing its work, the general populace had to accept that the government of the day was willingly choosing to fail as consistent attempts to hold the Department accountable fell flat every year. What other methods is AGSA considering exploring to ensure its recommendations are implemented? What are the challenges for this? She knew that the Committee and AGSA worked together but she asked for a more tangible way of ensuring a workable relationship between the Committee and AGSA.

Is there an updated version of the rate of vaccine delivery by Johnson & Johnson to date? She noted the low percentage in the presentation as of August 2021. There were issues about which countries were prioritised and vaccine accessibility to Africa in the previous year. She asked for more information if AGSA had it, otherwise the Committee would raise it with the Minister directly. Is there analysis by AGSA if the Department over-procured vaccines, noting the challenges with rollout strategies by provinces for the vaccination programme? She was asking this question because she knew that if that was the case the Department was going to be dodgy about this. However, vaccine mandates were a conversation for another day.

On the ICT crisis, what are the recommendations from AGSA to address this? How does this affect the current information system on the number of vaccinations? She was asking this because the Committee had made a recommendation to the previous Minister, Dr Zweli Mkhize, very early in March 2020 on developing region-based and district-based operational systems to deal with the ICT crisis and capturing of information – which recommendation was not taken up. There needed to be more in-depth information on ICT, as AGSA had done on Digital Vibes when it was first brought up. She felt AGSA could give the Committee more information on procurement and tendering. She asked for those details because there was an ICT crisis which meant that it was not capacitated. If there was a company supplying this the Committee would like to know. AGSA was able to give the Committee information on Digital Vibes before it was even of media interest.

Mr M Sokatsha (ANC) welcomed the report from AGSA. He raised a concern as there were about five provinces that received a performance information disclaimer and one adverse opinion. Is there a recommendation AGSA has made about this? AGSA had linked KwaZulu-Natal and Northern Cape for not appointing a Chief Financial Officer (CFO) and a Head of Department (HOD) respectively, which had affected their departments. Is there a specific recommendation to hold someone accountable for not appointing those key positions? AGSA mentioned that provinces had not concluded their APPs. Was this all provinces or specific provinces and what were the reasons?

On material irregularities, does AGSA have powers to make recommendations for criminal prosecution? If so, are there such recommendations for NDOH and the provinces? On additional amounts spent on infrastructure, Mpumalanga and the Northern Cape had huge amounts. Is there a recommendation for consequence management that should be taken? AGSA had noted non-adherence to the prescribed procedures for disposal of used vaccine vials. It had stated that it may have been done with the intention to reuse those vaccine vials, which was fraudulent. Are there specific recommendations by AGSA on criminal action that needed to be taken?

Ms Clarke asked how many appointees were made that did not comply with the price negotiations in terms of the vaccine, aligned to the second highest bidder scorer. What was the irregular expenditure on that?

The Chairperson had three points on the BRRR, accruals and material irregularities, and infrastructure delivery. On the BRRR, performance indicators were a primary concern for the Committee. Gauteng had an adverse finding and a number of departments received disclaimers or qualified audits for performance information. What are the stratification systems AGSA used to get to this indication? When one sees these performance indicators, one saw some provinces doing better such as the Western Cape. Would AGSA be able to tell the Committee what was different between the different provincial departments?

What is the possible solution to the accruals? The Committee kept on lamenting about it, but it just continued to increase. Surely there had to be an intervention to assist in managing accruals in the provinces?

On material irregularities, the North West had R35.4 billion material irregularities, followed by the Free State with R17.8 billion and KwaZulu-Natal at R13.1 billion. Would AGSA be able to give the Committee more detail? It could give a written response to the Committee, and indicate how many financial years were included in these figures.

On infrastructure delivery, AGSA highlighted poor project management. It was again consequence management for poor project planning by the provincial department. What are the consequences, bearing in mind the additional charges accrued due to poor workmanship as remedial work would need to be done? Are those costs claimed back from the original service provider? Is there a system in place for this? Are those contractors who do poor work placed on a blacklist nationally or provincially? These were some of the core items that needed to be addressed.

Ms Sokatsha added that the challenge of accruals had been coming on for a long time. The accruals were huge amounts of money in more or less all departments. What might the problem be? Might it be that the budget was inadequate? Or was it because the Department could not prioritise? Are they using monies in the wrong areas and prioritising wrongly?

The Chairperson thanked AGSA for the information shared with the Committee.

AGSA response
Mr Sekgetho appreciated the questions – some of which addressed crosscutting or overarching concepts. As he answered them, he hoped that he would address some of the direct questions by explaining the overall concept to address these concerns.

Members would recall that for several years now AGSA has had specific annual areas of focus when coming to Parliament. Examples have been quality of financial statements, quality of performance reports, supply chain management (SCM) and financial health. Even though not compliance-driven, AGSA stated that three quotations were needed for SCM. If three quotations were not obtained, AGSA deemed it important to brief those charged with governance and oversight such as the Committee.

Three or four years ago AGSA had also briefed the Committee on the financial health of this sector and had specifically raised concerns about the Gauteng DOH. AGSA had wanted to raise awareness and plant the seed to say certain problems were identified there. Even though there was no non-compliance, the problems stemmed from the inability of the institution to properly use its budget because they were sitting with large accruals. What accruals meant was when the financial year ended on 31 March, it had received services and goods but had not paid for them as there would be no cash to pay the service providers and it would not be shown as an expense. This was because the departments worked on a cash basis of accounting which meant they only recorded the transactions in their books once they parted with the cash. When the departments received the next year’s allocation, they would first have to start paying those service providers it owed and about 17% of the next year’s budget allocation would be spent before the budget year even commenced.

The question had been asked on if it was due to inadequate budget allocation or inability to prioritise. Unfortunately, what had been found was that some institutions embarked on other projects where the money was spent elsewhere or because there was a leakage on a particular project that was not managed well. This money would have to be recovered, and another project or programme would suffer. This related to Members' questions on infrastructure management and the implementation of infrastructure projects.

That could be a contributing factor to the accruals where, for example, you budget R100 for a project and the service provider then leaves with R50. You cannot abandon the project because the loss is big and the project is still required to deliver services, so you engage the services of a different service provider who will still require their own amount. You therefore end up spending R120 on the project, and that R20 needs to be plugged so you end up compromising on other projects or programmes. If this is not arrested, it then snowballs into the effect seen today.

He said that perhaps he was a little mischievous as he had mentioned that AGSA had been highlighting this to the Executive that even though there may not be specific non-compliance, they were not using their limited resources effectively and the root cause was they did not have proper project management and consequence management. Had AGSA arrested this when it initially reared its ugly head two to five years ago, then they would not have seen the accumulated effects seen now.

It was the consequences of all the years of small projects not completed that had to be paid for again, where losses were incurred or fruitless and wasteful expenditure was reported. The money had been paid in vain as nothing was received, but the commitments still had to be implemented to effect some form of service delivery. Departments thus ended up proceeding with the commitments and just paying them from the next year’s budget. It had to be remembered that, for the subsequent year’s budget, these departments came to Parliament and made commitments for that year on what they promised to achieve and how much it would cost to achieve those commitments. However, the Committee knew that the departments would first have to deal with this catch-up. So, will they really deliver on the next commitments? These questions had to be asked.

Were departments actually budgeting for the accruals and unauthorised expenditure? He spoke under correction but as far as AGSA was aware, the latest information available had seemed to indicate that about eight of the nine provinces had actually budgeted for the medico-legal claims. The fact that it is placed in the budget might mean that this already reduced the amount available for the implementation of health services.

On material irregularities, AGSA would certainly provide the Chairperson with that information. It was quite a bit of information and because it was also a legal process AGSA was a bit wary to share information if it had not reached a certain stage so they would need to determine that. AGSA could confirm that each material irregularity had been raised so the accounting officers have been notified as a minimum in terms of progress. However, once notified, the accounting officers had had a right of reply as it was a legal process subject to review. One thus had to ensure that the process is right and that the accounting officers are given a fair chance to reply. When they reply, the information would then be evaluated. Further, if the accounting officers were doing something about it and addressing the shortcoming then the material irregularity could be done away with. The whole concept of material irregularity was to push the accounting officers to take action where there is a lack of consequence management and spur them into action. Where the accounting officers were given the space and opportunity to take action but were not doing it, then the material irregularity process would continue. It was thus really a last resort in the audit process.

AGSA would get back to the Chairperson on the material irregularities and the detail that could be shared as well as note which year the loss was suffered. It would evaluate what was for public consumption at this point and what was not. There had been a strong view by the Committee on the criminal exploration of the material irregularities. The material irregularity process was never intended to arrest people. AGSA could not arrest people from a criminality point of view as they were auditors and accountants by trade, qualification and training. However, when AGSA picked up a dodgy transaction, it was referred to the relevant investigative bodies that had the requisite skills to investigate and determine criminality. AGSA had those arrangements with bodies such as the Public Protector and Special Investigating Unit (SIU). AGSA had referred a number of cases where the state had suffered a loss and they were not satisfied as there was a lack of action by the accounting officer. AGSA had this information and it was shared by the Auditor-General, Ms Tsakani Maluleke, in her general report tabled in Parliament in December 2021.

The APPs had been concluded by the nine provincial departments. AGSA’s review and assessment of those plans were still ongoing. It hoped that this would be concluded by 31 March 2022. The outcomes of that would be shared with the Committee.

There was also a challenge with price negotiations and how many suppliers were involved. When AGSA embarked on its work it focused on wastage and leakage linked to financial resources and spending. The work would then be supplemented by how well the project or programme was implemented or rolled out. The vaccines were subject to two main acquisition processes.

The first main acquisition process was the actual purchase of the vaccines. One thus went to whoever supplied the vaccines, bought the vaccines, and got the vaccines. Once the vaccines are secured, the second element was distribution of the vaccines to ensure they get to the intended beneficiary. These were the two big spending patterns for the vaccine rollout. On the actual acquisition of the vaccines, National Treasury had played quite a big role in assisting and guiding NDOH. At that particular time due to lack of availability, NDOH had to take whatever was available. It had engaged Treasury and got the necessary emergency procurement deviations. As a result, NDOH was allowed to go directly to the suppliers to acquire the vaccines. From a wastage and leakage point of view, AGSA evaluated the risk as mitigated due to the involvement of National Treasury and because NDOH was also able to speak directly to those suppliers.

The second part concerned the logistics for the distribution of the vaccines. AGSA focused on the procurement processes once the vaccines had landed on South African shores. The detail was contained in the COVID-19 Vaccine Programme Special Management Report and would be shared with the Committee by 26 March, with the distinct blessing of the Minister, since it was a formal parliamentary request. There were a couple of service providers. As it was a specialised service, it did have a lot of bidders that participated in the bid. When AGSA spoke about more than one supplier appointed, there was actually one supplier and then an additional supplier was appointed. NDOH had explained this to AGSA, which had really tried to understand from where they were coming. The Department said that to mitigate the capacity risk to ensure that should they appoint one person, and that person did not have the adequate capacity given the demand to get vaccines rolled out speedily, they had covered all of their bases and an additional supplier was appointed. However, in making that determination, NDOH still needed to ensure that it was reasonable, justifiable, and informed by some form of criteria and process. This was so NDOH could not be accused of acting in a biased manner as they would have the criteria and what they had evaluated and assessed. On the basis of the capacity assessment purported by NDOH management, AGSA did not have that evidence at all given points when the decision was taken. AGSA raised it as a problem as it may render the process unfair. This was because the service provider had done the tender, and won the bid outright as they scored the highest points, so they should have been awarded the tender. However, NDOH was trying to mitigate another risk in assigning it to an additional service provider when the reasons were not always clear.

On what additional action could have been done about infrastructure. Each of the ten health departments, through the accounting officers, should really look at recovery processes. The recovery process was allowed in terms of the law, but should just be acted on. AGSA’s point of reference was the Mpumalanga province. When a contractor withdrew, the Mpumalanga Health Department pursued recovery through the formal process and the money was recovered from that contractor because the accounting officer and the Department did not just let it go. A department thus had to at least demonstrate that they had at least attempted to recover the funds. Where a department was not successful in recovering the funds, it had to be for reasons other than not pursuing recovery so that they could demonstrate they had executed their fiduciary responsibility.

Members voiced frustration at the repetitive nature of the audit findings. AGSA shared the same frustration. The root cause of the findings was not being addressed and AGSA would tell the Department to implement consequence management and put audit action plans in place to address the shortcomings. However, it seemed there was a problem with the speed at which the recommendations were implemented. Therefore, AGSA implemented the material irregularity process with the support of Parliament's legislation amendments. The wheels were turning slowly, but they were turning. AGSA was seeing where they had raised a material irregularity (MI), and the accounting officer would come back to them and report that they had taken appropriate action. This was what AGSA wanted – they wanted accountability and consequence management to be implemented. Unfortunately, within the health sector this seemed to be quite slow. AGSA would unpack some of the material irregularities in the health sector and give the Committee feedback on progress and key developments. Certainly, in that space AGSA was using this MI process.

On the AOPI disclaimers, he advised the Committee perhaps not look at these as AGSA had put in place for shock value. AGSA did not usually share audit opinions on performance information. However, AGSA included it to show the Committee the significant challenges for the sector. The performance information disclaimers were not a formal outcome but it was what they would have obtained had AGSA expressed an AOPI opinion. What was important was to look at the narratives on the right-hand side of the slide. He asked Members to do him a favour and look at what AGSA had documented there. What AGSA was raising, and linking it to the medico-legal claims discussion, was if a department is legally required to completely and accurately report on performance as a fiduciary responsibility, then if the money requested from Parliament has already been spent on accruals then it needs to account for that – but it is not even doing that. AGSA had noted a lot of programmes and provinces had such limitations, which meant that they could not support or give AGSA information for the performance they were reporting but the money was spent.

For the bulk of those provinces, when it came to performance information, AGSA was not provided with sufficient supporting information in many instances. One thus inferred that there was a potential problem with the province’s record management system. AGSA then asked the question and went and unpacked the medico-legal claims a bit further: Could it be that they were found wanting in the medico-legal claims space because they did not maintain proper records? It may even be found that in some of the cases that AGSA kept losing and paying out claims, potentially the number of payouts could have been reduced if AGSA had at least had the supporting evidence to then support those cases. That was the reason why, in the current 2021/2022 financial year, AGSA in terms of its sector focus areas would enhance and intensify its efforts on the medico-legal claims. This was to try and determine what the causal link was and what it was resulting to, because everyone knew that it was taking away money from service delivery, as well as to determine what the root causes were and if it could be linked to poor and improper records management that seemed to be found on the programme for AOPI or performance information when tested.

It was worth noting that when AGSA tested performance information for the health sector, they selected one programme that every department was consistently required to have. The programme selected was District Health Services. Within the programme there were performance indicators that AGSA deemed to be key and directly linked to the service delivery mandate and where a lot of money was spent by the sector. If it was known that the programme would be subject to audit, which AGSA had been auditing for a number of years, he thought at least one would make an effort to ensure that proper processes were implemented on the programme. A lot of money was directly linked to service delivery here, hence it was critical, material, and of significant importance – which was why AGSA selected, reviewed and assessed it to give management the outcomes. There was certainly a case to be made, as was made by Members, for those Executive authorities to account and explain the shortcomings to the Committee and how they were addressing them.

On how AGSA would advise the Committee to better hold the Executive authorities to account, that became a little bit more difficult and was a bit above his pay grade. When looking at the PFMA against which AGSA audited, everything was assigned to the accounting officer for departments and to the accounting authority for public entities. AGSA did however engage the Executive authorities, gave them the information, empowered them, and had regular engagements with them. 90% of the time before AGSA came to Parliament they would have engaged the Executive authority in a particular portfolio to make them aware and alert to the concerns, give them an opportunity to get their side sorted, and then come for oversight. All the issues raised today had certainly been shared with the Executive authority – not only of the National Department, but with the provincial departments as well. On what AGSA could recommend – unfortunately the Executive authority accounted to Parliament. Parliament had to really explore ways in which it regularly engaged the Executive authority and how it would then require the Executive authority to account to Parliament.

When AGSA had come to Parliament in 2021 and done the BRRR process, they had solicited some recommendations from the Committee. AGSA had identified the root causes, identified what they were grappling with, and given recommendations on how to address the issue. What AGSA then solicited from Parliament or the portfolio committees was that on a quarterly basis, when the portfolio came and accounted through quarterly reporting, the accounting officer had to be explicitly asked for the list of all people who incurred fruitless and wasteful expenditure. From the list, AGSA would then see the progress in the investigations. There thus had to be a special session where the Committee just dealt with consequence management. That was his advice as he had seen that it works to some degree or extent. The Standing Committee on Public Accounts (SCOPA) was one committee that he had picked up seemed to have a big drive on this. SCOPA would dedicate an entire session and AGSA would brief them just on consequence management, irregular expenditure, and give them contractor names and amounts.

From there, SCOPA then went to that department and asked them to explain what they were doing about consequence management for each identified transaction. SCOPA was able to find gaps. For example, one department had said they had done consequence management but every single official who incurred irregular expenditure was given a final written warning. SCOPA said that did not make sense as the proper National Treasury process was that an investigation had to be done to determine what went wrong, and the punishment would have to fit the crime. In the list submitted to SCOPA they had given everybody a final written warning whether the irregular expenditure was R1 or R10 or R1 billion. This did not make sense and the department did not investigate the root causes of what went wrong. You are required to determine what the gap in the system was so that it can be closed and nipped in the bud, to prevent similar irregular expenditure from recurring. If a proper determination is not done, you cannot implement internal controls to prevent recurrence.

On Information Technology, AGSA had constantly been nagging about the IT environment. There were a number of IT systems within the Health portfolio, but unfortunately the systems were not always talking to each other and it was not always understood how they were used and what they were used for. If a way of streamlining the systems could be found, it may even be found that they could be used for future projects. A case in point was the vaccines. The Health portfolio was already supposed to have an IT system that tracked normal inoculations of other vaccines. There was thus already a successful vaccine programme running in South Africa for child immunisations. Now another vaccination programme had to be rolled out and NDOH went and got a different system. There may have been justifiable business reasons which are accepted, but if you take a strategic long-term step back you realise that potentially you did not need to develop a different system had the previous system been streamlined and updated. On the procurement of the IT system, the system was developed in-house with the assistance of the Council for Scientific and Industrial Research (CSIR). The CSIR was already contracted to NDOH for other work and it piggybacked off that arrangement and was successfully able to minimise the costs and not be exposed to any procurement shortcomings.

Further, as NDOH was developing it they also had the benefit of driving the inputs and testing them. This was what also facilitated the process for AGSA to be able to give NDOH inputs to make necessary adjustments as they were embarking and rolling it out. Granted, AGSA had still reported a couple of shortcomings but from a positive point of view, NDOH was able to respond to them. To reiterate, there was no procurement process as the system was developed through an existing contract with CSIR. It was correct that there was a cost involved but it was minimal compared to what it would have cost had they gone out and procured the system from a third party. Good work was done on the actual development even the digital certificate shortcoming it may currently experience. To close off the IT discussion, AGSA was planning to do some follow up work on it. AGSA would still do some audits on the system as part of the PFMA audit. Part of the work would be to address the vaccination digital certificates. This was an after-sale service process and one of the shortcomings identified after implementation of the system. It was definitely on AGSA’s radar and hopefully they would be able to give the Committee feedback by the October 2022 BRRR.

Digital Vibes was not included in the COVID-19 Vaccine Programme Special Management Report. From AGSA’s point of view, when they had looked at the costing and risk exposure, they had focused on the big ticket items – being the acquisition of the vaccines, logistics, and distribution. Whatever little resources AGSA then had available, they had tried to supplement it with how the vaccines were administered at facility level to ensure that they did not lose the essence of the service delivery implications. The awareness campaigns expenditure compared to the vaccination programme overall procurement budget was not material or significant so AGSA did not spend their efforts on it.

However, on Digital Vibes specifically, the Committee will recall that the previous Minister had come to Parliament and had repeatedly acknowledged that the finding was picked up by AGSA when doing the COVID-19 special audit unpacking COVID-19 related expenditure. AGSA had then recommended that an investigation be done. SIU had done this. Ms Musisinyani and himself are included in the SIU report where it mentions people interviewed as part of the Digital Vibes investigation.

For AGSA, the whole purpose of the material irregularity process is to get people to act, to get consequences enforced, for something to happen when reported. When AGSA did the MI process, the accounting officer was first told that AGSA would be recommending an investigation be done. If that is not done within six months, then AGSA came back to instruct the accounting officer to implement the requested actions – the failure of which would result in AGSA referring it to the investigative bodies if there is a suspicion of criminality, or if there is clear evidence of loss then AGSA would give the accounting officer a certificate of debt as the last resort. As part of the normal MI process, they would however have referred it anyway for investigation. AGSA was thus more than happy when the transaction was picked up by SIU, and AGSA then collaborated and provided inputs on that.

On changes in the vaccine supply and expiration dates, AGSA had certainly looked at some of the initial plans by NDOH and the sector, and had not identified any significant gaps. What made it difficult for AGSA to express a view on whether it was under-planned or oversupplied was that at a particular point in time there were a set of circumstances and assumptions and the planning was based on those. Those assumptions were informed and driven by the scenarios and circumstances prevailing at that particular point and there a lot of unknowns. AGSA thus had to give management latitude to say they were supported by people who were experts in the field. He was an accountant and auditor by trade. So to the best of AGSA’s ability, looking at if those dysfunctions were reasonable given the circumstances, AGSA did not raise any significant issues.

On the subsequent hesitation in uptake and it potentially resulting in vaccines not being utilised and some form of expiration and wastage, hindsight was the best vision. AGSA thus could not fault NDOH. However, what AGSA could not walk away from was NDOH sitting with the information today and what they were doing about it. This was a pertinent question that everyone should be asking officials because if they let it expire they would certainly have to answer tough questions from AGSA about wastage and its reporting. AGSA would then interrogate and ask if they could have done something different or better because they had known a month prior. Likewise with AstraZeneca, as soon as NDOH had become aware of the problem they started engaging in the process of reselling it to neighbouring countries, which they were able to do successfully. NDOH would have a tough time if they allowed this Pfizer batch to expire on the basis of slow uptake as they had already proven that, when faced with this challenge, there were avenues to be explored. NDOH would need to demonstrate how those avenues were explored and why they were unsuccessful if it comes to that.

The vaccination education budget was there but from a materiality point of view, AGSA had focused on the acquisition and logistics of distribution. However, those transactions still formed part of the expenditure report for the PFMA 2021/22 audit and may form part of AGSA’s sample. Whatever AGSA had not covered at a particular point, they would at least ensure that it is included for consideration as part of their work for the PFMA 2021/22 audit they were going to embark on now. That included the follow up on vaccines, IT work, and the no fault compensation fund. When AGSA was doing the August 2021 COVID-19 Vaccine Programme Special Management Report, there were still legal consultations taking place between the Health and Finance Executive authorities and other role players to give effect to the mechanics of the no fault compensation fund and its agreements. AGSA had decided to give them the necessary space to do their consultations, but it was also something AGSA would look at as part of the PFMA audit.

Part of the consideration for the PFMA audit would also be the recoupment of vaccine money from vaccinated citizens who had medical aid. This was because there was an undertaking from the medical aid schemes to refund government for members who possessed medical aid. As AGSA had cut off their audit work in August 2021 for the COVID-19 Vaccine Programme Special Management Report, they would now ensure that they did not leave it untouched as part of the PFMA audit. There would certainly be quite a number of items AGSA would need to come and follow up with the Committee by the time of the BRRR. Hopefully AGSA would have some news on this and it would come back and close the loop with the Committee then.

On the infrastructure response from the Ministry indicating 34 hospitals built from 1994 to 2021, unfortunately AGSA did not have that information to show what the number was. When AGSA looked at the Health sector from a service delivery point of view, they looked at everything for the period specified. AGSA could try and get the information but the Department was the best place to respond to this information. AGSA looked at hospitals and the state of infrastructure holistically and on everything that was underway. It thus became a little difficult to dissect the information to that level. AGSA had the list of the hospitals and sites visited, which could certainly be shared and one could establish if they were built pre or post-1994.

On the used vials, it was more about consequence management. Ms Musisinyani had adequately highlighted the risk to the sector, as the vials could be reused and therefore be susceptible to fraudulent activity. Fraudulent activity meant the vials were filled with water and sold onwards to people on the black market. AGSA tried to look at it holistically at different levels of exposure much like AGSA covered medical waste and the inherent risks it posed. As consequence management, it was for the Department to determine who was assigned the responsibility to deface or destroy the vials and to determine the consequence management. It really was that simple in terms of policy and guidelines. People assigned the responsibility were supposed to be held accountable. AGSA had brought this to the attention of the Department when embarking on the rollout and they had quickly updated their guidelines. It was a pity that the Department had planned so nicely for its implementation but there had been this weakness.

On medico-legal claims and if lawyer fees were subject to set criteria by the Law Society, AGSA was not aware. The Department was using state attorneys who have set fees. However, sometimes the state attorneys outsource work. Outsourced work was subject to a process for getting those specialist skills. AGSA could certainly follow up. The reason he was committing to follow up was AGSA was really going to zoom in on the root causes of the medico-legal claims. Part of this would determine, when lawyers were appointed, if there was sufficient information about representing the case sufficiently to achieve a more positive outcome. This question could be incorporated in terms of value for money as part of the exploration going forward.

On non-performance of infrastructure contractors, there was certainly a blacklist of contractors that did not perform although he was not sure of the details. A contractor would be put on the list citing what the problem was. That list should be considered as part of the procurement process when departments and entities contract services. Consulting the blacklist should be enforced, which the Committee could tangibly recommend for implementation. When NDOH came to the Committee, a list of all infrastructure projects, appointed contractors plus dashboard progress report could be requested. If a project is highlighted in red for lack of progress, then NDOH had to clearly and quickly indicate what it was doing as consequence management or follow up. Where a contract had ended but it was poor quality, NDOH had to report if they had listed the contractor on the blacklist so others could make informed decisions in future contracting arrangements.

Follow up questions
The Chairperson said that the Committee appreciated the frank, robust, and honest replies.

Ms Ismail agreed. Once contractors report they are insolvent, is there a process that can be taken to check their bank accounts? It was found in all spheres of government, a contractor has declared themselves insolvent but in the meantime, they had already transferred funds from one bank account to another. Is there a process in place to check this before accepting that they are insolvent, that the funds are lost, and that the project needs to go to another contractor?

Mr Sekgetho said that it was a tough but brilliant question. His understanding of the liquidation process was that insolvency could not just be declared, it had to be demonstrated. The unfortunate challenge was the fact that the person could come and produce their bank account and their bank account will show limited funds, but the funds had already been transferred out. Where there was such a suspicion then the accounting officer and officials are advised to lodge a complaint should they have such suspicion or refer it for investigation. As soon as the funds are moved away there is an element of suspected criminality that must be further explored. Other than that, he was an accountant and they did not deal with criminality – they looked at the invoices and the books but where they suspected certain things they just referred it for investigation.

The Chairperson congratulated Ms Musisinyani, who was now Deputy Business Leader, as well as Ms Thipe. The Committee noted the suggestions and recommendations to improve their oversight. He noted four important concerns which cropped up all the time, being procurement management, project management, consequence management, and the need for a contract management unit within the Department.

Ms Clarke recommended that the Committee meet with the Department and interrogate them on what AGSA had recommended. It was high time that the Department felt the pain that continued doing this kind of deviation.

Mr Sekgetho thanked the Committee. These engagements were really important and he thought that the Committee had understood and heard the messages that AGSA had tried to bring forward and elevate to their level. He mentioned that he always said that when accountants and auditors made a mistake then they fixed it via a journal or reconciliation, but when doctors made a mistake then people passed away. AGSA definitely understood the importance of the health sector and for it to perform well, and therefore all of the work that they did was not done by taking out a big stick and trying to whip them – AGSA also tried to partner with them to ensure that they brought the blind spots that could adversely impact on service delivery to their attention. AGSA appreciated the Committee’s support and role and would continue to work closely with the Committee to ensure that they worked together towards the progression of the Health sector. AGSA was excused.

The Committee considered and adopted the minutes of 9 March 2022.

The Chairperson noted the request by Ms Clarke to discuss the recently published draft regulations and the impact they would have. This was something that the Committee would put on its agenda for the future.

The Committee kept reminding itself about provincial oversight visit it should have as Parliament would rise very soon. The issues raised by AGSA were heard, and the Committee should make certain that it executed its oversight work more stringently in the provinces and sectors.

The meeting was adjourned.