Deliberation on the Annual Report of the Department of Health and Wellness for FY2022/23

Meeting report

The Acting Chairperson, Mr D America (DA), began the meeting by giving a thorough rundown of how things would unfold. To start, he mentioned that the initial segment of the meeting was set to be a private session, involving participation from Members, the Office of the Auditor-General of South Africa and its Internal Audit Committee. He made it clear that during this private session, both the AG and the Internal Auditor would be sharing their reports. Subsequently, a question-and-answer session was to be held for Members to get any necessary clarifications.

The Acting Chairperson made a point of mentioning that the usual Chairperson could not attend due to illness, and thus, he was taking charge in his absence. He underscored that this gathering was strictly an in-person meeting, with no virtual or hybrid aspects. It was particularly stressed that external parties would not have access to this closed session.

The second part of the meeting would be live-streamed on YouTube, making it possible for the general public to listen in on the discussions. Further, any members of the public present would have the opportunity to ask questions to the Department.

The Acting Chairperson also inquired whether any such requests from the public had been made. He emphasised that the meeting would comply with the regulations outlined in Section 72, ensuring public access.

Acting Chairperson invited Members to introduce themselves. He acknowledged the presence of the Minister and the accompanying team, and then the meeting proceeded with the identification of all attendees.

Roll Call

All the attendees presented themselves, and the first part of the meeting officially commenced.

Approximately an hour and a half later, the second part of the meeting commenced.

Second Segment

The Acting Chairperson commenced the second segment of the meeting by acknowledging its focus on specific sections of the annual report, namely sections C, E, and F. Before delving into these sections, he invited the Provincial Minister and the Head of Department (HOD) to provide any introductory remarks if they wished to do so.

Opening Remarks by the Provincial Minister

Dr Nomafrench Mbombo, Western Cape Minister of Health and Wellness, appreciated the opportunity to present the Department's annual report. She acknowledged that she had already provided extensive input in other sections of the meeting and deferred to her capable team to address specific questions. She emphasised the importance of accountability and said that while achieving a clean audit is significant, other aspects require attention.

HOD Remarks

Dr Keith Cloete, Head of Department, Western Cape Health and Wellness, conveyed his appreciation for the privilege and honour of appearing before the Committee. He highlighted the Department's strong culture of accountability, transparency, and ethical leadership. He commended the ethical scrutiny of the Audit Committee and the engagement with assurance agencies. Dr Cloete underscored the Department's commitment to serving the public with the highest ethical standards and expressed gratitude for the opportunity to engage with the committee.

The Acting Chairperson expressed his gratitude to Dr Cloete for emphasising the importance of organisational culture and quoted Peter Drucker, saying that culture has a significant impact on an organisation's success. He then outlined the plan for the meeting, indicating that they would engage with specific sections of the report, specifically parts C, E, and F, covering certain page ranges.

Members were encouraged to ask questions related to these sections, with a restriction of three questions per member in the first round. The Department would then have an opportunity to respond, followed by additional questions from the Members. The Acting Chairperson recognised Ms Maseko to begin the questioning.

Discussion

Deliberations on Part C, E, F

Ms M Maseko (DA) began by congratulating the Department on its audit outcome. She acknowledged that the Department usually receives a clean financial audit due to adhering to the Public Finance Management Act (PFMA). However, she emphasised the need to focus on performance auditing to evaluate the value for money spent by the Department. The Auditor-General is also exploring performance auditing, and there are challenges in this regard.

Ms Maseko discussed the Auditor-General's findings in programme two and programme four. She noted that, in programme two, the Department achieved 41%, while programme four achieved 44%. However, they did not achieve 59% and 56%, respectively. She pointed out that, in some cases, services were delivered, but the target setting, and the subsequent audit outcomes did not reflect the actual performance.

Ms Maseko raised concerns about how targets were set and whether the Department had control over certain aspects that led to underperformance. She emphasised the need to balance target setting, especially when services are delivered, but the target achievement does not align with the budget spent. She requested information about the Department's discussions with the Auditor General regarding target setting and how they plan to ensure that performance indicators accurately reflect their work.

Ms N Nkondlo (ANC) first inquired about the reference to "unsafe care for community mental health facilities" on page 137 of the Department's strategic risks. She requested an explanation of what this means and how the Department manages this risk.

Secondly, Ms Nkondlo raised concerns about the increasing medical-legal claims which were rated as high risks. She asked if the Department has effective strategies to mitigate this risk and requested details on how they are addressing it.

She questioned how the nine new fraud and corruption cases align with the Department's goal of maintaining an ethical environment. Ms Nkondlo asked for more information about these cases, their current status, and how they affect the Department's ethical stance.

Regarding programme performance, she noted that programme two was rated at 41%, while programme four was rated at 44% by the Auditor General. She asked if the Department agreed with these ratings and whether they had engaged in discussions with the Auditor-General about them.

Ms Nkondlo raised concerns about setting targets for indicators beyond the Department's control. She questioned the rationale behind setting such targets and suggested that targets should be SMART (specific, measurable, achievable, relevant, and time-bound) and within the Department's control.

She also sought clarification on the apparent disparity between the Department's budget expenditure, which was reported as nearly 100%, and the performance, which was rated at 44% or 42%. She asked for a simplified explanation of this discrepancy, particularly its implications for budgeting and future budget adjustments.

Mr G Pretorius (DA) questioned the Department's prevention plan for fraud and corruption. He sought information beyond the standard checks and balances and whistleblower mechanisms. Specifically, he inquired if the Department employs any additional proactive or early warning mechanisms to prevent fraud and corruption from occurring.

The Acting Chairperson indicated that he would pass the floor to the Minister, who could then direct the question to the relevant party, potentially the HOD or another Department delegate.

Minister Mbombo's response was a comprehensive examination of the intricacies of healthcare service provision, touching on the philosophical nature of the questions posed. She expressed her intent to provide a non-academic, practical perspective.

First, she emphasised the importance of accessibility, availability, efficiency, and effectiveness in healthcare services. Using school health services as an example, she highlighted that the number of staff required may not align perfectly with the number of students, but the key was the availability of services, which comes with associated costs. She stressed that the mere absence of some students on a particular day did not reduce the overall cost.

Minister Mbombo then emphasised the significance of targeting specific populations, not always corresponding with national aid targets. She clarified that many targets related to international health outcomes and the health system's readiness to deliver services, a broader perspective than mere numbers.

She provided another example related to preparedness for unforeseen events such as accidents or crimes during public gatherings, illustrating the need for additional resources and the importance of having staff and facilities ready to respond.

Minister Mbombo underlined the complexity of the healthcare system, advocating for the establishment of wellness hubs beyond traditional healthcare settings to effectively reach the population. She argued for a holistic evaluation of the healthcare system's success, taking into account multiple aspects, including human resources, leadership, health financing, and information systems. She emphasised the need for a system without weak links.

Dr Cloete expressed gratitude for the questions and began by addressing the topic of a clean audit. He highlighted the Department's commitment to understanding the value for money and mentioned that they have achieved a clean audit five times in a row. He underscored the significance of this achievement and their collaboration with the Auditor General to ensure value for money.

He then delved into the issue of unsafe mental healthcare facilities, explaining that these facilities house individuals with intellectual disabilities in community-based settings under the care of non-profit organisations. Dr Cloete detailed the involvement of the licensing unit, which operates within the provincial department, and its role in ensuring that both private health facilities and community-based settings meet the required norms and standards. He noted that the risk level for this matter had been rated as high due to the heightened national regulations and the challenges faced by community structures in meeting these stringent requirements.

Dr Cloete provided insight into their risk management process, explaining that when a risk is rated as very high, it is escalated to their senior management meeting. They assign a senior manager as a risk manager, and they receive monthly reports on the progress of risk mitigation. In the case of unsafe mental healthcare facilities, they work closely with various government departments, including public works, local government, and municipalities, to address the infrastructure and regulatory challenges. They have a project team dedicated to managing the risk, ensuring that organisations meet the necessary requirements and deliver optimal care.

Dr Cloete acknowledged the nine fraud cases and emphasised their commitment to addressing them. He highlighted their robust investigative process, including referrals to the Forensic Service, and the stringent actions taken to address fraud, such as disciplinary actions and even the involvement of the South African Police Service (SAPS) in cases involving their own staff members.

He then expressed his intention to return to the topic of target setting, promising further information on this matter.

Mr Simon Kaye, Chief Financial Officer, Western Cape Health and Wellness, provided additional information regarding the nine fraud cases. He explained that all nine cases had been self-referred by the Department to the Forensic Service (FPS) for investigation. These cases came to light through whistleblowers, and one case emerged from a tip-off. Mr Kaye mentioned that a direct report from their department typically indicates a substantial issue, hinting at some credibility to the allegations.

 

He then proceeded to share examples of the types of fraud cases under investigation, which included:

- Falsification of medical certificates

- Manipulation of procurement processes in multiple instances

- Manipulation of information and communication technology (ICT) hardware procurement

- Allegations of Broad-Based Black Economic Empowerment (BEE) fraud

- Leaking of confidential information

- An allegation involving fraud with a Security Service provider.

- Alleged sale of confidential patient information

 

Mr Kaye emphasised that these cases encompass a wide range of issues, not solely financial in nature. He mentioned that they closely monitor these cases on a quarterly basis in collaboration with the FPS team, reflecting their commitment to addressing and resolving them thoroughly.

Dr Cloete addressed the issue of budget allocation, performance indicators, and the setting of performance targets.

He began by explaining that correlating the budget spent with specific performance indicators is challenging due to the complexity of healthcare operations. The budget is allocated to various aspects of the healthcare system, and it is difficult to directly link specific financial allocations to performance indicators.

Regarding performance indicators, he highlighted that the current set of indicators is flawed and does not effectively reflect the overall performance of the healthcare system. The choice of indicators is not always relevant, and there are too many indicators to comprehensively cover all aspects of healthcare operations.

Dr Cloete mentioned that the healthcare sector, including the Western Cape Department of Health, has raised concerns about the inappropriateness of the selected indicators at the national level. They have advocated for a more streamlined and relevant set of indicators. This effort aims to make the indicator selection process more effective and accurate in reflecting the true performance of the healthcare system.

The third aspect Dr Cloete addressed was the definition of performance. He suggested that true performance should be measured based on whether essential services, such as ambulance services, clinics, and emergency centres, were provided as required. These core services should be the primary focus of performance evaluation.

Dr Cloete acknowledged the challenge of defining and measuring performance in the healthcare system and expressed a commitment to work with the audit committee and the Auditor General to address these issues. They plan to engage with the national sector to improve the selection of relevant and effective performance indicators, ultimately providing a more accurate representation of healthcare performance.

The Acting Chairperson expressed gratitude to Dr Cloete and the team members for their contributions to the responses. He acknowledged that the AG typically does not participate in this part of the meeting. But he suggested that this would be the right moment if the AG had any comments or questions to add.

The representative of the Auditor-General expressed agreement with the comments made by the HOD regarding the budget versus budget spend versus targets achieved.

Ms Maseko expressed her frustration with the way performance is audited, and suggested that there is a need for a better understanding of the indicators being used for auditing. She used an analogy of airline safety measures to highlight the difficulty in auditing certain performance aspects beyond the Department's control. Ms Maseko indicated that she might have more questions to ask in the future.

The Acting Chairperson responded humorously to Ms Maseko's analogy, suggesting that he inquire about the passengers' survival in a plane crash, furthering the playful comparison made by Ms Maseko.

Ms Nkondlo expressed her concern about the complexity and sophistication in the discussions, acknowledging the academic and philosophical aspects involved. She noted that resolving these issues might be challenging.

Ms Nkondlo emphasised the need for clear explanations and transparency, especially when trying to comprehend the information presented by the Department. She questioned the discrepancies between the Department's performance indicators and budget spending, suggesting that the information presented did not align with the expectations of taxpayers and oversight responsibilities.

She was curious about the term "sophistication". She urged that it needs to be demystified, as it is crucial for the ordinary citizen to understand how taxpayer resources are being utilised.

Ms Nkondlo indicated that the concept of "sophistication" may be getting out of hand, and she expressed her concern about how different stakeholders, including the Department, the Auditor General, and the audit committee, had varying perspectives on the performance indicators and budget expenditure. She was worried about the sophistication and complexity surrounding this matter.

She questioned the rationale behind setting targets that the Department does not have complete control over, especially regarding patient behaviour. Ms Nkondlo emphasised the importance of setting achievable and SMART targets within the Department's control.

Ms Nkondlo noted that the information presented was inconsistent, with performance indicators showing low percentages while budget expenditure was nearly 100%. She expressed her confusion and frustration with this inconsistency, highlighting that taxpayers deserve a clear correlation between budget expenditure and performance.

She concluded by expressing her concerns about the complexity and sophistication of the discussions, and she emphasised the need for future planning discussions to consider these concerns, as they would not move forward without addressing these issues.

Ms Nkondlo had inquired about medical legal claims, particularly in the context of contingent liabilities. She sought clarification and more information on the status of these claims and their associated risks, as they were identified as a higher risk by the Department.

Dr Cloete responded by clarifying his previous statements about the flaws in the process of selecting indicators and setting targets. He pointed out that, while they acknowledge the complexity in these areas, the data itself is credible, and the Department works within the parameters provided.

He mentioned that the Auditor-General confirms the credibility of the data, which is essential for achieving a clean audit in terms of predetermined objectives. Dr Cloete emphasised the importance of distinguishing between the credibility of the data and the process of selecting indicators and targets.

Regarding medical-legal claims, Dr Cloete explained the Department's approach. He said they have a medical-legal claims team consisting of Departmental staff, the State Attorney's Office, and legal services from the Department of the Premier (DOTP). This team assesses claims, examines medical records, and decides on the merits of each claim. They engage with the lawyers representing the aggrieved parties and aim to mediate settlements to avoid going to court.

Dr Cloete highlighted that their system effectively manages medical-legal claims, and the team's proactive approach helps them avoid extensive payouts. He mentioned that the Western Cape has a good track record compared to other provinces in this regard.

He concluded by noting that they clearly understand the number of active claims and projected payouts, allowing them to budget accordingly. Mr Kaye would provide further details on these numbers and the Department's position within the larger system.

Mr Kaye explained the financial aspects related to medical legal claims. He first mentioned that this issue is reflected in several places in the financial reports, particularly on page 298. The actual expenditure on these claims increased from 64 million to 163 million year on year. However, Mr Kaye clarified that this increase was partly due to timing differences, as cases expected to be settled in the previous year rolled over into the current year, impacting the figures.

He then highlighted that medical-legal claims are found in three specific areas: contingencies, provisions and payables. In contingencies, claims are recorded based on the possibility of settlement. In provisions, claims with conceded merits are recorded, and some estimates of the final amounts are included. In payables, where the Department knows exactly what they will spend on claims, it is not common to have court orders, as they often choose to settle claims.

Mr Kaye emphasised that the trend in South Africa is an increase in both the number and the financial magnitude of medical-legal claims, posing a financial risk. The Department's approach to managing this risk involves multiple clinical meetings and quality assurance assessments. They work closely with legal services and the state attorney's office to assess the merits of each case. The rigorous control systems in place deter claimants from pursuing unmerited claims in the Western Cape.

While the Western Cape's approach has successfully managed the risk, the upward pressure on medical-legal claims remains a concern and is factored into their risk assessment.

Ms Maseko raised several questions and concerns during the meeting. She asked about the reasons behind the late and non-payment of suppliers and the issue of misplaced, unrecorded invoices. She wanted to understand the Department's control over these problems and the underlying causes.

She inquired about "redundant stock" in the CMD and HIV, particularly the interpretation and reasons behind an increased amount of material losses written off. She asked if this refers to expired medication and what led to the increase.

Regarding government vehicle damages and losses, Ms Maseko requested an explanation for the reported figures, seeking to understand the circumstances behind these incidents.

She addressed the Auditor-General's mention of supply chain management regulations not being followed in the Department. She wanted to know under what circumstances such deviations are allowed and whether the Auditor-General identified this as an emerging risk. She suggested that a policy might be needed to formalise deviations when supply chain management regulations cannot be followed due to exceptional circumstances.

Dr Cloete acknowledged Ms Maseko's questions and concerns and recommended that Mr Kaye provide an explanation regarding the descriptions of the items on page 211 related to late and non-payment of suppliers, misplaced invoices, and other financial issues. Dr Cloete also mentioned that his colleagues could touch on the supply chain process not being followed while products are delivered. Additionally, he recommended that Mr Kaye explain the definition of irregular expenditure.

In response, Mr Kaye addressed the concerns about late or non-payment of suppliers, highlighting the challenges of achieving perfection when processing a large number of transactions. He mentioned issues with banking details, misplaced invoices, and system errors as factors contributing to delayed payments. The decentralised nature of the organisation, with different facilities processing their invoices, sometimes leads to deviations from standard procurement processes in emergency situations, resulting in irregular expenditure.

Mr Kaye stressed the importance of the organisation's culture and behaviours, emphasising the role of financial disclosures in promoting transparency. He noted that all personnel, including senior management, are required to submit financial disclosures annually, and the latest reporting period achieved a 100% submission rate.

He discussed the organisation's commitment to learning from mistakes, fostering a culture of transparency, openness, and allowing employees to make genuine mistakes and learn from them. Mr Kaye highlighted the distinction between genuine mistakes and fraudulent activities, expressing the organisation's intention not to create an environment of fear but one of trust and continuous improvement.

Irregular expenditure is actively managed within the organisation, and lessons are learned from mistakes to drive ongoing improvements. The culture of transparency and a commitment to address irregular expenditure contributes to the organisation's clean audits and pride in its achievements. Irregular expenditure is acknowledged, reported, and actively addressed to ensure continued transparency and learning.

Ms Santie Roy, Acting Chief Director: Supply Chain Management, addressed the matter concerning deviations from procurement regulations. She explained that the organisation's guiding principle is to prioritise competitive procurement in all instances, aiming not to deviate from regulatory scripts. Deviations are only allowed when they are explicitly provided for on a national or provincial level or through their own policies. Ms Roy noted that emergency procurement delegations, as mentioned by Mr Kaye, are in accordance with National Treasury regulations but are enacted through their policies.

Ms Roy emphasised that there are well-defined guidelines for deviations, such as limited bidding, extensions, or expansions of contracts. These guidelines are followed to ensure that deviations from the principle of competitive procurement are carefully managed. Oversight is a crucial aspect of this process, with various committees overseeing transactions based on their value and complexity. Additionally, there are internal and external assurance providers, including three separate entities within the Department itself that offer internal assurance.

Ms Roy's team, along with other internal entities, closely monitor and balance each other's activities to limit deviations as much as possible. The relationships among these assurance providers, along with the oversight of committees and policies, collectively contribute to the organisation's efforts to manage and mitigate deviations effectively.

Mr Glen Carrick, Acting Chief Director: Finance, Western Cape Health and Wellness, explained the concept of irregular expenditure, clarifying that it refers to expenditure incurred not in the prescribed manner as defined by legislation. He emphasised that irregular expenditure does not necessarily imply a loss or fraudulent activity. Mr Carrick provided an example where the correct item was purchased, but the procurement process did not adhere to the required regulations. This might occur when the wrong rank approves the procurement or when certain critical medical suppliers refuse to be registered on the necessary databases, leaving no alternative but to incur the expenditure.

Mr Kaye responded to redundancies - acknowledged that the organisation is large and deals with demand-driven services. Some consumables, including medications, have expiration dates, and despite efforts to manage them efficiently, there are instances where items become redundant. He cited an increase in redundancy, particularly concerning HIV self-test kits, which were ordered through a conditional grant, but the expected demand did not materialise. Additionally, there were issues with some COVID-related stock as the demand reduced. The organisation had to initiate a process to write off these items as they were no longer suitable for their intended purpose.

Mr Kaye noted that the amount of R1.3 million in the goods and services budget, within a total budget of R9 billion, falls within an acceptable parameter given the scale of operations.

Ms Maseko asked for clarification regarding the meaning of "ideal clinic status" and the associated percentage of 79, expressing her expectation that every clinic should aim for excellence. She requested an explanation of why the ideal clinic status was not set at 100%.

Additionally, she inquired about the Department's response to the recently reported human capital challenges, considering the province's population growth. She wanted to know when the Department last conducted a comprehensive analysis of workforce needs to meet the demand.

Ms Maseko also raised concerns about patients coming from other provinces to access medication in Western Cape health facilities. She suggested having a conversation about invoicing for patients receiving services in provinces where they are not residents, similar to the way school children have identification that follows them from one school to another. She noted the financial constraints and the importance of efficient budget allocation and tracking of patients for healthcare services.

Dr Cloete explained that the ideal clinic status refers to the facilities assessed based on a checklist comprising six different domains. A facility must score a minimum in all elements within the checklist to achieve ideal clinic status. The 84% figure mentioned earlier relates to provincial facilities, whereas the 70% figure includes the city of Cape Town. The discrepancy in percentages is because the city of Cape Town conducts its assessments. Dr Cloete acknowledged the goal of reaching 100% ideal clinic status and highlighted that they are working to address the specific issues preventing certain small facilities from achieving this status.

Regarding Ms Maseko's question about the equitable share and the allocation formula, Dr Cloete mentioned that the Western Cape is facing a significant financial shortfall for the current financial year, starting in 2023. They will be tabling an adjustment estimate in the next four weeks. Mr Kaye would provide a technical response regarding the allocation formula and its impact on the Western Cape compared to other provinces.

Dr Cloete also addressed the issue of patients coming from other provinces to access services in the Western Cape. He explained that when a patient is referred from another province to the Western Cape for services not offered in their home province, it requires an HOD-to-HOD referral. There is a national standard operating procedure for claims in such cases. However, the challenge lies in patients coming to the Western Cape for ordinary services without needing referrals. This migration of patients affects the equitable share formula, as the population numbers do not account for this movement. Dr Cloete expressed the need to refine the formula to consider this migration issue.

Mr Kaye was to provide a more technical response to the questions related to the equitable share formula.

Mr Kaye provided detailed information regarding the provincial equitable share formula and its impact on the Western Cape. He mentioned that the formula has been revised and started to be phased in, affecting the risk-adjusted factors determining the health allocation to the province.

The provincial equitable share formula consists of various elements, including population, sparsity, total fertility rate, premature mortality, and a multiple deprivation index. The multiple deprivation and sparsity elements have negatively impacted both the Western Cape and Gauteng, benefiting other provinces. This has resulted in a loss of R350 million for the Western Cape in the 2023/2024 fiscal year.

The formula allocates funding based on uninsured patients. So, an influx of insured patients reduces the allocated funds. Although the Western Cape's population has increased, the full benefit of this increase will not be realised until around 2024/2025, as the phased implementation process unfolds.

To address this issue, the Western Cape has deepened the analysis to a sub-district level, recognising the need to align operational requirements and budgets with the local population's needs and disease burdens. However, this process must be managed responsibly over time to avoid destabilising the entire healthcare system.

Mr Kaye also pointed out a flaw in the formula concerning counting primary healthcare headcounts. The formula assumes that all patients are counted when they cross a healthcare facility's threshold, while in reality, many services are delivered outside of facilities, such as through home deliveries of chronic medications and community health worker interactions. This lack of funding for services rendered outside facilities further complicates the equitable share formula's effectiveness.

The Acting Chairperson expressed gratitude to the Minister, Dr Cloete, and their team for their work, recognising the daily challenges they face. He acknowledged the successes achieved so far, particularly in maintaining unqualified audits and providing healthcare services in good hands.

Closing Remarks

Minister Mbombo expressed her gratitude to the Auditor-General, the internal audit committee, the Standing Committee, and the Chair for their support and engagement. She emphasised the importance of fixing issues within the South African health sector, and thanked her team for their hard work. She acknowledged the challenges and complexities involved in delivering healthcare services and managing audits. She looked forward to the upcoming quarterly reports and budget discussions. She thanked everyone, as it was their last annual report for the term.

Dr Cloete expressed his gratitude to the Chairperson and the Committee Members for the engagement and discussions. He emphasised the importance of transitioning from accepting a clean audit as a norm to focusing on value for money and improving the citizens' experience. He acknowledged the efforts of the team in driving down irregular expenditure and achieving good results.

Dr Cloete also commended the culture of commitment, ethics, and accountability within the organisation. He thanked the Department's leader, who had served for a decade, for her guidance, support, and leadership. He expressed appreciation for the leadership both at the provincial and national levels and for the supervision provided.

In his closing remarks, Dr Cloete thanked Minister Mbombo for her leadership and support throughout her term in office.

The Chairperson concluded the meeting by expressing gratitude to Dr Cloete and invited Members to enjoy the refreshments available in the Members' lounge.

The meeting was adjourned.