Fourth Quarter Conditional Grant Report for Provincial Health and Social Services: briefings

NCOP Finance

02 May 2006
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Meeting report

FINANCE SELECT COMMITTEE

FINANCE SELECT COMMITTEE
03 May 2006
FOURTH QUARTER CONDITIONAL GRANT REPORT FOR PROVINCIAL HEALTH AND SOCIAL SERVICES: BRIEFINGS


Chairperson: Mr T Ralane (ANC) [Free State]

Documents handed out:
National Treasury presentation
Gauteng Department of Health presentation
Kwazulu-Natal Department of Health presentation
Free State Department of Health presentation
North West Department of Health presentation
Limpopo Department of Health presentation
Eastern Cape Department of Health presentation
Limpopo Department of Social Development presentation
North West Department of Social Development presentation
Gauteng Department of Social Development presentation
Western Cape Department of Social Development presentation

SUMMARY
Provincial departments of Health and Social Development met with the Committee to provide information on conditional grants and other forms of financial allocations to the provinces. Detail was provided on expenditure trends and various highlights were explained. Monitoring mechanisms were in place to ensure sound implementation of projects. Improvements in spending patterns were outlined. Late tenders had to be addressed and spending anomalies reduced.

Members asked numerous questions including reasons for spending anomalies, a discrepancy between National Treasury and provincial department figures, management capacity problems, assistance provided to departments for management skills, the need to reduce late tenders, relations between the Department of Public Works and provincial departments, progress on addressing fraud cases, and steps to improve pension payments.

MINUTES

Health Presentations
National Treasury and the Departments of Health of Gauteng, Kwazulu-Natal, Free State, North West, Limpopo and the Eastern Cape Provincial Governments presented financial evaluation of the past year’s activities with particular focus on over- and underspending. Detail was provided on Conditional Grants and other grants such as HIV/Aids, Hospital Revitalisation, Integrated Nutrition and other transfers. Expenditure trends were outlined and allocation figures provided for various programmes. Achievements related to health expenditure were explained. Various monitoring mechanisms had been established to oversee the implementation of projects. Challenges pertaining to financial transfers were elucidated. Improvements in spending patterns were highlighted. Capacity constraints were a common problem in all provincial departments.

Discussion
Mr M Goeieman (ANC-Northern Cape) asked for a correct figure on Aids expenditure in Gauteng as the presentation contradicted figures provided earlier. Provinces had to explain the nature of problems rather than merely supplying figures. For example, constraints around the poor performance of hospital revitalisation had to be outlined. He asked why Limpopo experienced a high level of underspending and why the Northern Cape had high overspending.

Mr M Robertson (ANC-Eastern Cape) noted underspending of hospital revitalisation grants in all provinces. A discrepancy existed between certain figures provided by provincial departments and by National Treasury. Tender and procurement problems in all provinces implied a management shortcoming.

Mr Z Kolweni (ANC-North-West) asked why infrastructure grant overspending had occurred in Kwazulu-Natal. Continuous rollovers could create a cyclical problem. Hospital management underspending had taken place in the Eastern Cape.

Ms A Mchunu (ANC) referred to overspending in hospital revitalisation projects in Kwazulu-Natal. She asked whether inter-provincial training assistance was in place to supplement provincial staff training.

Mr E Sogoni (ANC-Gauteng) declared that provincial departments had to reduce the number of acting managers in order to provide stability within departments. The late approval of plans had to be addressed. The hospital revitalisation programme had weaknesses in all provinces. He sought clarity on why late approval for tenders occurred within the Free State, Limpopo and Eastern Cape departments. Detail was requested on the amount removed from the Eastern Cape budget. He asked whether the Free State Infrastructure Grant was sourced from National Treasury or the Provincial Infrastructure Grant.

Mr Goeieman stated that reference to percentages in reports tended to hide the real value involved and advocated that specific values should be provided in future.

The Chairperson asked where the Limpopo department sourced the provincial infrastructure grant from and suggested that other programmes could be compromised as a consequence. He asked whether clinic construction was funded from the equitable share. Detail was sought on relations between provincial departments and the Department of Public Works.

Mr D Botha (ANC-Limpopo) sought detail on the nature of the relationship between provincial departments and Public Works. The late approval of business plans had to be corrected. Capital expenditure underspending was unacceptable given the high level of need on the ground. Business plans had to be formulated before the commencement of the financial year to avoid complications. Late approvals affected the efficacy of spending.

Ms Jujula (Eastern Cape Member of the Executive Council (MEC)) stated that R10 million had been removed from the Hospital Revitalisation Grant that was sourced from the national equitable share. Public Works suffered from a lack of specialists and the shortcoming would be addressed by service providers in the form of public/private partnerships. The objective would be to avoid further under-expenditure. The provincial government was not opposed to the Division of Revenue Bill but requested an amendment to allow the department to access necessary funds. Integrated nutrition had experienced R1.7 million underspending due to the late delivery of food supplements. The total amount of the hospital management grant had been expended. Aids grants had been underspent by R2.5 million due to problems with service level agreements. Clinic construction was funded from the equitable share received from the provincial treasury. No allocation from the Provincial Infrastructure Grant (PIG) had been received.

The Chairperson noted that all provinces should respond to the issue of the PIG. The total amount should be shared between four departments and not allocated to one department.

Mr B Hlongwa (Gauteng MEC-Health) stated that the department overspent on hospital revitalisation as certain new projects were added. The figures provided for Aids expenditure were correct and no contradictions existed. Clinics were constructed from the equitable share. A sound working relationship existed between Public Works and the various provincial departments.

Ms B Nyembezi (KZN-MEC) declared that monthly meetings occurred between Public Works and the various departments. Clinics were constructed from the PIG. Private service providers would be utilised to improve standards of service delivery.

Mr B Keyter (Free State Department of Public Works) stated that workshops were held throughout the province for small service providers to assist in development projects. Unexpected delays such as adverse weather tended to delay the tender process.

Mr A Schoonwinkel (Free State Public Works Head of Department (HOD)) responded that clinics were constructed from the equitable share. Meetings took place with Public Works on a regular basis.

Ms L Sebego (North-West Department of Housing) stated that clinics were built from the provincial capital development fund and supplemented by PIG at times. Underspending had been R28 million. 68% of hospital revitalisation had been spent and rollovers had to be reduced. Business plans had been approved by the Department of Health and implementation would be the core focus. Low capacity of contractors for hospital revitalisation had a negative impact on service delivery. Projects would be implemented in accordance with clear timelines.

Limpopo stated that sound relations existed between Public Works and provincial departments. Clinics were built using a combination of PIG and conditional grants. More doctors and nurses were needed to address shortfalls. Bursaries had been increased to produce auxiliary nurses. Six new nursing training colleges were proposed to meet demand. A 65% vacancy rate prevailed within the health sector. A memorandum of understanding had been established with the University of Limpopo to increase the number of specialist graduates.

Mr Goeieman noted that private sector construction was completed in good time as opposed to public sector initiatives. Best practice should be obtained from private service providers to improve government efficiency. He sought clarity on the amount of overexpenditure in the Gauteng budget.

Mr Sogoni asked why late approval of budgets continued to hinder progress. The tender process should not experience so many obstacles.

The Chairperson asked why variable spending in Hospital Revitalisation occurred between provinces.

Dr Blecher (National Treasury) asserted that rollovers were likely to increase due to continued underexpenditure. National Treasury required the latest data from provincial governments to correlate with national figures.

The Chairperson declared that the Committee would monitor how grants were allocated within provinces to ensure that all relevant departments benefited. The capacity of provincial departments to spend allocations had to be considered by provincial Treasuries. Certain sectors should not be compromised by unfair allocations. The overall quality of spending was important and outcomes would be observed. He reminded provincial departments that a certain portion of grants could be utilised to improve human resource capacity.

The Fiscal and Financial Commission (FFC) stated that spending irregularities remained a concern of government and a number of non-financial matters were affecting spending patterns. Adequate resources were available and business plans and procurement practices had to be improved to enhance delivery. Capacity shortfalls existed with a number of contractors. Performance had to be related to business plans. Co-operation was emerging between departments in all provinces. Best practices had to be incorporated into the process to enhance efficacy.

Social Development Presentations

National Treasury and the Social Development Departments of Limpopo, North-West, Gauteng and the Western Cape provinces presented detail on allocations, transfers and expenditure of conditional grants, monitoring capacity and corrective measures to be introduced to improve delivery. Expenditure of various projects was outlined. Reasons for anomalies in spending patterns were explained.

Discussion
Mr Robertson noted a problem with expenditure on machinery in Limpopo and asked whether similar problems occurred in other provinces. Late tenders were difficult to comprehend as the financial year was clearly demarcated. Clarity was sought on underspending of disability grants in North-West and the Western Cape. He asked for detail on fraud cases regarding social welfare.

Mr Van Rooyen declared that underspending on social welfare was unacceptable due to the high levels of poverty in all provinces. He asked how overspending was financed in the Western Cape.

Mr Botha asked whether a reporting mechanism was in place in Limpopo to monitor transfers. Clarity was requested on the problem experienced by pension payment service providers. He asked whether non-governmental organisations (NGOs) were reporting to provincial departments in North-Weston their expenditure patterns.

Mr Z Kolweni (ANC-North-West) referred to emergency food relief in the North-West and noted the roll-overs of expenditure which he regarded as unacceptable.

Ms Mchunu asked how many recipients benefited from soup kitchens in the Western Cape.

The Chairperson asked which grants provided financial resources for social development.

Ms Masilo (ANC) sought detail on developmental programmes in all provinces.

Limpopo province responded that 17000 officials had been identified as involved in fraudulent activities and cases were pending. Infrastructure was funded from the equitable share and no funds were obtained from the conditional grant. The dispute regarding social grants had been resolved by court action and a new service provider had been procured. No disruption to grant provision had occurred. Information technology equipment had been sourced for the Social Security Agency. Late tenders were caused by poor applications and the subsequent need for re-advertisement.

Mr S Lerumo (North-West) responded that 525 officials had been refused indemnity for fraud based on a list of criteria. The nature of indemnity to be offered was considered by a firm of attorneys. A total of 1227 citizens had been refused indemnity and 3124 had received full indemnity. 392 individuals had acknowledged debt to be recovered. A common approach was needed to deal with guilty public sector officials. Capital expenditure was monitored and the viability of projects was gauged prior to implementation. All food parcels had been delivered by 31 March 2006. The service provider had submitted a late invoice and a rollover would be arranged to ensure payment. Funding would be sourced from the national government to finance the Integrated Social Development Services Grant.

Mr B Sibeko (Gauteng) replied that the South African Social Security Agency (SASSA) would be assisted over a three month period to establish services. The anti-fraud campaign had been successful and had generated savings for the government. 7000 individuals had been removed from the system. Pensions could be obtained at any ABSA branch under a no-fee arrangement. Such an arrangement ameliorated problems such as queues and crime. The integrity of the beneficiary database had been improved. Early childhood development centres had benefited from the integrated poverty alleviation programme. Street children were being assisted to acquire skills and reconnect with family.

Ms M Chaka (Gauteng-Chief Financial Officer) explained that overspending by NGOs was caused by the use of conditional grants and the 2005 allocation could not be diverted in time. Underspending on capital expenditure could be averted by integrated planning. A comprehensive asset manager policy had been developed. An Asset Management Forum would approve allocations. The intention was not to underspend on capital allocations. Infrastructure was funded from the equitable share.

The Chairperson declared that the no-fee arrangement with ABSA was a sound idea and served to address glaring shortcomings in the current pension payment system. Post Bank could also be used to issue pensions.

Ms Petersen replied that 1391 corrupt officials had been identified although none were in the Social Development department. Amnesty had been granted to 1336. 25 soup kitchens were in place with 84460 beneficiaries. SASSA had acquired new premises in January.

Mr Sogoni stated that reasons should be offered for underspending.

Mr Suleiman (ANC) asked whether corrective mechanisms were in place to address spending anomalies.

Mr Van Rooyen sought an explanation for high social development expenditure trends in the last quarter in the Western Cape and asked whether capacity problems existed.

Limpopo province replied that the role of doctors in the Aids grant allocations would be carefully monitored to close any loopholes.

Mr Robertson referred to payment problems at shops in rural areas where money was being withheld or used to pay for products.

The Chairperson declared that a national investigation was needed to deal with the issue. Victims could be brought before the Committee in future to testify.

The meeting was adjourned.

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