Health Provincial Conditional Grants & CapEx: 3rd Quarter 2006/07 spending

NCOP Finance

13 February 2007
Chairperson: Mr Tutu Ralane (ANC) [Free State]
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Meeting Summary

Morning session: The provincial departments of health briefed the Committee on third quarter expenditure of National Tertiary Services Grant (NTSG), Health Professions Training Grant (HPTDG), Capital Revitalisation Grant, Provincial Infrastructure Grant (PIG), HIV/Aids Grant as well as the Forensic Pathology Services Grant (FPSG).

The key priorities for health were to recruit health professionals, expand emergency medical services, step up primary health care and improve services in rural areas.  The outcome as at the end of the third quarter was at R38, 7 billion (72, 7%) and was slightly below the 75% benchmark that was expected. There was a projected over spending of R629 million but the projected over spending was not realistic for some provinces. North West had the slowest or lowest spending as at the end of the third quarter. A number of provinces were having problems in getting their budgets for personnel right. Capital spending was improving but some provinces were projecting under spending. Some provinces were asking for money on the hospital revitalisation whilst under spending on capital.

There was a vast improvement on spending in the HIV/AIDS grant. Spending on forensic pathology services was only at 27%. The handover of the grant was delayed for a long time because Treasury was said to be giving too little money. Provinces had refused to take the function because it was under funded. The funds had now been given but there was very low spending. The Eastern Cape and KwaZulu-Natal had spent 13, 2% and 15, % respectively.

There was no real alignment between activities and budgets in terms of plans. The budget, plans and activities should to be synchronised. Questions could be asked on how the national Department awarded funding for projects. Plans in KZN were approved very late but money made available at the beginning of the financial year. It was known that some plans had been approved yet there was no funding for them. DORA contained a provision on the reallocation of money. A question could be asked as to why all the money was transferred if province were under spending forensic pathology services.

The Chairperson said that there was an issue around the reliability and credibility of business plans and projections. There would be something wrong should people project over or under spending and none of them materialise. Departments were not planning. Departments could not be expected to deliver on the basis of their sixth sense. There should be plans and proper projections in place. The problem was not with the departments especially in so far as the provincial infrastructure grant (PIG) was concerned. The problem was with provincial treasuries. There was no reason why they should give money to departments knowing that they could not perform. A province had to take into account the department’s capacity to spend and manage when allocating the PIG. Provincial treasuries were simply throwing money to departments in violation of DORA. They were supposed to ensure that departments complied with the law but were breaking it themselves.

It was clear that there was no assessment of plans. This was picked up in previous meetings this week. There were also credibility and accuracy issues. The question was why should there be cases of over and under spending if business plans were assessed properly. One was talking about conditional grants and there should be no overspending because money was given on the basis of business plans. This matter should get urgent attention because department were over spending or under spending by huge amounts.

Afternoon session:
Although the spending on grants was on track, provinces highlighted the delays in the completion of infrastructure projects as well as key general problems in health care services. These included staff shortages in the light of greater demands for public health care services; weaknesses in district health systems which led to the overuse of tertiary facilities and the impact of cross-border migration on the provision of public healthcare services. National Treasury stressed the need for greater creativity by provincial departments to manage challenges. Dependence on conditional grants should be lessened.

The Committee raised concerns over unnecessary delays in the completion of infrastructure projects, the approval of business plans without the necessary funding. The Chairperson questioned the impact of cross-border migration on the demands of public health care services. This needed further exploration.

Meeting report

MINUTES
National Treasury Presentation on outcome of Conditional Grants & Capital Expenditure as at 31 December 2006

Dr Mark Blecher (Director: Social Services, Health and Public Finance) made the presentation. (See document attached). He said that the key priorities for health were to recruit health professionals, expand emergency medical services, step up primary health care and improve services in rural areas. Health had picked up 14 000 posts in the past especially in Limpopo and Mpumalanga and this was encouraging. The outcome as at the end of the third quarter was at R38, 7 billion (72, 7%) and was slightly below the 75% benchmark that was expected. There was a projected over spending of R629 million but the projected over spending was not realistic for some provinces. Gauteng was projecting a R399 million over spending and it was already too late for them to get the situation under control. The overspending would mainly be in personnel. Northern Cape was heading for an over spending of 4,4% and they had difficulties controlling their spending over the years. The province was showing a 29, 6% year on year growth that was extremely high.

He said that Limpopo had realised surprised since it was under spending badly at the beginning of the year. It had accelerated its spending. North West had the slowest or lowest spending as at the end of the third quarter. He was of the view that the province would have under spent by the end of the year. Limpopo was showing an over spending of R124 million on hospital services. This was probably a wrong projection and reflected on their budgeting. Gauteng was having problems in relation to central hospital services. It was projecting an over spending of R379 million. A number of provinces were having problems in getting their budgets for personnel right. Capital spending was improving but some provinces were projecting under spending. Some provinces were asking for money on the hospital revitalisation whilst under spending on capital. There was a vast improvement on spending in the HIV/AIDS grant. Spending on forensic pathology services was only at 27%. KwaZulu-Natal was spending on the forensic pathology services but the expenditure was on the equitable share (ES) and not on the grant. The handover of the grant was delayed for a long time because Treasury was said to be giving too little money. Provinces had refused to take the function because it was under funded. The funds had now been given but there was very low spending. The Eastern Cape and KwaZulu-Natal had spent 13, 2% and 15, % respectively.

The Chairperson said that there was an issue around the reliability and credibility of business plans and projections. There would be something wrong should people project over or under spending and none of them materialise. Departments were not planning. Departments could not be expected to deliver on the basis of their sixth sense. There should be plans and proper projections in place. The committee might want to have some Indaba during the year because things could not be allowed to continue in this manner.

National Treasury presentation on Provincial Infrastructure Budgets and Expenditure Trends: Health
Ms Malijeng Ngqaleni (Chief Director Intergovernmental Policy and Planning) made the presentation. (See document attached). She focussed on health infrastructure expenditure trends and infrastructure delivery improvement programme. There had always been reports on capital expenditure but such reports did to show where the money was being spent. One should be able to link the expenditure to the deliverables and the quality of the services delivered. There was a reporting model that tried to pull together all the infrastructure programmes that departments had. There was a need to streamline processes so that people did not end up producing a number of reports that required the same information. The total adjusted budget was R4, 1 billion. This was less than the R5 billion that was reflected on payment of assets. Payment of assets included all other equipment but was supposed to exclude maintenance. Gauteng, Mpumalanga and Western Cape were doing well on spending on infrastructure.

The Chairperson said that section 9(2)(c) of the Division of Revenue Act (DORA), 2006 provided that a "province must ensure that its provincial departments responsible for education, health and roads-(c) participate, together with the provincial department responsible for public works in the Infrastructure Development Improvement Programme (IDIP) facilitated by the National Treasury, unless the National Treasury exempts any such department from participation". The only time when departments could not participate in IDIP was when National Treasury had exempted them. The issue of compliance was new and had already been piloted. Implementation was happening full steam and systems and structures were in place. Departments of education across provinces had reported improvements in terms of IDIP. The committee would devote more attention of compliance with IDIP. He wondered if the provincial departments of Public Works were well capacitated. Treasury should check if all the Public Works provincial departments were ready in terms of capacity.

Eastern Cape Presentation
Ms Lizzie Nomsa Jajula (MEC: Health) and Mr M Fraser (CFO) attended the meeting. The MEC said that there were gaps in Treasury's presentation. The document presented by Ms Ngqaleni was not a true reflection of the situation on the ground.
 
Ms Ngqaleni replied that part of the problem was how provinces reported and represented what had been done. Improper reports impacted on budgets. National Treasury relied on information that it received from provinces. Sometimes people were doing well but there was poor reporting.

Mr Fraser made the presentation. (See document attached). The total infrastructure adjusted budget was R644, 727 and the department was projecting to spend nearly the whole amount. There were delays in spending due to heavy rains in the second half of last year. Contractors with outstanding claims had been asked to submit all their certificates as soon as possible for payments to be made. Spending on both HIV/AIDS and the Hospital Revitalisation grants was on track. The Forensic Pathology and Health Professionals Training and Development (HPTD) were behind. The department had engaged Coega Development Corporation (CDC) to assist in the managing of the construction of new mortuaries and the refurbishment of ex- South Africa Police Service (SAPS) mortuaries. The acquisition of new equipment for mortuaries was at an advanced stage.

North West Presentation
Dr Lydia Keneilwe Sebege (HOD) made the presentation. (See document attached). She confirmed figures presented by National Treasury. The department was weak in terms of spending. It was standing at the door of the intensive care unit (ICU) hoping to get out and close the door behind it. There was a lack of capacity to run the hospital revitalisation grant. It had unsuccessfully made an attempt get a person from the built environment to assist. It was embarking on a head hunting exercise to get the relevant skills. A medical doctor was overseeing the programme.

The Chairperson said the committee had sent a letter to the national department inviting the Minister and the department to participate in the committee's division of revenue discussion. The department should justify why the province's revitalisation grant should not be cut and redirected to other provinces that could spend. There was no malice on the part of the committee. DORA provided for withholding powers. The provincial department might be invited to come and justify why some of the under performing grants should not be cut. The committee wanted to give the department only that which it could chew. The Committee was only trying to help since the department was trying to come out of the ICU. Cutting the grants would reduce the pressure that might push it back to the ICU.

Dr Sebege said that some of the monies were committed to projects and the ultimate sufferers would be the electorate. It would be better to remove the person who was not performing rather than taking the money away from people who needed services.

The Chairperson said that there were two devils and both were terrible. The first one was money sitting in banks and doing nothing (under spending). The second was taking the money to other provinces that were performing and had capacity. The province from which the money would not lose entirely as it would receive the money as and when it had the required capacity. The electorate was already suffering because money was just sitting in bank accounts.

Dr Sebege said that she was embarrassed by the spending trends in her province especially because she knew that she could do something about the situation. She promised to do something about the situation.

The Chairperson said that some questions would have to be asked especially because the HOD came from the Department of Public Works where she had done a good job. He suspected that she had inherited a bigger monster in the Department of Health.

Limpopo Province presentation
Dr JV Dlamini (HOD) attended the meeting. The HOD made the presentation. (See document attached). The revised budget of the Department was R788 million. The Department had spent R465 million as at the end of December 2006. This amounted to 59% of the revised budget. It had asked for a rollover of R6 million but was given R50 million. The Department had no business plans to spend the amount by the end of the year. Treasury had correctly indicated that the Department would under spend by R44 million. It had spent 68% of its revised budget on conditional grants. There were problems in relation to the HIV/AIDS grant. The Department was in May asked to indicate if it wanted rollovers on the grant and had asked for R13 million. It was given R35 million in rollovers. Spending was not good on the National Tertiary Services grant. The orders for equipment were placed late. R31 million was committed and the suppliers had promised that they would have delivered the equipment by the end of February.

The Chairperson said that the problem was not with the Department especially in so far as the provincial infrastructure grant (PIG) was concerned. The problem was with the provincial treasury. There was no reason why they should give so much money to the Department knowing that it could not perform. A province had to take into account the department’s capacity to spend and manage when allocating the PIG. Provincial treasuries were simply throwing money to departments in violation of DORA. They were supposed to ensure that departments complied with the law but were breaking it themselves. The Eastern Cape Executive Council simply took a political decision that money should go to roads in violation of the law. Health and education were compromised in the process. He congratulated the province for building clinics but the sad thing was that there were no roads to the clinics. The question was how people would go there if there were no roads. The Department of Roads had under performed. It had spent R1, 3 billion last year and there were potholes and no fencings and road signs on the roads. He wondered where the Department had got the money to build clinics because they had received nothing from the PIG. It was important to have all supporting structures in place when building clinics.

KwaZulu-Natal Presentation
Dr Busisiwe Muriel Nyembezi (HOD) and Mr S Buthelezi (CFO) attended the meeting. The CFO made the presentation. (See document attached). The HOD said that the MEC could not attend the meeting due to the State of the Province address. The CFO said that the department was expecting to spend the entire budgets in most of the grants. It had spent only 44% and 15% in the hospital revitalisation and forensic pathology services grants respectively. It was projecting an under spending of R27 million on the forensic pathology services grant. There were delays in taking over the forensic pathology services from SAPS. There were also delays in the identification of sites and construction of new mortuaries. The Department had spent 93% of the PIG and the full amount would be spent by the end of the financial year. Adequate monitoring capacity was in place.

Discussion
Mr Z Kolweni (ANC) [North West] asked what would happen should the Eastern Cape under spent. The committee was aware that the HOD in North West was new and that she might have inherited problems. He asked the Limpopo Department why it had asked for an allocation that it could not use.

The Chairperson said that there was a risk of huge under spending if the departments were not careful. He was worried that they were making unreasonable commitment. A department would say that it had spent 44% on Hospital Revitalisation grant and that it would have spent the entire budget by the end of the year. The committee wanted accurate reports so that it could assist where necessary. A range of measures could be used to assist. There were provinces that were deserving of better allocations because they were performing. The committee knew what the problems had been for the last five years. There were still some problems in KZN.

Mr BJ Mkhaliphi (ANC) [Mpumalanga] asked KZN to comment on plans that were never approved as far as January 2006. What was the situation with the in relation to the plans? Was the issue related to the R88 million that was earmarked for release back to the National Department of Health? How would the department be able to spend this amount by the end of the year should more clarity be given about it? He noted that the Department was holding back on planning for new financial year in respect of the PIG. The PIG was a priority to health and education. He asked why the department was not doing forward planning?

The Chairperson said that it looked like the department would start planning when the money arrives in April.

The Chairperson asked the KZN department if the R344 million listed in the presentation was a total projection or actual expenditure as at 31 December 2006. Was the department projecting over or under spending and what it doing about the projection? He also asked how credible or reliable were the figures presented.

He said that the Eastern Cape had projected over and under spending. He asked if the projections were credible. There would be overspending in HIV/AIDS. The problem was that there would be nobody to bail the department out. He asked how it would deal with the projected over spending. The department had engaged CDC to assist on issues around forensic pathology. He referred to section 9(2)(b) and 9(3)(b). The Act provided that a service delivery agreement should be signed with the Department of Public Works. He asked if the Department had engaged with the Department of Public Works. What were the problems that resulted in the department approaching CDC? The CDC was a fairly new creature. He asked if it would have the capacity to deal with the matter. The Gauteng Department of Education was being ripped off by their own colleagues in Public Works. They were asked to pay R70 million for planning. They protested until the amount was reduced to R23 million but this was still unreasonable. He wondered if there was no capacity in the Department of Public Works to an extent that necessitated going to CDC. The Department had received no exemption from National Treasury in relation to compliance with DORA.

MEC Jajula replied that the department was not hiding anything when it said it would be able to spend its budget. She said that capacity in Public Works was very low and the situation had been the same even in previous years. It had been using government agencies like the Independent Development Trust (IDT). The IDT had gone down in terms of capacity. CDC had the capacity to fast track planning so that there would be no delays in expenditure. The Executive Council had approved a move to Coega.

She said that the department had overspent on HIV/AIDS and it would over spend even this year. The reason for this was that it was increasing the number of accredited sites. The target clientele for this year was 27000 and it was currently sitting at about 240o0. The target for the next financial year was 75000. The issue was not just about anti-retroviral drugs but also about the other part knowing their status first. The department was increasing voluntary counselling and testing. It would increase support and medicines for those who were already directly infected by HIV/AIDS. The department had received R19 million from the Expanded Public Works Programme to add on to what it had received when it started.

The HOD replied that the department had started very slow on forensic pathology service and was now trying to accelerate the expenditure. The key expenditure was R34 million for mortuaries and R11 million for the refurbishment of former SAPS mortuaries. There was an amount of R14 million for equipment. The tender process had already been done and the department was awaiting the adjudication process to run its course. It had employed CDC on refurbishment and construction of mortuaries. CDC had demonstrated its capacity in the Coega area. The department might still have challenges in spending the whole amounts because of time constraints.

The Chair said that North West had confessed that it was in the ICU. The Committee might want to have a special session in the province in order to see if systems and structures were in place. Treasury might want tot assist KZN because it had problems. Limpopo seemed to have problems and therefore in need of assistance. The Chairperson said that the SAPS issue had been going on for some time. He wondered if department would want the committee to convene a meeting with SAPS, national Department and provinces. There was a whole range of things and the issues were not the same for provinces. One could not have SAPS as major complaint forever.

The MEC said that there was a slow handover from SAPS but this was no longer an issue. Delivery did not takeoff immediately after the handover. The transaction between the department and SAPS had been very slow.

The Chairperson did not allow the other provinces to respond to questions raised about them. They would address the committee after the fourth quarter and after their engagement with National Treasury.

Dr Sandra Sookal (Director: Provincial Budget Analysis - National Treasury) said that it was clear that there was no real alignment between activities and budgets in terms of plans. The budget, plans and activities should to be synchronised. Questions could be asked on how the national Department awarded funding for projects. Plans in KZN were approved very late but money made available at the beginning of the financial year. It was known that some plans had been approved yet there was no funding for them. DORA contained a provision on the reallocation of money. A question could be asked as to why all the money was transferred if province were under spending forensic pathology services. This was creating lots of problem for provinces because they feared that they would lose the money if they did not spend it.

She said that there had been concerns on the forensic pathology grant from the first quarter. Departments should go back and look at their plans. There was something wrong in the plans if departments were unable to implement what was contained therein. A lot of departments had inflated their personnel budgets. This was one of the reasons why they had a lot of money. They inflated the budgets so that they could move the money to other programmes. This was not a way of good budgeting. Treasury would focus on this from now onwards. There was a need for an indication of how plans were assessed.

Mr Muller (CFO: Department of Health) said that the department assessed all plans. Conditional grants with the exception of the forensic pathology services grant had been in existence since 1998 and it had been a learning process since then. The HIV/AIDS grant was flowing quite nicely. There were problems in Hospital Revitalisation and Forensic pathology services grants. The forensic pathology grant was in its second year and had a large capital component in it. The provincial departments had, in certain cases, taken responsibility for forensic pathology services from 1 April. SAPS still provided forensic pathology services and such services should be invoiced. The invoices were not being submitted. Provinces had always said that SAPS had promised that the invoices would be delivered anytime. Money should be available to pay should the invoices arrive. The department had not stopped the money because the accounts should be paid.

He said that there was a debate going on in the budget council about the allocation of grants. One would be attacked by the Budget Council should the principle that money should be allocated to a province where it would be spent immediately. There was a need to discuss the issue of reallocation. The overload of personnel budget could have happened in one province.

The Chairperson said that it was clear that there was no assessment of plans. This was picked up in previous meetings this week. There were also credibility and accuracy issues. The question was why should there be cases of over and under spending if business plans were assessed properly. One was talking about conditional grants and there should be no overspending because money was given on the basis of business plans. This matter should get urgent attention because department were over spending or under spending by huge amounts. The risk was that there nobody would who would bail out any department that had over spent. The department would have to find the money elsewhere and the question was where? They would be forced to dig deep into the equitable share. Provinces were playing budgeting games because they wanted to have some cushions somewhere. Departments were on the eve of the next financial year but KZN had to pull back a bit on planning because it was waiting for 1 April 2007.

He said that another problem was how equitable were the conditional grants. There were huge inequalities. He asked how the issue of backlogs was dealt with across provinces. The committee had already picked up some problems in relation to the Municipal Infrastructure Grant. He referred to the two districts in KZN: Umgungundlovu and Ugu. Umgungundlovu had a bigger population but the conditional grant and equitable share for Ugu were much higher. What formula was the national departments using in allocating the funds? The committee had asked the Financial and Fiscal Commission (FFC) to comment on the HIV/AIDS component of HIV Education. It was found that the national Department of Education, in allocating the grant, was using the education component in the formula. This did not address the focal issue.

Mr Sogoni (ANC) [Gauteng] said that much had been said about alignment but nothing had been said about co-ordination. Provincial treasuries did not understand how allocations were made. It had been said that transfers from national departments flew straight to provincial departments. Provincial treasuries had problems in monitoring the grants.

MEC Jajula said that all budgets were transferred to provincial treasuries and then to departments. Monitoring was done on monthly basis.

Mr Bongani Khumalo (FFC: Manager: Fiscal Policy Analysis) said that there was a discussion between KZN and Limpopo treasuries around money that had been reallocated with the hope some provinces would get it later when they had capacity. One of the province said that it was expecting to get the money whilst another said that there was no paper trail to suggest that that it would get the money. There should be consistency in applying some of the principle. National departments motivated for conditional grants because there were targets that they wanted to meet. One could not simply ask for conditional grants to supplement the provincial equitable share. One should ask if the issues were correctly identified should there be under spending. The issue would be whether the plans were aligned to the objects and the framework of the grants. It was worrying that plans were approved in January whereas the allocations were made at the beginning of the financial year.

The Chairperson said that engagement should be a practice. There should be some engagement before any money was taken from one province to another. One of the problems was that there were windows: conditional grants and the adjustment period. One could ask why should there be adjustments. The response would be that there were unforeseen circumstances that necessitated adjustments. The issue was again one of planning. Disasters were not a problem because there was the contingency reserve.

Free State Presentation
Dr R Chapman (Acting HOD) made the presentation. (See document attached). The original budget for comprehensive HIV/AIDS grant was R142 million. The expenditure was R97 million (69%). The whole amount would be spent by the end of March 2007. Some invoices from NHRS were expected to come in during the last quarter. The department started with a budget of R41 million on forensic pathology services and received an additional amount of R5 million. Expenditure was around 16% percent and it was estimated that the province would only be able to spend an additional amount of R19 million. There would be an under spending of around R10 million.

Northern Cape Presentation
The Chair said that the MEC had sent him a letter indicating that he had appointed an Acting HOD: Ms M Thuntsi. Dr Shabbir (Medical Director) made the presentation. (See document attached). He said that the total conditional grant allocation showed an annual growth of 53, 5%. The main contributions came from HIV/AIDS, National Tertiary Services, Hospital revitalisation and the introduction of the forensic pathology services grants. The department had received its 3rd quarter transfers as planned. 95% of the 3rd quarter transfers had been spent. 81% of the total transfers had been spent by the end of the 3rd quarter. It had spent 100% in the PIG. The remainder of projects had to be funded from the equitable share. The HIV/AIDS grant was facing challenges in relation to the recruitment and retention of health professionals.

He said that there were delays in the appointment of contractors for the Hospital Revitalisation grant. There was inadequate technical capacity in the award process. The shortage of skills due to the current demand in the construction sector was another challenge. There was also a shortage of materials particularly bricks and cement.

Discussion
The Chairperson said that it was clear that the equitable share was being used as a supplement. The mindset of provinces was that grants were the basis and foundation and that they should run to equitable share when they ran short of money. Grants were supposed to supplement all other monies that provinces had. The Northern Cape provincial treasury was not complying with DORA. On what basis did it give part of the PIG to the department? The law clearly indicated that money should be allocated on the basis of the capacity to spend. The money should not have been given to the department and the problem was that there was a mentality of entitlement. This issue should be resolved with provincial treasuries. He asked what had happened in relation to the Hospital Revitalisation grant. The province had performed well in the past financial year but things were going wrong at the moment.

Mr Kolweni said that the Northern Cape was projecting an under spending of about R80 million. He asked why the reason for poor slow spending was poor planning.

Mr Sogoni said that conditional grants made provision for capacity building. He asked why departments were not using the grants to build capacity if the problem was capacity. He said that the Chair had always raised the issue of people who tried to separate grants from the equitable share. This made it difficult to understand the consolidated expenditure. It created confusion as to how much had been spent. The Public Finance Management Act provided that Treasury could give a format on the kinds of statements that could be used. It might be better if Treasury was to give such format so as to have uniform reporting.

Afternoon session:
Preliminary Discussion with Gauteng Health Department
The Chairperson requested that National Treasury representatives explain the problems with the spending of the Provincial Infrastructure Grant experienced by the Gauteng Department of Health (GHD). It would not be receiving this grant due to the under performance of its sister departments. However, the provincial education department had received this grant the previous year despite their poor performance. The legislation stated that the capacity of provincial departments would be considered before PIG was granted.

Ms Nqaleni (National Tresury) explained that although provincial departments tended to guarantee their capacity to spend the PIG, spending information indicated to the contrary. Even though Gauteng provincial departments were spending on grants received, the provincial treasury was not receiving reports on this spending timeously. The Division of Revenue Act (DORA) specified the submission of such reports

The Chairperson emphasised that a department should not be penalised for the under performance of other provincial departments.

 
Ms Sybil Ngcobo (HOD, Gauteng Department of Health) commented that this explanation was not received at the time. The written explanation clearly stated that refusal was due to the performance of sister departments. Since these departments had not complied, alternative funding would be granted to these for which the whole provinces was collectively accountable. This issue was also raised at a meeting with National Treasury in November 2006.

Ms Nqaleni answered that if provinces acted on spending challenges, funding would be granted.

Gauteng Department of Heath (GDH): presentation
Ms Sybil Ngcobo (Head of Department) reported on trends in third quarter spending on conditional grants.

Expenditure on National Tertiary Services (75 percent) and Health Professions Training and Development (75 percent). Although spending on the HIV/Aids grant was recorded as 106 percent, the actual spending on this grant was 84 percent. A misallocation resulted in the inflated figure, but had been corrected in January 2007.

Contrary to the projected 100 percent spending on the Forensic Pathology Services Grant, latest estimates indicated that only 86 percent of the allocation would be spent by the end of the current financial year. The appointment of personnel had been delayed since the transfer of staff from the South African Police Services (SAPS) only started on 1 July 2006.

Corrective measures included: An executive support programme manager and been appointed to ensure appropriate planning and execution of facility related functions, including the capital budget. Projects had also been reprioritised in order to manage the expenditure within the exiting budget allocation.

Key challenges were raised. Allocations were not entirely according to the service needs per region and the range of eligible services provided at each institution exceeded grant allocations. Although posts had been advertised, it still remained a challenge getting suitable candidates to implement Anti-retroviral Treatment programme.

Western Cape Department of Health: presentation
Professor Craig Househam (Head of Department) provided key challenges and successes in the spending of conditional grants in the third quarter of 2006/07. The Department had spent 99 percent of the total funds provided by the conditional grants.

A major challenge for the Aids conditional grant was the growth of the anti-retroviral campaign. Significant implications were involved in enrolling a significant number of clients into life-long care for the health care system. The greatest challenge remained the effective prevention strategy.

Using the forensic pathology services conditional grant, 18 forensic pathology laboratories had been maintained and seven were under construction. 170 staff members had been appointed and 52 vehicles were in active service.

Although spending on the hospital revitalisation programme was on track, problems were experienced in the construction of facilities in Khayelitsha and Mitchells Plain. General problems persisted which included filling of posts and lags in communication between the national and provincial department.

Discussion
The Chairperson noted that the delayed construction of new hospitals would have an adverse effect on employment creation. He reminded officials that the goals of halving unemployment and poverty by 2014 needed to be achieved. The inaccessibility of provincial hospitals for those not native to a province was also alarming. Medical treatment at state hospitals should not be preferential. These two matters posed grave consequences to the provision of health care in provinces.

Mr E Sogoni (ANC)[Gauteng] asked whether GHD had made progress in the transfer of staff from the South African Police Services (SAPS) to its newly established Forensic Pathology unit. When was this transfer expected to be completed?

Ms Ngcobo responded that this transfer of services had been completed. It had already spent 85 percent of the Forensic Pathology Grant (FPS).

Mr Sogoni noted that the WCHD had already spent 100 percent of the conditional grants for most of its programmes for the third quarter. How would this department maintain the development of infrastructure, when budgets had been spent?

Professor Househam confirmed that this trend indicated to a minimal over expenditure on its equitable share. However, measures were in place to ensure that this spending remained within the relevant regulations. An overspend on its overall budget for this financial year was not anticipated. The use of the current information systems as well as the availability of the necessary technical staff, could result in a minimal over – and under expenditure.

Ms D Robinson (DA) [Western Cape] commended the WCHD for managing to spend the required 40 percent of the allocated budget on the improvement of its forensic pathology unit. However, the delays in the hospital revitalisation projects in Khayelitsha and Mitchell’s Plain  were a cause of concern. She stressed the province was in dire need of adequate health care facilities.

Mr Househam explained that the WCDH had received prior approval of three business cases, which included Khayelitsha, Michelle’s Plain and Valkenberg. The national department had in a letter, indicated that the implementation of these business cases would be closely monitored. It also implied the availability of funds. The construction of these projects had commenced with the approval and he confidence that the necessary funding would be provided.

Dr Mark Blecher (Director: Health Public Finance, National Treasury) was concerned that the uncertainty over funding allocations hampered the timeous completion of infrastructure projects in provinces. This should not be allowed to happen. Cost projections needed to be thoroughly worked-out, before construction was initiated.

Mr B Mkhaliphi (ANC)[Mpumalanga] wanted to know why the GDH indicated that more business plans had been approved without the necessary funding. Could the National Treasury provide further clarification?

The Chairperson commented that political commitments needed to be followed-through. He continued that the lack of progress made in infrastructure projects, did not match the tone of the State of the Nation address. The issues raised by heads of departments would be explored during the discussion of the division of revenue, since they hold serious implications.
DORA and new recommendations of the Financial and Fiscal Commission (FFC) should be consulted and integrated.

Ms Ngcobo explained that issues concerning health care were an emotional issue. The realities of backlogs in essential health services such as surgeries indicated the importance of prudent management of public finances to ensure that health services were available to all South Africans.

The process of approval of business plans and the approval of projects were an evolving process. This meant that although business projects had been approved, funding was not necessarily immediately available.

Mr Sogoni expressed his agreement.  The coordination and involvement of National Treasury was essential.

Mr Mkhaliphi noted that although clinics were the centres for primary health care, many people tended to utilise tertiary hospitals as a source of primary care. This should be seen in the light of efforts to curb cross-border flows and the right treat people where they preferred to be treated.

Prof Househam answered the purpose of the NCSG was to enable tertiary hospitals to provide specialised medical care. Since this is a priority, in the light of staff shortages, patients who do not need specialised medical attention, would be referred to primary health care facilities.

Ms Ngcobo added that the under utilisation of primary health care facilities were due to the lack of appropriate facilities. Moreover, many South African tended to believe that hospitals provided better services. These twin problems needed to be tackled through a national primary health care strategy.

Concluding remarks by National Treasury
Mr Gerrit Muller (Health) focused attention on the National Tertiary Services Grant (NTSG) and the impact of cross-border migration on public health facilities. He explained that Gauteng had reached an agreement with Mpumalanga that would ensure the treatment of Mpumalanga residents in Gauteng tertiary hospitals. Mpumalanga would only be billed for the provision of primary health care at these facilities. National Treasury would assist Gauteng in recovering fees from Mpumalanga. He added that the impact of cross-border on the increased admissions to the newly completed Calvinia Hospital in the Western Cape needed to be explored.

Mr Blecher commented that all provinces affected the budget process; the allocation of funds as well as the approval by parliament and provincial legislatures of these allocations.  The expansion of infrastructure programmes needed to commence from a strong base. It was therefore important to build both the planning and administrative capacity as well as the financial management prior to building. He stressed that provinces should therefore respect the budgeting process and the appropriations.

Ms M Nqaleni (National Treasury) remarked that the meeting highlighted the complexity of managing conditional grants to ensure that spending was aligned to specific policy objectives. The interface between PIG and the hospital revitalisation programmed was also highlighted as some provinces recorded an under expenditure on these grants when while these infrastructure projects were delayed. The management of project funding was currently a cause of concern. National Treasury would meet with representatives of both WDH and GDH to assess spending and challenges raised.

Ms S Sooklal stressed the importance of creative measures to ensure that provinces deal with staff capacity and the development of hospital infrastructure. The reliance on conditional grants needed to be reduced.

A representative from National Treasury commented that government considered the challenges of the public health acre system as important. The impact of heightened demands on hospitals, and the delays in hospital revitalisation projects were also a cause of concern.

Chairperson’s closing remarks
The Chairperson commented that provincial departments had a responsibility to convince National Treasury that the amendments to DORA, were effective. The causes of the delays in the hospital revitalisation programme needed to be explored before the end of the current financial year.

The Chairperson commented that the relationship between the increase in cross-border flows and the provision of health care needed to be interrogated. Information in the Adjusted Estimated of National Expenditure, regarding the trends in migration and admissions to hospitals in each province did not support this relationship. Further discussions with National Treasury would be arranged.

The Chairperson thanked everyone for attending the meeting.

The meeting was adjourned.


 

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