Provincial Health Departments: Conditional Grant and Capex Spending 3rd Quarter 2006/07: briefings

NCOP Finance

07 February 2008
Chairperson: Mr T Ralane (ANC, Free State)
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Meeting Summary

Seven Provincial Departments of Health (excluding KwaZulu Natal and Gauteng) briefed the Committee on the spending for the 3rd quarter of 2006/07. All Departments reported under spending in certain areas, and difficulties in relation to the Forensic Services grant and with delays occasioned by the Department of Public Works. In the Eastern Cape in particular there were further problems with the supply of ambulances and emergency personnel. In some provinces the building of clinics had needed to be halted or slowed to prevent over expenditure, but the comment was made by the Committee that sometimes this could be the result of poor planning. Two provinces indicated that they had needed to take over patients from other provinces as a result of new demarcations. The Chairperson asked that this be flagged as an issue for discussion. A meeting would have to be held with the Premier of the Eastern Cape following problems with the provision of emergency service vehicles, and this issue would be raised with the Premier the following day, and then taken further in a formal meeting.

Some of the provinces noted that the delays in transferring funds following adjusted estimates were causing problems, and late roll overs had adversely affected service delivery. The officials from National Treasury offered differing viewpoints; one held that there could be a problem in the system whereas the other stated that the formulas were now clear and provinces should not be seeking to rely on additional funding where there had been under performance, but would have to surrender. Some of the provinces complained that there seemed to be a “federalist approach”, citing particular problems that had arisen as a result of the National decision on the Occupation Specific Dispensation, which the provinces had had to implement, giving rise to over spending. It became clear to the Committee that it was necessary to further address the issue of the baseline with the provinces, and to clarify the points on roll overs and transfers during the discussions on the Division of Revenue Bill.

The escalation in building costs, particularly for clinics, seemed to be a universal problem, and Free State noted that the increases in the budgets did not in fact amount to real increases on the ground. Augmentation of services had implications on finances and planning. The Committee agreed that there was a need for a broad level discussion also on how to approach this challenge.

Meeting report

Provincial Department of Health briefings on Conditional Grant and Capex Spending for 3rd Quarter
Limpopo Provincial Department Briefing

[PMG note: Due to a re-scheduling of the meeting, PMG was not present for the first half hour of the briefing]

Mr Seaparo Sekoati, Limpopo MEC for Health, tabled a written presentation to the Committee, containing figures on spending. He noted that there would be some underspending, and that there were some problems in relation to the Forensic Pathology Services Grant (FPSG).

Dr Charles Nkadimang, Superintendant General, Limpopo Provincial Department, further discussed some of the figures, stating that there had been an additional allocation, in respect of two items, but that money had been suspended.

The Chairperson expressed extreme concern, and said that it would be necessary to have discussions with the provinces in regard to the figures. He would like to know why the baselines had been reduced so drastically. He suggested that perhaps the Committee could include Limpopo in an oversight visit, and that during a planned visit on 18 and 19 February perhaps the issue of the baseline could be discussed. He asked if anything was received during the adjustment budget.

Mr Sekoati replied that there was an allocation for two additional items, but R186 million had been suspended.

The Chairperson noted that the performance of this Department had improved, save for the problems raised. He would like to write to Provincial Treasury, and there would need to be a meeting with the National Department of Health (NDOH) and Provincial Treasury (PT). National Treasury had been concerned about erosion of the baselines, because the formula was clear. He said that if departments would abide by the formula, then any other problems would be addressed. Where the formula was not being followed, then there was a problem, and the 4% departure that had been spoken of represented a huge amount. He would like to address the issues before the Division of Revenue Act (DORA) was passed. Whilst he would not like to "punish" those not performing well, he stressed that it was illogical to “load” too much funding on those departments who clearly could not spend the money and could not perform.

Mr Sekoati said that if support was given, then it would make a difference to the way in which the province performed.

The Chairperson said that the baseline issue was not limited to Limpopo. Departments must not compromise the formula and the baseline. He noted that discussions would include decreasing the equitable baseline. for Limpopo. There had been an “unknown” overdraft (over spend) of R600 million, which the Department was instructed to pay immediately, but the adjustment was only around R34 million. The baseline was 24%. The Committee must discuss this issue with the NDOH. The provincial Exco was accountable. The Committee must urge PTs and Excos to take the Departments of Health seriously. The provincial development and growth strategy set out targets for growth, but these could not be achieved if the population was unable to get proper health care when it needed to. Health had been compromised through “slicing” of the equitable share.

Dr Sandra Sooklal, Director: Intergovernment relations, National Treasury, said that perhaps this was not the correct forum to address the problems. Basically, in Limpopo, there had been a major overspend in health in the last financial year, as well as unauthorised expenditure for two years prior to that. The province did not really reduce the baseline, but did say that each department must share in the unauthorised expenditure. The easiest way was to introduce austerity measures, including reducing administrative costs (such as phones, cell phones, travel and subsistence, catering for meetings) As far as the baselines were concerned there were huge increases for the 2008/09 budget, and the Committee was welcome to have this discussion with Provincial Treasury. The Department was aware of the huge increase in the baseline. She could not divulge the figures at present, prior to budget tabling. One of the concerns of NT was in fact whether the Department would have the capacity to spend that budget.

The Chairperson said that the Committee would hold Treasury to its word, especially in respect of spending. He would be happy to look at the baselines himself in due course, and would be meeting with the MEC and provincial treasury. The Committee would look at the whole implications, process and programme.

Mr Sekoati said he had already explained the financial situation, which was known to National Treasury. He did not know where the comments about the huge budget came from. The Department was starting from a deficit basis, and had suspended a lot of activities. It also had to cut off clinics that should have been built in the financial year. This affected delivery of services. There was not a lot of spending on matters such as catering and telephones, and the cuts had in fact affected delivery of services. He was surprised that NT seemed to be taking it lightly. Provincial Treasury was fully aware of the facts. He felt it was incorrect for NT to say that huge sums would be made available. If the baseline was not met, then the Department would be starting from a negative position. It may be that it would receive more than it would be able to handle.

Mr D Botha (ANC, Limpopo) said that it was necessary to do something urgently and he offered to set up a meeting.

Mpumalanga Provincial Department Briefing
Mr William Lubisi, MEC for Health, Mpumalanga, noted that his Provincial Department of Health had spoken to the National Department and had held meetings with the Departments of Public Works (DPW) and Provincial Treasury (PT). The challenges in that province mostly lay around spending. In regard to the spending on infrastructure, the Department had met with DPW to iron out the problems, especially the management of the projects. It was agreed that there must be regular meetings between the two MECs and HODs. In addition, provincial and national treasury were asked for assistance. The Department had also met with Development Bank of SA (DBSA) to consider the possibility of the Bank assisting with building capacity in the Department, to push for projects to be accelerated. The problems around infrastructure should be sorted out soon.

 There had been delays in Forensic Pathology Services (FPS), emanating from DPW, especially in the appointment of contractors, which led to low spending. The two departments, and the consultants and contractors, had met, and his department had expressed unhappiness with performance, and extracted a commitment for improvement. However, that was a continuing problem. The Department had now taken a decision that the contracts would be cancelled if there was continued non-performance. It would be meeting with the Minister on the following Monday.

The Chairperson said that the improvements shown in the report were encouraging. However, this Committee would be meeting with the Department and the Provincial Treasury when it would raise the problem of non-performance, and capacity, with DPW. There was funding in DORA geared to capacity. It would be desirable also if NT and the NDOH representatives could be present at that meeting, which was scheduled to take place during the period 18 to 20 February. Efforts must be taken to assist in strengthening the department.

Eastern Cape Provincial Department briefing
Ms Nomsa Jajula, MEC for Health, Eastern Cape, said that she appreciated the current stance of discussing the baseline. It was clear that this province too was moving from a backlog. This was an issue that NDOH had been discussing, and it was discussed also with the Fiscal and Financial Commission. Each department had to start being realistic about figures and what was needed. The Departments would have to consider issues of cash flow and expenditure.

In the Eastern Cape the Emergency Services had not been solved. The Department had appointed staff to run emergency services, aiming for readiness for 2010. Instead of the 50 ambulances it had requested, only seven were received, and no school services or dental services were granted. The recent bus crashes had highlighted the desperate need to have efficient emergency services. The personnel position was more or less on track. Hospital revitalisation and infrastructure were running well, except in two areas, and there might be under spending by around 6%. Land had not been allocated to two hospitals on time; to St Patricks, for expansion of the maternity ward, and St Elizabeth, where the drawing of construction plans had failed to take into account that the sluice rooms could not be put next to the kitchens, resulting in the plans having to be re-drawn. The equitable share amount was not sufficient, and currently Cecilia Makiwane Hospital was running out of funds, although it was due to have been completed by May 2009. The Department was having to try to re-shuffle amounts between infrastructures. The deadlines would probably not be met. The Forensic Services conditional grants were on track, but there might be over spending in the area of HIV / Aids treatment. The programmes were running fast and the Department was raising the issue with PT, as these programmes should be funded and should not be stopped. Oncology and its equipment created a problem. There was a change of specification at NDOH level, leading to a delay in supply, and hence there had been a request for roll over. The department was keeping a close watch on this.

Ms Pumla Vazi, CFO, PDOH, emphasised that in respect of Forensic Pathology, the Department was on track, having received a roll over of R52 million, and 14 mortuaries were under construction. R31 million had been transferred in January. There would be pressure on the provincial infrastructure grant in respect of Cecilia Makiwane Hospital. Overspending in the HIV area had occurred because the number of sites offering anti-retroviral treatment had increased. In the Health Professions Training and Development (HPTD) grant was already over spending. By the fourth quarter it would have come to some conclusion. The Hospital Revitalisation was being monitored closely. The Department had appointed project managers for each site and there were fortnightly meetings. 75% had been spent during the three quarters of the financial year, so this was on track

Mr Lawrence Boya, Superintendant General, PDOH, said that HTPD was now under pressure. That should not have happened. When the surrenders were made, PT had taken money from a conditional grant. The way it had sought to rectify that was by making an allocation in the 2008/09 financial year, but this would not help the position in this year.

The Chairperson said that the HTPD issue was a problem and PT was not assisting. They should be ensuring compliance by everyone else as well as themselves with the DORA provisions.

Dr Mark Blecher, Director: Social Services, National Treasury, said that there was a difference in viewpoints between the PT and Provincial Department on the adjustment budget. PT was of the view that overall the Department was heading for a large under expenditure, with facts and information to support their predictions. Therefore, on that basis, PT had made a substantial reduction for the province. That had not been picked up when going through the adjustment book. He said that it was his view that it would be incorrect if this had been done, and he would be following up on that.

Dr Sooklal said that if there was to be any reduction on a conditional grant, the only place it could be reduced was from the National Department. As far as she was aware, there was no information or directive given to NT that NDOH would be withholding the transfer of the conditional grant. There was overall quite a bit of under spending in the province.

The Chairperson said there was no justification for reducing the conditional grants. NT was correct. From a procedural point of view, firstly the NDOH should write a letter setting out the intention to withhold, giving the Provincial Department the opportunity to state its case. The Committee must investigate what had gone wrong. The money had been taken from the Provincial Infrastructure Grant (IGP). It had happened once before, when the money was re-directed to a non-deserving department. This was now the second instance where PT had acted in this way. He asked the MEC to furnish a letter confirming the withdrawal and the fact that there did not appear to be any basis for it.

Mr M Robertson (ANC, Eastern Cape) asked that NT and PT should both be present at a meeting with the Committee.

The Chairperson agreed, stating that PTs appeared to be letting the Committee down

Mr Robertsen said that the MEC was obviously very frustrated. The lack of emergency vehicles had formed the subject of a media article on 20 December, and the issue had come up in discussions with the Departments of Trade and Transport and Roads. The Committee needed to deal with this issue, which had been dragging on for too long. The ongoing saga was an embarrassment to all.

The Chairperson said emergency medical services were privatised in Eastern Cape. The quality of service was very poor, the response time was shocking, and the vehicles did not comply with emergency specifications.  There was a government-wide decision that Fleet Africa should be providing vehicles for government. More had been allocated for emergency services in the Medium Term Budget Policy Statement. He wondered how this could be dealt with in the context of privatisation. Clearly the company was not performing up to standard, but the government had not made any exceptions within the framework.

Dr Blecher said that he had no comment beyond what had been said. The contract should be explored and if there were legal grounds to cancel the contract then those options should be taken.

The Chairperson said that the Committee would now write a letter to the Premier on this issue, as it was a problem “larger than the Committee”. A meeting had already been held with the two MECs. Issues around performance under the contract, and quality of service would be addressed.

Mr Botha said that Department of Roads, Eastern Cape, had said that the provincial departments could deal directly with the company and if PDOH were not happy with the services, then perhaps they should be tackling the issue directly.

Mr Robertson noted that the Provincial Department of Transport and Roads (PDTR) had been with the Committee the previous day. He asked the MEC whether orders could be placed directly with Fleet Africa, or if the orders had to be directed through the PDTR.

Ms Jajula replied that all requested transport had to be approved by PDTR. A meeting had taken place between relevant stakeholders in the two departments, to try to correct the issues. Despite that meeting, Fleet Africa had done nothing. The specifications for the vehicles were made by the PDOH, which was the driver and custodian of the vehicles. It would specify what was needed, and the cost. Fleet Africa had failed to provide what was needed.

Mr E Sogoni (ANC, Gauteng) agreed that the Premier should become involved. The debate with the PDTR had not been as direct in probing the issues as today’s meeting. It seemed that the contract with Fleet Africa was shortly to come to an end, but if the PDOH had no information as to what was supposed to happen, then clearly there were problems. He further queried whether NT could assist. The PDTR had advised that the arrangement was in the interests of public private partnerships (PPP), but it was not clear whether this was a directive from Treasury, and whether it must be done "at all costs".

Mr Botha reminded the Committee that Mr Robertsen had asked a direct question how the arrangements worked. The PDTR had said that all departments could deal directly with the company. If that was not so, then that Department had been misleading the Committee, and the accuracy of the rest of the report could also be called into question.

Mr Robertson agreed with Mr Botha’s recollection. This was a really serious matter. Rescue vehicles were not available, and this led to deaths from road accidents. The contract with Fleet Africa should have been terminated months ago. The matter could not be solved by this Committee, Health, or Roads and Transport. A heavyweight player must facilitate to ensure that matters were resolved.

Mr Sogoni raised a point that this comment might not have come from the Head of Department at PDRT.

The Chairperson said that the matter had not been discussed in depth, precisely because the HOD had not been present.

The Chairperson said that a letter would be written officially, to get a proper update. A meeting would be requested with the Premier of the Eastern Cape, to impress the urgency and vital need to act on the matter.

Ms Jajula stressed that the staff included not only drivers, but those trained in emergency services.

Mr Sogoni commented that hopefully this matter would not be raised time and again, unless it was dealt with as a specific agenda item. He suggested that there be time frames set out in the letter.

The Chairperson noted that Mr Sogoni and he would try to find time to meet the Premier briefly on the following day, to raise the issues and set a date to deal with this in more detail. Within the next two weeks the two MECs must give responses to the Committee.

A Member asked for clarity on the delay in allocation of land, and who was responsible. This question was not directly answered.

Northern Cape Provincial Department briefing
Ms Shiwe Selao, MEC for Health, Northern Cape, noted that the relationships between the Department and PT had improved, and the MEC for Finance in the province was advocating the position in regard to under funding in the sector. If government did not give health what was due, then it must accept that the services could not be delivered.

There were projections of under expenditure on mental health. The Department had pleaded that when adjustment estimates were made it was necessary to transfer funds to the department immediately, otherwise there was a negative impact in terms of service delivery. With assistance from NT, there was some visible progress. She had undertaken personal visits to revitalisation sites and clinics to check movement.

The province was over spending already on conditional grants for HIV and AIDS, due to taking over patients from North West although there had not been any additional allocations. Services to patients were continuing. In respect of the FPSG there was projection of over spending. The Provincial Infrastructure Grant had not show good performance, and here there was under spending. There had been interaction with PT because funding had been reallocated to other projects in the province, and there was commitment and approval from PT for the reallocation. She stressed that the baseline would have to be corrected for the Department to be able to carry out its core business. Lastly, she commented on a recent tragedy, in which  12 out of 27 patients being transferred to specialist clinics were killed when the ambulance transporting them was involved in a horrific accident.

Dr Thabo Sibeko, HOD, Northern Cape Provincial Department of Health, said that only 21% of the equitable share, as against the national average of 26% to health, was given to this department. He said that the roll overs were received very late, and this was simply not practicable for the department. The building of the hospital in Upington had to be suspended. The Department had thought it could be on site in November, but NT had problems with the cost, and this would also therefore be showing under spending, through the processes not being in place. He explained that the slides on pages 5 and 6 might seem to indicate that the department was struggling with the National Tertiary Services Grant (NTSG) and training. This was work in progress. There was misallocation of the funds, and he assured the Committee that in fact the services had been delivered but the allocation was not reflected correctly up to the third quarter.

Mr Z Kolweni (ANC, North West) asked for further clarity on the MEC’s point that adjustment estimates should be transferred immediately.

Mr Botha said that one of the clinics was showing 200% over spending. He asked whether there would be enough money. Some of the projects were showing considerable over-expenditure, and he asked for the reasons behind this. He asked if the projects could be completed in this financial year.

Mr Sogoni said that Northern Cape PT had previously given input, and there seemed to be some disjuncture between their report and this. This report suggested that matters were on track, but PT seemed to indicate that there were still challenges, for instance, in overall expenditure. He asked whether provision had been made, during the adjustment, for the over expenditure. He noted that on the National Tertiary Services Grant, PT had reported that only 1% had been spent.

Mr Botha also referred to the NT report and said that Northern Cape was reported to have over spent by R152 million. He was concerned about the process and asked how this would be balanced at the end of the year. Nobody would be rescuing those who over spent.

Ms Selao responded that she was not sure what would happen. She would be happy to provide details to the committee on areas of pressure, which included pharmaceuticals, and food for patients coming from far-flung areas to Kimberley. She should perhaps have indicated earlier that she was projecting R123 million over spend (as against initial projections of R143 million) on the overall budget. There would certainly be over spending on FPSG and HIV and AIDS. She was aware that the PDOH was not supposed to over spend on conditional grants, but she asked for guidance on the issues involved.

Dr Sibeko said again that work was ongoing to correct the administrative error, and he would like to clarify this now, so that queries were not being raised later. He queried the PT statement, saying that he had understood that overall there would be 44% over expenditure as at that date.

Mr Sogoni clarified that this had referred to overall expenditure as at end of December. If this was correct, then taking into account the explanation on the NTSG, it would seem that there were still challenges, especially around issues of accounting. The report of PT seemed to indicate that areas of reporting might need to be tightened.

Dr Sibeko said that the Department was on a cost-containment exercise. The expenditure on clinics had to be seen in the context of having a small budget. Some of the funds were being reallocated to reflect what the Department had to do. This was assisting in the budgeting process for the IGP and the building of the clinics.

Dr Sibeko added that when the NTSG was set up, the provinces were required to have cost centres.  This had proved to be a problem, and he did not believe that Northern Cape was alone in having billed the amounts to the equitable share. He would investigate the correlation between the PT figures, as he stressed again that PT was fully aware that there was likely to be over spending. When the Department had attended during the last quarter’s discussions, he had also indicated that escalation in building costs was hampering the budgeting. That was a national issue.

The Chairperson said that part of the problem (which had been picked up also on the previous day) was that some provinces had been affected by demarcations. The Committee needed to have a bigger view of the challenges still being carried over from the demarcation. He asked that they consider the implications of the demarcations on their budgets now. A once-off grant had been given to North West. The Committee might want to consider this route.

North West Provincial Department Briefing
Ms Nomonde Rasmeni, MEC for Health, North West, noted that the Department was projecting over expenditure, had pressures on laboratory services, and would be overspending on HIV/AIDs, but that these issues were being discussed with PT. Spending on the FPSG was weak and there was expected to be an under spend. Plans had been put in place to try to accelerate spending, and Public Works were also to try to renovate mortuaries, build new mortuaries and allow utilisation of facilities. Two hospitals under the revitalisation programme had shown progress, and were likely to complete on track.

Dr Lydia Sebego, Superintendant General, North West PDOH, noted that there were pressures. The presentation acknowledged that expenditure reflected on the system for the conditional grant was 65%, but the table given later had noted a figure of 71%. She explained that R45 million had been given from the adjustment budget, and this was allocated to the infrastructure grant. The overall allocation was R65 million. Later, PT said that R28 million was in fact meant for the disaster at one of the hospitals, and a further amount should have been allocated to clinic building programmes. Therefore there was still over spending on infrastructure, even at end December.

The weakest performance lay in the areas of NTSG and FPSG. As accounting officer, she was satisfied with the plans in place for National Tertiary Services, and was confident that there would be improvement. Before receiving the rollover for FPSG, the Department had agreed that there would be spending by DPW. She was not so confident that this expenditure would take place and she warned that there might be a need to roll over a portion of the allocation.

Monitoring systems were in place to manage expenditure. With regard to projected under expenditure, the Department had been in discussion with PT, and PT had come up with a figure, which did not agreed entirely with the Department's. Some cost centres had not perhaps been properly reflected; and that was being dealt so that the figures would change.

The Chairperson noted that there had been a substantial improvement. However, some of the items would have to be monitored.

Mr Botha said that the Department should be complimented on how far they had come to date.

Dr Blecher said that NT was concerned on under spending. The proportion of the budget spent by this province to end December was the lowest of all the provinces, and there was under spending last year as well. NT was acknowledging the progress, but wished to sound its concerns. The personnel numbers in North West showed that there was difficulty in attracting and retaining personnel; as an equal number of people were leaving as coming in. He thought there was need to build capacity and recruit and retain staff as a priority.

Dr Sebego said that this was indeed a challenge. There were a number of interventions already in place, to try to get specialists from countries such as India, which were spearheaded by the Premier and the MEC. There would be a country agreement soon in place. However, she noted that in some cases the staff leaving, especially at senior management level, had in fact needed to leave so that progress could be made and the Department develop.

Dr Sooklal said that the expenditure trend in the Department across all programmes was the lowest of all provinces, and she said that issues of under spending were as serious as over spending.

The Chairperson agreed that there would be attention paid to this.

The MEC committed herself to ensuring that there would be improvement on expenditure trends. She was confident that the team in the Department would be able to progress to better results.

Free State Provincial Department Briefing
Mr Sakhiwo Belot, MEC for Health, Free State, noted that the presentation set out the progress of what had been done since the Department had last appeared before the Committee.

Prof Pax Ramela, HOD, Free State PDOH, said that the Province still had some areas of challenge in relation to spending on infrastructure. There was over spending because of acceleration of these infrastructure projects. The PDOH was discussing with PT the possibility of halting some projects due to inability to pay for the projects on site. There should have been building of six clinics, but this was likely not even to be able to start even in the next financial year.

In respect of the FPSG, there was previously a problem with allocations for completion of the mortuary in Bloemfontein, and additional amounts were received for completion. However, there were a number of smaller holding mortuaries where work was not begun because the allocation was insufficient.

Prof Arrie Schoonwinkel, CFO, PDOH, said that trends in the conditional grants allocations showed that there was likely to be 100% spending, except in respect of infrastructure, where there would be over spending by a margin of R32 million. With regard to Capital Expenditure, the Department projected over expenditure of R37.9 million. Thus in totality there would be over spending. There was further a problem with a divergence between budget and assistance with outpatient services, and NT was aware of the problem, although it was not yet sure what would be done to rectify it..

The Chairperson noted under spending on HIV and Aids.

Dr Sooklal said that there were two kinds of infrastructure grants noted in the presentation. She asked why these were reflected separately, and why over spending was reflecting under the infrastructure enhancement grant. This should probably be addressed at provincial level. She had thought that the purpose of the provincial allocation was complementary, and suggested that there might be something wrong with the planning.

Mr Kolweni asked how the over expenditure would be financed. He accepted that there might be a problem with Public Works. Comments had been made before this Committee that over spending would affect subsequent financial years, because the over spend from this year could become a first charge against the department for the next year. If the business plans were not properly drawn up or followed, this would give rise to over expenditure.

Mr Sogoni asked what percentage of the total IGP grant was represented by the R30 million figure. The expenditure in some areas during the three quarters was low, and this was a challenge. Over spending on other programmes was equally a challenge. Free State PDOH had accounted properly for the NTSG. However, it should be looking more carefully at their planning.
Dr Blecher said that Free State had in a sense been "stuck" on the revitalisation projects for so long that only in the last few months could it think about getting other projects started. The Committee would need to look at how to get the infrastructure programmes back on track. There had been instability for a few years without an HOD but the new appointee, he was pleased to see, was turning this situation around. The NDOH had requested additional funds for the revitalisation grant, and perhaps one of the new hospitals in Free State could be shifted to the revitalisation project.

Mr Sogoni noted the comments in the written presentation under capacity constraints and bursaries.

The Chairperson said that 55% of the IGP had been spent. Enhancement infrastructure compromised something in the equitable share; even the IGP was not yet exhausted at 55%. PT should be dealing with this, as clearly as it had not applied its mind before giving out the money. This was an issue that the Committee should raise with PT. There had been under performance on IGP and HIV and Aids

Mr Belot said that the IGP Infrastructure Grant was ring fenced for two hospitals. One was already in the process of building, and that was why there was expenditure of 55%. The other had shown no expenditure, because land between the hospital and police station was held by the National DPW, but not transferred to the Department, causing delay. That process was only completed in December. There would be work commencing soon.

As far as over expenditure was concerned, the province had experienced under expenditure on infrastructure, leading to the decision that there should be acceleration. However, the progress then became out of sequence with the funding, creating a cash flow problem between the two financial years. This was the problem with the infrastructure grant, and it had been discussed with PT and Exco. There was a choice of getting additional funding, or stopping the projects. An advance on the allocation for the following financial year was requested. However, there were clinics whose building had been suspended immediately. PDOH was looking at slowing down progress on building to fall properly into cycle.

In regard to bursaries, Mr Belot commented that the top 100 students in the province would be allocated bursaries from the Premier's office. The Department had intended not to issue bursaries, because of the pressure on its financial resources. It had the largest number of bursaries, and the long years of study, and discrepancy between input and output created difficulties. However, the Department was faced with the situation where it would be approached by students half-way through their studies, who could not continue unless they received funding.

The Chairperson said that was a problem that was to some extent unplanned. He said that the Department could have a responsibility to those “landing on the doorstep”. He thought that a way must be found to handle the matter, although he would not like to see students having to abandon their studies.

Mr Botha was concerned about the stopping of the building of clinics, and asked what the legal consequences were as far as contractors were concerned.

Mr Belot replied that there were legal implications. The contractor would still be entitled to payment. The reality was that whilst PDOH was told that budgets had been increased, this did not translate to real increases.

The Chairperson said that this problem was not unique to the Free State. The acceleration of service delivery across the board had implications on the finances, as there would be over spending. Costs of building materials were escalating as well. He thought that there was a need to have a broad-level discussion on how to approach this challenge, as also whether the services were meeting the challenge.

Mr Sogoni agreed that the interests of the people were important; but there was a need to be realistic. This came back to the question of planning. If a certain amount of money was available, yet people were calling for further services or assistance, the question arose where the money would emanate. Business plans and general financial planning would have to be strengthened. The comment about "borrowing" from the following financial year was also worrying as this had a spiralling effect. Mr Botha's comments that nobody would bail out those over spending applied equally here.

Mr Botha said that all the provinces and departments had problems with escalation and shortages of building materials. The price fixing of projects, such as cement, was also a problem. He would like to hear how the provinces would deal with that issue as they had made business plans for this year.

Mr Belot said that he would like to give a progress report on the work presented previously to the Committee. The problem went back some years. When allocations were made for provinces, provinces also set provincial priorities, and the allocation was directed in terms of those priorities. This did not suggest that the departments were not planning. They had planned and submitted the plans, but then also had to take the priorities into consideration. Bursaries were included in those provincial priorities, to try to address the shortages of health personnel. The province had taken a conscious decision to grow its own personnel, rather than depending on contracts. That programme was paying dividends and had produced a number of qualified medical students. However, this was expensive. He reminded the Committee also that accelerating infrastructure was not only a provincial, but national matter. The Free State had taken a conscious decision to accelerate. Part-way through, the realisation dawned that there was no money. The money had been spent, and the question was then whether it had been properly used.

A Member noted that the financial year ended in 53 days. 45% of the Infrastructure Grant was still to be spent, and the tendering processes had not been finalised, so surely the money could not be committed or spent in this financial year.

The Chairperson noted that there was no need to respond to this question at present but the Committee would be monitoring the project.

Mr Belot indicated that some of the money had been committed, since part was allocated to the planning and could be utilised.

Mr Sogoni hoped that this discussion would be taken further during the discussions on the Division of Revenue Bill.
Western Cape Provincial Department Briefing
Professor Craig Househam, HOD, Western Cape PDOH, noted that there had been under performance in HIV/AIDS and FPSG. The Province had received an additional R50 million in the adjustment estimates. If this was deducted from the amount granted, there would in fact be a reflection of 90% expenditure. The PDOH had not been sure that the allocation would come through, so expenditure had been shifted to be reflected against other items. That would be adjusted, and claims to NGOs and the City of Cape Town would be paid out. There should be 100% expenditure by the end of the year on all except FPSG.

The Department projections for the year end showed an over expenditure on the Occupational Specific Dispensation (OSD) for Nurses. it was under funded on this, could not address it in this financial year and it would reflect on the final budget of the Department.

The MTSG spending was on track. The FPSG showed some under expenditure. This related to personnel, where not all staff were appointed because of non availability in the sector.  There was underperformance and delays on the building of mortuaries - 80% of time had elapsed yet there was only 50% spending, because the installation of the final equipment was the most expensive part of the project. The PDOH would be settling a claim before year end. HIV / AIDS grants would be spend to the total of the augmented grant. Hospital Revitalisation expenditure was on track. The Department had to slow expenditure on some projects to ensure that it did not overspend. Planning was important, and there should be accurate budgeting against planning. However, managing construction projects was not an exact science. There were variables around the cost and materials, the availability of artisans, and the weather. The Integrated Development Planning (IDP) process sought to drive projects as whole projects rather than line budgets. He had great sympathy for the difficulties being experienced in the Free State.

The Chairperson noted that roll overs were coming in late, and he asked why this was a problem.

Dr Blecher said that he believed that there was a problem. The current roll over system did lead to uncertainty on grants at a later stage in the year than NT would like. Before the funds were spent they had to be appropriated. The nature of the once-a-year adjustment led to the delay. The way NT dealt with conditional grant roll overs was that funds were transferred to the provinces, but a surrender of those funds should be done back to the national sphere for adjudication of the process. That, in his view, had not worked well. It was quite a difficult process because the nature of motivations received made it difficult to judge them from a distance. Where funds were withheld by the national department this could be decided as early as May. However, if funds had not been surrendered and formally approved, then there was a problem. The National Department had decided it would like to withhold and make a d decision centrally. The provincial departments would have to discuss that with their national departments. He believed that there was a general problem requiring a better solution.

Dr Sooklal held a different view. She explained the ideas behind the roll overs. In 2003/04 a Section 35 clause was put in to DORA, so that there could be a reconciliation of conditional grant amounts. Prior to that, the money coming to the province would not be recalled even if there was under spending, and over a period the money would be "lost" in the provincial coffers. Under spending on an HIV grant, if not ring fenced and kept for that, would thus be used to offset over expenditure on other non-conditional grant programmes, or would even be used by the province in another department. The reconciliation of the conditional grants had taken an entire year before figures could be extracted. Even then, there were different sets of numbers, and the under spending was never recalled, and thus remained somewhere in the coffers, unaccounted for. The clause therefore had been implemented in the last financial year.  It had now become clear that the rules for rollovers of conditional grants were the same as applied to other roll-over. There would be no rollovers for money not committed, or not spent, and the funds would have to be surrendered. She was not sure why there was confusion. There would not be new money in the next financial year. It was not correct for the provincial departments to claim that service delivery could be hindered because they were not sure whether they would receive money. If there were unforeseen or unavoidable expenses, then new money could be requested and paid. However, this would apply only to situations such as an unforeseen disaster. Departments could not work on the anticipation that delivery would be hindered if roll overs were late. The Western Cape had motivated strongly for additional funding for HIV and Aids. An amount was given. However, NT had not factored in, and would not factor in, the carry-through costs of the ARV treatment, which would, in future, have to be provided by the province. At the end of the next financial year there would be a similar problem, and she would alert the house to this. The argument on late appropriation of roll over funds did not hold. There were clear processes and practice notes. Only three provinces had surrendered the funds as required. Two tried to do so, particularly for health, but NT tried to find a mechanism to deal with this. The National Department would have to withhold the amount of the underspending for 2007/08, once it had verified that there was no commitment to spend.

Prof Househam found it strange that thousands of people could be put on treatment but funds would not be forthcoming. He agreed that the extra funding given to the Western Cape had followed a strong motivation and was not a roll over. He had understood the money had been allocated for a specific purpose by NDOH. However, that money was paid late, and in the meantime the PDOH had had to come up with other strategies, even to the extent of seeking funding from donors.

In respect of the Occupation Specific Dispensation (OSD) grant he was worried that he was hearing a federal approach. He would have thought that national and provincial treasuries should be of one mind, and the same should apply to all sectors. Things fell between the cracks at the moment. The improvement of conditions of service was not adequately funded. There had been a national decision taken by Department of Public Service and Administration (DPSA), National Treasury and NDOH, and yet the provinces were supposed to implement. Where there was a disjunction the provinces were left “carrying the baby”.

The Chairperson said that during the summit of the 10th Anniversary of the NCOP, the Minister of Finance sent out a challenge to the NCOP, saying that policy was developed nationally, yet how should it be funded. The issue of powers and assignments, oversight and accountability were further challenges. Funding was given out, but some provinces decided not to surrender, and that was worrisome. The point was, where was the money now. When dealing with education matters, the Committee had heard that the National Department had said that there must be a recovery plan, but one provincial department had not had that in place. The Committee thought there should be some savings from the province that had failed to have a recovery plan - for instance, from the no-work, no-pay savings, as well as money not spent under the School Nutrition Programme. Some provinces thought that the money should be directed to other areas of social development. The Committee held that some audit should be done. The law was clear in terms of cooperative governance. The Committee would have to return to this discussion.

Dr Thabo Sibeko (HOD Northern Cape) wanted to follow up on the discussion. He was concerned that Treasury was in some instances claiming that something was happening, but those on the ground knew that it was not happening or working, and the roll overs were not effective. This had been mentioned for the last three years. He asked that officials from National Treasury must sort this out; it was of concern to him that those on the ground knew that it was not working

The Chairperson said that this problem could be resolved. The discussion on the Division of Revenue Bill would also bring all parties to the table. The comment had also been made that provinces had a mentality of federalism themselves. Discussions would be held on 4 March and he suggested that it would be useful for HODs of some of the provincial departments to give input, and perhaps some of the issues could be firmed up also at the level of provincial MinMECs. With holding of funds should not be done mid-stream. He reiterated that where, for a number of years, there had been a consistent pattern of under spending, those provinces should not be "suffocated" by being allocated amounts that could not be spent. It would be preferable to get certainty so that planning was fine-tuned in relation to the allocations. The tendency to leave money sitting in accounts or to be surrendered must end.

Transfers troubled the Committee when they did not equal spending. This could be regarded as unspent money that should revert to the national revenue fund. He was concerned about Dr Sooklal's comment about funds that were not given back, and there was a need to look further into why the procedure was not followed, why the funds were not surrendered, and where the funds were now, as they were intended for service delivery. If a national department had given a directive to return money by a certain time, then this directive must be followed so that there could be redistribution and reallocation. He asked for further investigation by NT on money that was not returned.

Dr Sooklal stated that if funds were not surrendered, there would not be any rollover allowed.

Mr Sekoati (MEC, Limpopo) agreed that a national agreement might be taken, but provinces would be landed with a burden. He agreed that the OSD was causing over spending at provincial level, and agreed too that it would be more useful to take a non-federal, unitary approach.

Mr Bellot, (MEC, Free State) was optimistic that this year health and education had been identified as key priority areas.

Mr Sogoni noted that there was need to look clearly at the position on the ground and the Committee must pay serious attention to some of the challenges being raised, and try to pay visits to the provinces.

The Chairperson noted that it was critical for the committee to monitor the baselines, and all would fall into place after that. This was a huge national effort and time must be set aside to find solutions, and to discuss matters with each other. During discussions on the Division of Revenue Bill, the Committee would stress that all projects must be in line with IDPs. The situation in the Eastern Cape, where there had been building of clinics without any roads to access them, could not recur. Any official approving plans not in line with IDPs must be held accountable for wasteful expenditure. Performance should also be brought into line and there should not be bonuses paid where there was consistent under performance.

The meeting was adjourned.


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