ATC151028: Budgetary Review and Recommendations Report of the Portfolio Committee on Health, dated 27 October 2015

Health

THE BUDGETARY REVIEW AND RECOMMENDATIONS REPORT OF THE PORTFOLIO COMMITTEE ON HEALTH, DATED 27 OCTOBER 2015

 

 

The Portfolio Committee on Health (the Committee), having assessed the service delivery performance of the Department of Health (the Department) and Entities, against its mandate and allocated resources, reports as follows:

 

1. INTRODUCTION

 

Section 5 (1) of the Money Bills Amendment Procedure and Related Matters Bill provides for the National Assembly (NA), through its committees, to annually assess the performance of each national department, with reference to the following:

• Medium Term estimates of expenditure, its strategic priorities and measurable objectives;
• Prevailing strategic plans;
• Expenditure reports relating to such department published by National Treasury in terms of Section 32 of the Public Finance Management Act PFMA (No.1 of 1999);
• Financial statements and annual reports of such departments;
• Reports of the Committee on Public Accounts relating to the department; and
• Any other information requested by or presented to a House or Parliament.

 

The Committee must table the Budgetary Review and Recommendations Report (BRRR) after the adoption of the budget and before the adoption of the reports on the Medium Term Budget Policy Statement (MTBPS) by the respective Houses in October of each year.

In order to enable the Committee to take an informed decision on the performance of the Department of Health and its entities for the financial year 2014/15, the Committee consulted the following reports and/or documents:

• Annual Performance Plan of the Department of Health (2014/15);
• Strategic Plan of the Department of Health (2014 – 2019);
• Annual Report of the Department of Health (2014/15);
• Annual Report of the South African Medical Research Council (2014/15);
• Annual Report of the National Health Laboratory Services (2014/15);
• Annual Report of the Council for Medical Schemes (2014/15);
• 2013/14 PC Health BRR Report.
• National Treasury Response on the 2013/14 BRRR;
• 2014 Estimates of National Expenditure;
• Report of the Auditor-General South Africa (2014/15); and
• Report of the Financial and Fiscal Commission (2014/15).

 

 

 

 

 

1. Core functions of the Department of Health

 

The Department of Health derives its mandate from the Constitution. Section 27(1) (a) of the Constitution states that “Everyone has the right to have access to health care services, including reproductive health care”.  Section 27(3) further notes that “no one may be refused emergency medical treatment.” Section 28(1) (c) further gives every child the right to “basic nutrition, shelter, basic health care services and social services”. Finally, schedule 4 of the Constitution makes health care services both a national and provincial legislative competence and/or imperative.

In line with its constitutional obligations, the vision of the Department is ‘a long and healthy life for all South Africans’. Its mission is to improve health status through prevention of illness and disease, through the promotion of healthy lifestyles, and to consistently improve the health care delivery system by focusing on access, equity, efficiency, quality and sustainability.

The Department carries out its mandate through six programmes, comprising Programme 1: Administration; Programme 2: National Health Insurance, Health Planning and Systems Enablement; Programme 3: HIV and AIDS, Tuberculosis, Maternal and Child Health; Programme 4: Primary Health Care Services; Programme 5: Hospitals, Tertiary Health services and Human Resource Development, and; Programme 6: Health Regulation and Compliance Management.

The Annual Performance Plan 2014/15 of the Department was designed to deliver on the Medium-Term Strategic Framework (MTSF) 2014-2019 commitments, namely:

• Sub-Outcome 1: Universal Health Coverage progressively achieved through implementation of NHI
• Sub-Outcome 2: Improved Quality of Care
• Sub-Outcome 3: Re-engineering of PHC
• Sub-Outcome 4: Reduced Health Care Costs
• Sub-Outcome 5: Improved Human Resources for Health
• Sub-Outcome 6: Improved Health Management and Leadership
• Sub-Outcome 7: Improved Facility Planning and Infrastructure Delivery
• Sub-Outcome 8: HIV and AIDS and Tuberculosis prevented successfully and managed
• Sub-Outcome 9: Maternal, Infant and Child Mortality reduced

 

The strategic orientated goals of the Department for the 2014/15 financial year are as follows:

 

• Goal 1 – Make progress towards universal health coverage through the development of the National Health Insurance scheme and improve the readiness of health facilities for its implementation
• Goal 2 – Re-engineer primary healthcare by increasing the number of ward based outreach teams, contracting health care providers and district specialist teams and expanding school health services 
• Goal 3 – Improve the quality of care by setting and monitoring national norms and standards, improving system for user feedback, increasing safety in health care and by improving clinical governance 
• Goal 4 – Improve health facility planning by implementing norms and standards
• Goal 5 – Improve financial management by improving capacity contract management, revenue collection and supply chain management reforms
• Goal 6 – Improve human resources for health by ensuring adequate training and accountability measures
• Goal 7 – Prevent disease and reduce its burden and promote health
• Goal 8 – Develop an efficient health management information system for improved decision making

The Committee exercise oversight over the following entities that reports to the Minister of Health:

 

1. South African Medical Research Council (SAMRC);
2. Council for Medical Schemes (CMS);
3. National Health Laboratory Services (NHLS);
4. Compensation Commissioner for Occupational Diseases (CCOD); and
5. Office of Health Standards Compliance (OHSC).

 

 

1. 2013/14 BRRR RECOMMENDATIONS

 

 

1. Response by National Treasury on the 2013/14 BRRR recommendations

 

In 2013/14 the Committee recommended that the Department adopts strategies to ensure improved spending of the Infrastructure and National Health Insurance Grants. National Treasury identified two main issues causing poor spending on the National Health Grant: Health Facility Revitalisation component as: (i) inadequate capacity within the National Department of Health to manage the grant component; and (ii) the project portfolio contains too many small projects, many of which provinces are capable of implementing on their own. Due to slow spending and performance, the baseline for the Health Facility Revitalisation component will be reduced by R411.6 million over the 2015 MTEF period. The slow progress on this grant component and the ability of the Department to deliver infrastructure on behalf of the provinces, remains a concern.

 

The slow uptake of General Practitioners under the National Health Grant: NHI component was mainly due to problems with the conditions of service. Due to the slow progress, the baseline for the National Health Insurance will be reduced by R273.3 million over the 2015 MTEF period.

 

In relation to the need for increased funding for Primary Health Care re-engineering and refurbishment of all health facilities in order to achieve the desired ideal facility status, National Treasury participated in the “3-feet Laboratory on Primary Health Care” which was mandated by the Presidency and is working with the Department on possible funding options for the Ideal Clinic Initiative. The Department intends to redesign the direct NHI conditional allocation to be the main funding vehicle for the Ideal Clinic Initiative and to shift funds from the other conditional allocations for this.

 

On the recommendation to ensure that the Office of Health Standards Compliance (OHSC) is fully operational in terms of staffing and financial resources to ensure that it carries out its mandate which is to enforce quality of health care. The budget of the OHSC is currently a sub-programme of the Department. However, as from 2015/16 onwards, it will have its separate budget as a public entity, receiving funding through a transfer from the Department. National Treasury noted that the OHSC as a sub-programme of the Department has been consistently underspending its budget allocation. For this reason, only R85.2 million out of R164.6 million requested in the 2015 MTEF period was approved.

 

 

1. REPORT OF THE AUDITOR GENERAL

 

The AG has expressed an unqualified audit opinion with findings on the Department’s 2014/15 Annual Report. This means that the financial statement of the Department present fairly the financial position of the Department. The Department has for the last four consecutive years obtained an unqualified audit opinion from the AG.

Unauthorised, irregular and fruitless and wasteful expenditure – The AG also noted Irregular Expenditure rising dramatically from R4.1 million in 2013/14 to R398.3 million. This is largely related to the R391 million paid directly to the National Health Laboratory Services (NHLS). This was in contravention of the Division of Revenue Act, and was subsequently recovered from the NHLS within the same financial year and was therefore not included in the AG report itself.

Reliability of information – The AG also found that there were material issues in relation to the reliability of performance information on those indicators tested.

• As was the case for the past three years, in respect of indicators selected for Programme 3: HIV and AIDS, TB, Maternal, and Child Health, the manual registers supporting the totals recorded in the information systems of the Department did not agree to amounts reported in the annual performance report. This is due to control processes not being fully implemented at provincial facilities.
• The AG was unable to obtain sufficient information and explanations regarding the reliability of the reported performance information on 17 selected indicators relating to Programme 3.

 

Provincial departments audit outcomes – Six provincial departments received qualified audit opinions. Limpopo, North West and Western Cape provincial health departments received unqualified audit opinions. The AG noted that all departments (national and provincial) and entities have incurred irregular expenditure. There was an increase in irregular expenditure incurred, from R941 million in the previous financial year to R5.1 billion. The main contributors were Mpumalanga (R1.9 million), KwaZulu-Natal (R839 million), North West (R763 million) and Northern Cape (R622 million). Three entities (CMS, NHLS and SAMRC) incurred irregular expenditure.

 

 

1. REPORT OF THE FINANCIAL AND FISCAL COMMISSION (FFC)

 

The FFC reported that there has been improvement in expenditure in all the grants except for the Infrastructure related grants. Some of the reasons attributable to underspending are poor project management and delays in supply chain management processes. The FFC has cautioned in the past against the merging of grants especially those that are underperforming without underlying performance data.

 

The FFC observed that the NHLS is undergoing reforms to address a number of operational inefficiency challenges. A new costing model have been developed which could reduce tariffs.

 

On NHI and the White Paper process, the FFC noted that spending on NHI grant is improving but remains lower than initial allocation. As a result, grant baselines have been reduced drastically due to underspending. According to the FFC, NHI requires supplement funding from the provincial equitable share however, the challenge is that most provinces are unable to do so due to fiscal constraints.

 

 

1. PERFORMANCE (FINANCIAL AND SERVICE DELIVERY) OF THE DEPARTMENT 2014/15

 

1. Financial performance

 

The Department received a budget of R33.9 billion in the 2014/15 financial year up from R30.5 billion in the previous financial year (2013/14). This is an increase in nominal terms of 11.2% and 4.7% in real terms. The Department spent R33.2 billion, which is 97.8% of the available budget. The Department under-spent a total amount of R745.9 million, resulting in under-expenditure of 2.2%. Underspending was mainly concentrated in Goods and Services and Capital.

 

 

Table1: Programme expenditure 2014/15

	Final	Actual Expenditure	Over / Under Spent	% Spent
	397 731	386 476	11 255
NATIONAL HEALTH INSURANCE, HEALTH PLANNING & SYSTEM ENABLEMENT	654 127	316 667	337 460
HIV AND AIDS, TB, MATERNAL & CHILD HEALTH	13 046 659	13 027 910	18 749
PRIMARY HEALTH CARE SERVICES	107 155	102 355	4 800
HOSPITALS, TERTIARY HEALTH SERVICES & HUMAN RESOURCE DEVELOPMENT	18 808 853	18 482 048	326 805
HEALTH REGULATION & COMPLIANCE MANAGEMENT	886 045	839 199	46 846
	33 900 570	33 154 655	745 915

 

 

 

 

 

 

 

1. Programme Performance

 

This section provides an analysis of the expenditure performance of the Department. The analysis focuses particularly on spending of the allocated budget in each of the six main programmes.

 

Programme 1: Administration – The aim of this programme is to provide overall management of the Department and centralised support services. The programme was allocated R397.7 million and spent R386.4 million (97.2%, up from 89.6% in the previous financial year) with an under-expenditure of R11.3 million (2.8%). The majority of this programme’s budget was spent on Goods and Services (55.4% up from 43.3%) and Compensation of Employees (43.3%). In terms of payments for capital goods only R2.3 million from a budget allocation of R5.9 million was spent, representing an under-expenditure of 60.6%.

Under-expenditure in this programme has declined in this financial year to R11.2 million from R41.5 million in 2013/14 financial year. The reason given for the under-expenditure is that invoices were not processed before the financial year end. These invoices were for legal services, services rendered by the Department of International Relations and Co-operation (DIRCO) and external audit fees.   

Programme 2: National Health Insurance, Health Planning and Systems Enablement – This programme is aimed at improving access through the development and implementation of policies to achieve universal coverage through integrated health systems planning, improving access to quality health services, reporting, monitoring, evaluation and research. This programme was allocated R654.1 million (up from R492.9 million in the previous financial year) with an actual expenditure of R316.7 million (up from R197.9 million). The NHI sub-programme received the largest portion of programme 2’s budget, 78.4% (R487.2 million).

Under-expenditure in this programme has increased to R337.5 million compared to the 2013/14 financial year (R295 million). Reasons for the under- expenditure relates to the slow recruitment of General Practitioners in the NHI Pilot Districts, as well as the delays in negotiating additional funds for the South Africa Demographic and Health Survey.

Programme 3: HIV and AIDS, Tuberculosis, Maternal and Child Health – This programme consists of three sub-programmes that relates directly to the Millennium Development Goals (MDGs) 4, 5 and 6 which are critical indicators for the Department and for health in the country. This programme was allocated R13 billion (up from R11 billion in 2013/14). A large proportion (98%) of this programme’s budget is allocated to the HIV and AIDS sub-programme. Programme 3 spent R13.028 billion (up from R10.9 billion) which is a 99.8% expenditure rate, with an under-expenditure of R18.7 million.

Programme 4: Primary Health Care (PHC) Services – This programme also houses a number of sub-programmes identified as key policy interventions by the Department in improving the health service and reducing the quadruple burden of disease. These programmes include District Health Services, Communicable diseases, Non-communicable diseases (NCDs), and Violence and Trauma and EMS. The budget allocation for this programme has declined from R113.8 million in 2013/14 to R107.2 million in 2014/15. This decline in budget is despite the fact that the Violence, Trauma and EMS sub-programme was added to the programme over this period. 

This programme shows a 95.5% expenditure outcome, representing 4.5% (R4.8 million) under-expenditure. Reasons given for the under-expenditure includes the printing of promotional material which were not received from the supplier before the financial year end as well as challenges of banking details for transfer payment to the Kidney Foundation.

Programme 5: Hospitals, Tertiary Health Services and Human Resource Development – This programme deals with the development of policies, delivery models and clinical protocols for hospital and emergency medical services. It also ensures that Academic Medical Centres (AMCs) and health workforce development programmes are aligned.

This programme has spent 98.3% (R18.482 billion) of its R18.809 billion allocated funds, resulting in under-expenditure of R326 million or 1.7% (underspending in 2013/14 financial year was R244.842 million, or 1.4%). R316.7 million of this under-expenditure can be attributed to Health facilities Infrastructure Management sub-programme.

Programme 6: Health Regulation and Compliance Management – The aim of this programme is to regulate procurement of medicines and pharmaceutical supplies, including food control and trade in health products and health technology. It also promote accountability and compliance by regulatory bodies for effective governance and quality of health care.

This programme was allocated R886 million and spent 94.7% of its appropriated funds, amounting to R839.2 million (up from R735.1 million in 2013/14), with under-expenditure of R46.8 million. An additional R23.2 million was appropriated to the National Health Laboratory Services due to the Ebola outbreak in West Africa. A total of R21.5 million was underspent by the Office of Health Standards Compliance.

1. Conditional grants

 

The Department has underspent on the Health Infrastructure Grant (Indirect) to the amount of R312 million (R257 million in 2013/14) and R 305 million (R279 million in 2013/14) on the NHI Grant (Indirect), this resulted in underspending on Programme 2. With regards to spending of grants by provinces, Eastern Cape, Mpumalanga and Northern Cape provinces managed to spend 26%, 47% and 57% respectively, on the NHI Gant.

 

1. Service delivery performance

 

In terms of service delivery performance, for the financial year 2014/15, the Department achieved 64 (63%) of its 102 targets (Table 2). The Department appears to do better in relation to Programmes 1, 2 and 5 in terms of percentage of targets met achieving 80%, 74% and 71% of the targets set, respectively. Only 48% (up from 33% in the previous financial year) of the targets for Programme 3 were fully achieved. For Programmes 4 and 5, 65% and 58% respectively, were achieved.

 

 

 

Table 1: Programme Performance Overview

Programme	Number of targets	Achieved	Not fully achieved	Percentage  Achieved
ADMINISTRATION	10	8	2	80%
HEALTH PLANNING AND SYSTEM ENABLEMENT	19	14	5	74%
HIV AND AIDS, TB AND MATERNAL, CHILD AND WOMEN’S HEALTH	31	15	16	48%
PRIMARY HEALTH CARE SERVICES	23	15	8	65%
HOSPITALS, TERTIARY SERVICES AND WORKFORCE DEVELOPMENT	7	5	2	71%
HEALTH REGULATION AND COMPLIANCE	12	7	5	58%
Total	102	64	38	63%

 

 

1. Programme Performance

 

This section provides an analysis of the performance of the Department under each of its six main programmes. The analysis focuses particularly on the overarching targets and achievements under each programme and highlights some of the challenges that prevented the Department from achieving these target.

 

Programme 1: Administration – There are five new performance indicators in this programme, these relates to developing an integrated communication strategy, improving turnaround time for recruitment processes, developing an Employee Wellness Programme, developing a framework for Integrated Health Service Plans as well as establishing consultative fora.

Targets achieved include an unqualified audit opinion for the Department as well as 3 provinces (North West, Limpopo and Western Cape). It was noted that Limpopo managed to improve its audit outcomes moving from a qualification in 2013/14 financial year to an unqualified audit outcome.

 

The targets that were not achieved under this programme include improving turnaround time for recruitment processes to four months and establishing one national and nine provincial consultative fora.

 

Programme 2: National Health Insurance, Health Planning and Systems Enablement –As with the previous financial year 14 of 19 (74%) targets were achieved. Some targets achieved in this programme includes the implementation of a revenue retention strategy, this resulted in R450 million total revenue collected by the five central hospitals. Furthermore, the Department managed to achieve the implementation of the central chronic medicine dispensing and distribution programme in ten NHI pilot districts as planned for the 2014/15 financial year.

In improving management and control of pharmaceutical services, the Department managed to review and publish the PHC Essential Medicines List (EML) and Standard Treatment Guidelines (STGs) as well as reviewing 24% (the target was 20%) of Hospital Level Paediatric EML/STGs.

A deviation from the planned targets under this programme is the envisaged implementation of the Monitoring and Evaluation (M&E) Plan for Health. The Department did not implement the M&E plan and only managed to review and revise it.

 

Programme 3: HIV and AIDS, Tuberculosis, Maternal and Child Health – In Programme 3, the Department only managed to achieve 15 out of 31 targets (8 of 24 targets in 2013/14 financial year). This means that the Department spent 99.8% of its allocated budget under this programme and only achieved approximately 48% of its targets.

In terms of HIV and AIDS, a total of 508 404 (the target was 1 million) Medical Male Circumcisions (MMC) were performed. Though the target of 1 million was not achieved, HIV testing increased from 6.6 million in the previous year, to 9.6 million.  South Africa is reported to have the largest ARV programme in the world, in 2014/15 there were 3.1 million people on the ARV programme.

In 2014/15, 60% of Tuberculosis-related targets were achieved as compared to 25% in the 2013/14 financial year. The Department aimed to conduct risk assessments at 20 Correctional Services Management areas, but managed to visit four. The reasons given for the deviation is that there were delays in grant implementation with funds only moving to NGOs ten months after the official commencement of the Global Fund grant.

The Department is making some progress with regard to maternal health issues. The targets relating to delivery in facility, mother postnatal visit within 6 days and antenatal 1st visit before 20 weeks were not achieved. The Department planned to achieve 80% rate of mother postnatal visit within 6 days, instead 74.3% was achieved. Only 53.9% of pregnant women booked for antenatal care visit before 20 weeks, against a target of 65%.

There was an improvement on the indicator to reduce maternal mortality rate in public health facilities. The target for maternal mortality ratio in facility was 100 per 100 000 live births, the Department managed to achieve 132.5 per 100 000 live births. The Department implemented MomConnect as an innovation to improve antenatal care, to date 420 00 women are registered.

The PMTCT rate continues to improve from 2.0% in the previous year to 1.5% (target was 1.8%) which is a significant improvement. It appears that the Department is on its way to getting it down to zero. Targets relating to reducing child under-five mortality rate were all achieved.

 

Programme 4: Primary Health Care (PHC) Services – The Department achieved 15 out of the 23 targets related to PHC, including surpassing the target for number of functional ward based PHC outreach teams (1748 were established, the target was 1500). A new indicator is for all clinics to be scaled up to Ideal Clinics within the next three years.  

With regards to malaria, the Department has not achieved the malaria transmission rate target of 0.82 malaria cases per 1000 population at risk. The reason given for this is that there was a spike in cases in Limpopo which reported a 1.2 incidence rate (6 811 local cases). Potential factors contributing to the increase in malaria was shortage of DDT (pesticide used to kill mosquitos) and immigration to the Limpopo province.

For non-communicable diseases (NCD) a number of new targets were reported including reducing obesity in men and women, screening of high blood sugar and blood pressure levels, as well as improving access to mental health. Regulations for emergency medical services (EMS) has been published for comment and EMS response times are going to be reviewed. With regards to the Forensic Chemistry Laboratory, the Department reports having established baselines with regards to test turnaround times.

 

Programme 5: Hospitals, Tertiary Health Services and Human Resource Development – The number of targets for this programme has been reduced from 12 to 7. In 2014/15 financial year, 5 out of the 7 (71%) targets have been achieved compared to 5 of 12 targets or 41.6% in 2013/14.

The Department planned to gazette 2 tertiary hospitals providing the full package of Tertiary services, 3 hospitals were gazetted. Guideless for staffing norms and standards for clinics and CHCs were developed. Four Regional Training Centres (RTCs) were established (the target was to establish three).

The target to accredit five nursing colleges was not achieved. The reason given for this deviation is that there is a need to first develop a scope of requirements for the implementation of the nursing strategy.

Programme 6: Health Regulation and Compliance Management – In terms of performance in this programme, 7 out of 12 (58%) targets were achieved as compared to 15 of 20 (75%) targets in 2013/14 financial year. Some targets achieved includes, 63% of health establishments that have developed annual Quality Improvement Plans, the target was 45%. The patient satisfaction survey baseline was established during this reporting period.

 

1. PERFORMANCE (FINANCIAL AND SERVICE DELIVERY) OF ENTITIES

 

 

1. South African Medical Research Council (SAMRC)

 

A summary of the financial performance for the 2014/15 is as follows:

 

• Total revenue increased by 2.5% from R651 million in 2013/14 to R667.4 million in 2014/15. The total revenue consist of government grant of R391.5 million and R275.8 million from income from research contracts and other grants and services.
• Operating expenditure increased from R670 million in 2013/14 to R697.7 million in 2014/15 financial year. The increase was attributed to an increased in collaborative research.
• The entity experienced an operational deficit of R3.7 million due to delayed payments on Flagship projects.
• The AG gave the SAMRC a clean audit opinion for the fifth consecutive year. However, the AG pointed out that supply chain management processes is concerning.

 

Table 3: Statement of changes in net assets

	Accumulated  surplus	Total net assets
	R	R
Balance at 1 April	241 358 172	241 358 172
Changes in net assets      Surplus for the year	4 533 526	4 533 526
Total changes	4 533 526
Balance at 1 April 2014	245 891 698	245 891 698
Changes in net assets      Deficit for the period	(3 767 376)	(3 767 376
Total changes	(3 767 376)	(3 767 376
Balance at 31 March 2015	242 124 322	242 124 322

 

During this reporting period, SAMRC reported on ten (10) targets of which nine (90%) have been achieved. Table 4 below gives details of the SAMRC’s performance per programme for this reporting period.

Table 4: Performance on four objectives

PROGRAMME	STRATEGIC OBJECTIVE	PERFORMANCE TARGET
ADMINISTRATION	To ensure good governance, effective administration and compliance with government regulations.	Clean audit was achieved   Target was 30% but only achieved 21%.
CORE RESEARCH	To produce and disseminate new scientific findings and knowledge on health.	Target was 400 and exceeded to 481 reviewed articles
		Target of 100 articles reviewed and published in ISI journals but only done 85 articles.
		Target of 10 peer reviewed articles with an MRC-affiliated author in the top four journals, 20 articles were published.
		Produce 160 ISI journal articles where the first author is affiliated to the MRC during the reporting period. By end of the reporting period, 229 articles were published.
	To facilitate the translation of the SAMRC research findings into health policies and practices.	The SAMRC aimed to influence 4 new local/international policies and guidelines. This target was met.
	To provide funding for conducting health research.	Award 100 research grants. The SAMRC awarded 101 grants during the reporting period.
INNOVATION AND TECHNOLOGY	Number of innovation and technology projects funded by the SAMRC to develop new diagnostics, devices, vaccines and therapeutics.	31 projects were funded by the SAMRC. Exceeding the target of 30 projects.
CAPACITY DEVELOPMENT	To enhance the long term sustainability of health research in South Africa by providing funding for the next generation of health researchers.	Target of 60 bursaries/ scholarships to be issued. By end of the reporting period, 86 were issued.

 

1. National Health Laboratory Services (NHLS)

 

A summary of the financial performance for the 2014/15 fiscal year is as follows:

 

• Surplus generated for the year amounting to R180 million compared to a loss of R152 million in the previous financial year.
• Revenue grew by 10% from R5.2 billion to R5.7 million. Revenue from provincial hospitals amounted to 96% of the total revenue generated.
• Production costs including direct labour and material grew by 6% from R3.9 billion to R4.2 billion.
• General and support expenses decreased by 5% from R1.8 billion to R1.7 billion in the financial year under review.
• Assets increase by 20% mainly as the result of a 17% increase in accounts receivables and 87% increase in the bank. The closing bank account balance ended at R651 million compared to R348 million in the previous financial year.
• Accounts receivables balance at year end constituted 68% of total assets compared to 71% in the previous financial year, indicating an improvement in collection.
• Current liabilities increased by 32% compared to the previous financial year. The balance at the end of 2014/15 was R1.5 billion compared to R1.2 billion in 2013/14. The trade and other payables grew from R714 million in 2013/14 to R1 billion in 2014/15. Other liabilities include R126 million leave liability and R854 million employee benefits obligations.

 

The NHLS received an unqualified audit opinion with findings. There were no material findings on the usefulness and reliability of the annual performance report. Material findings were reported on compliance with laws and regulations as follows: 

 

• As with the previous financial year, there are properties that were still not transferred into the name of the NHLS.
• Proper control systems to safeguard and maintain assets were not implemented resulting in non-compliance with the PFMA (No.1 of 1999).
• The NHLS had material irregular expenditure as a result of the accounting authority no taking effective steps to prevent irregular expenditure (amounting to R341 million from R7.9 million in the previous financial year).
• A material adjustment needed to be made to the annual financial statements to avoid a qualified opinion.

 

In terms of achievement of targets, only 8 of the 25 targets set were achieved, meaning that 32% of targets were achieved and 68% were not achieved. Details per key performance indicator are as follows:

 

Key performance indicator 1: Partner Perspective

 

Only 2 out of 8 targets were achieved. The performance of the programme is as follows:

 

• Improve Partner Satisfaction

• Partner satisfaction index – Service: N/A (target 76%): Survey was not done due to cash constraints.

• Improve Total Turnaround Times (TAT)

 

• TAT TB Microscopy   –  92% (target 90%): Target achieved
• TAT CD4 – 89% (target 90%):  Target not achieved due to shortage of laboratory staff.
• TAT Viral Load – 81% (target 90%): Target not achieved due to shortage of laboratory staff.
• TAT HIV PCR – 70% (target 90%): Target not achieved due to tests being referred to centralised sites.
• TAT – Cervical Smear – 57% (target 75%): Target not achieved due to tests being referred to centralised sites.

• Improve Quality of Tests:

• Proficiency testing (Excluding Parasitology + Morphology)   – 91% (target 95%): Target not achieved due to shortage of laboratory staff.
• Proficiency testing (Parasitology + Morphology) – 95% (target 75%) – Target achieved.

 

Key performance indicator 2: Financial Perspective

 

Only 3 out of the 6 targets were achieved. These included:

• Turnover (Rm)   – R5 600 (target R5 036)
• Spend Materials as per budget – 31.5% (target 30.5%)
• Spend Overheads as per budget – R3 690 (target R3 442)

 

The targets not achieved related to late or non-payment by debtors including:

• Minimum cash collection (Rm) – R4 863 (target R5 060)
• Improve payment to creditors – 125 days (target 40) [last year 61 days]
• Improve collections from debtors – 335 days (target 45) [last year 185 days]

 

Key performance indicator 3: Employee Perspective

 

The NHLS has achieved only 2 out of 7 targets set in this programme. Those not achieved include:

• Employee satisfaction – N/A (target (2.9) – Survey was not done due to cash constraints.
• Maintain low vacancy rate – 22% (target 5%)
• Maintain low staff turnover – 9% (target 10%)
• Improve Broad-Based Black Economic Empowerment (B-BBEE) status – 3 (target 4)
• Maintain high registrar pass rate – 55% (target 60%)

 

Those indicators achieved included:

• Improve employment equity (EE) profile – 82% (target 60%)
• Improve B-BBEE procurement – 57% (target 55%).

 

Key performance indicator 4: Internal Perspective

 

Only one of four targets were achieved under this programme.

 

• Achieve laboratory accreditation:

• Accreditation – Academic institutions    –  91% (target 100%) not achieved
• Accreditation – Regional laboratories    –  55% (target 100%) not achieved

• Improve translation of research:

• Research report submitted to influence policy – 4 (target 5) not achieved
• Research report translated into service – 12 (target 5)

 

1. Council for Medical Schemes (CMS)

 

The AG highlighted the following concerns:

• The AG observed that during this reporting period, CMS incurred irregular expenditure which was mainly related to lack of compliance to supply chain management regulations.
• Incurred irregular expenditure was mainly related to, a bid awarded without following correct procedures; quotations accepted based on lowest price instead of on points scored; three quotations not obtained; non-compliance to cost containment measures; deviations incorrectly approved; and request for quotation incomplete.

 

Highlights of the CMS Performance Indicators:

 

• CMS had planned to achieve 100% of its quarterly performance indicators by the units, but only managed to achieve 86% of the targets.
• The target was to publish 11 Prescribed Minimum Benefits (PMBs) benefit definitions and CMS scripts. A total of 12 PMBs benefit definitions and one CMS script were published, thus exceeding the target.
• Only 73% of complaints were resolved, against a target of resolving 93% of complaints within 120 days and within the complaints procedure.
• Out of 960 planned clinical matters to be reviewed by the Clinical Review Committee (CRC) for the year under review, the CRC only reviewed 623 clinical matters.
• CMS planned for 99% network and server uptime per quarter, but only managed to reach 97%.
• Employment equity target was 85%, this target was exceeded by 3%.
• CMS had planned for a 90 days turnaround time to fill vacancies. However, it took CMS longer than 90 days to finalise the appointments of staff.
• Target for staff members attaining an effective level of performance was 75%. By end of the reporting period, this target was exceeded by 19%.
• CMS had planned to accredit 4964 brokers and broker organisations within 21 working days of receipt of complete applications. This target was exceeded by 63 accreditations.
• The target to produce 4 reports on provider compliance according to the International Classification of Diseases (ICD-10) was not met, as only one report was produced.

 

The AG provided the CMS with its 15th consecutive unqualified audit report for the manner in which the CMS managed its financial affairs and complied with the requirements of the PFMA (No. 1 of 1999). Though the CMS received an unqualified audit report, the AG identified weaknesses relating to supply chain management and information technology governance.

 

1. Compensation Commissioner for Occupational Diseases (CCOD)

The CCOD was not audited again this financial year as the entity did not submit annual financial statements for the fourth consecutive year (2011/12 to 2014/15). The position for the Commissioner was filled, however, the position of CFO was vacant throughout the financial year.

 

1. Office of Health Standards Compliance (OHSC)

The Office of Health Standard Compliance did not table its annual report for the year under review.  The Department reported that the OHSC could not table its annual report as the CFO position has recently been filled. The budget of the entity was managed by the Department.

 

1. COMMITTEE OBSERVATIONS  AND RESPONSES

 

1. Department

 

Having considered the 2014/15 annual report of the Department of Health, the Committee made the following observations with respect to financial and service delivery performance:

 

• The Department has again achieved an unqualified audit report for the fourth consecutive year.
• The lack of reliability of performance data remains a concern. This was in relation to performance indicators for Programme 3.
• Overall, the Department is performing well with regards to spending of the allocated budget. The Department spent 97.8% of its adjusted budget.  However, there are pockets of underspending (Programme 2 and 5).
• Programme spending levels ranged from 48.4% to 99.9%. Programme 2 under-spent by 51.6%. In general, under-expenditure has decreased compared to the 2013/14 financial year.
• The Committee noted a huge amount of irregular expenditure as a result of non-compliance to legislation by the Department, provinces and entities.
• An increase in irregular expenditure was noted for the Department, from R4.1 million in 2013/14 to R398.3 in 2014/15. This was as a result of a direct payment (R391 million) made to the NHLS in contravention of the Division of Revenue Act (No. 1 of 2015) to assist the entity with cash flow constraints.
• The Eastern Cape, Free State, KwaZulu-Natal, Mpumalanga and Northern Cape provincial health departments had irregular expenditure related to supply chain management. This results in continuous qualification by the AG.
• The Committee commends Limpopo for moving from a disclaimer in 2012/13 to an unqualified audit opinion in 2014/15.
• The Committee noted with concern the late payment of service providers, which is a contravention of Treasury regulations.
• The Committee was concerned that all provinces reported performance information that had findings on reliability.
• Underspending of schedule 6 conditional grants was noted as a concern. Under- expenditure on the Health Infrastructure Grant (indirect) to the amount of R321 million and on the National Health Insurance Grant (indirect) by an amount of R305 million.
• In terms of percentage of targets fully met, overall performance was at 63%. The worst performing programme in this regard is Programme 3, which only achieved 48% of its targets yet spent 99.9% of its allocated budget.
• The Committee noted with concern that pharmacies in certain central hospitals do not operate over 24 hours.
• There seem to be slow progress in implementing the Mental Health Strategy. Public awareness around mental health care is insufficient.
• The launch of the Ideal Clinic initiative is highly commended by the Committee.
• The Department has registered more than 420 000 pregnant women on the recently launched MomConnect initiative.

 

 

1. Entities

 

Having considered the 2014/15 annual reports of Entities, the Committee made the following observations with respect to financial and service delivery performance:

 

1. South African Medical Research Council  (SAMRC)

 

• The entity incurred irregular expenditure arising from non-compliance with supply chain management practices to amounting to R729 000 in 2014/15.
• The AG found that there is a slow response by management to address audit concerns raised in previous years.
• The Committee noted a discrepancy in what the entity reported to have received from the Department (R391 million) as opposed to R446 million as reported by the Department in its annual report.
• Previously disadvantaged universities were given a lesser amount of money for research purposes as compared to previously advantaged universities.

 

1. National Health Laboratory Services (NHLS)

 

• The NHLS had material irregular expenditure as a result of the accounting authority not taking effective steps to prevent irregular expenditure (amounting to R341 million from R7.9 million in the previous financial year).
• Most targets set by the NHLS were not achieved due to financial constraints and staff shortages. 
• The Committee noted with great concern that there were no timeframes set on when the properties will be transferred to the name of the NHLS.

 

1. Council for Medical Schemes (CMS)

 

• The Committee noted with great concern that CMS procured services to the value of above R500 000 without inviting a competitive bid as required by Treasury Regulations 16A6.1.
• CMS planned for a 90 days period for recruitment and talent management but in some positions it took more than 630 days to finalise the appointment of staff.
• The Committee noted that the CMS does not have timeframes set to address transformation within the entity.

 

1. Compensation Commissioner for Occupational Diseases (CCOD)

 

• The CCOD’s continuous non-submission of annual reports and financial statements remains a concern. This is a concern as it reflects a lack of accountability as to how the entity is spending its allocated finances and how this is affecting the compensation of ex-mine workers.

 

 

1. Recommendations

 

Having made the above-mentioned observations, the Committee recommends that the Minister of Health should:

 

• Present to the Committee a turnaround plan to address the recurring issue related to quality of data as reported by the Auditor-General.
• Present a detailed plan on how to improve on underspending on Programme 2.
• Present a report on reasons for the inadequate performance against set targets versus high expenditure under Programmes 3 and 4. 
• Implement strategies to ensure improved spending on Schedule 6 conditional grants (Infrastructure and National Health Insurance Indirect Grants).
• Ensure that service providers are paid within the set 30-day period.
• Ensure that pharmacies in all central hospitals operate 24 hours.
• Ensure that information systems for tracking progress on infrastructure projects is strengthened.
• Ensure that the Department speeds up the finalisation of the White Paper on NHI with its funding model. 
• Ensure that the Department fast-track the implementation of the Mental Health Strategy.
• Strengthen financial management planning of provincial departments in order to improve financial audit outcomes.
• Ensure effective data collection mechanisms to improve reliability of performance information in provinces.
• Ensure that provincial departments have appropriate accountability mechanisms and skilled personnel in order to address continuous findings on compliance to legislation.
• Ensure that financial statements of the CCOD are audited dating back to 2010/11 financial year and present to the Committee within three months of this report.
• Strengthen controls over the review and monitoring of compliance with legislation, especially in the area of supply chain management, within the CMS.
• Ensure that the NHLS develop debt collection strategies to avoid future cash flow constraints.
• The NHLS should present to the Committee a detailed Human Resources Development Plan with its financial implications.
• Ensure that CMS submit transformation plan with clear timeframes.

 

Unless otherwise indicated, the Department of Health should respond to the recommendations within three months from the day the report is adopted by the House.

 

1. CONCLUSION

 

The report provided an assessment of the performance of the Department of Health on its budget allocation and service delivery performance for the 2014/15 financial year. The overall assessment and production of this report enables the Committee to fulfil its obligations in relation to the amendment of Money Bills by Parliament in relation to the Department of Health.

Key milestones were achieved during the reporting period (2014/15). The highlight of this is the progress made in the implementation of the National Health Insurance in the 11 NHI pilot districts, the Department receiving an unqualified audit opinion from the Auditor-General with Limpopo province moving to an unqualified audit opinion.

 

Report to be considered.