ATC111019: Report First Quarter Expenditure on the Comprehensive HIV and AIDS Grant, the Hospital Revitalisation Grant and the Forensic Pathology Services Grant in the 2011/12 Financial Year

NCOP Appropriations

Report of the Select Committee on Appropriations on the First Quarter Expenditure on the Comprehensive HIV and AIDS Grant, the Hospital Revitalisation Grant and the Forensic Pathology Services Grant in the 2011/12 Financial Year, dated 19 October 2011

 

1. Introduction

The Select Committee on Appropriations (the Committee) conducted hearings on the spending levels on the following health grants in the 2011/12 financial year:

• Comprehensive HIV and AIDS Grant;
• Hospital Revitalisation Grant; and
• Forensic Pathology Services Grant.

 

This emanated from the provincial expenditure report published by National Treasury on 16 August 2011.  The hearing took place on Tuesday, 6 September 2011, in Committee Room S12A at Parliament.

 

2. Terms of reference 

The hearing formed part of the Committee’s ongoing interaction with provinces to monitor their spending patterns on conditional grants. A framework for each grant sets out the purpose of the grant, measurable objectives, conditions, allocation criteria, and past performance, among other things.

 

Provinces were requested to make oral presentations on the grants and to take into consideration the following:

• Data trends in allocations, transfers and actual expenditure of the grants for the first quarter of the 2011/12 financial year;
• Assessment of the department’s monitoring capacity for the financial year, under-spending and what capacity constraints impacted on these outcomes;
• Whether monthly reports are received from receiving departments or municipalities, and if not, what are the departments doing to ensure compliance with monthly reporting; and
• The department’s spending plan on the grants.

 

The Committee invited the provincial MEC’s responsible for Health from the Eastern Cape, Mpumalanga, Limpopo and the Western Cape, as well as the national Department of Health. In addition, National Treasury was requested to make a presentation. The MEC’s from the Eastern Cape and Mpumalangaattended the hearing. The MEC’s from the Western Cape and Limpopo submitted apologies and sent officials to represent them. The Committee decided not to hear the briefing from the Western Cape, as neither the Head of Department nor the Chief Financial Officer was present. The national Department of Health was also absent from the hearing.

 

3.  National Treasury (NT)

3.1 Comprehensive HIV and AIDS Grant (CHAG)

3.1.1 First Quarter spending

National Treasury presented expenditure on the CHAG as at 30 June 2011 as follows: 

Province	Main budget:	Projected outcome:	Actual spending as at 30 June:	Spending as Percentage of main budget:
	R’000	R’000	R’000	%
Eastern Cape	864 173	773 737	99 866	11.6
Free State	530 440	530 440	100 684	19.0
Gauteng	1 620 673	1 620 673	280 476	17.3
KwaZulu-Natal	1 889 427	1 907 333	439 016	23.2
Limpopo	624 909	624 909	120 374	19.3
Mpumalanga	490 366	490 366	81 359	16.6
Northern Cape	212 923	212 923	27078	12.7
North West	599 437	599 437	74 747	12.5
Western Cape	660 614	660 614	95 395	14.4

 

3.1.2 Factors affecting spending

According to NT, a typical reason given for the slow spending by most provinces was slow or delayed internal supply chain (procurement) processes within the health departments.

NT, together with the provincial treasuries, has determined the following:

• There is poor internal capacity (in terms of staff numbers) in the CFO and Supply Chain Management (SCM) functions within provincial health departments. The provinces of the Eastern Cape and the Northern Cape are of the most concern in this regard, and NT and the respective provincial treasuries have deployed expertise to assist them to manage these internal processes.
• On a national level, there needs to be clarification of national guidelines for training to service providers.
• Some aspects of the programme (e.g. donations and procurement done through the Lottery) require national intervention and support in order to realise improvements.

 

3.2 Forensic Pathology Services Grant (FPSG)

3.2.1 First Quarter spending

National Treasury presented expenditure on the FPSG as at 30 June 2011 as follows:  

Province	Main budget:	Projected outcome:	Actual spending as at 30 June:	Spending as Percentage of main budget:
	R ‘000	R ‘000	R ’000	%
Eastern Cape	73 506	69 473	17 923	24.4
Free State	39 451	39 451	6 930	17.6
Gauteng	97 966	97 966	12 074	12.3
KwaZulu-Natal	161 550	161 550	38 978	24.1
Limpopo	42 308	42 308	9 976	23.6
Mpumalanga	53 114	55 607	77 751	14.6
Northern Cape	24 240	24 240	5 312	21.9
North West	28 019	28 019	5 253	18.7
Western Cape	70 226	70 226	13 690	19.5

 

 

3.2.2 Factors affecting spending

NT reported that slow execution of procurement processes is the biggest reason for under-expenditure on this Grant, particularly the following:

• In the Free State Province there was a delay in awarding tenders (this appears to be a symptom of general capacity and skills challenges in the department).
• In Gauteng Province, the poor performance of the Department of Infrastructure Development (Public Works) has led to slow progress in the building of mortuaries.
• In Mpumalanga Province there are vacancies in key posts that are not being filled.
• In the North West Province there are delays in procurement processes.  This suggests low capacity or competency in the finance and SCM functions of the department.
• In the Western Cape Province payments to service providers were being processed late.  Although payments were planned for July, there is still slow expenditure at the end of July.

 

The national Department of Health is conducting site visits to determine the progress on projects and the level of direct support required by provinces. NT is continuing the implementation of the IDIP HR strategy, which is aimed at guiding provinces to ensure the right competencies are being recruited in respect of infrastructure projects.

 

3.3 Hospital Revitalisation Grant (HRG)

3.3.1 First Quarter spending

National Treasury presented expenditure on the HRG as at 30 June 2011 as follows: 

Province	Main budget:	Projected outcome:	Actual spending as at 30 June:	Spending as Percentage of main budget:
	R ‘000	R ‘000	R ’000	%
Eastern Cape	382 048	355 914	45 976	12.0
Free State	417 883	417 883	94 883	22.7
Gauteng	801 965	801 965	144 733	18.0
KwaZulu-Natal	547 698	611 651	123 818	22.6
Limpopo	371 672	371 672	19 883	5.3
Mpumalanga	356 557	356 557	24 665	6.9
Northern Cape	406 892	401 891	73 987	18.2
North West	370 074	370 074	140 488	38.0
Western Cape	481 501	481 501	77 115	16.0

 

3.3.2 Factors affecting spending

The HRG continues to be plagued by poor performance in the 2011/12 financial year.  The Grant was under-spent by over R1 billion in 2010/11 and the spending rate in the first quarter of 2011/12 has declined even further (by 13.2%). According to NT there are broadly two reasons for this under-performance:

 

a)      Poor infrastructure planning by provinces

This includes the following:

·         Inadequate scoping and design (e.g. Natalspruit, King George V).

·         Poor communication and co-operation between the provincial departments of Public Works and Health (most provinces have consistently raised this as a challenge).

·         Poor or inaccurate cash-flow projections (e.g. the provinces of Gauteng, KwaZulu-Natal, Limpopo and the Northern Cape).

·         Inadequate technical skills or staffing capacity (this has been highlighted by most provinces).

 

b)      Poor project performance

This includes the following:

·         Unexplained delays in variation order approvals, construction, and equipment procurement, etc.

·         Poor or slow performance of contractors, including contractors who are awarded tenders for big projects they cannot execute.

·         Insufficient monitoring by senior managers in client departments.

 

Measures have been implemented by the national Department of Health and NT to tighten the management and monitoring of projects and to adhere to effective planning principles.

 

4. Eastern Cape Province

 

The Eastern Cape Province indicated that the following capacity constraints have adversely impacted on the outcomes of all the grants:

• Compensation of Employees – the Department has had challenges with problematic conditional grant Persal link codes, which has recently been remedied.
• Goods and Services – the Department has experienced some challenges in paying various key accounts timeously, thus adversely impacting on the expenditure disclosed. This is currently being remedied through the Finance Cluster turnaround plans for accounts payable. In addition, Medsas interfaces with BAS in the month of June 2011 were not up to date, which has been rectified in July.
• Transfers and Subsidies – There have been extensive challenges with the respective institutions in complying with the Public Finance Management Act requirements of Section 38(1)(j) (written assurance from the entity that that entity implements effective, efficient and transparent financial management and internal control systems; as well as Treasury Regulation 8.4.2 (…withholding transfers and subsidies to an entity  where conditions attached to the transfer and subsidy have not been complied with). An example of this is that the Fort Hare and Walter SisuluUniversities were not able to produce audited financial statements for the last three years.

 

4.1 Comprehensive HIV and AIDS Grant (CHAG)

The Eastern Cape Province reported that they had projected to spend R190.3 million on this Grant during the first quarter, but the actual expenditure was R99.9 million, leaving a variance of R90.4 million.

 

The Province further indicated that the following challenges were experienced, with remedial actions taken in brackets:

 

• Due to the verification process of invoices before decentralised National Health Laboratory Services (NHLS) funds are paid by facilities, no invoices were paid during February, March and April 2011, resulting in under-expenditure of R73.0 million on Goods & Services.
• R37.0 million allocated for blood and blood products was under-spent because facilities who do not transfuse could not spend even though allocations were made to them.
•  An amount of R28.0 million for condoms was not spent due to new arrangements by the National Department of Health (NDoH) regarding payments of delivered condoms procured by provinces. (National suppliers are now being registered in the Eastern Cape database to enable invoicing by the NDoH.)
• The allocations for Antiretrovirals (ARV’s) were overestimated, as ARV prices were reduced by 53 per cent. (An amendment will be made to shift funds to another economic classification.)
• Allocations of R17 million for training of home-based carers and the purchasing of home-based kits were decentralised to districts, whose spending was delayed by the district tender process and district supply chains. (Provincial Programme Managers will facilitate expenditure through district tender processes.)
• An amount of R4.3 million for TB/HIV was not spent, as conferencing and printing activities engaged in during April, May and June remain unpaid. (Provincial Programme Managers to facilitate timely payment of commitments.)
• The allocations for the Prevention of Mother to Child Transmission (PMTCT) programme were not spent in April, May and June due to tenders not being awarded yet. (Remedial provincial five day tender to speed up the tender process.)
• Allocation for purchase for the High Transmission Areas (HTA0 programme was not done because the HTA Programme Manager’s post is vacant after the departure of the previous manager in April. (The EU Monitoring and Evaluation Manager has been transferred to the HIV Directorate to start by 1 August. Meanwhile procurement for the HTA programme has been delegated and will be facilitated by Provincial Programme Managers.)
• Allocations to purchase Post Exposure Prophylaxis (PEP) comfort packs was not done as the selected Supplier 1 withdrew. (Procurement to be done through Supplier number 2.)

 

4.2. Forensic Pathology Services Grant (FPSG)

The Eastern Cape Province reported that they had projected to spend R22.0 million on the FPSG during the first quarter, with the actual expenditure being R17.9 million, leaving a variance of R4.0 million.

 

The Province indicated that this under-spending was due to staff shortages. The recruitment process for vacant posts in the Port Elizabeth and East London region would be finalised at the end of August 2011. In addition, a request has been made to the Organisational Development Directorate (OD) for the creation of additional posts.

 

4.3 Hospital Revitalisation Grant (HRG)

The Eastern Cape Province reported that they had projected to spend R72.1 million on the HRG in the first quarter, but the actual expenditure was R46.0 million, leaving a variance of R26.1 million. The main reason for the under-expenditure was attributed to the late commissioning (only in June 2011) of major building works. Notwithstanding the under-expenditure in the first quarter, the department indicated that the total budget of R382.0 million would be spent by the end of the financial year.

 

The Infrastructure Unit, together with the Budget Office and the departmental Project Implementation Agency, has put a process in place in order to improve the settling of outstanding invoices. Since the end of June, expenditure for this Grant has improved and stood at R95.0 million by the end of August 2011.

 

5.  Mpumalanga Province

5.1 Comprehensive HIV and AIDS Grant

Mpumalanga Province reported that of the total budget of R489.6 million for this Grant, a total of R134.1 million was transferred during the first quarter. The department managed to spend only R81.4 million of this amount.

 

The following challenges were reported in spending on this Grant (with remedial steps in brackets):

• Delays in the appointment of personnel for the Medical Male Circumcision, High Transmission Areas and for programme management support in the districts and sub-districts. (Appointments will be fast-tracked.)
• Non-delivery of condoms to the province due to the slow registration of condom suppliers on the provincial data base - only one supplier is successfully registered currently. (Follow up registration of six condom suppliers on the provincial data base with Supply Chain.)
• Under-expenditure on ART drugs and test kits due to donations. (Savings will be shifted to needy programmes within the Grant.)

 

5.2 Forensic Pathology Services Grant (FPS)

5.2.1 First Quarter spending and performance

The first quarter expenditure target had been R12.6 million, but the Province spent only R7.8 million. The Province indicated that the non-appointment of personnel had a negative effect on the spending on the Grant, as expenditure on goods and services and capital assets is dependent on the availability of staff.

 

The Free State Province reported on their performance against first quarter delivery targets as follows:

• Number of sites providing Forensic Pathology Services: Out of the first quarter target of 20 sites, the Department achieved 19. No staff has been appointed for the Carolina Medico Legal Laboratory (MLL).
• Number of autopsies conducted: A total of 1 004 autopsies had been performed. Although the first quarter target had been 1 200, the Province indicated that there is no control over this variable.
• Number of kilometers traveled for Forensic Medical Care: The first quarter target had been 45 000 kilometers, but the actual number was 136 726 kilometers. Due to a shortage of Medical Officers, corpses are transported from one station to another for a post mortem.
• Number of Medico Legal Laboratories (MLLs) under construction: The first quarter target had been to have two MLLs under construction. However, only one had been achieved – in Piet Retief. The second project, in Witbank, was not approved in the 2011/12 Infrastructure Year Plan.
• The target of developing one asset register per facility was achieved.
• Number of FPS employees appointed, including specialists: Out of the first quarter target of 118, the department managed to appoint 98. The problem is that the 20 outstanding posts are the most senior ones.
• Number of training sessions conducted: Although there was none projected for the first quarter, six took place.
• Number of wellness, counseling and teambuilding sessions conducted: The target of one was achieved.
• The first quarter targets in terms of monthly and quarterly reporting were achieved.

 

5.2.2 Challenges and remedial steps

The Province indicated that the following challenges were experienced, with the remedial actions to be implemented in brackets:

• The appointment of a Senior Manager for FPS has been delayed. (A follow-up will be made with Human Resource Management within the Department.)
• Services rendered by private undertakers in Piet Retief, Balfour, Belfast and Volkrust is in contravention of the rules and regulations for rendering FPS in South Africa. (Consider upgrading the currently installed cold rooms in hospitals to have a reception, viewing areas, office space and a store room for consumables.)
•  There is a shortage of personnel due to a delay in the advertisement of posts. (Immediate filling of all vacant funded posts by the Grant.)
• There is a shortage of specialists in the FPS due to a lack of academic institutions and suitable infrastructure. (An M5 facility to be included in the Departmental Infrastructure Plan for the 2012/13 financial year.)

 

5.3 Hospital Revitalisation Grant (HRG)

The Province reported that of the R77.7 million transferred during the first quarter, they have only spent R24.7 million.  The following reasons were given for the under-expenditure:

 

• Poor performance by contractors, leading to contracts being terminated. Contractors were opposing termination thus delaying the appointment of new contractors and the spending of funds.
• Equipment ordered but not yet delivered and therefore payments not yet effected (funds are committed).
• Delays in the procurement of consultants for projects under planning.

 

The following plans were being made to improve spending:

 

• National Department of Health initiative to revitalise Nursing Schools using funds from projected savings;
• The implementation of projects currently in the planning stage;
• Appointment of new contractors with a proven capacity to  deliver big projects;
• Strengthen inter-departmental partnership with the implementing agent; and
• Strengthen capacity of the infrastructure unit (appointment of a Resident Engineer).

 

6. Limpopo Province

6.1 Comprehensive HIV and AIDS Grant

Of the R125.0 million transferred during the first quarter, the Province has spent  120.4 million. They reported the following plans to improve spending, with the amounts involved indicated in brackets:

• Linking of HIV and AIDS staff that is currently paid through the equitable share to the grant (R6 million).
• Invoices for ARV’s for August to be paid in September (R23 million).
• NHLS invoices for August to be paid in September (R5.5 million).
• Non-profit organisation payments for the second tranche for three outstanding districts (R30 million).
• Payment to the national department for the procurement of condoms (R5 million).

 

6.2 Forensic Pathology Services Grant (FPS)

Of the R10.6 million that was transferred during the first quarter, the Province managed to spend R10.0 million.  They reported the following plans to improve spending, with the amounts involved indicated in brackets:

• Fast track procurement of protective clothing like gowns and specialised gloves (R1 million).
• Procurement of autopsy instruments (R0.5 million).
• Procurement of cleaning materials (R1 million).
• Procurement of stretchers and electric saws (R1 million).

 

6.3 Hospital Revitalisation Grant (HRG)

Of the R101.2 million transferred to the Province during the first quarter, they managed to spend only R19.9 million. A Performance Improvement Plan has been developed with the aim of attaining the spending of R109.3 million by 30 September 2011. The details of the plan were presented as follows:

 

 

Accelerated Expenditure Plan	Amount
	R ‘000 000
Professional fees for Maphutha Malatjie OPD	4
Professional fees for Maphutha Malatjie Resource Center	1.1
Professional fees for Letaba projects	2.3
Professional fees for Thabazimbi Mortuary	1.2
Professional fees for Thabazimbi Main Hospital Buildings	10
Construction costs for Thabazimbi OPD and Admin Block	14
Construction costs for Thabazimbi Staff accommodation	1.2
Transactional Advisor’s Fees for the Academic Hospital	5.5
Professional Fees for the Academic Hospital	6
Down-payment on equipment on enabling projects	8
Purchases of Health Technology Equipment	3
Final Accounts	3
Construction costs on the 10 hospital enabling projects on site	22
Organisational Development and Quality Improvement	1.9
Invoices approved but not yet paid	26.4
TOTAL	109.3

 

 

7. Conclusions

After interacting with provincial departments responsible for health and National Treasury, the Committee concluded the following:

 

7.1 There is decline in the spending by provincial health departments on these conditional grants, more specifically, the Forensic Pathology Services Grant and the Hospital Revitalisation Grant;

7.2 Poor performance by contractors is a major cause of under-spending on the Hospital Revitalisation Grant (HRG);

7.3 The absence of resident engineers, as well as the non-performance of SCM Committees

within health departments further hampers performance on the HRG;

 7.4 There is a lack of qualified senior personnel that impacts on the spending of the Forensic Pathology Services Grant;

7.5 The Eastern Cape Department of Health is in the process of cleaning up corruption within its ranks; and

7.6 The Mpumalanga Department of Health has vacancies in critical areas due to the low salaries being offered in comparison with other provinces.

 

8. Recommendations

Having considered the submissions by provincial departments of health and National Treasury on the spending patterns on the Comprehensive HIV and AIDS Grant, the Hospital Revitalisation Grant and the Forensic Pathology Services Grant in the first quarter of the 2011/12 financial year, the Select Committee on Appropriations recommends that the National Council of Provinces considers the following:

 

8.1 The Minister of Hidher Education and Training should consider establishment of a university in Mpumalanga which would be of critical importance to the health sector, in light of the critical shortage of medical skills in the Province;

8.2 The national Department of Health should take steps to address the deteriorating year-on-year expenditure performance of the Forensic Pathology Services Grant and the Hospital Revitalisation Grant, particularly in light of the contribution it has to make towards the National Health Insurance objective, i.e. having well equipped facilities providing quality services;

8.3 Supply Chain Management processes regarding condom distribution in terms of the Comprehensive HIV/Aids Grant should be addressed as soon as possible by Provinces that have experienced delays in the supply of condoms as this forms an integral part of the grant objective; and

8.4 The Committee also wishes to emphasise the importance of having a resident engineer in health departments to assist and accelerate the delivery of Hospital Revitalisation Grant projects.

 

 

Report to be considered.