Programme based budgeting: the health budget programme structure in South Africa
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1 Programme based budgeting: the health budget programme structure in South Africa WHO symposium on Health Financing Presenter: Mark Blecher National Treasury of South Africa 1 November
2 Presentation overview Legal framework Conceptual overview Current budget structure for health departments By programme By economic classification Further segments for reporting purposes Key expenditure trends Challenges Conclusion 2
3 Legal framework The Constitution calls for the legal establishment of a national treasury to, amongst others: Prescribe measures to ensure both transparency and expenditure control in each sphere of government Introduce uniform expenditure classifications The PFMA establishes the National Treasury (NT) to, among others: Prescribe uniform treasury norms and standards Monitor and assess implementation of norms and standards in provincial departments, public entities and constitutional bodies NT issued Guidelines on Budget Programmes in 2010 to provide clarity on the design and use of budget programmes. These were accompanied by detailed manual on programme planning, indicators, targets etc. NT issues an annual circular on agreed uniform budget programme structures for implementation in each year Forms an official basis for publication, collection, aggregation and reporting on government spending 3
4 Key concepts Parliament appropriates the annual budget by (1) programme and (2) economic classification: Programme: A main division within a department s budget that funds a clearly defined set of objectives based on the services or functions within the department s legislative and other mandates. Economic classification: The budget is appropriated by high-level item categories: Compensation of employees Goods and services Transfers and subsidies Payment for capital assets (Payments for financial assets) (Interest and rent on land) Shifting funds between programmes and these items is possible but generally requires treasury approval 4
5 Key concepts Budgets are broken down into further granularity. These lower level categories have do not carry the same legal restrictions, but are important for reporting and expenditure monitoring purposes. Subprogrammes: subcomponents of programmes that define services and activities that contribute to the overall programme objective Lower level items: further breakdown of the economic classifications, e.g.: Compensation of employees: Salaries, social contributions etc. Goods & services: Medicines, medical supplies, lab services etc. Capital assets: Buildings, equipment etc. Transfers: NGOs, public entities, subnational government etc. Other reporting segments: Including responsibility (facility), projects, infrastructure, funding source etc. Each time spending is incurred codes for multiple axes are completed on the financial system (BAS) 5
6 Uniform Budget Programme Structures A uniform budget programme structure exist for provincial departments of health (as well as other sectors). This has many benefits: Allows for comparisons of key government programmes Affords benchmarking across provinces Facilitates consolidation and aggregation of budgets Increased transparency Promotes allocative efficiency Tracking of expenditure Facilitates appropriate interventions NB of working with decentralised levels (e.g. provinces) to develop common budget structure, planning format, national indicators; Subnational can add to these Deviation from this structure requires National Treasury approval 6
7 Key issues Basis for legal appropriation Dependent on financial information system Worked best when well incorporated with planning (APP, strategic plan), annual report, performance objectives and indicators by programme and auditing Process of developing common structure of APP, measurable objectives, performance indicators Uniform budget programme structure: i.e. all provinces must comply; very important for reporting, monitoring, accountability Transparent way of putting in public domain (electronic and hard copy) annual Appropriation Act by programme, budget book by vote and programme (financial and performance; monthly, quarterly and annual reports, auditing Usefulness for accountability, benchmarking 7
8 Current budget structure for health departments Programme name Purpose Subprogrammes 1. Administration To conduct the strategic management and overall administration of the Department of Health 2. District health services 3. Emergency medical services 4. Provincial hospital services To render Primary Health Care Services and District Hospital Services. The rendering of pre-hospital Emergency Medical Services including Inter-hospital Transfers and Planned Patient Transport. Delivery of hospital services, which are accessible, appropriate, effective and provide general specialist services, including a specialized rehabilitation service, as well as a platform for training health professionals and research. Office of the MEC Management District management Clinics Community health centres Community based services Other community services HIV/AIDS Nutrition Coroner services District hospitals Emergency transport Planned patient transport Regional hospitals Tuberculosis hospitals Psychiatric /mental hospitals Sub-acute, Step down and Chronic Medical Hospitals Dental training hospitals 8
9 Current budget structure for health departments Programme name Purpose Subprogrammes 5. Central hospital services 6. Health sciences and training 7. Health care support services To provide tertiary health services and creates a platform for the training of health workers. Rendering of training and development opportunities for actual and potential employees of the Department of Health. To render support services required by the Department to realise its aims. Central hospital services Provincial Tertiary Hospital Services Nurse training college Emergency medical services training college Bursaries Primary health care training Training (other) Laundry services Engineering services Forensic services Orthotic and prosthetic services Medicine trading account 9
10 Current budget structure for health departments Programme name Purpose Subprogrammes 8. Health Facilities Management Provision of new health facilities and the refurbishment, upgrading and maintenance of existing facilities. Community Health Facilities Emergency Medical Rescue Services District Hospital Services Provincial Hospital Services Central Hospital Services Other Facilities 10
11 Key expenditure trends District health services has grown significantly as % of total in past decade. Largely due to growing ART programme Spending on central and tertiary hospitals higher than on provincial hospitals in recent years High spending on infrastructure between 2004 and 2012, but budgets have been cut in recent years due to fiscal constraints Percentage of total provincial health expenditure /97 98/99 00/01 02/03 04/05 06/07 08/09 10/11 12/13 14/15 16/17 18/19 Administration District Health Services Emergency Medical Services Provincial Hospital Services Central Hospital Services Health Sciences and Training Health Care Support Services Health Facilities Management Year 11
12 Key expenditure trends Significant differences between the 9 provinces ZAR per capita (uninnsured) Administration DHS EMS PHS CHS Facilities ec fs gt kzn lim mpu nc nw wc 12
13 Key expenditure trends 3000 ZAR per capita (uninnsured), 2016/ CoE G&S Transfers Capex ec fs gt kzn lim mpu nc nw wc 13
14 Key expenditure trends ZAR per capita (uninnsured), 2016/ Medicines Medical supplies Lab services ec fs gt kzn lim mpu nc nw wc 14
15 Challenges Programme and sub-programme spending are very useful But budgeting system still retains characteristics of traditional line-item budgeting remain, causing rigidity and inefficiencies Allocations too often appear to be based on historical expenditure trends rather than clear enough links to plans, targets etc. Try to interrogate and explain these links in budget documentation, which is quite extensive, programme based. Each Department required to submit annual performance plan and try to get budget and APP to align Programme performance often not sufficiently taken into account when determining allocations SA does not have wide use of systems of diagnosis and procedure coding in public sector, so not good linkages to disease groupings 15
16 Conclusions South Africa has well developed budget structure with programmes and budget programmes Institutionalised with standardised gazetting of health budgets, data collection and reporting and spending categorisation on BAS system Budget structure linked to mandatory planning on the Annual Performance Plan and reporting in the annual report System is fairly well bedded down and is quite a lot positive to learn from In general system works reasonably well, although sometimes budgets and APPs not completely aligned in practice, not well linked to diagnosis and procedure coding; Budgets often not responsive enough to performance changes; Some difficulties with incentives arising from performance auditing. 16
17 Thank you! 17
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