1. Medical Research Council on its 2014/15 Annual Report: Department of Health 2014/2015 performance: Auditor-General & FFC briefings

Transcription

1 1. Medical Research Council on its 2014/15 Annual Report: Department of Health 2014/2015 performance: Auditor-General & FFC briefings 2. Chairperson: Ms L Zwane (ANC) 3. Date of Meeting: 13 October Summary The Auditor General South Africa (AGSA) briefed the Committee on the Audit Outcomes of the Health Portfolio and the Health Sector for the 2014/15 financial year. Limpopo province had improved to the status of unqualified with findings and the Eastern Cape (EC), Free State (FS), Gauteng (GP), KwaZulu Natal (KZN), Mpumalanga (MP) and the Northern Cape (NC) remained unchanged with the status of qualified with findings and the North West (NW), the Western Cape (WC) and National had the status of unqualified with findings. Most auditees had not complied with the legislation. The quality of annual performance reports reflected that 67% were reliable and useful. The status of key commitments by the Minister to address root causes showed that in progress were: Controls would be strengthened to review and monitor compliance with legislation; A qualified chief financial officer would be recruited at the Compensation Commission for Occupational Diseases (CCOD); and An electronic health patient registration system would be designed and implemented to support the reliable recording of health data. The top three root causes to be addressed were: Slow response by the political leadership and senior management Inadequate consequences for poor performance and transgressions Instability or vacancies in key positions There were a number of areas where the portfolio was actually doing well. The hard work being done in Limpopo was very recommendable for this portfolio. However if the AG had to pinpoint the challenges in this portfolio, it was really the reliability of performance information. Of major concern for this portfolio was the issue around supply chain management. The Committee asked when irregular expenditure was regarded as serious and when it was regarded as unacceptable. Members heard that all irregular expenditure was serious and was reported in the Management letter. It was explained why the Free State province was qualified with irregular expenditure of R20 million. This was because the AG knew whether the R20 million was all the irregular expenditure, as it might be more. So this was why the amounts were qualified. The reliability of reports was questioned and more information was asked for with regard to getting reliable data from provinces. Members heard that the biggest challenge here was that information was captured from statistics at facility level into the system. There was lack of oversight, a lack of

2 accuracy in capturing information and a lack of review of the information; and then also the system was not always so stable, although it had improved a lot. The Committee heard that the shifting of R391 million from the National Department Division of Revenue (DORA) was an isolated issue and the AG was not so worried about the processes at the National Department of Health; also with regard to what was classified as irregular expenditure, the issue of irregular expenditure was defined in the legislation and in the various prescripts obtained from National Treasury in terms of what was defined as irregular expenditure: in terms of the R391 million, it represented non-compliance with the Division of Revenue Act, the DORA, which stated that as long as money was paid into a bank account that had not been gazetted, it would constitute irregular expenditure. Members asked if there was a relationship between irregular expenditure and fruitless and wasteful expenditure. There was not necessarily a relationship between fruitless and wasteful expenditure and irregular expenditure. It depended on certain things. If fruitless and wasteful expenditure was high there might be a qualification on fruitless and wasteful as well, however the AG was not entirely sure and would investigate further and report to the Committee. The AG was committed to checking if there was any qualification on fruitless and wasteful expenditure. Members asked why the concurrent challenges impacting on accountability were not elevated because the root cause was the issue of concurrence. The Committee heard that the AG was very clear about the current challenges at the Health Council. For example decisions would be made, but accountability did not rest there. In a number of cases the Minister was quite frustrated, because they would make decisions but the MEC s would do something different. It was very difficult for the AG to pinpoint these situations because it was not covered in its audit process. The audit was done on the financial statements of that province. The Fiscal and Financial Commission reported on the concerns and achievements of the budget programmes of the Department of Health. In the midst of their presentation it became evident that the FCC had omitted to include seven pages in their presentation. They apologised for the printing error and committed to deliver these pages before the end of the business day. The health policy issues of the National Health Laboratory Service (NHLS) were reported on and it was stated that significant progress had been made in meeting outcome targets set for The Committee heard that provinces had exhibited general under expenditure on health, with the exception of two provinces. The Committee made an urgent intervention in this session because it noted that the FCC felt that what they were required to respond to was not what they had been asked to respond to. The Committee did not have a problem if the invitation and questions were not within the scope and mandate of the FCC but it had the sense that the response and comments bordered on the impression that the Committee did not understand the responsibilities of the Department. It was impressed upon the FCC that the Committee knew what it was asking. It should also be remembered that the Committee had oversight work and the answers would assist with its oversight work. Throughout the discussion session the Committee noted differences in the figures and statistics between the Annual Report of the Department of Health and the FCC Report. The FCC s response was that they did not have the Annual Report of the Department of Health. The Committee issued a mild reprimand about this because the Annual Report was available long before the FCC had to prepare their presentation for the day. Members asked if the Equitable Share Formula was going to be substantially reviewed to include basic services and other factors so that it could be a fair distribution as opposed to being an economic calculation based on numbers. The Committee heard that the Provincial Equitable Share was not to achieve multiple objectives but to redistribute the funds in the provincial pool. The aim of the Provincial Equitable Share was not to achieve multiple objectives but to redistribute the funds in the provincial pool. The Committee expressed concern about the lack of evidence of the FCC s mandate in relation to the provinces, especially with regard to conditional grants in the provinces.

3 Members asked for an explanation about the statement made that health costs were spiralling, and were told this issue was related to health care inflation and inflation took into account everything so there was always debate around whether there was health inflation or an education inflation, but it was something that could not be ignored. So if those in the sector argued that the rate at which the allocations were increasing was lower than the rate at which health care was rising, it was a point that had to be listened to although the FCC argued that inflation took into account all the variables including health care. The FCC was cautioned about not declaring their errors timeously and was asked to speak to the Chairperson in future if they landed up in a similar situation. It was decided that for future presentations the FCC had to liaise with the Committee Secretary and they would be given a 14 day period to complete their presentation. The South African Medical Research Council (SAMRC) briefed the Committee on its Annual Report 2014/15. The Committee heard that this was the third consecutive clean audit for the South African Medical Research Council (SAMRC). The research highlights and measured deliverables were as follows: 481 Peer reviewed articles with an SAMRC affiliated author were published in the ISI journal An additional 20 articles were published in peer reviewed articles with an SAMRC affiliated author in the top four journals NEJM, Lancet, Science and Nature 86 Bursaries, scholarships and fellowships were provided to post-graduate participants at different universities. 101 Research grants were awarded by SAMRC during the reporting period In promoting innovation and technology 31 invention projects were funded during the reporting period. The annual performance showed that: 9 out of 10 targets were achieved; and There was a 90% achievement for 2014/15 Financial Year The SAMRC will be in a strong position to achieve the remaining annual target following on the implementation of an additional requirement whereby recipients of SAMRC funds were obligated to acknowledge the SAMRC in all publications or publicity materials emanating from, related to or based on SAMRC funded project work. Of concern was an increase in prostate cancer and that 1 in 4 children die within the first 28 days of life. On the positive side lung cancer was reduced. The following were raised as things to worry about: The lack of critical mass of bio-statisticians; Critical for the success of research; and Need to work with DHE to look at short, mid and long-term strategy. Members asked about the scarcity of the BCG (Bacillus Calmette-Guerin), the TB [Tuberculosis] vaccine; if the SAMRC had ever thought of creating a situation where it was able to manufacture some vaccines or create research projects into vaccines; if there were any active projects in getting vaccines for TB; absenteeism; and translating policy into practice. Fruitless and wasteful expenditure of R was explained as the SASMRC had recovered about R of this money and the total amount of irregular expenditure was really small, it was all just an element of supply chain management procedures that were not followed. The role of the SAMRC in Africa and SADC was explained as the SAMRC was working in the African region on HIV vaccine development. A vaccine programme was being rolled out the MRC

4 was a co-founder of P5 which was a private/public partnership and had a footprint in Malawi, Zambia, Mozambique, Zimbabwe and South Africa - and would be doing HIV vaccine development within that SADC area. The SAMRC also worked on malaria and was the only country in southern Africa that had a GIS mapping of malaria, so it could alert SADC countries to where there were outbreaks of malaria. The SAMRC was also working with the CSIR to develop a Nano technology platform for malaria so that it could help SADC partners with this. The SAMRC also worked with Sudan and Madagascar. It also had relationships with Kenya and supported the recently launched Academy of Science Programme on the Grand Challenges Africa. The relationships with BRICS countries were explained, as there were relationships with China and India with regard to an HIV vaccine; and with Brazil, India and China with regard to childhood obesity. Relations with Russia had failed so far but there was a commitment to work on this. Members asked if there was research strategy to retain staff and were told that the small bottleneck could be averted if an attrition did not affect the country as long as a mass of trained personnel was created. When asked about the success of the 31 projects members were told that these were three to five year projects and it took 15 years to get a drug to market, and 10 to 12 years to market a vaccine. It was hoped that three of these projects would go all the way. Childhood Obesity was one of the key concerns of the Committee. There was not only an interest in the statistics around obesity but there was a keen interested in understanding what the epigenetic components were that caused children to be obese and what the interventions were. The interventions were during pregnancy, so this collaboration with China, India and Brazil would be looking at pregnancy interventions to see how to impact on childhood obesity The Committee appealed to the SAMRC to research the areas of: Paediatric mental health; and The role of traditional healers and western medicine. 5. Minutes Auditor General of South Africa (AGSA) on the Audit Outcomes of the Health Portfolio and Health Sector for the financial year Ms Alice Muller, Corporate Executive: AGSA, said that the briefing would reflect on the audit outcomes of the Health Portfolio. The AGSA had made sure that the financial statements were free from misstatements and did not include any assurance on the budgetary process of the Department. Ms Jolene Pillay, Senior Manager: AGSA said that of concern was that most auditees did not comply with the legislation in the following areas: 1. The quality of annual financial statements submitted 100%; 2. Human resource and consequence management 100% 3. Prevention of unauthorised, irregular and or fruitless and wasteful expenditure 67% National Department of Health (NDoH), Medical Research Council (MRC) and 33% CMS. Here 67% was good and 33% required intervention; 4. Management of strategic planning and performance 67% Centres for Medical Services (CMS), MRC and 33% NDoH. Here 67% was good and 33% required intervention; 5. Management of procurement and or contracts 33% CMS and 67% MRC, NDoH. Here 67% was of concern and 33% required intervention; and 6. Internal audit and audit committee 67% CMS, MRC and 33% NDoH. Here 67% was good and 33% required intervention.

5 The quality of annual performance reports reflected that 67% were reliable and useful. The status of key commitments by the Minister to address root causes showed that in progress: Controls would be strengthened to review and monitor compliance with legislation; A qualified chief financial officer would be recruited at the Compensation Commission for Occupational Diseases (CCOD); and An electronic health patient registration system would be designed and implemented to support the reliable recording of health data. Ms Pillay said that in the movement of audit outcomes from 2013/14 to 2014/15 overall improvement in audit outcomes reflected that: Limpopo province had improved to the status of unqualified with findings and Eastern Cape (EC), Free State (FS), Gauteng (GP), KwaZulu Natal (KZN), Mpumalanga (MP) and the Northern Cape (NC) had remained unchanged with the status of qualified with findings and the North West (NW), the Western Cape (WC) and National had the status of unqualified with findings. The top three root causes to be addressed and by whom were: 1. Slow response by the political leadership and senior management 2014/15 EC, FS, GP, KZN, LP, NAT, NW, NW, NC, WC 1. Inadequate consequences for poor performance and transgressions 2014/15 - EC, FS, KZN, LP, MP, NW, NC, WC and 1. Instability or vacancies in key positions 2014/15 GP, KZN, MP, NC. Ms Muller said she believed there were a number of areas where the portfolio was actually doing well. If one looked at the portfolio under the direct supervision of the Minister, the fact that there were three entities that did not have material adjustments was quite commendable; secondly, on usefulness of targets, a lot of work had gone into this to ensure the targets met the Smart principles and that technical indicators were set correctly. Also for the National Department of Health, the targets where they were directly responsible were all verifiable and reliable. It was only where the information from the provinces fitted in; the AG could not get all the evidence. Obviously the hard work being done in Limpopo was very recommendable for this portfolio. However if the AG had to pinpoint the challenges in this portfolio, it was really the reliability of performance information. Patient information needed urgent attention across all provinces. This issue would prevent Limpopo from ever going to the status of a clean audit. The Department had issued Policies and Procedures to all provinces during the last year so there now was a structure on how data had to be collated. The provinces needed to develop a system that could support them to do that and steps were taken to get a new system but it was going to take time, and while waiting for the new system, it was important that officials on the ground made the effort to collate data correctly and accurately. Ms Muller said the other matter of concern for this portfolio was the issue around supply chain management, which was an area that needed urgent attention. R6 billions of irregular expenditure was incurred in one year. Some of them referred to the prior year where contracts were signed already last year so they paid for it this year but it was already signed last year. But R5 billion of that R6 billion

6 was signed this year. It was contracts and agreements entered into in the current year where due process was not followed. If one took this into account, including the five departments, it was unknown if the amount that was disclosed was complete because it might be more. So the risk that it might be more in future was high. This was shared at the National Health Council to indicate that the supply chain area needed urgent attention. A conversation was had with the National Department of Health around their Risk management and internal audit areas. These were two important governance activities that needed to happen to strengthen them, which would eventually support them in achieving a clean audit. A clean audit needed to be sustainable and sustainability would be vested in how good risk management and internal audit practices were. Discussion Mr I Mosala (ANC) asked what the Department s response was to the Compensation Commission for Occupational Diseases (CCOD) not having submitted for four years. For four years no audit was done, yet there was talk about taxpayer s money being allocated to that institution Ms Pillay replied that the entity had received several disclaimers of opinion. At that stage the main cause was related to leadership within the entity and at that stage the leadership level was on an Assistant Director level resulting in numerous challenges in the internal control environment, which led to the breakdown that was experienced there. Since then the Department has tried to fill some of the leadership positions. A Commissioner was appointed who later resigned then it took a few years before another Commissioner was appointed. Another challenge that was experienced on a leadership level was the appointment of a Chief Financial Officer (CFO). The nature of the CCOD was quite complex; it was a fund. It needed someone at the right level to prepare a set of financial statements. The issue was mainly getting leadership at the right level to lead them out of the position they were in. Further than that the Department needed to provide an indication of the progress made since, the plan being to submit financial statements regarding CCOD. Ms Muller added that this would be a good question to pose to the Department to find out what the progress in this area was. Mr A Mahlalela (ANC) asked when irregular expenditure was regarded as serious; and when was it regarded as unacceptable. This was raised in the context of the Eastern Cape and in cases where some provinces received a qualification because of irregular expenditure. Ms Muller replied that all irregular expenditure was considered serious. It was all reported in the management letter. From there the Auditor General would decide if it was material, or for example, the process was followed but a tax certificate was not attached and the amount was small. That would then be left in the management report and not elevated to the audit report. The bottom line was that all irregular expenditure was considered serious. The issue around irregular expenditure was that due process was not followed. This raised a very pertinent question as to why due process was not followed. It was now required of management to find out what caused the deviations. If the root cause was not known then the situation could not be fixed. Management needed to do the investigations to see what was driving this behaviour. There were often no investigations into the matters. (Ms Muller linked the next question with this) The issue was that there were no investigations. One area was Mpumalanga had now stepped in and had an investigation team to sort out and investigate those issues. Mr Mahlalela asked what was the root causes for the slow responses from senior management, and why the Free State for example was qualified when they only had irregular expenditure of R20 million Ms Muller replied that it was because the AG did not know if that R20 million was all. The audit process that was followed was that the AG selected a sample, it then tested those contracts, those tenders or those quotations; and errors would be found. It then asked management to look at all the

7 transactions and to make sure that what they disclosed was adequate. So for the five departments, the Eastern Cape, Free State and KwaZulu Natal, the AG did not know if the R700 million was everything. In Mpumalanga the R1.9 million could be more. The AG did not know whether that was everything. This included the Northern Cape as well. It was important that it was explained that the R5 billion might be a lot more. That was why those amounts were qualified in the annual financial statements. That was the relationship between what was disclosed and the qualification. Mr H Volmink (DA) asked for clarity on the issue of the reliability of reports and the AG mentioning that a huge challenge was getting reliable data from provinces. He did not see anything coming out in the recommendations about the provincial block of reliable data. He also asked for more information on this issue. Ms Muller replied that the biggest challenge here was the systems, District Health Information System (DHIS), was a system where one captured data into the system, so it was like a database. It was not a system where data flowed through and was collated at a central point. So information was captured from statistics at a facility level into the system. This caused a lot of challenges. There was lack of oversight, a lack of accuracy in capturing information and a lack of review of the information; and then also the system was not always so stable although it had improved a lot. It had to be said that the controls around the system had improved but a new system was needed. The Department responded by saying that it would initiate a new system and the aim was that this system would be used throughout the country in all nine provincial departments. So there was a request to stop developing systems in the provinces as then the new system could be supported. Mr Volmink said on page 11 of the report it was reported that R391 million was shifted from the National Department Division of Revenue Act (DORA) grant, and then back. He asked what happened, and what the impact of this shift was. Ms Muller said that Ms Pillay could explain what had happened here, but she thought this matter was isolated. So the AG was not so worried about the processes at the National Department of Health. A lot of contracts were now tendered at a National level and the AG could not find any flaws with those tenders in the process, and the AG was happy with the way the processes were run. Ms Pillay replied that with respect to the NHLS and what was classified as irregular expenditure, the issue of irregular expenditure was defined in the legislation and in the various prescripts obtained from National Treasury in terms of what was defined as irregular expenditure: in terms of the R391 million, it represented non-compliance with Division of Revenue Act, the DORA, which stated that as long as money was paid into a bank account that had not been gazetted, it would constitute irregular expenditure. So because the legislation had stated that it was irregular, the Department had to classify it as irregular expenditure. Ms Muller added that what was important was that they managed to turn this transaction around in the same financial year, but it did not divert from it being irregular expenditure when they incurred the transaction. Mr Volmink said that the troubling table on page 25 looked at irregular and unauthorised expenditure. He asked if there was a relationship between irregular expenditure and fruitless and wasteful expenditure. He asked further if the AG could speak to fruitless and wasteful expenditure in Gauteng (the R159 million), and also a bit more about the R1.9 billion. As a recommendation it would be good to see an allocated budget, approved budget adjustments, actual expenditure, and then percentages of these components in terms of these overall amounts. For example that R1.9 billion, how much of the actual budget did it represent for Mpumalanga. Ms Muller replied that there was not necessarily a relationship between fruitless and wasteful expenditure and irregular expenditure. It depended on certain things. She did not have the audit reports of Mpumalanga currently, she just assumed that if fruitless and wasteful expenditure was high there might be a qualification on fruitless and wasteful as well, however she was not sure. She would have

8 to check if there was any qualification on fruitless and wasteful expenditure. There was not necessarily a correlation between the two. It did not say that if due process was not followed then that amount was not fruitless and wasteful. The challenge was the important question, which was why the departments did not follow due process. Some of the actions taken by the national department to centralise some of these procurements was a wise decision until they could stabilise procurement in the provinces. It normally happened at facility level that due processes fell flat. Hence there were challenges, but a leadership response was now required in this matter. Mr Volmink said the recommendations on the poverty of accountability; difficulties around leadership and relationships within governance of the whole sector were very abstract as there was not much detail there. He asked if what the AG was saying would result in change or what was needed here to bring about change. The Chairperson asked why the concurrent challenges that were impacting on accountability were not elevated. The root cause was the issue of concurrence. Ms Muller said that in the AG s sector report this sector report would be tabled soon- it was very clear about the current challenges at the Health Council. Decisions would be made, but accountability did not rest there. In a number of cases the Minister was quite frustrated, because they would make decisions but the MEC s would do something different. It was very difficult for the AG to pinpoint these situations because it was not covered in its audit process. It did its audit on the financial statements of that province. That was why it was not included in here per se. Mr Mahlalela asked for clarity about understanding of the AG on commitments. He raised this because when he was analysing some of commitments vis-a- vis the budget, there was no correlation between the two. He asked the AG for its understanding of commitments vis-a-vis accruals; and how the two related to each other. Ms Pillay replied that this was a technical question regarding the audits. Essentially a commitment was where a Department had contracted with a supplier to supply goods and services but it may run over a number of years. So at the end of a financial year, the Department was required to disclose how many contracts had been signed and if they committed the funds of the Department, but spending would occur in the future. If the Department had budgeted appropriately, they would budget to ensure that they would be able to pay these contractors as the services were tendered; therefore it was important that it was disclosed appropriately. Ms Pillay replied further that accruals related to services rendered during the period, however no payments were made in respect of those accruals. So the service had been received, but the payment still had to happen and this was where it impacted on the next year s budgets. A lot of the time this was a rolling process where departments were paying for services of the previous year and not having funds to pay for services of the current year so this was an area of concern in terms of financial health to make sure that accruals were not excessive; and that there were adequate funds in the budget to be able to pay for those. With regard to the 30 days for payment, Mr Mahlalela asked when this decision was material and therefore when the matter should be reported. He was raising it in the context that the report presented the National Department of Health as having had more than 30 days of payment of more than R57 million, but this had not been reported as a problem. Ms Pillay replied that in terms of testing the AG had not identified any instances of non-compliance. The audits of the AG were of a test nature, so there might be instances where it was not aware of the audit itself and therefore did not identify instances of non-compliance that the Department had disclosed. Ms Muller added that the AG, in these instances, did a sample check on invoices to see whether the invoices had been paid in 30 days. Then if the error rate were high then it would be reported on. If the sample showed that the error rate was low, then it would not be elevated to the audit report.

9 The Chairperson commented on the comprehensive and informative presentation and said that she hoped it would empower the Committee in its oversight. There were a number of questions for the Department. This session was adjourned Finance and Fiscal Commission Mr Daniel Plaatjies, Commissioner provided an overview of the Financial and Fiscal Commission. Ms Nomonde Madubula, Researcher: Financial and Fiscal Commission, provided information on the strategic overview of the National Department of Health s alignment with the National Development Plan goals; and an overview of the Department s health performance plans. Ms Madubula said that South Africa s Health Outcomes remained below the national set targets despite efforts to transform the health system into an integrated and comprehensive system including a significant amount of investment and expenditure in the sector. The Challenges highlighted were: Poor quality of public health care, an ineffective and inefficient health system and documented institutional failures (FFC 2014, Chapter 5); Increasing maternal and mortality rate due to among other things HIV/AIDS; and Spiralling health costs The budget programmes of the Department of Health reflected the following concerns, achievements: Total Budget increased from R billion in 2014/15 to R billion in 2015/16 Programme 1 Administration increased from R399.7 million in 2014/15 to R457.1 million in 2015/16 Overall management and support services Programme 2 National Health Insurance, Health Planning and Systems Enablement decreased from R491.9 million in 2014/15 to R587.8 million in 2015/16 Health financing reform, integrated health system planning, monitoring and evaluation as well as research Programme 3 HIV/AIDS, TB and Maternal and Child health increased from R in 2014/15 to R billion in 2015/16 Coordinate and fund health programmes for HIV/AIDS, TB, maternal and child health Programme 4 Primary Health Care Services decreased from R93.5 million in 2014/15 to R225 million in 2015/16 Develop and oversee legislation and policies, norms and standards for a uniform district health system Programme 5 Hospitals, Tertiary Health Services and Human Resource Development increased from R billion in 2014/15 to R billion in 2015/16 Develop policies for hospital and emergency medical services including aligning academic medical centres with workforce programmes as well as ensuring planning of health infrastructure meets the needs of the economy Programme 6 Health Regulation and Compliance Management increased from R865.3 million in 2014/15 to R1 596 billion in 2015/16 Regulate the procurement of medicines and health technology and promote accountability and compliance Mr Plaatjies apologised for the printing error regarding the presentation as the last seven slides had not been printed, but endeavoured to either provide them at a later date or proceed with the presentation at a slower pace.

10 The Chairperson put this position to Members who agreed that the presentation should proceed but that the FCC should provide the outstanding information before the close of business, and ensure that this did not happen again. Ms Madubula continued and stated that the conditional grant analysis showed that: The overall aggregate spending for health grants for the year 2013/14 was about 96% compared to 2012/13 at 85% There has been improvement in expenditure in all the grants except for the Health Facility Revitalization at 85% Some of the reasons attributable to under spending were: Poor project management, delays in supply chain management processes The FFC has cautioned in the past against the merging of grants especially those that were under performing without underlying performance data. Mr Eddie Rakabe reported on the health policy issues of the National Health Laboratory Service (NHLS), which were as follows: NHLS reforms have resulted in reduction of Public Employment Services (PES) and HIV/AIDS Grant baseline R1.7 billion over the 2015/16 MTEF Provinces benefited from tariff reduction of 3.9% and savings on budget NHLS was currently undergoing reforms to address a number of operational inefficiency challenges: A new costing model have been developed Addressing inefficiency could reduce the tariffs The Department of Health recently held consultative meeting with the Commission on the progress with NHI and the White Paper process Spending on National Health Insurance (NHI) pilot grants was improving but remained lower than initial allocation Grant baselines have been reduced drastically due to under spending. NHI implementation was still constrained by supply chain, staffing and delegation problems; and NHI required supplement fund from PES but most provinces were unable to do so due to fiscal constraints In conclusion Ms Madubula said that: Significant progress has been made in meeting outcome targets set for 2014; Provinces exhibited general under expenditure on health except two provinces with over expenditure; and Unstable growth paths on provincial programmes which recorded negative growth rates was worrying given the NHI reforms currently taking place in the sector. Discussion Response from the Commissioner

11 Mr Plaatjies replied that with regard to the numbers and where the FCC got those numbers from, he would ask the technical staff to respond to this, as there seemed to be different sources for the numbers. In response to Mr Mosala, the FCC had responded to what was asked for. The Committee had asked for a response on the Department of Health s budget and this was materially and substantially different to when it asked the FCC for a response on the health function. Mr Mosala had correctly showed that the response on the Department s budget did not include the provincial level and nine provincial departments and how those health functions operated. If the Committee needed additional information like the Equitable Share Function then the FCC could come back and do this. The starting point for this was to have this conversation with National Treasury then everyone would be able to come from different angles. The persons who dealt with the Equitable Share Function were based in National Treasury. With regard to population, the Equitable Share Function showed where the majority of the population was. There were tensions around the migration of people and how people moved from Gauteng to the Western Cape. Some were moving to the N1 provinces like the Free State and the Eastern Cape. But there has also been a decline in certain provinces in population numbers. The Equitable Share question had a population bias to it, not necessarily a service bias, but there was a service pressure bias to it. The conditional grant dealt with the spill over effect needed to be dealt with to protect the budget of a province through a conditional grant. Current expenditure needed to be looked at. That was the debate around appropriate financing of public health, but also what were the subsidisation questions that the public health system provided to deal with primary health care. This was a different type of question. It was partly linked in a small way to the National Budget of the National Department, but it was not about the total financing of health services. Hence the debate was not about the total financing of health services. The Committee was right in saying there was a need to look at an analysis of a range of public entities that were located in the health sector, but that again was another type of question that was being asked. Mr Mosala was asking a different type of question on the health function. The FCC could answer this; it just needed a time frame The Chairperson interrupted and said that she did not have a problem if the invitation and questions were not within the scope and mandate of the FCC. But as she was listening she got the sense that the response and comments bordered on the impression that the Committee did not understand the responsibilities of the Department. She humbly requested understanding in moving forward and the knowledge that the Committee knew what it was asking. It should also be remembered that the Committee had oversight work and the answers would assist with its oversight work. Mr Plaatjies said it was not the intention to create the impression that the Committee did not know the mandate of the FCC. The letters the FCC received asked them to respond to the Department of Health s budget and questions asked was about the total function and. The Chairperson interjected and asked the FCC to please respond to the technical questions. Mr H Volmink (DA) commented that it was helpful to get detailed analyses from the Commission particularly when looking at the mandate, which was to give recommendations that would assist in the legislative provisions and executive decisions. He referred to page 20 and said that with regard to the FCC comments on Programme 3 on the overall programmatic expenditure, it spoke of a slight under expenditure on the whole of 0.5%. However if one actually went to the Department of Health s report and broke it into sub programmes, the sub programme on Women s Maternal and Reproductive Health actually showed a significant under expenditure. R14.6 million was allocated and R2 million or so was spent. There was under spending of about R 2 million, which was about 15% of under

12 expenditure. And the reason why it was significant - if one looked at page 7, one would see that the maternal mortality rate was only down to 269, so in other words there was under expenditure on a critical area. Further if one compared it to the UN Millennium Development Goal s target, then it was way off. He said that comment on that point would be helpful to the Committee to understand matching performance with expenditure. The overall programmatic picture was different to the granular picture if one went down to programmatic levels. It would help the Committee tremendously if it had that level of detail in the reports. Ms Madubula replied that with regard to Programme 2 and 5 in terms of the challenges currently taking place, the FCC did a study last year which covered Programme 2, which was Primary Health Care. It wanted to find out what the challenges were. So it made recommendations to Chapter 5 will avail it to the Committee - and found that some of the reasons while there were norms and standards in place which came into effect in 2000 (not all quantified) not all provinces were able to meet those norms. So the FCC recommended solutions. Also in Programme1, which talked about infrastructure, the FCC was currently looking at a study on what the infrastructural requirements were for health in the sector in line with the NHI. Mr Volmink said if one looked at the distribution of revenue, the strong population bias in the formula was a challenge. If one were calculating on the basis of population then one would not achieve the goal of equity. He asked when the Equitable Share Formula was going to be substantially reviewed to include basic services and other factors so that it could be a fair distribution as opposed to being an economic calculation based on numbers. Mr Eddie Rakabe, Researcher: FCC, replied that with regard to the Provincial Equitable Share formula, there had been a Technical Committee on Finance recently where all the MEC s on finance agreed that the Equitable Share Formula had to be looked into. The Provincial Equitable Share was something the Commission would be looking into, as it was a very contentious issue. There were always counter debates around whether/what variables to put in the Equitable Share formula because ultimately it was about a revenue sharing instrument. If there were any other objectives that the government wanted to achieve, it was not the job of the Provincial Equitable Share formula to do this, but there were other policy levers that could be used to achieve those policy objectives. The main objective of the provincial equitable share was how fair it was in distributing the funds across the different provinces and that was what the FCC would be looking into but the principle that it wanted to leave with members and stakeholders was that the aim of the Provincial Equitable Share was not to achieve multiple objectives but to redistribute the funds in the provincial pool. If it was felt that this was unfair, it was something that the FCC could look into but with other objectives this was where the policy came in so this separation had to be made between the two. Mr Mosala said that from the mandate of the FCC one would have expected an analysis of the entities that fell directly under the Department of Health, but it was not coming out very clear here. Added to this was the FCC mandate in relation to provinces. This was not clear from the presentation, for example the situation with conditional grants and the provinces was unclear. He hoped that the documents promised to the Committee before the close of business today would have more detail and give the Committee the kind of information about the situation in the provinces. Mahlalela (ANC) appealed to the FFC to make the promised detailed information available as soon as possible. Mr Mahlalela asked the FCC to elaborate further on the statement it had made that health costs were spiralling. He asked the FCC to quantify this statement or provide information that related to the statement. Mr Rakabe replied that this was an issue related to health care inflation; people in the sector argued that health care costs rose faster than inflation, but when one looked at inflation, it actually took into account everything so there was always debate around whether there was health inflation or an education inflation, but it was something that could not be ignored. So if those in the sector argued

13 that the rate at which the allocations were increasing was lower than the rate at which health care was rising, it was a point that had to be listened to although the FCC argued that inflation took into account all the variables including the health care. Mr Mahlalela referred to pages 15 and 16; he was not sure about the figures used because they did not correlate with the figures in the Annual Report. Mr Rakabe said that when preparing for this request the FCC did not have access to the Annual Report and obviously this was not an excuse. This was why there were variations in the Annual Report and what the FCC report was saying. The main point was about bringing across the inconsistencies in allocations and growth rates. He also could not do the public entities because it would have meant using last year s results. So this was the explanation of the variation in the numbers. Mr Mahlalela asked for clarity because the audited final appropriation for 2014 /15 according to the Department was R billion and for the FCC was R billion. Also in Programme 2 and Programme 4 there were differences in calculations as well. Concern was expressed because the FCC analysis and figures did correlate. This process was a budget review recommendation process, so one would have thought that at the end the FCC would advise the Committee that the Department was properly budgeted for, or that there were programmes that required review for whatever reason. But the FCC was very general and this was not assisting the Committee in this process. The Committee also thought that given that Programme 2 was a problem it thought the FCC was going to say why it was not performing and how it needed to be changed. Mr Mosala asked for clarity, was the Commission saying that by the time they received the letter to come and present, the Department had not availed to them the annual report; or were they saying that the Department did not co-operate with them with regard to the issue of the Annual Report so that the FCC did not use previous reports information to come to the conclusion of the current financial year. Mr Mahlalela said he wanted to raise the same matter but in a different context. The understanding one had was that the invitation was done last week and the Department s Annual Report was tabled on 29 September so by the time the letter was received the Department s annual report was already tabled. So he did not understand the argument presented that the FCC could not access the Annual Report, because the Annual Report had been released already. The FCC already had a Parliamentary Liaison person. Mr Mahlalela said he was referring to Programme 2, Primary Health care, not Programme 3 in his question. Mr Plaatjies said the bottom line was that the FCC had to go back to the drawing board and look at what the Annual Report was saying as it should have checked that the reflections of the years going back to the last financial year was based on the audited report. The FCC slipped up and apologised for this. With regard to the question on Programme 2, the position was the same because two different figures were being looked at from two different documents. He suggested the Committee ask the FCC to return and give a review and analysis of the health function and the location of the central position or the Department of Health s budget relative to the nine provinces, and also a thorough sense of policy to service trends. If the Committee wanted to go that route he would ask for a 14 day period in which to produce this brief. The Chairperson said she would confer with Members about the time frame proposed. Mr Mosala recommended that for purposes of more in depth oversight, the presentation from the FCC was greatly needed. He was not sure whether 14 days were sufficient given the capacity of the FCC

14 and so that they did not give the wrong statistics again, maybe they should just be told to prepare and then the Committee Clerk could communicate with them. The Chairperson said in future if the FCC realised that it had erred, it should whisper in the Chairperson s ear so that he or she would be able to assist. One of the worst things that could happen was when the leadership picked up on mistakes that could have been avoided. It was important to raise this so that there was trust in the information that was given. The FCC was thanked for their honesty. There would be communications with the Secretary of the Committee and the Committee would look into the date and hoped that the FCC had understood the Committee s concerns. The question s which were asked, was not just about asking questions, the Committee had to exercise oversight and could not do this without information. So institutions like the FCC were in fact assisting and empowering the Committee. The FCC was thanked and hope was expressed that at the next session there would be ease and comfort in the interactions. This session was adjourned. South African Medical Research Council on their Annual Report 2014/15 Summative Report. Ms Zodwa Dlamini, Deputy Vice-Chair: MRC said that this was the third consecutive clean audit for the South African Medical Research Council (SAMRC). The research highlights and measured deliverables were as follows: 481 Peer reviewed articles with an SAMRC affiliated author were published in the ISI journal An additional 20 articles were published in peer reviewed articles with an SAMRC affiliated author in the top four journals NEJM, Lancet, Science and Nature 86 Bursaries, scholarships and fellowships were provided to post-graduate participants at different universities. 101 Research grants were awarded by SAMRC during the reporting period In promoting innovation and technology 31 invention projects were funded during the reporting period. Professor Glenda Grey, President: SAMRC outlined the strategic goals of the SAMRC. The annual performance showed that: 9 out of 10 targets achieved; and A 90% achievement for 2014/15 Financial Year The SAMRC will be in a strong position to achieve the remaining annual target following on the implementation of an additional requirement whereby recipients of SAMRC funds were obligated to acknowledge the SAMRC in all publications or publicity materials emanating from, related to or based on SAMRC funded project work. Of concern was an increase in prostate cancer and that 1 in 4 children die within the first 28 days of life. On the positive side lung cancer was reduced. The Eastern Cape Cancer Register has been strengthened with: Enlarging office staff; Updating to CANREG 5; Engaging part-time data collectors in study area; and Enhancing the use of the data. Mr Richard Gordon, Executive Director: National Department of Health reported on the Grant Making unit and some of the projects that were being dealt with. There were about 50 projects in this