IDASA Budget Information Services: briefing

Meeting report

HEALTH PORTFOLIO COMMITTEE
10 March 2003
IDASA BUDGET INFORMATION SERVICES: BRIEFING

Chairperson: Mr. L. Ngculu (ANC)

Documents handed out
Analysis of the Budget IDASA Budget Information Service
HIV Issues byDASA Budget Information Services on HIV issues
Vote 16: Department of Health (link to Treasury website)

E-mail [email protected] for documents below:
IDASA Southern Africa Budget Guide and Dictionary
Health Grants
2003 Budget Review

SUMMARY
The Committee was urged to examine budget reports informing on whether government resources were being allocated equitably. Equity considerations were investigated with regard to conditional grants and provincial budgets. Members were urged to thoroughly examine the forthcoming provincial budget reports to determine whether the projected real growth of 3.9% would be sufficient to cater for the priority areas projected. These included population growth; additional AIDS patients and the increased costs of equipment and medical consumables.

Roll-overs was a management issue that resulted from poor communication channels between and within departments. The committee was informed that the problem of late transfers to departments, the issue of business plans and the tendering process were some of the key obstacles to timely expenditure. The lack of monitoring systems for transfers to local government and NGOs, poor financial and project management skills and capacity issues were some of the main contributing factors to the incidence of rollovers.

MINUTES
Briefing by Alison Hickey, IDASA
Ms Hickey informed the Committee that Idasa's budget briefs provided timely and topical analysis that were concise on current issues. The budget information services' research analysis, training and capacity building was aimed at ensuring that budgets were responsive to the needs of the poor. She added that IDASA's Budget Information Services (BIS) investigated South Africa's budget system with the ultimate goal of alleviating poverty in the country.

Ms Hickey informed the Committee that each sphere of government was allowed to raise different types of revenue and that the provincial revenue consisted of 4% from its own sources, 10% conditional grants and 86% being the equitable share vote. The Constitution assigned specific functions for each sphere of government and social spending took the greatest share of 80%, followed by Education at 40%, Health 24% and Welfare at 19%. There were two ways in which the national government allocated money to the provinces namely through the equitable share in block grants and conditional grants, which were assigned for specific projects in the provinces.

The legal framework for the budgetary process is supplied by the Intergovernmental Fiscal Relations Act of 1997 which spells out the process of consultation that should be followed in enacting Annual Division of Revenue Bill. The other level of legal framework is the Public Finance Management Act of 1999 which recognised general accounting practices, introduced uniform treasury norms and standards and sets out measures to ensure transparency and expenditure control. There is a four stages through which the budget process travels and these are the drafting phase, legislative, implementation and the auditing phase.

Ms Hickey further explained the responsibilities of the different spheres of government noting that the national government determined health policies and the attendant legislative framework whilst the provincial government dealt with the implementation of the national policies by providing necessary services including the provision of primary health care. Local government shared the service provision mandate with the provinces.

Ms Hickey revealed that the total national health expenditure in 2003/04 is 8.4 billion and that the national health expenditure excluding transfers in 2003/04 is 603 million whereas the projected consolidated total provincial expenditure in 2003/04 is 36.6 billion. She clarified that consolidated health conditional grant to provinces amount to 7.4 billion. She explained the budget implications on the division of roles and responsibilities in health provision noting that 93.3% of the national health budget consists of transfers mainly to provincial departments whereas 88% of the national health expenditure goes to provinces as conditional grants. National health expenditure is less than 2% of consolidated provincial and national health expenditure and that 98% was spent on service delivery in the provinces through conditional grants and equitable transfers.

Ms Hickey outlined how the budget factors in the Committee's over-sight role and explained that the budget process flowed from national policies and that after the vote there were structures and institutions that undertook implementation of service delivery. The committee came in to check on the impact of the programmes that had been financed through these budgetary allocations and that the salient question was how to measure inputs, outputs and outcomes.

Lessons could be learnt from the budget process in terms of adequacy for what was budgeted for in view of inflationary trends and whether the projected allocations were sufficient to cover the targeted intervention. The question of priority was important in that it would address the dilemma as to how the budget compare to resources spent in other areas. This would help to determine what government priorities were as stated in the budgets and to determine if the government was keeping its promises on priority areas. The budget helped to address the question as to whether the government's response on a given issue was improving and whether resources were being allocated equitably. The other important lesson was that of efficiency - was money being spent properly and was money being spent on the right projects.

Addressing the critical issue of HIV/AIDS a massive boost in resources was needed to strengthen the health sector. Extra money for HIV/AIDS was put into the Equitable Share in the 2003/4 budget. However Ms Hickey wondered whether the provincial health departments were witnessing the benefit of those funds in their budgets or whether money was diverted to other departments and priorities. Absorption capacity was a critical issue, given the direction the 2003/4 budget took in addition to the provincial programme management skills and financial management skills. Effective HIV/AIDS responses would require leadership, allocation of sufficient resources, getting the policy right, the setting up of appropriate structures/systems and capacity to deliver services.

Briefing by Ms Alex Vennekens-Poane, IDASA
Ms Vennekens addressed the question of how policy developments impacted on health budgets and listed various examples of where this trend was evident. She noted that the relevant areas were the need for new and upgraded clinics, negotiations around the division of responsibility, nutrition programme, hospital services in terms of infrastructure backlogs and hospital revitalisation. Hospital services in terms of management and ality improvement too call for urgent intervention.

Ms Vennekens outlined examples of key health policy developments impacting on budget allocations noting the distribution and scarcity of health personnel was one burning item. She also cited non-personnel inputs, which comprised increased prices of medical equipment and consumables, machinery, stores and livestock. She listed other inputs as specialised hospital sub-programme, the new national health Bill that had implications on provincial budgets and the provision of free medical care for people with disabilities.

Members were guided on the type of questions to pose during the budget vote noting that the consolidated provincial budget called for a thorough interrogation to determine whether the projected real growth of 3.9% would be sufficient to cater for the priority areas projected. These were namely: the population growth, additional Aids patients and the increased costs of equipment and medical consumables. Other needs in this area were the provision of free medical care for people with disabilities and additional personnel. She further advised members to scrutinise the health budget programmes with a view to determine whether to what extent this reflects national policy priorities and whether allocations are in line with objectives and which provinces would be able to spend the increased health Bill.

Ms Vennekens urged members to look out for equity considerations with regard to conditional grants and provincial budgets and satisfy themselves as to what proportion do the extra allocations for rural medical personnel/scarce skills constitute of the total budget. Members were also urged to investigate as to how much on average was the increased per capita. She also counselled members to check on whether the increase in equipment expenditure keep up with medical inflation and where there were major backlogs whether these could be addressed within the current budgetary framework. She noted that it was important for members to check and see whether real growth was sufficient to cater for expansion of the programme and increased levels and whether this factor took into account higher inflation on particular items.

On the integrated Nutrition Programme, Ms Vennekens urged member to investigate the critical question as to whether growth in real terms would be sufficient in order to cater for increased frequency of feeding, standardisation of menu's including grade R pupils, the impact of escalating food prices and the HIV/AIDSpandemic.

Ms Vennekens outlined the measurable objectives which was to continuously strengthen policies and programmes for HIV/AIDS prevention and care including those for sexually transmitted diseases and tuberculosis, child health, reproductive and women's health, occupational and environmental health and nutrition. She identified the other objectives as ensuring that all medicines used are safe and affordable and that 90% of essential medicines are available at all times in the public sector. The other important intervention was to monitor and evaluate health trends, through relevant research and epidemiological surveillance in order to ensure that national policies and programmatic interventions are achieving their desired impact. It was equally important to support the development of affordable health services, and coherent service provision and financing in the private health sector. It was also imperative to develop and assist provinces to implement a comprehensive national health human resource plan that would ensure an equitable distribution of health professionals.

Briefing By Mr Nhlanhla Ndlovu, IDASA
Mr. Ndlovu briefed members on the preliminary findings from provincial interviews on the role of provincial treasuries in HIV/AIDSfunding with respect to roll-overs and noted that ordinarily funds flowed through provincial treasuries hence financial control and business plans were the responsibility of national departments. Provincial treasuries received financial and non-financial reports from departments and in turn the provincial treasuries reported to the National Treasury.

Mr. Ndlovu reported on key obstacles identified by provincial treasuries that contributed to roll-overs and noted that the treasuries insisted that the question of under-spending was a management issue that resulted from lack of knowledge that was compounded by poor communication channels between and within departments (bureaucracy). Treasuries also identify the problem of late transfers to departments, the issue of business plans and the tendering process as major obstacles. Lack of monitoring systems for transfers to local government and NGOs, poor financial and project management skills and capacity issues were some of the main contributing factors to the incidence of rollovers.

Mr. Ndlovu pointed out that on the other hand, provincial departments blamed roll-over on bureaucracy in reporting, noting that conditions attaching on conditional grants were impossibly rigid and that the tendering process inhibits timeous service delivery. The provinces also lacked personnel and support facilities, difficulties relating to Section 100 departments (EC). They received the smallest conditional grants yet shoulder huge demands and the integrated HIV/AIDS strategies were not functional particularly in cases staffing shortages.

Discussion
Ms Tshwete (ANC) inquired about a contingency reserve.

Ms Hickey explained that a contingency fund was one used for unforeseen occurrences such as an abrupt cholera outbreak.

Ms Madumise (ANC) asked what happened to money that was rolled over.

Ms Hickey replied that roll-overs often occured due to delays in the tendering process and that such funds automatically become part of the following years expenditure bill.

Ms Mnumzana (ANC) asked what application the rollover would be used for in the following year.

Ms Hickey pointed out that most of the funds that were not utilized in 2000 for HIV/AIDS was not rolled over yet budgetary allocations had increased exponentially in this respect.

Ms Rajbally (MF) wanted clarity on whether rollovers would affect next financial year's budgetary vote.

Ms Hickey replied in the negative noting that such roll-overs might affect the allocations indirectly in that the treasury took into consideration resources that remained unspent but that for the most part it was added to the current budgetary vote.

Dr. Cachalia (ANC) wanted clarity on the reasons behind the perennial incidence of rollovers.

Ms Hickey said that she was not precisely sure and called for more research in this area but that for the most part provinces complained of stringent conditions for conditional grants that had the effect of inhibiting timeous expenditure due mainly to structural deficiencies.

Mr. Ndlovu pointed out that on the other hand, provincial departments blamed the roll-over conundrum on bureaucracy in reporting, noting that conditions on conditional grants were impossibly rigid and that the tendering process inhibited timeous service delivery. Provincial treasuries insisted that the question of under-spending was a management issue that resulted from lack of knowledge that was compounded by poor communication channels between and within departments - namely bureaucracy.Treasuries identified the problem of late transfers to departments, the issue of business plans and the tendering process as major obstacles. Lack of monitoring systems for transfers to local government and NGOs, poor financial and project management skills and capacity issues were some of the main contributing factors to the incidence of rollovers.

Dr. Cachalia (ANC) asked if there was a way in which conditional grants could be renegotiated.

Ms Hickey replied that it was not clear if the conditional grants were open to re-negotiation but that some provinces claim to have succeeded in this regard.

Ms Malumise asked if the AIDS/TB allocation went to the department of health alone or if other departments took a share as well.

Ms Hickey pointed out that the funds were channeled through the Department of health but that Social Development also took a share for its community and home based care program and education on the personnel and skills development progress. She added that in addition various NGOs are funded through the health budget vote.

Dr. Jassat (ANC) wanted confirmation of the charge by NGOs on a claim that some received funding while others were left out or that some were funded more than others and that some were not recognized at all.

The Chair interjected at this juncture to remind members that this was an information presentation by Idasa to familiarize members on the budget process and that questions that were meant for the Department should not be directed at them.

Ms Hickey explained that there was a unit within the health Department that received applications for funding from NGOs and after processing the application it sent them to the National Department to decide which ones to fund. The National Association of People with AIDS (NAPWA) was a beneficiary of the Global Fund and did not feature anywhere in the national budget.

Ms Dudley (ACDP) asked where the list of NGOs that applied for funding could be obtained.

Ms Hickey replied that the information could be accessed through the Department of Health.

Ms Tshwete (ANC) noted that a substantial sum of money had been given to NGOs but lamented that there was no adequate monitoring to ensure that such funds were applied propertly.

Ms Hickey said that she was not familiar with the process of monitoring but inferred that report on performance and the submission of audited accounts was part of the requirement for funding.

Ms Baloyi (ANC) asked how conflict in priorities between the national and provincial mandates were resolved.

Ms Hickey replied that the national department utilized conditional grants as a leverage tool to ensure that the provincial governments adhered to national priority mandates.

The Chair asked how the budget would address the extra burden undertaken by certain institutions like the Western Cape hospitals that took on the extra burden of given health care to patients from other provinces.

Ms Hickey pointed out that once again conditional grants came in handy here to deal with the incidence of service spillage to help alleviate the extra burden shouldered by facilities in other provinces and that this went to explain the huge health bill some provinces received over and above others.

Ms Baloyi lamented the fact that poorer provinces did not benefit from per capita calculations as much as they should.

The Chair noted that per capita expenditure averages had been worked out but that this did not address the problem of inequitable distribution of resources.

Ms Hickey explained that per capita calculation should not be based on both conditional and discretionary grants but rather that conditional grants could be left out to focus on the equitable share to arrive at the correct position.

The Chair pointed out that part of the problem that this normally caused a disparity between provinces that claimed inequitable share distribution stems from these calculations.

Ms Hickey explained that at times more funds went to provinces with many tertiary institutions whose conditional grants had been declining hence an attempt to compensate these with discretional grants.

Meeting was adjourned.