Summary of the Auditor-General’s report of Provincial Departments of Health and
challenges identified in the National Department of Health
1. Introduction
This paper provides a summary of the Auditor-General’s report on Provincial Departments of
Health (Eastern Cape and Gauteng). It also highlights some of the challenges that the
National Department of Health faces in terms of executing its mandate. This is in order to
assist the Select Committee members during engagement with the department.
The Auditor-General’s responsibility is to express an opinion on the financial statements
based on the audit the AG made. This is required by section 188 of the Constitution of the
Republic of South Africa, 1996, section 4 of the Public Audit Act, 2004 (Act No. 25 of 2 004)
(PAA) and section 40 (2) of the PFMA.
2. Gauteng Department of Health
The Gauteng Department of Health and Social Development received a qualified audit report
during this financial year.
2.1.
Basis for qualified opinion
2.1.1. Tangible assets
the Department could not provide sufficient appropriate audit evidence for tangible assets
amounting to R3 135 148 000 (2009-10: R2 762 096 000) and there were no satisfactory
audit procedures that the AG could perform to obtain reasonable assurance that the tangible
assets were complete, existed, were classified and valued correctly and accounted for in the
correct accounting period. Consequently, the AG was unable to obtain sufficient appropriate
audit evidence to satisfy the AG as to the existence, completeness, valuation, cut off,
classification and rights and ownership of tangible assets.
2.1.2. Departmental revenue and receivables
The Department could not provide sufficient appropriate audit evidence for the departmental
revenue and receivables amounting to R438 979 000 (2009-10: R407 314 000) and
R887 348 000 (2009-10: R631 387 000) respectively. This is due to inadequate record
keeping, ineffective computerised information systems and failure to update patient fee
tariffs. The Department’s records did not permit the application of alternative audit
procedures regarding revenue and receivables. Consequently, the AG could not obtain
sufficient appropriate audit evidence to satisfy the AG as to the completeness, classification,
accuracy, occurrence and cut off of departmental revenue and the completeness, valuation,
existence, cut off and rights and ownership of receivables.
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2.1.3. Employee benefits
The AG reported that the were no systems in place for internal controls over all leave records
on which the AG could rely on for the purpose of his/her audit and there were no satisfactory
audit procedures that the AG could perform to obtain reasonable assurance that the leave
records were valid, accurate and complete. Consequently, the AG was unable to obtain
sufficient appropriate audit evidence to satisfy the AG as to the completeness, valuation,
existence, cut off, classification and rights and obligations of leave entitlement amounting to
R1 049 987 000 (2009-10: R885 736 000).
2.2.
Emphasis of matters
The AG draws attention to the matters below:
2.2.1. Significant uncertainties
With specific reference to note 21.1 to the financial statements, the department was the
defendant in lawsuits as a result of the premature termination of consultant contracts as well
as other numerous claims instituted against the department in respect of civil, medico-legal
and emergency medical services. The ultimate outcome of the matters could not be
determined.
2.2.2. Material under spending of the budget
As disclosed in the appropriation statement, the department mat erially underspent the budget
on Programme 1: health administration R92 682 000, Programme 3: Emergency Medical
Services R172 554 000, Programme 8: Health Facilities Management R853 658 000,
Programme 9: Social Welfare Services R109 133 000, Programme 10: Development and
Research R40 554 000 to the total amount of R1 177 027 000. As a result, the department
did not achieve its objectives of the mentioned programmes.
2.2.3. Accruals
accruals which exceed the payment term of 30 days as required by Treasury Regulat ion (TR)
8.2.3 amounts to R2 156 908 000. This amount, in turn, exceeded the voted funds to be
surrendered of R1 418 246 000 as per the statement of financial performance by
R788 308 000 would therefore have constituted unauthorised expenditure had the amo unt
been paid in time.
2.3.
Other reports
2.3.1. Investigations
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There are investigations in progress relating to procurement irregularities, fraud, theft,
negligence and mismanagement of funds transferred to no profit organisations. The
investigations were still on-going at reporting date.
3. Eastern Cape Department of Health
The Eastern Cape Department of Education received a qualified audit opinion for the current
financial year.
3.1.
Basis for qualified opinion
3.1.1. Irregular expenditure
There are irregular expenditures relating to the current financial year of R152,6 million (200910: R373, 1 million), is understated by an amount of R328, 7 million (2009 -10: 954, 5 million)
as a result of non-adherence to financial delegations of authority, non-compliance with
supply chain management (SCM) regulations, amounts not yet paid being recorded in the
register, conditional grant expenditure not in accordance with the purpose of the grant and
foreign employees employed on a permanent basis. Irregular expenditure is further
understated by R2, 1 billion (2009-10: R1, 1 billion) as the department has also not taken
adequate steps to investigate and correct irregular expenditure identified during prior years
audits.
Furthermore, the department did not provide adequate supporting doc umentation as
evidence that all SCM regulations had been complied with and alternative procedures could
not be performed. As a result, it was not possible to confirm the full extent to which irregular
expenditure of R873, 9 million (2009-10: R721, 3 million) as disclosed in note 28.1 to the
financial statements is understated.
3.1.2. Movable tangible assets and minor assets
Included in the asset register were movable tangible capital assets of R42, 3 million and
minor assets of R12, 2 million, which are currently under investigation as the department
does not know the location of these assets. Assets selected from the asset register did not
always reconcile with the supporting documentation and some assets recorded in the asset
register were found to have been stolen or not in working condition, resulting in an
overstatement of R56, 8 million (2009-10: R161, 4 million) of movable tangible capital assets
and an overstatement of R2, 9 million (2009-10: R1, 6 million) of minor assets.
Not all assets purchased or received during the year were recorded in the assets register and
assets were also incorrectly classified as minor assets instead of major assets. It was also
found that some of the current year adjustments made to prior year balances were i ncorrectly
processed, resulting in movable tangible capital assets being understated by R28, 4 million
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(2009-10: R4, 7 million) and minor assets being overstated by R4, 4 million in the financial
statements.
3.1.3. Accruals
The department did not have adequate systems to maintain records of outstanding payments
for goods and services received but not yet paid. The manual schedules prepared in support
of the R1, 1 billion (2009-10: R1, 3 billion) disclosed as accruals in note 24 to the financial
statements, were found to be inaccurate as certain invoices raised as accruals had already
been paid and, in some instances, the amounts on the accruals listing did not agree with the
amounts per the supplier statements and other supporting documentation. Accruals are
therefore overstated by R124, 8 million (2009-10: R427, 1 million).
Furthermore, the department did not provide adequate supporting documentation for
amounts of R68, 1 million (2009-10: R0, 3 million) included in the accruals listing. As a result,
it was not possible to confirm the obligation, valuation and completeness of accruals as
disclosed in note 24 to the financial statements.
3.1.4. Expenditure
The department does not have an adequate system in place to ensure that inventory is used
for its intended purpose, and sufficient audit evidence was not provided to ensure that
medicine issued from the medical reports totalling R115, 6 million reached the hospitals or
institutions to which they were sent. Consequently, it was not possible to confirm the
completeness of other material losses as disclosed in note 8.1 to the financial statements.
It was also not possible to agree amounts charged by service providers to the set tariffs in
the contract for payments made of R85, 5 million as rates charged were not stipulated in the
invoices and no reconciliations were performed by the department. Furthermore, services of
R45, 4 million, which were paid for by the department, were actually received. As a result, it
was not possible to confirm the occurrence and accuracy of consultants, c ontractors and
agency/outsourced services of R1, 1 billion as disclosed in note 6.3 to the financial
statements.
Furthermore, expenditure was incorrectly classified in the accounting records of the
department, which resulted in expenditure for capital assets being overstated by R43, 1
million (2009-10: R21, 3 million understated), current expenditure, goods and services being
understated by R33, 9 million (2009-10: R21, 3 million overstated) and current expenditure;
interest and rent on land being understated by R9, 3 million in the statement of financial
performance and notes 6, 7 and 10 to the financial statements.
3.1.4.1.
Fruitless and wasteful expenditure
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Fruitless and wasteful expenditure relating to the current year of R23, 1 million, as disclosed
in note 29.1 to the financial statements, is understated by R11, 7 million as result of interest
on overdue accounts, overpayments made to employees, transversally paid employees and
overpayment to deceased employees, which were identified as a result of the audit process
and amounts recorded in the register that did not agree with the relevant supporting
documentation. Furthermore, the department did not take adequate steps to address and
correct fruitless and wasteful expenditure identified during prior years’ aud its of R10, 6
million. As a result, the closing balance for fruitless and wasteful expenditure of R30, 4
million (2009-10: R8, 5 million) is understated by R22, 3 million (2009-10: R10, 6 million.
3.1.5. Other reports
3.1.5.1.
Investigation
The department has engaged a consortium of independent consulting firms to investigate a
number of allegations relating to procurement fraud, corruption, maladministration, financial
irregularities, financial misconduct, theft, and fraud, misappropriation of assets, human
resource related matters, nepotism and arson.
As disclosed in note 8.2 to the accounting officer’s report, there were 46 cases that were
completed, two awaiting confirmation of debt recovery, eight awaiting outcomes of the
disciplinary hearings, 40 still in the investigation phase, five in the preliminary phase, 11 in
the reporting phase and one that has been handed over to South African Police Services.
There were also a further 17 cases that are being investigated by other units within the
department
4. Additional Information on the Department of Health
Summary of Challenges identified during this financial year
The following targets were NOT achieved, as set out by the Department of Health’s 2010/112012/13 strategic plan:
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Seven point nine (7, 9%) of TB patients defaulted treatment, against a target of 7%;
A total of 4,989,000 female condoms were distributed during 2010/11, which was lower
than the target of 6 million;
The set target was to test 15 million South Africans by June 2011. At the end of June 2011,
14, 7 million people had accepted HIV counseling, and 13 million had agreed to undergo
HIV testing;
Eighty nine point four per cent (89, 4%) of South African children under the age of 1 were
fully immunised during 2010/11. The target was 90%;
Twenty nine point 9 per cent (29, 9%) of mothers and 27% of babies were reviewed within
six days, which was lower than the 2010/11 target of 40%. This was also lower than the
30% achieved in 2009/10;
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Eighty one per cent (81%) of maternity facilities conducted perinatal review meetings,
against a target of 100%. Personnel shortages and inadequate clinical facilitation skills
contributed to this;
Sixty one per cent (61%) of Primary Health Care facilities had providers trained in the
Integrated Management of Childhood Illnesses (IMCI), which was lower than the set target
of 75%, as well as the actual performance of 74% during 2009/10. This was due to health
worker migration due to occupation specific dispensation (OSD), and migration towards
providing paediatric ART services.
Although access to ART was expanded to 418,677 people living with HIV&AIDS in 2010/11
(318,612 adults and 37,065 children), these figures were lower than the set targets of
placing 400,000 new adult patients and 40,000 new child patients on ART;
A total of 74% of TB patients completed their treatment during the reporting period. The
2010/11 target was 80%. Due to migration, some patients were lost to follow-up;
A total of 69% of HIV positive MDR patients were initiated on ART, against a 2010/11 target
of 100%. Although this was lower than the set target, it reflected improvement from the
55% recorded in 2009/10;
A total of 84% of HIV positive XDR patients were initiated on ART, against a 2010/11 target
of 100%;
The following key activities did not take place during the reporting period:
o Accreditation of facilities;
o External audits of health facilities; and
o Establishment of the Ombudsman Office.
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The National Health Insurance (NHI) Fund was not established during the reporting period
– approval was however, obtained from Cabinet for this;
A total of 143/400 hospital managers were enrolled for a hospital management, training
programme. The intake of students was reduced by both the Universities of KwaZulu-Natal
and University of Witwatersrand (WITS) to address the research backlog and throughput;
No progress was made with the Management and Leadership Feasibility Study for the
Management and Leadership Academy, which was planned to be completed by March
2011;
Feasibility studies were undertaken for 2/5 Flagship Tertiary Hospitals, Chris Hani
Baragwanath (GP) and Limpopo Academic Hospital (LP);
Appointment process of transactional advisors was finalised for 3/5 Flagship Tertiary
Hospitals namely: Nelson Mandela Academic (EC); Dr. G. Mukhari (GP) and King Edward
VIII (KZN).
The National DoH and 3/9 Provinces (EC; KZN & WC) appointed engineers to strengthen
internal capacity, with the aim of improving the delivery of integrated health infrastructure.
Amongst others, this will assist in:
o
ensuring cost-effectiveness in awarding contracts for the construction of health
facilities;
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o
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fast-tracking the completion of health facilities;
improving the quality of health facilities completed.
Of the 40 DMTs established, 32 had written HR delegations; 11 had financial management
delegations; and 7 had Supply Chain Management delegations. The target for 2010/11 was
52 districts.
District Health Councils (DHCs) were established in 32/52 districts.
PHC facility committees were established in 43/52 districts.
A PHC facility supervision rate of 68, 4% was recorded, against a target of 80%.
For various reasons, delays occurred in the approval of business cases for the following hospitals:
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Dr. P. Ka Seme and Edendale Hospitals (KZN);
Musina Hospital (LP);
Bophelong Psychiatric Hospital (NW);
Valkenburg Psychiatric Hospital (WC);
Tygerberg Tertiary Hospital (WC)
5. Financial statement of the Department of Health
The Department OF Health received a Qualified Audit opinion for 2010/11 reporting period from the
Auditor General (AG). Only 2 Provinces – North West and Western Cape – received an Unqualified
Audit Opinion from the AGSA. The target for 2010/11 was that 4 Provinces (at the least) would
obtain an Unqualified Audit Opinion.
The main reason for the qualified opinion is related to the Asset Register with regard to the
valuation of assets.
a. Matters of Emphasis on the following:
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Restatement of comparative figures for the operating lease expenditure for Buildings and
other structures.
Irregular expenditure of R43 million, of which R30 million was for the supply chain process
undertaken for the Expenditure incurred for local and overseas travel, conferencing,
accommodation
b. Budget and Expenditure:
The final appropriation for the National Department of Health for the year 2010/11 was R21,6
billion. The budget increased by R3,2 billion from 2009/10.
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The Under Expenditure on Compensation of Employees (COE) was influenced mainly by a long
recruitment process which commenced in September 2010 after the lifting of the moratorium on
filling of posts. The amount involved is R30, 7 million.
Some of the Goods and Services which were committed late during the financial year could not be
delivered before year end. There was a delay with the procurement of condoms, through a tender
managed by National Treasury. The under-spending was R181, 418 million while an amount of
R213 million was committed over a period of more than twelve months.
Under expenditure for Transfer Payments included an amount of R452, 5 million for the
Revitalization grant which had to be withheld due to non-spending by Provinces.
Capital expenditure under-expenditure amounting to R27 million was due to delays in the
procurement processes.
c. Budget Under-spending on Programmes:
i. Program 1: Administration
The programme shows an under expenditure of R21,8 million (7.7%) against a budget of R282
million. The under expenditure has increased by 6% from 2009/10.
The under spending is related to vacancies as well as late commitment of roll over funds for
Capital expenditure for IT equipment.
ii. Program 3: Health planning and monitoring
The programme shows an under spend of R 31,2 million (7.4%) against a budget of R422,6 million.
This is an increase from 5% for 2009/10.
The under spending was attributed to vacancies. The recruitment processes could not be
concluded before year end.
iii. Program 6: International Relations, Health Trade and Health Products
Regulation
The programme has spent 72.2% of its allocated funds amounting to R78 million with an under
spending of R30 million (7, 8%).
5.1.
PROVINCIAL CONDITIONAL GRANTS EXPENDITURE AS AT 31 MARCH 2011
5.2.
Forensic Pathology Programme
 Gauteng underspent R 42,149 000, which amounts to 55% of the total budget of R92,921
000.
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5.3.
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Hospital Revitalisation Programme
Eastern Cape underspent R 192,050 000 amounting to 54% spent of the total budget of
R360, 660 000.
Free State underspent by R133, 792 000 which amounts to 74% of total budget of R378,
426 000.
KZN underspent by R203, 245 000 amounting to 76% of total budget of R500,815 000.
6. Conclusion
The Department of Health has experienced successes as well as vast challenges during the
2010/11 reporting period. The Department has made positive in-roads to getting many more
people tested for HIV and AIDS and continue to try to improve the public health system albeit
those provinces are challenged to spend their budgets according to principles of efficiency,
effectiveness, and economy.
References
Auditor General Eastern Cape (2011)
Auditor General Gauteng (2011)
Department of Health (2007) Strategic Plan 2009/10 – 2011/12
Department of Health (2011) Annual Report 2011
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