Presentation on the Key Challenges Experienced in the Provincial Health Sector – Finance

1. Presentation on the Key Challenges Experienced in the Provincial Health Sector – Finance Presented by Dr Benjamin Malakoane Member of Executive Council: Department of Health Free State Province

2. ANNEXURE A:FINANCIAL REVIEW 2015/16

3. Actual Spending vs. Budget CoE / Goods & Services conflict • CoE has been increasing from 63% in 2011/12 to 65% in 2016/17, leading to crowding out of Goods & Services. • Due to fiscal discipline initiated during 2014/15, CoE decreased by 1%. This resulted in service delivery pressures emanating from lack of appointment of personnel. In the current financial year the department was instructed by Provincial Treasury to reduce CoE by 0.05%. This is creating a further pressures on the Employees benefits of the previous financial years.

4. Budget Allocation Budget Allocation Goods & Services from 2011/12 to 2019/20 • Whilst the budget has been nominally increasing, the inflation has impacted negatively on the purchasing power. • The increase in accruals is demonstrative of the inadequate budget allocation. • Accruals have a negative ripple effect on the Cash flow of the ensuing years. • The department reduced the accruals as from 2014/15 as compared to the previous years, however in the 2015/16 FY they further increased by 2 percent.

5. Conditional Grants

6. AUDIT OUTCOMES 2015/2016

7. QUALIFICATION AREAS The department got a qualified audit opinion on the following areas 2014/15

8. QUALIFICATION AREAS The department got a qualified audit opinion on the following areas 2015/16

9. Emphasis of matters Emphasis of matters if not attended to and becomes material they may results in to qualification areas

10. Financial sustainability

11. Predetermined Objectives AG have the responsibility to report findings on the reported performance information against predetermined objectives.

12. Compliance with legislations AG have the responsibility to report findings on the reported performance information against predetermined objectives.

13. Compliance with legislations (cont..)

14. Contributing factors to Qualification matters • Irregular Expenditure – As the department was qualified on irregular expenditure since 2007/2008 and the department was suppose to have checked the entire population after the audit. Through the discussion with AG the only way was then the department to check the whole population from as far back as 2009 (411 432 transaction). The processes were started but could not be complete before the end of the financial year hence completeness of irregular register. • Accrued Revenue – Due to system break down and back ups not maintained, the department was unable to account for accrued revenue. The department is in a process of acquiring new patient revenue system. • Commitments ( Infrastructure commitments)- The department did not to maintain accurate commitment register. The following were contributing factors: • Project managers not competent • Lack of proper contract management • IRM reporting not accurate

15. Contributing factors to Non Compliance issues d) 30 day payment- as a result of shrinking budget e) Conditional Grant – spending not for the purpose that it was intended for though not significant.

16. Way forward • Finalisation of Audit Action plan – All facilities audited or not will have to replicate the audit action plan to ensure that current findings will not be repeated in the next financial year. • This audit action plan addresses aspect of correction of matters identified by AGSA, detection and prevention. • Monthly monitoring of implementation of resolutions • Internal Control Unit to do spot checks on the implementation of Audit Action plans • As part of consequence management disciplinary action against some of the officials will be instituted as workshops have been held and directives issued during the course of the year

17. THANK YOU