1. Introduction to the budget process and intergovernmental fiscal relations

1. Analysing the health budgetIDASA Budget Information ServiceAlex Vennekens-PoaneAlison HickeyNhlanhla Ndlovu10 March, 2003 Handouts:Division of Revenue Bill (pgs. 85-91)National Health Budget chapter (from Estimates of National Expenditure 2003/4)Budget Review (pgs. 128, 155, &166)Idasa Budget Dictionaryselected Idasa handouts on PFMA “Preparing for Committee Hearings” handout Idasa Budget Information Service

2. Presentation 1. Intro to the budget process and division of revenue2. Division of responsibilities between natl & prov health depts3. What can we learn by looking at the budget? 4. Structure and format of budget documents5. How do policy developments impact on health budgets?6. Questions to ask on the health budget7. HIV/AIDS in Budget 2003/4 Idasa Budget Information Service

3. Revenue sources for different spheres of government Division of Revenue vertical and horizontal splits equitable share and conditional grants Legal framework for budgeting Steps of the budget process 1. Introduction tothe budget process andintergovernmental fiscal relations Idasa Budget Information Service

4. Intergovernmental Fiscal Relations…. • Each sphere of government is allowed to raise different types of revenue. • Provincial revenue: 4% own revenue, 10% conditional grants, 86% equitable share • Constitution assigns specific functions for each sphere of government. • Local government revenue: 83% own revenue, 17% transfers • Social spending over 80% of provincial budgets • social spending Education:40% Health: 24% Welfare:19% Idasa Budget Information Service

5. More IGFR…. • Division of Revenue • Top slice (executive/political decision) • Vertical split (executive/political decision) Excluding top slice: 39% national 57% provincial 4% local government • Horizontal split between provinces (determined by formula) • Two ways national government sends money to the provinces: • Equitable share (block grant to each province. Size is determined in horizontal split.) • Conditional grants (earmarked funds from national to provinces) Idasa Budget Information Service

6. 1. Drafting phase Four stages of the budget process: 2. Legislative phase 3. Implementation 4. Auditing 3 year rolling budget Medium Term Expenditure Framework Idasa Budget Information Service

7. Division of roles and responsibilities Budget Implications 2.Division of responsibilities between national and provincial health departments Idasa Budget Information Service

8. Roles and responsibilities of health departments Idasa Budget Information Service

9. Budget Implications of Division of Roles and Responsibilities i.r.o. of Health Total National health expenditure in 2003/04 = 8.4 billion National health expenditure excl. transfers in 2003/0 = 602 million Projected consolidated total provincial health expenditure in 2003/04 = 36.6 billion Consolidated Health conditional grants to provinces amount to 7.4 billion Idasa Budget Information Service

10. Budget Implications of Division of Roles and Responsibilities i.r.o. of Health • 93.3% of natl DoH budget is transfers, mainly to provincial departments (conditional grants) • 88% of natl health expenditure goes to provinces as cgs • National health expenditure is less than 2% of consolidated provincial and national health expenditure • 98+% is spent on service delivery in the provinces (through conditional grants and equitable share allocations). • Cgs about 20% of consolidated provincial health expenditure Idasa Budget Information Service

11. How does budget analysis fit in the oversight role of committees? What can we learn by looking at the budget 3. What can we learn by looking at the budget? Idasa Budget Information Service

12. budget inputs: funds, resources budget outputs: medicine, vaccinations, HIV tests budget outcomes: improved child health How does budget analysis fit in the oversight role of committees? Structures and institutions for implementation Impact of programme or policy Service Delivery Policy Budget Indicators?How do we measure inputs, outputs and outcomes? Idasa Budget Information Service

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15. Budget documents: handout (National Estimates of expenditure Budget Review Division of Revenue Bill Provincial Budgets) Walk through National Estimates 4. Structure and format of budget Idasa Budget Information Service

16. Departmental budgets Programme budgets Divided into separate line-items National / Provincial budget National Budget National Vote 16. Health National Vote 16. Health Programme 2: Strategic Health Programmes National Vote 16. Health Programme 2: Strategic Health Programmes Sub-Programme 2.1: District Health Systems Idasa Budget Information Service

17. National / Provincial budgets • Each budget (national, provincial, department, programme) can be presented using the 3 different classifications: 1. by programme 2. by economic classification 3. by standard item • Each department has its own budget. • We are primarily concerned with the programme classification. Budget documents can provide more/less text on policies, achievements, goals, programme purpose. • In the Provincial Health budgets, standard items are important in order to assess the mix of inputs used for service delivery Idasa Budget Information Service

18. budget classification systems Government budgets can have the same information listed in 3 different ways: 1. Listed by programme Each programme is divided into sub-programmes Which is further divided into sub sub programmes or line-items Idasa Budget Information Service

19. 3 different budget classifications (cont.) Two main sections: Current expenditure Capital expenditure 2. Listed by economic classification Also known as Government Financial Statistics (GFS) classification Idasa Budget Information Service

20. 3 different budget classifications (cont.) 3. Listed by standard item classification Personnel expenditure Administrative expenditure Stores and livestock Equipment Land and buildings etc. Idasa Budget Information Service

21. Examples 5. How do policy developments impact on health budgets? Idasa Budget Information Service

22. Examples of health policy developments impacting on budget allocations • PHC: Need for new and upgraded clinics => Infrastructure Conditional Grants • PHC: Negotiations around the division of responsibility around PHC => Transfer payments • Nutrition Programme: Adoption of PSNP Review recommendations => Integrated Nutrition Programme Conditional Grant • Hospital Services: Infrastructure backlogs => Hospital Revitalisation Grant • Hospital Services: management improvement => Hospital Management and Quality Improvement Grant Idasa Budget Information Service

23. Examples of key health policy developments impacting on budget allocations • Personnel: distribution and scarcity of health personnel => provincial health budgets: personnel item • Non-personnel inputs: increased prices of medical equipment and consumables => provincial health budgets: machinery and equipment item, stores and livestock item • Legislation: Mental Health Care Act => provincial budgets: specialised hospitals sub-programme • Legislation: New National Health Bill => Act => implications for national, provincial and local government responsibilities and budgets • Free medical care for people with disabilities => provincial health budgets • Other??? Idasa Budget Information Service

24. Consolidated provincial health budgets Other questions in relation to health budgets (These are examples; same principles can be applied to any budget programme / item) Example of the Integrated Nutrition Programme conditional grant Example of the Hospital Management Improvement Conditional Grant 6. Questions to ask on the health budget Idasa Budget Information Service

25. Consolidated Provincial Health Budgets Will real growth of 3.9% be sufficient to cater for: - Population growth - Additional AIDS patients - Increased cost of equipment & medical consumables (medical inflation about 3% above normal inflation - ASSA) - Free medical care for people with disabilities above age 6 (impacts only on hospital services, not on PHC since PHC was already for free) - Personnel Idasa Budget Information Service

26. Consolidated Provincial Health Budgets (contd) • Look at health budget programmes / items in provincial budgets and see to what extent these reflect National policy priorities, and whether allocations grow in line with objectives. • Which provinces will be able to spend the increased funds? • Compare actual health expenditure YTD 2002/03 by province • Major increases in capital budgets are anticipated but, despite improvement since 2001/02, consolidated Health Capital expenditure in provinces, YTD Q3 2002/03: 51% Idasa Budget Information Service

27. Consolidated Provincial Health Budgets (contd) Idasa Budget Information Service

28. Consolidated Provincial Health Budgets (contd) Per capita health expenditure: - Comparison of per capita health discretionary expenditure in provinces (excluding conditional grants from national) - Real growth in discretionary per capita expenditure Idasa Budget Information Service

29. Consolidated Provincial Health Budgets (contd) Idasa Budget Information Service

30. Examples of other questionsin relation to the health budget - Equity considerations with regard to conditional grants and provincial health budgets - What proportion do the extra allocations for rural medical personnel / scarce skills constitute of the total personnel budget? How much on average is the increase per capita (currently employed personnel & vacancies)? - Do increases in equipment expenditure keep up with medical inflation? If there are major equipment backlogs, can these be addressed within the current budget framework? - For each policy / programme it is important to look whether real growth is sufficient to cater for: expansion of the programme (additional recipients of services, improved quality) and increased target levels, does it take into account higher inflation on particular items? Idasa Budget Information Service

31. INP Conditional Grant How has this been costed? I.e. cost per learner * learners? Will growth in real terms be sufficient in order to cater for: - Increased frequency of feeding - Standardisation of menu’s - Including grade R pupils - Impact of escalating food prices - HIV/AIDS (National Estimates p.328) Idasa Budget Information Service

32. INP Conditional Grant (continued) • Additional health districts until all are included (2004)? • (I.e. how many extra learners? National Estimates p. 338) • 83% spent YTD in Dec. previous financial year. This implies provinces likely to overspend on this grant. What are the reasons for this? Idasa Budget Information Service

33. Hospital Management Improvement Conditional Grant YTD Dec. 2002 indicates that provinces are likely to under-spend on this grant. - Which provinces are most likely to under-spend? - What are the reasons for this? - How will this be addressed? Idasa Budget Information Service