Provincial health departments slide R8bn into the red

Provincial health departments had collectively run up a bank overdraft of R8bn by the end of March, according to the Department of Health’s latest annual report, tabled in Parliament on Friday.

It is the first time that the health department has reported this kind of detail on provincial health departments’ financial troubles, and adds weight to its efforts to get the Treasury to try to find a way to bail them out. In June, Business Day reported that officials from the health department and the Treasury were looking into the possibility of providing more money to the provinces after it emerged that they had run up a collective debt of R7,5bn by the end of March last year.

According to the health department’s 2009-10 annual report, the provinces had also reported accruals of R3,2bn, unauthorised expenditure of R11,6bn and overexpenditure of R3,4bn.

Independent economist Alex van den Heever welcomed the details reported by the health department, saying the numbers indicated “a system under massive stress in terms of governance and accountability”. He said the Treasury was more likely to consider an adjustment to the equitable share, which would benefit all the provinces, than a cash handout to those deep in the red.

The health department said it did not have the money to establish a provincial support office as originally planned, but technical assistance from the Treasury had helped improve provincial budget management. Without specifying provinces, it said five out of the nine had stayed within their goods and services budgets, and six managed not to overspend on salaries.

The annual report contains some good news, as it is the first one to receive an unqualified audit opinion from auditor-general Terence Nombembe in seven years. This is an important development, suggesting a significant improvement in the department’s capacity to manage its R18,8bn budget. The department’s poor financial management has for years earned it the scorn of Parliament’s standing committee on public accounts and opposition parties. “It is positive progress,” said the Democratic Alliance’s shadow health minister, Mike Waters. He declined to give further comment until he had read the report.

While the auditor-general’s report indicates he was satisfied that the figures reported by the department were a fair reflection of its finances, Mr Nombembe said it needed to improve its monitoring of conditional grants. These grants are ring- fenced for specific programmes such as improving hospitals, and are channelled from the Treasury to provincial health departments via the national health department.

The health department was supposed to monitor conditional grants with quarterly visits and inspections, and evaluate and investigate inconsistencies arising from these audits, but was failing to do so consistently, Mr Nombembe said. It was also hampered by provinces’ late submission of business plans and performance reports. This has been a concern for several years.

The department reported that it withheld R402m of funds earmarked for hospital revitalisation grants, as some provinces had experienced construction delays. The health department also reported that it had not spent any money on tickets or paraphernalia for the 2010 Soccer World Cup.

Source: Business Day