On 29 July 2009 we were mandated by Cabinet to develop a plan to deal with over expenditure in the KwaZulu-Natal Department of Health (DOH) and put in place measure to prevent it from happening again in the future. Accordingly, that plan was developed and adopted by Cabinet on 26 August 2009. Today we will present that plan in detail to the people of KwaZulu-Natal.
The Department of Health overspent its budget by large amounts over the past two financial years. Cumulative over expenditure in this regard is currently in excess of R2 billion. The budget overruns in the Department of Health introduced a risk to the fiscal stability of the province and hence Cabinet mandated the MECs for Health and Finance to work together to reduce over expenditure and put measures in place that will bring short, medium and long term solutions.
Cabinet determined that a new pair of hands was required to deal with the issues at hand and it approved that officials from KwaZulu-Natal Treasury be seconded to work with the Department of Health and assist it with financial management of its affairs.
Mr Ndoda Biyela, General Manager for Public Finance and Ms Lorraine Naidoo, Manager for Supply Chain Management at the KwaZulu-Natal Treasury have therefore been serving at the Department of Health as of 3 August 2009. At the same time two officials from the Department of Health were seconded to the KwaZulu-Natal Treasury where they do other government work.
Implementation of the recovery plan is managed at a technical level by the steering committee comprising heads of Department for Health and Finance plus a representative of the National Treasury. The steering committee reports to MECs for Health and Finance who in turn report on progress fortnightly to the KwaZulu-Natal Cabinet.
The MEC for Finance will hand over to the MEC for Health. MEC for Health will preset key details of the recovery plan.
A thorough diagnostic exercise revealed several areas of concern that gave rise to and perpetuated over expenditure of the Department of Health budget.
* Budget management is weak
* Financial management staff at most institutions is not adequately qualified to perform required functions or the posts are vacant
* Supply chain management was in tatters. This has a crippling effect on the efficiency of all other elements that rely on the performance of the supply chain management unit
* There was incorrect completion of the in year monitoring (IYM) that hid impending expenditure until it was too late, wasting valuable time for an early intervention
* Human resource management was weak
A thorough plan to reduce overspending and bring the budget to balance over a multiyear period has been adopted by Cabinet. Today the MEC for Health will lead the department to present this Cabinet approved plan to the Finance Portfolio Committee starting at 10h30.
The recovery plan incorporates multiple interventions including the fiscal adjustment plan aimed at curbing over expenditure and putting controls in place to prevent it from happening in the future.
Key talking points
Government is NOT attempting to cut spending on public health care. Health budget continues to grow but we are trying to:
* move money to public health care priorities
* reduce wastage and inefficiency in spending
* address public concern that the public health care system is ineffective, in paralysis and near collapse
* change the culture towards greater prudence and less extravagance
* improve value for money across the public sector
* deliver more and better with the same resources.
* prevent fraud and corruption.
* weed out fraudulent and corrupt elements that have infiltrated our system, prosecute them and recover losses incurred.
Accordingly, we have adopted a phased approach and thus have developed immediate, medium and long terms measures.
Immediate; stabilise budget and the bank account, reduce:
* administrative costs and spending on travel, prohibit specific items such as entertainment, frills, car hire, advertising, etc.
* filling of posts except critical and especially clinical posts
* purchase of motor vehicles except ambulances forensic pathology fleet
* office, domestic furniture and domestic equipment
* agency fees including nursing agencies
* venues, facilities and Departmental catering
* adverts; marketing, recruitment, gifts, etc.
Medium term:
* improve procurement to get better value for money
* participate in national period TR contracts
* review public entities’ trading accounts, performance and form
* review relationships with non-governmental organisations, value for money, performance and form
* reduce reliance on external consultants, attract and retain talent
* review corporate services staffing levels
* reduce committees and unstructured meetings, cut out expensive venues, and reduce air travel
* rationalise regional and district offices
* reduce international travel, size of delegations
* seek out and remove, prosecute and recover stolen resources from corrupt and compromised elements, both inside and outside the Department of Health
* cut back on unstructured policy processes and consultants’ research and focus on implementation and delivery
* the appreciation of the exchange rate should enable some savings on foreign purchases, imported medical equipment
* persal cleanup process and HR functions review to increase efficiency and effectiveness of Human Resource Management.
* organisational design, review and align to core function and budget
* review major contract and renegotiate bad deals, fight off rip offs
* institutionalise Medium Term Expenditure Framework (MTEF) planning
* implement the fiscal adjustment plan, report regularly with the KwaZulu-Natal Treasury to the KwaZulu-Natal Legislature.
Longer term
* Take strategic decisions now that would save large amounts of money in future.
Concluding remarks
We seek to change the culture in the public service to one where public servants understand that the money belongs to citizens. We are of the view that without progress on the value for money agenda, government cannot hope to deliver more during this five year term. We are determined to be at the forefront in pursuit of value for money on provincial spending.
It is clear to us that without reducing waste and excesses, public criticism of the public sector health systems will undermine the trust and confidence that the people of KwaZulu-Natal have placed in this government. We are aware that saving sizeable amounts of money will take time, hard work and early strategic decisions. Jointly as the KwaZulu-Natal Department of Health and the KwaZulu-Natal Treasury we are committed to taking those decisions and we take council from the KwaZulu-Natal Cabinet on behalf of whom we act.
Lastly, we would like to call on all role players in our democratic system to provide full support to this effort by playing their roles diligently to ensure that fiscal prudence becomes entrenched to allow the province to operate on a sound fiscal platform.
Issued by: KwaZulu-Natal Provincial Government
8 September 2009
