AG sounds alarm over weak financial controls in public health

The office of the auditor-general has sketched a grim picture of the weak financial controls in the majority of provincial health departments, telling MPs on Tuesday that the Eastern Cape, Free State and Northern Cape received qualified audits for the fourth year running in 2022/2023.        

Their performance stands in stark contrast to the Western Cape health department, the only one to have consistently received clean audits in those years.

Audit outcomes are a key measure of the financial management capacity of government departments: a qualified audit signals the auditor-general is not satisfied that an entity has accounted properly for money allocated to it. Provincial health departments account for the lion’s share of the public health budget and were allocated altogether R248bn in 2022/2023, according to the Finance and Fiscal Commission.

The Limpopo health department has yet to finalise its audit outcome, while Gauteng, Mpumalanga, North West and KwaZulu-Natal received unqualified audits with findings, as did the national health department.

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Auditor-general business unit leader Thabelo Musisinyani said the overall quality of provincial health departments’ annual financial statements was worrying as the national health department and most provincial health departments submitted documents with material misstatements that were resolved during the audit process.

That the Western Cape consistently submitted annual financial statements without such misstatements indicated the control environment was sound and that many departments were relying on the audit process to rectify weaknesses in their internal controls, she told parliament’s portfolio committee on health.

Provincial health departments were largely failing to rein in payouts for successful medical negligence claims, increasing financial strain on the sector, she said.

The sector was not on track to meet the government’s 2019-2024 medium term strategic framework target of reducing provincial health departments’ contingent liabilities for medico-legal claims 80%, from R70bn to under R18bn over the period, warned Musisinyani. 

The contingent liabilities for medico-legal claims for eight provinces ran to R67bn in 2022/2023, and the figure is expected to be higher once Limpopo has completed its financial statements.

A case management system developed by the national health department and intended to help provinces manage medico-legal claims was not yet fully implemented, and a new policy and legal framework for medico-legal claims had yet to be finalised, she said.

Medical negligence claims are not budgeted for, which means they erode the allocations originally earmarked for other purposes, resulting in increased accruals and late payments of suppliers. Accruals are unpaid bills to suppliers that are rolled over from the end of one financial year to the start of the next.

Unpaid invoices totalled R17.8bn at the end of the 2022/2023 fiscal year, a significant increase on the R16.1bn reported the year before, said Musisinyani.

“This means the sector is consistently borrowing from future allocations to fund current year expenses, forcing management to continuously make choices of which activities (and services) to prioritise and which to suspend, further disadvantaging citizens.”

MPs were unimpressed by the failure of underperforming provincial health departments to improve, with committee chair Kenneth Jacobs saying the national health department should consider placing the Northern Cape health department under administration. Opposition MPs said provincial health departments should be called to account to parliament.

“We have been talking about these matters for the past four years, and it gets worse every year. Something needs to be done to resolve these problems urgently,” said FF+ MP Philip van Staden. “We saw during oversight visits how problems are escalating and the danger it (poses) for patient lives. It is time for provinces to come before this committee to take responsibility,” he said.

kahnt@businesslive.co.za