“The Northern Cape did not obtain the required approval from the accounting officer for the order that exceeded the maximum allowable threshold,” the report stated.
THE NORTHERN Cape paid almost R1.5 million more for personal protective equipment (PPE) for health care workers than the maximum price prescribed by the National Treasury.
This was revealed by Auditor-General Kimi Makwetu during the announcement of his preliminary report into the awarding of PPE contracts in April.
The overall Covid-19 allocated budget for the health sector in the Northern Cape as at July 31 was R177.86 million.
Makwetu pointed out, however, that the total spending as per the Covid-19 expenditure reports submitted by the provincial health departments was significantly different in some provinces from what was reflected on the Basic Accounting System.
“The total spending has not yet been audited for accuracy and completeness.”
In the Northern Cape, the total spent as per expenditure report was R16.87 million, while the total as per the Basic Accounting System was R6.32 million.
“It is not clear how the health departments compiled the expenditure reports submitted. We have not made enquiries in this regard or attempted to reconcile the differences.”
In terms of PPEs for health care workers, Makwetu explained that in order to minimise supply chain irregularities, the National Treasury set specific prices for departments and entities to follow when procuring PPEs.
Seven of the nine provinces ordered PPE items from suppliers at prices in excess of the maximum prices prescribed by the National Treasury.
Examples given in the report of orders placed by the Northern Cape provincial Department of Health at prices above those prescribed by the National Treasury include the purchase of 400 000 examination gloves. The provincial department paid R1.08 for a single unit, while the recommended price prescribed by the National Treasury should have been R0.96. The total spent in excess of the prescribed price was R48 000.
Another example given was for the 100 000 disposable gowns purchased, for which the provincial Health Department paid R127.50. The recommended price was R113.40, resulting in R1.4 million being spent in excess of the prescribed price.
“Instruction notes issued by the National Treasury indicated the maximum prices regarded by the National Treasury as realistic and market related during the Covid-19 pandemic, to be paid by the departments for selected PPE items,” the report explained.
“The departments could order PPE items from existing contracts or any other supplier, but the prices at which the departments ordered the PPE items had to be equal to or lower than the prices in these instruction notes.
“At provincial level, either the medical depots and/or the departments’ supply chain management directorates ordered PPE from suppliers.”
A further instruction was issued by National Treasury on April 28, 2020 which prescribed that a price variance of up to 10% of prices in the instruction note would be allowed. Any deviation to this provision had to be approved by the accounting officer, based on a justifiable reason.
“All the provinces, except Mpumalanga and Limpopo, ordered PPE items at prices exceeding the 10% threshold during the period April 28, 2020 (when instruction note 5 became effective) and June 30, 2020.
“The Northern Cape did not obtain the required approval from the accounting officer for the order that exceeded the maximum allowable threshold,” the report stated.
Potential loss for the Province, as a result, was estimated to be R1.458 million.
The number of orders placed in the Northern Cape at the time was six and the total value was R51 million.
The number of orders with PPE items possibly ordered at prices in excess of the prescribed prices that might be paid was stated as two while the rand value in excess of the prescribed prices was R1.458 million.
“Despite several attempts to obtain management responses to the audit observation, none had been provided by the Northern Cape Department of Health at the time when this report was concluded.
The audit further stated that in the Northern Cape, even though the department indicated that all the orders placed for PPE had been delivered, the delivery notes for orders to the value of R9 343 836 were either not provided to the auditor-general to confirm that these were delivered by the suppliers, or the delivery notes were not signed by an official from the department.”
The report further indicated that, by July 31, the Northern Cape had ordered no ventilators.
It had also not appointed any additional community health care workers (CHW). According to Makwetu, CHWs were appointed by provinces to assist with expanded screening, which commenced in April 2020, in areas where people lived. In the Northern Cape, the department used existing CHWs.
Only one site in the Province had been identified as a field hospital (temporary facility) by the end of July.
“The departments of health in the provinces were historically plagued by high volumes of irregular expenditure, poor maintenance of equipment and poor workmanship for infrastructure projects. The pandemic required these departments to spend significant additional amounts of money to curb the impact of the pandemic. The implementation of preventative controls for the sector was therefore of the utmost importance.”
“Overall, we have identified several control weaknesses and related findings throughout the health sector that could materially impact the quality and value for money of the services or products delivered and communicated these to management,” Makwetu stated in conclusion, referring to the situation at health departments nationally.
“This had a significant impact on whether the funds have actually been spent for its intended purpose by the departments and entities involved. The report indicated that risks highlighted by the health minister during our engagement on June 17, 2020 relating to inflated PPE prices had also materialised widely across the sector. These cases should be duly investigated and transgressors held accountable. Monies should also be recovered and the sector should not lose sight of the dire need to implement corrective measures as it will still incur significant spending on procuring PPE in the near future.”
He added that the expected increase in expenditure, in conjunction with the increase in the pandemic as the numbers rise, exposed the sector to more risks.
“We are actively engaging with the Special Investigating Unit as we proceed with the audit of the health sector. Our collaborated efforts aim to ensure that we focus our audit efforts on high-risk areas and eliminate duplication of effort. We are also engaging with the fusion centre and will share our findings with them for immediate follow-up and investigation. The audit team is engaging and will continue to engage with the accounting officers on the findings noted above, and assess the impact of these findings on the outcomes of the sector. This will be included in the next special report.”
