Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

Background:

• 2 primary vehicles to transfer funds to provinces from national: conditional grants & equitable share

• Problems with condtl grants (underspending)

• Enhanced Response to HIV/AIDS in Budget 2002/3

• New funding approach gives provinces more freedom to allocate resources and implement programmes as determined by provinces

Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

What is government spending on HIV/AIDS?

Allocations for general strengthening of health sector (non-specific HIV spending)

+

Total government is spending on HIV/AIDS

Conditional grants to provinces (ring fenced funds)

HIV/AIDS specific allocations/programmes by provinces themselves (from own budgets)

HIV/AIDS-specific allocations

HIV/AIDS Directorate in national Department of Health

Other programmes: nutrition, poverty alleviation, social security,

Funds added to provinces equitable share grant--for purposes of HIV/AIDS

Conditional grants administered by national depts (DoH, DoE, DSD)

On regular budget of DoH (as programme)

Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

1. Smart budget with large increases in resources for HIV/AIDS.

Context of poverty alleviation, social security, nutrition,

support to hospitals etc.

NEW BUDGET 2003/4

R million 2003/4 2004/5 2005/6DoH HIV/AIDS (including condtl grant) 666 851 903

DSD conditional grant for CHBCS 66 70 74 DoE conditional grant (Life skills) 120 129 136

To provinces via equitable share 1,100 1,900 2,454

Total 1,952 2,950 3,568

Total over 3 year period (MTEF) 8,470

Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

NEW BUDGET 2003/4, cont.2. More importantly, new budget channels large

amounts through ES to provinces

• Overall R13.9 bn added to provincial ES (over and above what was announced last year)

Province's share in DOR increases from 56% in 2002/3

to 57.6% in 2005/6

• Allows for general strengthening health sector; deal with additional hospitalisation costs

Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

NEW BUDGET 2003/4, cont.

• Some indications ES funds successfully trickling down, as demonstrated by increased provincial health budgets

R billion 2002/3 2003/4 2004/5 2005/6

Total provincial expenditure 136.919 158.995 175.468 191.590Real growth rate 8.93% 5.21% 4.09%

33.159 36.569 39.881 42.946Real growth rate 3.46% 3.96% 2.66%Source: Budget Review 2003/4. Based on preliminary provincial budgets and will differ slightly from final budgets tab led over next two weeks.

Consolidated provincial health expenditure

Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

2. Budget allows resources for anti-retroviral programme

• Increase in ES partially to allow for treatment options considering ARVs, once policy is finalised/approved

• Addtl future funding options: contingency reserve, cgs to be announced in Oct.

NEW BUDGET 2003/4, cont.

• Compares reasonably to UCT/TAC cost estimates of national prevention & treatment plan (R1.6bn for 2003; R5.6bn in 2005)

Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

KEY QUESTIONS TO BE ASKING

1. Massive boost in resources needed to strengthen health sector generally. Are we doing enough? 2. Extra money for HIV/AIDS was put into the Equitable Share in Budget 2003/4. Are provincial health departments seeing the benefit of those funds trickling down to their budgets?

Or is money diverted to other departments and priorities?

MainstreamingProvincial budgets as moment of truth

3. Absorption capacity becomes critical question, given direction of Budget 2003/4

provincial programme management skills financial management skills

Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

Massive boost in resources needed to strengthen health sector generally.

Absorption capacity becomes critical question:- programme management skills - financial management skills

- leadership- allocation of sufficient resources- getting the policy right- set-up of appropriate structures/systems- capacity to deliver services

Effective HIV/AIDS response will require:

Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

1. Suggests low spending on HIV/AIDS conditional grants is because spending on cgs generally is low.

• Average spending for HIV/AIDS cgs for 2001/2 (77%) was

higher than spending on cgs generally (70%).

Desk study findings on conditional grant spending :• Calculated actual expenditure record on cgs for 2000/1; 2001/2; first half 2002/3• Based solely on public spending data from National Treasury

Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

2. Good evidence that spending on the HIV/AIDS conditional grants has significantly improved in the last two years.

2000/ 1 compared to 2001/ 2:

Health sector 59% 69%Education sector 22% 76%Social Development sector 36% 115%Total HIV/ AIDS conditional grants 36% 77%Source: National Treasury.

Expenditure as percent of total

available 2000/ 01

Expenditure as percent of total

available 2001/ 02

Desk study findings on conditional grants, cont.

Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

Desk study findings on conditional grants, cont.

Spending at mid-year 2001/ 2 and 2002/ 3:

Health sector 28% 47%Education sector 11% 31%Social Development sector 10% 15%

Total HIV/ AIDS conditional grants 16% 36%Source: National Treasury.

Spending as percent of total available as of 30 Sept 2002

Spending as percent of total

available as of 30 Sept 2001

Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

Average spending on regular provincial health dept

budgets = 99%

HIV/AIDS conditional grant spending generally = 77%

HIV/AIDS health cg specifically = 69%

3. Suggest provincial health depts more easily spend funds from their regular provincial budget--compared to ring-fenced funds transferred from national govt as conditional grants

Desk study findings on conditional grants, cont.

Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

• Data analyses focused on the following:

- Size of conditional grant (CG)

- Programme/ subprogramme receiving HIV/AIDS funding

- Department sourced HIV/AIDS funding

- Quantity and quality of information provided in the

official provincial budget statements

Desk study results on HIV/AIDS allocations

in 2002/3 provincial budgets

Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

Conditional GrantsDepartment of Health

• Health CGs administered by District Health Services

• In 2002/03 size of health CG increased in order to cover: VCT, CHBCS, Step down care, provincial management, and PMTCT

• Departments directly and indirectly spend finance from own revenue on AIDS

Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

Real growth rates of CGs in the health sector

• Total health cgs for HIV/AIDS R334 million in 2003/4

• In real terms, the CG to provincial DoH increased by 50% in 2003/04; 37% in 2004/05; and 8% in 2005/06.

Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

Department of Education

• Lifeskills CG administered by different programme in each province

• Total Lifeskills cgs in 2003/4 R120 million

• In real terms, the CG to provincial DoE drops by 21% in 2003/04, grows by 2% in 2004/05 and 1% in 2005/06.

Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

Department of Social Development(Welfare & Social Services)

• CG administered by different programmes

• Total cg for CHBCS R66 million in 2003/4

• The CG to provinces grows in real terms by 31% in 2003/04, 1% in 2004/05 and also 1% in 2005/06.

Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

Own revenue allocation

• Budget statements do not give full details about additional allocation from own revenue

• Interviews with departments prove that almost all departments make direct and/or indirect allocations to HIV/AIDS

Desk study results of 2002/3 provincial budgets, cont.

Quantity and quality of reporting on HIV allocations

• Budget formats vary across provinces and departments

Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

Role of provincial treasuries in HIV/AIDS funding

• Funds flow through provincial treasuries

• Financial control and business plans are the responsibility of national departments

• Receive financial and non-financial reports from departments

• Provincial treasuries report to National Treasury

• Additional earmarked allocation from provincial treasury to the health sector (e.g. KZN & EC)

Preliminary findings from provincial interviews:

Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

Key obstacles identified by provincial treasuries

• Underspending is a management issue

• Lack of knowledge

• Poor communication channels between and within departments (bureaucracy)

• Late transfers to departments (the issue of business plans and the tendering process)

• Lack of monitoring systems for transfers to local government and NGOs

• Poor financial and project management skills

• Capacity issues

Provincial interviews, cont.

Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

Provincial departments’ response

• Bureaucracy in reporting

• CG conditions impossibly rigid

• Tendering process inhibits timeous service delivery

• Lack of personnel and support facilities

• A case of the EC lifeskills programme

• Difficulties relating to Section 100 departments (EC)• DSD receiving the smallest CG yet huge demands• Integrated HIV/AIDS strategies not functional

(particularly in cases staffing shortages)

Provincial interviews, cont.

Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

Massive boost in resources needed to strengthen health sector generally.

Absorption capacity becomes critical question:- programme management skills - financial management skills

- leadership- allocation of sufficient resources- getting the policy right- set-up of appropriate structures/systems- capacity to deliver services

Effective HIV/AIDS response will require: