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Attribution: Please cite the work as follows: World Bank. 2022. Finhealth - Andhra Pradesh (India): Analysing Public Financial Management Systems That Affect Service Delivery Outcomes. Washington, DC: World Bank. © World Bank. All queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; e- mail: pubrights@worldbank.org. FinHealth Andhra Pradesh (India) ii Contents ACKNOWLEDGMENT...................................................................................................................................... VI ABOUT THE AUTHORS................................................................................................................................... VII ACRONYMS AND ABBREVIATIONS ............................................................................................................... VIII EXECUTIVE SUMMARY .................................................................................................................................... X 1. INTRODUCTION ......................................................................................................................................1 1.1 PURPOSE OF THIS REPORT ............................................................................................................................... 1 1.2 METHODOLOGY ............................................................................................................................................ 1 1.3 STRUCTURE OF THIS REPORT ............................................................................................................................ 2 2. STATE CONTEXT: ANDHRA PRADESH ......................................................................................................3 2.1 SOCIAL, ECONOMIC, AND POLITICAL CONTEXT ..................................................................................................... 3 2.2 STATE’S PUBLIC FINANCIAL MANAGEMENT SYSTEMS ............................................................................................. 4 3. HEALTH SERVICES IN THE STATE: A CRITICAL OVERVIEW ........................................................................6 3.1 SECTORAL POLICIES, GOALS, AND PRIORITIES ....................................................................................................... 6 3.2 HEALTH FINANCING AND EXPENDITURE TRENDS ................................................................................................. 10 3.3 SUMMARY OF PREVIOUS WORK DONE ON PFM ANALYSIS FOR HEALTH ................................................................... 13 4. PUBLIC FINANCIAL MANAGEMENT AND HEALTH SERVICE DELIVERY PERFORMANCE ...........................15 4.1 STRATEGIC PLANNING AND FINANCING ............................................................................................................. 16 4.1.1 SECTOR PLANNING COORDINATION (H1) ...................................................................................................... 16 4.1.2 SECTOR PLAN COSTING AND FINANCING (H2) .............................................................................................. 18 4.1.3 EXTERNAL FUNDING OF THE SECTOR (H3) .................................................................................................... 19 4.2 BUDGET PREPARATION ................................................................................................................................. 19 4.2.1 ANNUAL BUDGET PREPARATION PROCESS (H4) ............................................................................................ 19 4.2.2 BUDGET CLASSIFICATION (H5) ....................................................................................................................... 24 4.2.3 FORECASTING OF EARMARKED REVENUES (H6) ............................................................................................ 26 4.2.4 MEDIUM-TERM PERSPECTIVE IN EXPENDITURE BUDGETING (H7) ................................................................ 26 4.2.5 TRANSFERS TO SUBNATIONAL GOVERNMENTS (H8)..................................................................................... 27 4.3 BUDGET EXECUTION ..................................................................................................................................... 31 4.3.1 PREDICTABILITY OF IN-YEAR RESOURCE ALLOCATION (H9) ........................................................................... 31 4.3.2 COLLECTION OF EARMARKED REVENUES FOR HEALTH (H10) ....................................................................... 32 4.3.3 ACCOUNTING FOR HEALTH SECTOR REVENUES (H11)................................................................................... 33 4.3.4 PURCHASING ARRANGEMENTS (H12) ........................................................................................................... 34 4.3.5 PAYROLL CONTROL (H13) .............................................................................................................................. 36 4.3.6 INTERNAL CONTROLS ON NON-SALARY EXPENDITURE (H14) ....................................................................... 37 4.3.7 INTERNAL AUDIT (H15) .................................................................................................................................. 39 4.4 MANAGEMENT OF PHYSICAL INPUTS................................................................................................................ 39 4.4.1 STAFF RECRUITMENT (H16) ........................................................................................................................... 39 4.4.2 STAFF PERFORMANCE MANAGEMENT (H17) ................................................................................................ 43 4.5 OPERATIONAL SUPPLIES ................................................................................................................................ 44 4.5.1 PROCUREMENT MANAGEMENT (H18) .......................................................................................................... 44 4.5.2 PUBLIC INVESTMENT MANAGEMENT (H19) .................................................................................................. 49 4.5.3 PHYSICAL ASSETS MANAGEMENT (H20) ........................................................................................................ 50 4.6 ACCOUNTING AND REPORTING ....................................................................................................................... 52 4.6.1 ACCOUNTING, RECORDING, AND RECONCILIATION (H21) ............................................................................ 52 4.6.2 BUDGET EXECUTION REPORTS (H22)............................................................................................................. 54 4.7 BUDGET EVALUATION ................................................................................................................................... 55 4.7.1 EXTERNAL AUDIT (H23) ................................................................................................................................. 55 4.7.2 PUBLIC ACCESS TO HEALTH FINANCE INFORMATION (H24) .......................................................................... 56 5. EMERGING INSIGHTS AND KEY MESSAGES: PFM AND HEALTH IN ANDHRA PRADESH ..........................58 6. RECOMMENDATIONS ...........................................................................................................................63 FinHealth Andhra Pradesh (India) iii List of tables Table 1: Study methods and sample ....................................................................................................... 2 Table 2: Key fiscal health indicators........................................................................................................ 4 Table 3: AP Health indicators - a snapshot ............................................................................................. 6 Table 4: Key health indicators: NFHS 4 and NFHS 5 results .................................................................... 6 Table 5: Inter-district variation in health outcomes ............................................................................... 7 Table 6: Number of facilities and beds under APVVP (by levels of facilities) ......................................... 8 Table 7: Verticals within the DoHM&FW ................................................................................................ 9 Table 8: State health budget and expenditure ..................................................................................... 10 Table 9: NHM budget and expenditure ................................................................................................ 10 Table 10. Utilization rates for select budget components under the NHM ......................................... 12 Table 11: Share of expenditure on social services (%) .......................................................................... 12 Table 12: Overview of results against the FinHealth assessment domains .......................................... 15 Table 13: SDU engagement in planning ................................................................................................ 17 Table 14: Availability of operational and budgeting guidelines at SDUs .............................................. 21 Table 15: Effects of not engaging health facilities in planning and budgeting - voices from health facilities ................................................................................................................................................. 21 Table 16: Budgets proposed versus approved...................................................................................... 22 Table 17: Budget classification tiers ..................................................................................................... 24 Table 18: Staff (excluding contractual and outsourced) available for accounts and finance related designations .......................................................................................................................................... 25 Table 19: Delays in fund transfer under the RMNCH and National Urban Health Mission (NUHM pools of the NHM (%)............................................................................................................................ 28 Table 20: Percentage change in revised estimate compared to the original budget estimate (%)...... 32 Table 21: Revenue collections under different health insurance schemes .......................................... 33 Table 22: Sanctioned posts and vacancies for select positions in APVVP administered hospitals....... 40 Table 23: Sanctioned posts and vacancies for select positions in the DME administered institutions and hospitals ......................................................................................................................................... 41 Table 24: DoHM&FW recruitments planned for FY2021–22 ................................................................ 42 Table 25: Utilization trends for HR and training budget lines under the NHM .................................... 42 Table 26: Utilization trends for procurement and infrastructure budget lines under the NHM .......... 48 Table 27: Capital outlay and expenditure under the demand of the DoHM&FW and the NHM budget .............................................................................................................................................................. 49 Table 28: Financing source and agencies managing expenditure on medicines .................................. 53 Table 29: Estimating total health expenditure in a fragmented accounting landscape ....................... 54 Table 30: Public (health) finance: What is and is not available in the public domain .......................... 57 Table 31: Recommendations: short, medium, and long term .............................................................. 67 FinHealth Andhra Pradesh (India) iv List of figures Figure 1: Per capita government spending on health (in INR) .............................................................. 10 Figure 2: Expenditure by sub-departments within the DoHM&FW ..................................................... 11 Figure 3: Health budget utilization trends: 2016–17 to 2020–21 (revised estimate) .......................... 11 Figure 4: Distribution of funds under the state budget after legislative approval in AP ...................... 27 Figure 5: Delays in transfer of NHM central funds by the state ........................................................... 29 Figure 6: Flow of funds from the GoI to the implementing agency for NHM in AP ............................. 30 Figure 7: In-year availability of funds for the DME and APVVP ............................................................ 31 Figure 8: Issues in staffing at the DoHM&FW, AP................................................................................. 44 Figure 9: Capital budget and expenditure for health under the state budget ..................................... 49 Figure 10: Fishbone analysis: Strategic planning, financing, and budgeting ........................................ 61 Figure 11: Fishbone analysis: Budget execution and service delivery gaps ......................................... 61 Figure 12: Fishbone analysis: Monitoring and accountability structure’s impact on service delivery . 62 Figure 13: Fishbone analysis: Summary of links between PFM issues and service delivery gaps ........ 62 List of boxes Box 1: Examples of infrastructure gaps due to no facility-level plan and budget ................................ 18 Box 2: Surgery in damp clothes ............................................................................................................ 22 Box 3: Budget classification structure and its impact on service delivery ............................................ 25 Box 4: Impact of no medium-term perspective in expenditure budgeting .......................................... 27 Box 5: Impact of fund transfer practices on service delivery ............................................................... 30 Box 6: Impact of current accounting practices ..................................................................................... 34 Box 7: Impact of weak purchasing arrangements on service delivery ................................................. 35 Box 8: Consequence of weak HR & payroll management practices ..................................................... 37 Box 9: Impact of weak internal control................................................................................................. 38 Box 10: Impact of weaknesses in staff recruitment.............................................................................. 43 Box 11: Consequence of no framework for public asset management ................................................ 51 FinHealth Andhra Pradesh (India) v Acknowledgment This report was prepared under the aegis of a Global Programmatic Flagship Analytic, ‘PFM in Health Sector: Service Delivery Challenges and Solutions’ (P155193), jointly led by the Governance Global Practice (GGP) and the Health, Nutrition and Population (HNP) Global Practice. This assessment was undertaken by a joint World Bank team in close cooperation with the Government of Andhra Pradesh. The report was prepared by a World Bank team led by Manoj Jain (Lead Governance Specialist and Task Team Leader of the Global Flagship - PFM in Health and Co-TTL of this task), Owen Smith (Senior Health Specialist and Co-TTL of this task), and Rajesh Jha (Lead Consultant). The study in Andhra Pradesh was embedded within the overall health systems project in the state. Andhra Pradesh Health Systems Strengthening Project (APHSSP) Task Team Leader Bathula Amith Nagaraj (Senior Operations Officer, HNP) played an instrumental role in coordination and policy level dialogues with the state health department. And the PFM context was provided by Tanuj Mathur (Senior Financial Management Specialist, Global Governance Practice). The APHSSP task team shall continue the dialogue with the state to take the study recommendations forward. We would like to extend our sincere thanks to the Principal Secretary and the Commissioner in the Department of Health, Medical and Family Welfare, Government of Andhra Pradesh for their unflinching support to the assessment and their belief in the cause and approach. We also extend our sincere gratitude to the Project Director of the Andhra Pradesh Health Systems Strengthening Project for the leadership and facilitation of the entire assessment. The state and district teams of the National Health Mission (NHM) were instrumental in data collection and entry, without whose support primary data collection would have been a challenge. Special thanks to all the officials of the Directorate of Public Health and Family Welfare, Directorate of Medical Education, Andhra Pradesh Medical Services and Infrastructure Development Corporation, Andhra Pradesh Vaidya Vidhana Parishad, Dr YSR Aarogyasri Health Care Trust, and others in the department who made themselves available for a series of online consultations during the COVID-19 pandemic, despite the pressures of the pandemic response. We would also like to extend our thanks to the district health administration teams of all the 11 districts where primary data were collected. The task team benefited from a panel of peer reviewers who provided some excellent feedback based on their rich experience of working on public financial management (PFM) and health issues globally. Peer reviewers were Adanna Chukwuma, Senior Economist (HECHN), World Bank; Edson Correia Araujo, Senior Economist (HSAHN), World Bank; Jennifer Asman, Public Finance Policy Specialist, UNICEF, New York; Maxwell Dapaah, Senior Financial Management Specialist (EEAG2), World Bank; and Timothy Stephen Williamson, Global Lead, Public Financial Management, World Bank. And finally, we would like to thank the Bill and Melinda Gates Foundation who have funded the global task. FinHealth Andhra Pradesh (India) vi About the authors Manoj Jain is currently a Country Focal Point (India) and Lead Governance Specialist in the Global Governance Practice (GGP) of the World Bank. In a career spanning over 29 years, Manoj has had multifaceted engagements in the private and public sector. He has worked extensively in the area of public financial management (PFM) for the past two decades and is leading several high-profile engagements across the globe, more so at the federal and subnational levels in India. Manoj has been leading the World Bank’s governance and PFM agenda in service delivery, especially in health and education sectors. He is leading development of a tool in education, called FinED, similar to FinHealth, which helps triangulate causal relationships between PFM, education financing, and education service delivery. He has authored, published, and contributed to several reports and articles in the PFM arena across the world. Owen Smith is a Senior Economist with the World Bank’s Health, Nutrition and Population (HNP) Global Practice, currently based in New Delhi, India. Since joining the World Bank in 2005, he has worked extensively on health financing and health policy issues in the Europe and Central Asia and South Asia regions. He is a co-author of Getting Better: Improving Health System Outcomes in Europe and Central Asia and Going Universal: How 24 Countries are Implementing Universal Health Coverage. Before joining the World Bank, he worked as a health economist at a consulting firm with a focus on Sub-Saharan Africa and as a macroeconomist at the Canadian Department of Finance with a focus on East Asia. Rajesh Jha is a Senior Consultant with the World Bank’s HNP Global Practice, based in New Delhi, India. At the World Bank he has worked extensively on health insurance, PFM for health, and public- private partnerships (PPPs). He was the country lead for Resource Tracking and Management for Primary Health in India implemented by the Harvard T.H. Chan School of Public Health under a grant from the Bill and Melinda Gates Foundation and has worked extensively on strengthening PFM for health. In the past, he has worked on health systems and PPPs in India as well as on HIV prevention for vulnerable population groups and community systems strengthening across South Asian countries. FinHealth Andhra Pradesh (India) vii Acronyms and abbreviations AC Air Conditioner AFS Annual Financial Statement AHCT Dr YSR Aarogyasri Health Care Trust AP Andhra Pradesh APCOS Andhra Pradesh Corporation for Outsourced Services APHSSP Andhra Pradesh Health Systems Strengthening Project API Application Programming Interface APL Above the Poverty Line APMERC Andhra Pradesh Medical Education and Research Corporation APMS Audit Para Management System APMSIDC Andhra Pradesh Medical Services and Infrastructure Development Corporation APVVP Andhra Pradesh Vaidya Vidhana Parishad ARI Acute Respiratory Infection ASHA Accredited Social Health Activist AYUSH Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homeopathy BCTV Blood Collection Transportation Vehicle CA Chartered Accountant CAG Comptroller and Auditor General CBRO Comprehensive Budget Release Order CCO Chief Controlling Officer C-DAC Center for Development of Advanced Computing CDS College Development Society(s) CFMS Comprehensive Financial Management System CHC Community Health Center CSS Centrally Sponsored Scheme DCHS District Coordinator for Hospital Services DDO Drawing and Disbursing Officer DFID UK Department for International Development DHS Directorate of Health Services DME Directorate of Medical Education DMOH District Medical Officer of Health DoF Department of Finance DoHM&FW Department of Health, Medical and Family Welfare DoPH&FW Directorate of Public Health and Family Welfare DPR Detailed Project Report DTA Director of Treasury and Accounts EML Essential Medicine List ERP Enterprise Resource Planning FMR Financial Management Report GoAP Government of Andhra Pradesh GoI Government of India GSDP Gross State Domestic Product HDS Hospital Development Society(s) HMIS Health Management Information System HOD Head of the Department HR Human Resource(s) HRIS Human Resource Information System FinHealth Andhra Pradesh (India) viii HRMS Human Resource Management System IPD Inpatient Department KPI Key Performance Indicator MTEF Medium-Term Expenditure Framework MTFPS Medium-Term Fiscal Policy Statement NCD Noncommunicable Disease NFHS National Family Health Survey NHM National Health Mission NIC National Informatics Centre NITI Aayog National Institution for Transforming India OPD Outpatient Department OT Operation Theater PD Personal Deposit PEFA Public Expenditure and Financial Accountability PFM Public Financial Management PHC Primary Health Center PIM Public Investment Management PIP Project Implementation Plan PMJAY Pradhan Mantri Jan Arogya Yojana PPP Public-Private Partnership PRD Panchayat Raj Department RFID Radio Frequency Identification RMNCH Reproductive, Maternal, Newborn and Child Health SAI Supreme Audit Institution SCO Sub-Controlling Officer SDU Service Delivery Unit SOP Standard Operating Procedure UGC University Grants Commission UHC Universal Health Coverage UPHC Urban Primary Health Center VHSNC Village Health Sanitation and Nutrition Committee FinHealth Andhra Pradesh (India) ix Executive summary Background Objective and methods While high levels of political commitment to Since tax-financed government revenues are essential improve health outcomes in the state have ensured for progress toward universal health coverage (UHC), that Andhra Pradesh (AP) ranks fourth among the and efficient allocation and use of such revenues is category of 21 large states in the NITI Aayog1 Health more critical in resource-constrained environments, Index, the health sector is challenged by an the state government agreed to undertake an epidemiological transition with rising incidence of assessment of public financial management (PFM) noncommunicable diseases (NCDs). The state has systems within the health sector. In recognition of this made significant achievements in the last five years agenda, an assessment of the potential for achieving better alignment between the PFM and health systems in almost all key maternal and child health indicators. was undertaken. AP was the first state in India for the Despite these improvements, prevalence of diarrhea assessment. and acute respiratory infections (ARIs) among children under five years appears to be on the rise. The assessment was conducted using the FinHealth: Wide interdistrict variations in the health outcomes PFM in Health toolkit formally launched by the World indicate challenges in equity and access. Almost 60 Bank in 2019. The toolkit adopts a unique approach by percent of the state disease burden is because of linking supply-side barriers to PFM systems and aims to NCDs. Lower respiratory infections, diarrheal establish a causal relationship between PFM issues and diseases, tuberculosis, preterm birth complications, health service delivery outcomes. It assesses the PFM and HIV continue to be among the top 15 causes of systems across 24 PFM domains clustered into six broad PFM functions. The toolkit has evolved through years of life lost in the state. extensive pilots in the Kyrgyz Republic (2016), Lao Despite increases in absolute health expenditure, People’s Democratic Republic (2018), Guinea Bissau the state’s health financing landscape is (2019), Armenia (2020), Myanmar (2020), and Georgia characterized by low allocations for health and (2021). AP (India) was the seventh pilot. The scope of suboptimal budget utilization. Total government assessment in AP covered the functioning of the entire health expenditure as a share of gross state domestic Department of Health, Medical and Family Welfare product (GSDP) ranged between 0.8 percent and 0.9 (DoHM&FW) across all 24 domains of the toolkit. percent of the GSDP between 2015–16 and 2019–20. A mixed methods approach was used for the The share of government expenditure on health assessment. As part of the review, various government varied between 4.5 percent and 4.8 percent from orders and budget books were reviewed. Quantitative 2017–18 to 2018–20, with a per capita government assessment included a survey of 40 facilities and 161 spending on health at INR 1,420 in 2019–20. While patient interviews across 11 of 13 districts in the state. the expenditure in public health remains stagnant A team of senior researchers conducted a qualitative over the last four years, there is an increase in deep dive in one district, followed by a series of state- spending on family welfare and medical education. level in-depth consultations with different wings within Primary drivers of underutilization are high staff the DoHM&FW. vacancies in the department and insufficient capacity Fishbone approach (from FinHealth) has been used to to manage infrastructure projects. identify the causal link between PFM and health service outcomes. 1 NITI Aayog = National Institution for Transforming India. FinHealth Andhra Pradesh (India) x How weakness in PFM issues cause health service delivery gaps FinHealth Andhra Pradesh (India) xi Key findings and recommendations No. Key findings Recommendations 1 The absence of a state health policy, medium- Develop health policy and a Medium-Term term strategy and health expenditure Expenditure Framework (MTEF) for health. framework has contributed to challenges in Experience from the previous MTEF may be used to meeting population health needs and resource develop a medium-term framework as the basis for planning for health systems and facilities. The planning the policy objectives. annual planning and budgeting process is effectively top down and fragmented. The level of integration between the state and the National Health Mission (NHM) planning and budgeting process is weak. Most of the strategies and targets are determined centrally, with minimal involvement of lower levels of health facilities. Service delivery gaps and facility needs do not always get captured, affecting service delivery and patient confidence in the public health system. (H1, H2, H4, H7) 2 Sector-specific planning and budget manuals Develop a Health Budget Manual and SOP. While are also lacking, and weaknesses in the annual the state budget manual is comprehensive planning and budgeting process compound the regarding the general rules and procedures, the problem. There is no simplified Health Budget Manual should capture the manual/standard operating procedure (SOP) procedures in a simplified checklist form and based on the Treasury Code, Finance Code, and provide sectoral technicalities related to budget the state budget manual. The manuals and estimates for health and hospitals. The SOP shall codes are not translated into health guide the drawing and disbursing officers (DDOs) department-specific operational checklists that and sub-controlling officers (SCOs) in budget can aid budget and expenditure management estimation processes, budget aggregation at the and contribute toward the standardization of next higher level, the process to be followed to PFM practices. Budgeting for health services validate estimates from subordinate offices, and so and hospital facilities has technicalities that the on. state budget manual cannot capture. Staff involved in budgeting have no trainings for this Transition from parallel planning and budgeting purpose. (H4) process to comprehensive, integrated annual plans and budgets. Develop integrated plans and budgets for each health facility and district. This should form the basis of developing a comprehensive state plan and budget. Each item of the plan and line of the budget can have columns for different sources of funding. This approach will have the following benefits: • Each health facility and district will have its plan and budgets, which can be used to strengthen results-based accountability structures. • This will be a good tool to assess the resource gap for strategic activity/intervention. • It will be easier to pull out NHM plans or any other plan as required depending on the source of financing. 3 NHM and state budget classification structures Reform budget classification system to ensure are misaligned. Weaknesses in budget integration of or create an interface between the structure and classification include a lack of budget classification systems of the state and NHM interface between the functional and economic budgets. This will facilitate comprehensive FinHealth Andhra Pradesh (India) xii No. Key findings Recommendations classification systems used for the state budget allocation decisions and comprehensive tracking of and the NHM budget and an unmanageably budgets and expenditure by service delivery levels, large number of budget lines under the NHM. service delivery units (SDUs), and functional and Fund allocations under multiple heads and economic classifications. The state department’s programs at the facility level complicate computerized treasury system may institutionalize a financial management tasks, especially at lower unique code to capture location details of all levels of health facilities with inadequate staff. expenditures. (H5, H8) 4 There are no costed plans for districts and Develop normative costing of services at different health facilities. Suboptimal facility-level levels of health care. While the normative costing engagement in planning and inadequate should be based on detailed standard treatment budget allocations lead to systemic gaps that protocols for each package in the service delivery affect service delivery. Compromise on a basket, it is important to track the deviation results-based management approach does not between the normative and actual/current costs. allow linking results with expenditure. This shall inform resource mobilization and Optimizing expenditure efficiency at the service allocation decisions and set the base for economic delivery level is a policy imperative, especially in evaluations and efficiency studies. a resource-constrained environment. (H2, H4, H9, H18, H20) 5 Parallel institutional and management Ensure functional integration of the Directorate of structures for hospitals and public health lead Health Services (DHS) and the Andhra Pradesh to challenges that affect integrated planning Vaidya Vidhana Parishad (APVVP) institutional and oversight on the financing of services. The structures to enable integrated planning, multiplicity of sub-departments within health at budgeting, and effective implementation. This will the state level further constrains budget strengthen the primary to secondary care referral optimization and expenditure management. chain, allow for integrated and optimal use of There is a need for integrating the planning and limited resources, and enable community health management functions of the primary- and centers (CHCs) to have technical oversight on the secondary-level health facilities to strengthen primary health centers (PHCs). Planning and the service delivery chain and referral network. budgeting will become more efficient. (H1, H4) 6 There is minimal effort at the facility or the Strengthen Dr YSR Aarogyasri Health Care Trust state level to maximize insurance claims’ (AHCT) as an integrated platform for strategic revenue mobilization and utilization purchasing for health. Over the years, the AHCT has opportunities for government hospitals. In developed robust tools, systems, and processes for design, earnings through insurance claims are purchasing services from the private sector (H12). the most predictable and flexible revenue pool The DoHM&FW can ensure efficiency gains through at the disposal of the facility in-charge, which the following: can be used locally for improving clinical and • Develop a strategic purchasing policy nonclinical facilities and patient experience in framework for the health sector in the state. government hospitals. The opportunity of • Consolidate all private sector engagement locally using these funds is compromised by efforts under the aegis of the AHCT. delays in reimbursements to government hospitals and weak central oversight on fund • Set up a dedicated public-private partnership utilization (H6, H11). (PPP) cell within the AHCT for market assessment, design, and structuring, including 7 The approach to private sector engagement is technical, financial, and legal structuring. ad hoc without a strategic purchasing framework that aligns with health sector policy • Integrate multiple PPP monitoring dashboards goals. Over the years, the AHCT has developed through a single-window platform for a robust tools, systems, and processes for consolidated overview of all purchasing actions. purchasing services from the private sector. But • Reduce fragmentation in benefits package and the approach to private sector engagement is pricing structures across different health fragmented and handled by multiple agencies insurance programs managed by the AHCT. within the department. There are multiple FinHealth Andhra Pradesh (India) xiii No. Key findings Recommendations platforms and monitoring dashboards, contract management functions are also fragmented and there are challenges around, delayed payments to private providers (H12). 8 Purchasing arrangements are fragmented. While the AHCT purchases services from the private sector under different insurance programs, other forms of private sector engagement for specialized clinical support services, such as high-end diagnostics and nonclinical support services, are handled by multiple agencies with varied contracting and payment processing modalities (H12). 9 The availability of funds is unpredictable. Improve fund transfer turnaround time from There are delays in fund flow and substantial treasury to the personal deposit (PD) accounts for delays in reimbursement of claims under the the central and state shares of the NHM. The state Aarogyasri Scheme. There is limited evidence of government should prioritize fiscal transfers under cash flow projections, resource tracking, and centrally sponsored scheme (CSS) in a time-bound integrated performance monitoring against fashion. expenditure. Further, there are delays in beneficiary incentives as some banks, especially rural areas, are yet to be linked to the Comprehensive Financial Management System (CFMS) (H8, H9). 10 Health financing decisions are too centralized. Ensure adequate financial management capacity at Budget structures are highly rigid, and the health facility level. Capacity augmentation financing under the NHM has gradually could be in the form of deputing/recruiting evolved into a rigid structure, with almost no accounts/administration staff and filling up vacant flexibility for local expenditure decisions. positions. This should be followed by training staff Manual record-keeping and accounting at the on budgeting, financial management, and financial lowest levels of health facilities coupled with reporting. few dedicated and trained staff for finance make financial management an arduous task for doctors who act as de facto finance managers at the PHC level. (H4, H8) 11 Weak human resources (HR) management Strengthen HR management by setting up a cell or practices, including high vacancies, directly a directorate and use IT for centralized affect commitment, satisfaction levels, and management and overview of all HR. The HR staff accountability at all levels. Service Directorate shall perform the following: delivery gaps are inevitable. Some of the major • Develop a comprehensive HR policy and HR challenges are the shortage of medical and management framework. paramedical staff, delays in salary release, and • Develop a centralized database of all lack of adequate dedicated staff for finance and permanent, contractual, and outsourced accounts for financial management functions employees – this database should have API2- and multiple payroll management functions. based links with the government’s Human Performance management is more of an Resource Management System (HRMS), NHM’s administrative prerequisite and lacks value. Human Resource Information System (HRIS), Capacity is further constrained by lack of and the payroll platform used by Andhra training on finance and underspending of the Pradesh Corporation for Outsourced Services overall training budget (H13, H16, H17). (APCOS) for all outsourced employees. 2 API = Application programming interface. FinHealth Andhra Pradesh (India) xiv No. Key findings Recommendations • Undertake competency mapping for all cadres of health care personnel, based on which all job descriptions can be updated. Job descriptions should include minimum required competencies and minimum training/skills development programs required to deliver the job. • Develop aggressive recruitment strategies to fill up vacant positions, including strengthening the cadre of accounts/finance management staff at different levels in the health system. • Set up a learning management system, prescribe mandatory learnings focused on minimum competency requirements, and design courses in partnership with learning institutes. Government of India’s (GoI) iGOT platform (https://diksha.gov.in/igot) may be considered for this purpose. This should lead to a continuous learning environment. • Set up a robust performance appraisal framework for all employees. • Assess staff requirements for accounting and financial management work, especially the health facilities, and prioritize all such positions to relieve doctors from unwanted administrative and financial management tasks. • Rationalize pay structures and introduce hard location incentives, and so on. 12 Budget execution capacity is weak, especially Develop centralized expenditure management and of capital expenditure budget lines. The tracking dashboard and budget performance weaknesses in budget execution stem from metrics for effective budget implementation. multiple factors already described above, key Expenditure management and tracking dashboard among them being poor and fragmented should provide real-time expenditure management planning, unpredictable fund flows, gaps in HR, information system and analysis by districts, and weaknesses in integrated monitoring and spending units, levels of care, and economic and accountability for results (H9 to H15). functional classifications. An attempt should be made to link the results to health management information system (HMIS) indicator results and initiate a culture of integrated physical and financial tracking for better health outcomes. Streamline internal control on non-salary expenditure through the enterprise resource planning (ERP) interface that replaces the need for manual record maintenance and strengthen internal monitoring and budget execution. The ERP architecture should cover all aspects of facility operations and services and should make manual records, such as diet register and vehicle logbook, obsolete. ERP platform will improve internal controls, reduce leakages, improve efficiency, and increase accountability. A state-level central command center dashboard could monitor all internal processes, in-built algorithms can highlight variations and compliance gaps and provide a risk FinHealth Andhra Pradesh (India) xv No. Key findings Recommendations score for each spending unit (including health facilities). Those with risk scores above a certain threshold may be subjected to specific internal audits. 13 There is a need for improved operational Undertake business process reengineering for efficiency in the procurement processes, procurement, sample testing of drugs, and especially for civil works and medical improving of the supply chain system for medicines equipment. Procurement systems are not fully and consumables. The turnaround time for district aligned to either the sectoral priorities or the warehouses sending samples for testing through the systemic weaknesses at the grassroots level. Andhra Pradesh Medical Services Infrastructure This is affecting service delivery in relation to its Development Corporation (APMSIDC) state office responsiveness to local needs and the quality of and the drugs testing laboratory infrastructure services. Significant underspending of civil within the state needs to improve. Set up a works and equipment budgets is evidence of mechanism for periodic prescription audits and the systemic gaps that need immediate beneficiary audits to assess patients’ accessibility to corrective actions (H18). medicines. Undertake a deep dive into the drugs supply chain to identify areas for process improvement and improve access to medicines. Strengthen the system for planned preventive maintenance of medical equipment and increase allocations for repair and maintenance. Set up a mechanism for planned preventive maintenance of medical equipment at all levels of health care facilities, including use of technology for tagging of equipment using bar codes and radio frequency identification (RFID) chips for tracking usage, repair, and warranties. The DoHM&FW may pilot managed equipment contracts or the lease model for high- end expensive equipment. This may not only reduce large one-time purchase expenditure but also transfer the onus of providing supplies and maintenance to the manufacturer. This practice is prevalent in the private sector. Introduce a Public Investment Management Framework for Health in the DoHM&FW to optimize returns on investment for health service delivery outcomes. The framework should aim to prevent economic losses through project delays and premature asset failure. The framework will be expected to strengthen health infrastructure governance over the entire investment cycle. It will include investments for primary, secondary, and tertiary health care and the required legal and regulatory procedures for investment. FinHealth Andhra Pradesh (India) xvi No. Key findings Recommendations 14 There is a lack of standard internal audit Centralize all internal audit functions of the protocols and tools across different agencies DoHM&FW operations within the secretariat under the DoHM&FW, and the practice is department. Centralization will imply dissolving the highly fragmented. The NHM, AHCT, and APVVP internal audit/concurrent audit cells within agencies have varying internal audit practices. While the such as the NHM and the APMSIDC. The centralized NHM’s approach is relatively more structured as internal audit wing should be headed by an officer it hires an audit for concurrent audit, other not less than the Secretary/Additional Secretary agencies like the AHCT, APMSIDC, and the rank. It should have a comprehensive internal audit APVVP face problems such as staff vacancies, framework and audit matrix for each institution, absence of a budget for internal audit, and most depending on its functions and finances. It should importantly, no internal audit framework. The have standard processes, standardized templates, DOHM&FW does not have a centralized and adequate staff or provision to recruit internal overview of compliance gaps on an ongoing audit firms. The scope of internal audit should be basis. Due to the absence of a robust internal comprehensive to include but not be limited to the audit framework, there is limited evidence on ongoing review of risks and controls, accounts audit, the robustness of internal expenditure control performance audit, and compliance audit at measures, though adequate internal frequencies that the DoHM&FW may deem expenditure control exists at all levels in the appropriate. design (H14, H15). Improve the capacity to track and respond to audit observations as per the Comptroller and Auditor General (CAG) guidelines. Set up an Audit Para Management System (APMS) for management and tracking of all documents related to audit paras and inspection reports. APMS shall be a web-based portal to support audit management processes, assigning responsibility of responding to observations within the DoHM&FW, vetting, submitting replies, and tracking. This will work as a financial audit tool and promote transparency and accountability. It will also prevent the DoHM&FW from featuring as a defaulting auditee in the CAG audit reports. 15 Accounting practices and financial reporting Streamline, modernize, and standardize outside the treasury system are predominantly accounting practices in agencies that operate manual and lack standardization. State-level outside the treasury system. Agencies within the agencies, district units, and all health facilities DoHM&FW such as the NHM, APMSIDC, and the up to the PHC level have manual books of autonomous Hospital Development Societies (HDS) accounts. Accounting packages are not used. and college development societies (CDS) should PHCs bear the maximum brunt of manual migrate their accounting practices to a web-based accounting and records due to the multiplicity accounting ERP solution and have standardized of financing sources and budget codes and due accounting practices and uniform accounts books. to having the responsibility of maintaining accounts of all subcenters and all Village Health Sanitation and Nutrition Committees (VHSNCs) under their jurisdiction (H21, H22). FinHealth Andhra Pradesh (India) xvii No. Key findings Recommendations 16 While external audit structures are robust, Improve transparency by publishing information allocations and expenditure details of the in the public domain. Consider putting all implementing units are not available in the information listed under Table 30 in the public public domain. The external audit conducted by domain. the Supreme Audit Institution (SAI) is robust, but the DoHM&FW’s capacity to respond to audit observations appears to be a challenge. While state budget and expenditure figures are available to the public up to the unit head level, budget releases are available in a non-user- friendly way in the form of government orders that can be downloaded from a dedicated portal. It is challenging to aggregate and analyze this information for meaningful insights. Release and expenditure reports of the NHM, APVVP, APMSIDC, and AHCT are not available in the public domain. Their audit reports are not available either. Overall, these shortcomings hinder links between budget reporting and budget formulation through evidence-based policymaking (H23, H24). All the issues identified and the recommendations, except the one on reforms in the budget classification structure, are within the domain of the DoHM&FW. On the changes in the budget classification structure, the DoHM&FW would need to coordinate closely with other service delivery rendering departments and advocate to the Department of Finance (DoF) for a service delivery orientation in financial accounting and reporting FinHealth Andhra Pradesh (India) xviii 1. Introduction 1.1 Purpose of this report There is a broad global consensus that tax-financed In recognition of this agenda, an assessment of the government revenues are essential for progress potential for achieving better alignment between toward universal health coverage (UHC). In the PFM and health systems was undertaken in the advanced health systems, approximately 75 percent state of Andhra Pradesh (AP) in India. This state was (or more) of health financing is sourced from general selected on the basis of its high levels of political budget revenues or mandatory social insurance commitment to comprehensively improve the health contributions managed by government agencies. In services in the state, a track record of innovations, low- and middle-income countries, this ratio, while and its above average performance in the Indian lower, tends to increase steadily over time. The state context. The World Bank is investing US$328 centrality of government financing to the UHC million for the Andhra Pradesh Health Systems agenda elevates the importance of public financial Strengthening Project (APHSSP, 2019–2024), aiming management (PFM) systems for the broader health to improve quality of care, improve responsiveness of sector agenda. To ensure efficient and effective use public health facilities, and increase access to of resources, targeting of scarce public resources to expanded package of primary care services. This priority groups, and health benefits package that report is part of the World Bank’s support to the state maximize health outcomes, it is essential to of AP and includes an assessment of the PFM systems mainstream PFM into the health systems and its impact on health service delivery outcomes. strengthening agenda and facilitate greater alignment between PFM systems and health financing strategies. 1.2 Methodology The assessment was conducted using the FinHealth: The methodological choice was dictated by the PFM in Health toolkit launched by the World Bank in fundamental questions this assessment aimed to 2019. The toolkit adopts a unique approach linking answer. We adapted a mixed method approach to supply-side barriers to PFM systems and aims to establish the links between health service delivery establish a causal relationship between PFM issues outcomes and the PFM systems that ensure the and health service delivery outcomes. It assesses the availability of resources at service delivery units PFM systems across 24 PFM domains clustered into (SDUs). Elements of quantitative and qualitative six broad PFM functions. The Department of Health, research were combined with a desk review of Medical and Family Welfare (DoHM&FW) expressed secondary data and content analysis of relevant a need for a high-level broad assessment across all 24 government orders and documents. domains (refer to Table 12) of the FinHealth toolkit based on which the state could undertake deep dives The study team developed all data collection tools, in specific prioritized areas as part of the ongoing and data collection was done by the World Bank health systems strengthening project. team and directly by the DoHM&FW officials. Officials from 11 of 13 districts of the state were trained on the quantitative survey tool that was administered to the health facilities across those districts. Qualitative interactions were led directly by the World Bank study team. FinHealth Andhra Pradesh (India) 1 Table 1: Study methods and sample Tools Coverage and sample Quantitative survey (primary) Facility-level The survey covered 40 health facilities across 11 districts in the state. The facilities included survey 31 primary health centers (PHCs), 7 community health centers (CHCs), 1 area hospital, and 1 district hospital. Patient surveys 161 patients were interviewed across 11 districts. Of these, 114 patients were from 31 different PHCs, 35 from 5 CHCs, 1 from one area hospital, and 11 from one district hospital in East Godavari. Qualitative assessment (primary) Facility The World Bank study team planned to cover in-depth qualitative assessments in three assessments districts, of which only one district, Guntur, could be covered in February 2020, after which all primary data collection was disrupted. In Guntur district, we had in-depth discussions with the service delivery team at one PHC, one CHC, one area hospital, one district hospital, and one medical college hospital. Stakeholder consultations (qualitative) In-depth group Senior officials from the DoHM&FW, Department of Finance (DoF), Department of Medical, discussions Health and Family Welfare (DMH&FW), Andhra Pradesh Vaidya Vidhana Parishad (APVVP), Andhra Pradesh Medical Services Infrastructure Development Corporation (APMSIDC), Dr YSR Aarogyasri Health Care Trust (AHCT), National Health Mission (NHM) Content analysis and secondary data review Government Government records included budget manuals; government orders issued by the DoF, the records DoHM&FW, and other relevant government departments. Budget data This included all budget and expenditure data under Demand XVI ‘Medical and Health’ for the DoHM&FW; detailed budget and expenditure of NHM; expenditure statements from Directorate of Public Health and Family Welfare (DoPH&FW), Directorate of Medical Education (DME), APVVP, State Health Society, APMSIDC, and so on. Limitations included COVID-19 related delays 1.3 Structure of this report and granularity of data. The COVID-19 pandemic severely hampered timelines and the quantum of This assessment is based on the FinHealth toolkit primary data that could be collected. The developed by the World Bank in 2019 to establish assessment team could visit only one of the three the links between health service delivery and the districts planned for a first-hand on-site PFM building blocks. The report begins with a assessment. There were challenges in conducting brief state context (Chapter 2), followed by a most stakeholder consultations through virtual short critical overview of policies, structure, meetings, for which senior officials gave time systems, and service delivery and a broad despite the priorities related to COVID-19 overview of health financing trends in AP response. Inability to go through the financial (Chapter 3). Chapter 4 presents the in-depth management system records and files, including assessment of the PFM gaps and their impact on but not limited to procurement files, expenditure health service delivery across 24 domains in the reports, books of accounts, was another FinHealth toolkit. This is followed by a summary limitation. The observations made in this report of root cause analysis in Chapter 5 and a set of are based on responses and data received from recommendations in Chapter 6. The different head of the department (HOD) offices recommendations have been categorized into without having an opportunity to triangulate the short, medium, and long term. responses. FinHealth Andhra Pradesh (India) 2 2. State context: Andhra Pradesh Located in the southern peninsula of India, AP is Pradesh (GoAP) in 2017 indicates that one out of the eighth largest state in India by area and tenth every five persons in the state is living in largest by population. The Andhra Pradesh multidimensional poverty.5 Reorganization Act 2014 bifurcated the erstwhile Andhra Pradesh into two states, carving out 10 of On the economic front, since 2014–15 AP’s gross AP’s 23 districts into a new state called state domestic product (GSDP) has consistently Telangana. Post bifurcation, AP’s population for grown higher than the national GDP. State 2021 is projected at 5.28 crores3 and contributes revenues have been significantly dented post to 3.87 percent of India’s population. The decadal bifurcation, and even the revenue deficit grants growth rate is 9.21 percent (2001–11) compared under the 14th Finance Commission have been to national growth rate of 17.7 percent. The state inadequate in correcting the fiscal imbalance and has a bicameral legislature having 175 members. was INR 15,444 crores in 2018–19 as per the latest Comptroller and Auditor General (CAG) 2.1 Social, economic, and audit report.6 This is estimated at 3.8 percent of the state’s GSDP as against the 3 percent target political context set under the Medium-Term Fiscal Policy Statement (MTFPS). The 39 percent revenue The latest National Family Health Survey (NFHS) deficit to fiscal deficit ratio indicates borrowed estimates indicate that in 2019–20, AP had funds for consumption instead of asset creation. among the highest sex ratio in the country at Almost 37 percent of borrowed funds were used 1,045 females for every 1,000 males. The state for revenue deficit financing. This reflects the performs better than national averages in terms precarious financial health of the state. The of sex ratio (AP: 997, all India: 943) but is problem was further accentuated by an almost marginally lagging in literacy rate (AP: 67.35 26 percent shortfall in the state’s own tax percent, all India: 72.98 percent). It is divided into revenue receipts in 2018–19 as against the 13 districts. AP is predominantly an agrarian budget estimate. Total outstanding liabilities are economy, with 60 percent dependency on 2.25 times the revenue receipts and 28 percent agriculture. of GSDP as against the MTFPS target of 25 percent. Revised estimates of revenue deficit and The state is predominantly rural, with 69 percent fiscal deficit are projected at INR 34,927 crores of the households in rural areas. Almost 18 and INR 54,639 crores, respectively, by the state percent of the households are headed by government.7 Across India, state finances have women.4 The multidimensional poverty index also been severely affected by the COVID-19 report released by the Government of Andhra pandemic and its economic impact. 3 Population Project for India and States: 2011-2036. November 2019. National Commission on Population. MoHFW, GoI. 4 International Institute for Population Sciences (IIPS) and ICF. 2021. “National Family Health Survey (NFHS-5), India, 2019- 20: Andhra Pradesh.� Mumbai: IIPS. 5 http://apvision.ap.gov.in/mpi.php. 6 CAG, State Finances, 2019. 7 Socio Economic Survey 2020-21, Planning Department, Government of Andhra Pradesh. FinHealth Andhra Pradesh (India) 3 Table 2: Key fiscal health indicators Fiscal health indicators 2015–16 2016–17 2017–18 2018–19 Resource mobilization Own tax revenue/GSDP 6.6 6.33 6.11 6.22 Own non-tax revenue/GSDP 0.81 0.74 0.47 0.47 Central transfers/GSDP 7.25 7.11 6.39 5.6 Expenditure management Total expenditure/GSDP 18.37 18.91 16.98 16.11 Total expenditure/Revenue receipts 125.2 133.28 130.87 131.17 Revenue expenditure/Total expenditure 86.45 88.09 88.16 85.48 Revenue expenditure on social services/Total expenditure 41.85 38.07 43.03 42.74 Capital expenditure/Total expenditure 12.77 11.48 9.81 13.28 Management of fiscal imbalances Revenue deficit/GSDP -1.21 -2.47 -2 -1.49 Fiscal deficit/GSDP -3.65 -4.43 -4 -3.8 Primary Deficit/GSDP -2.02 -2.75 -2.29 -2.16 Revenue deficit/Fiscal deficit 33.11 55.75 49.88 39.19 Source: Report of the CAG on State Finances for respective years. 2.2 State’s public financial • Andhra Pradesh Infrastructure (Transparency through Judicial Preview) management systems Act, 2019. Optimal alignment of health financing and PFM The GoAP has a robust set of rules and codes systems is critical for universal health coverage. that guide the PFM system in the state. The state Such an alignment ensures inclusion of health has a comprehensive and detailed budget policy priorities in budget, targeting of funds to manual, Treasury Code, and Finance Code. priority intervention areas, value for money through effective and efficient use of resources, Treasury operations and accounting are IT and accountability mechanisms to track priority enabled with robust internal control measures. expenditure.8 AP is one of the first states in the country to set up a Comprehensive Financial Management There is a strong legislative framework that System (CFMS). The CFMS is used for all fund guides the state’s financial management. Major allocations and transfers including third-party legislations include the following: payments. • AP Fiscal Responsibility and Budget To streamline budget management and enable Management (APFRBM) Act, 2005 timely allocation of funds, the DoF instituted the • AP Fiscal Responsibility and Budget system of Comprehensive Budget Release Order Management (APFRBM) Rules, 2006 (CBRO). As per a DoF government order, the • Andhra Pradesh Contingency Fund Act, CBRO system enables departments to distribute 1957 budgets in accordance with their workplans and priorities instead of quarterly equal instalments.9 8WHO. 2017. Aligning Public Financial Management and Health Financing: A Process Guide for Identifying Issues and Fostering Dialogue. Geneva (Health Financing Guidance Series no. 4). 9 Guidelines for issue of Comprehensive Budget Release Order (CBRO) and Budget Distribution. Finance (Budget 1) Department, G.O. MS. No.: 101, dated 14 August 2019. FinHealth Andhra Pradesh (India) 4 The state has a system for personal deposit (PD) agencies from the treasury and sub-treasury accounts for fast-tracking expenditure under accounts bypassing certain procedures that are specific schemes. The AP Financial Code mandatory for routine transfers, thereby stipulates that for scheme-specific expenditure reducing the transfer turnaround time. incurred by designated government functionaries, funds from the consolidated fund The state has stringent legislative control over of the state are placed at their disposal. At the public expenditure. There are three categories end of March 2019, the state had 33,801 PD under which all transactions from the accounts with a cumulative balance of INR 38,498 consolidated fund of the state are accounted for: crores. The DoHM&FW has several PD accounts revenue expenditure, capital disbursements, and that shall be referred to in the later sections of loans. Budgets and expenditure are subject to this report.10 In 2011, the undivided state of AP legislative scrutiny and voting. The AP Vigilance set up the green channel initiative to reduce Commission is an independent robust structure delays in fund transfer for schemes and welfare that acts as a watchdog on public finances and measures. The green channel initiative ensures accountability, including transparency in funds are transferred to the implementing governance and operations. 10Report of the CAG on State Finances Audit Report for the year ended 31 March 2019. Report no. 4 of the year 2020. Government of Andhra Pradesh. FinHealth Andhra Pradesh (India) 5 3. Health services in the state: A critical overview 3.1 Sectoral policies, goals, and priorities There are high levels of political commitment to network of facilities in the three-tier health improve the health outcomes in AP. The state services delivery network that includes 7,507 ranks fourth among the category of 21 large subcenters, 1,145 PHCs, 8 district hospitals, and states in the NITI11 Aayog Health Index, with an 11 teaching hospital with a combined bed incremental change of 1.07 percentage point and strength of 33,217.13 The state performs better incremental performance rank of 10 (of 21 than the national average in most key health states) in 2019–20 over the base year (2018– indicators. 19).12 This has been achieved through a vast Table 3: AP Health indicators - a snapshot Indicators AP target AP India Source Maternal mortality ratio <70 65 112 SRS 2016–18 Infant mortality rate <20 29 32 SRS 2018 Under-5 mortality rate <25 33 36 SRS 2018 Total fertility rate 1.8 1.6 2.2 SRS 2017 Contraceptive prevalence rate — 71.1 47.8 NFHS 5 for AP; NFHS 4 for India Crude birth rate — 16 20 SRS 2018 Crude death rate — 6.7 6.2 SRS 2018 Adult sex ratio — 996 943 Census 2011 Child sex ratio — 944 918 Census 2011 Source: Adapted from Socio Economic Survey 2020–21, Department of Planning, GoAP. the infant mortality rate and total fertility rate. There have been some significant Table 4 provides a comparative overview of improvements in key primary health indicators select indicators to reflect significant in the last five years. The NFHS-5 estimates improvements in the last five years. reflect improvements in key indicators such as Table 4: Key health indicators: NFHS 4 and NFHS 5 results NFHS 4 NFHS 5 Indicators (2015–16) (2019–20) Total fertility rate 1.83 1.68 Pregnant women consuming IFA tablets for 100 days or more 56.1 70.3 Pregnant women consuming IFA tablets for 180 days or more 30.6 41.1 Neo-natal mortality rate (NNMR) 23.6 19.9 Infant mortality (IMR) 34.9 30.2 Under-5 mortality rate (U5MR) 40.8 35.2 11 NITI Aayog = National Institution for Transforming India. 12 NITI Aayog. 2021. “Healthy States Progressive India: Report on the Ranks of States and Union Territories - Health Index Round IV (2019-20).� 13 Department of Health, Medical and Family Welfare. http://hmfw.ap.gov.in/index.aspx. FinHealth Andhra Pradesh (India) 6 NFHS 4 NFHS 5 Indicators (2015–16) (2019–20) Percentage of mothers with 4 ANC visits 76.3 67.3 Institutional births (%) 91.5 96.5 Institutional births in public facility (%) 38.3 50.4 Fully vaccinated children (12–23 months) 65.3 73 Note: ANC = Antenatal care; IFA = Iron and folic acid. Despite these improvements, there are There are wide interdistrict variations in the indicators that have reflected a decline in the health outcomes as well. Such variations point last five years. Prevalence of diarrhea and acute toward inequity and the need for better targeting respiratory infections (ARIs) among children and resource allocation, among a range of other under five years appears to be on the rise. While contextual factors that may need further the prevalence of ARI has increased from 0.5 examination. See Table 5. percent in 2015–16 to 2.4 percent in 2019–20, the prevalence of diarrhea has increased from 6.6 percent to 7.2 percent in the same period. Table 5: Inter-district variation in health outcomes No. of State districts Indicators Low High average below the state average Contraceptive prevalence rate 66 79 71 7 (East Godavari) (Krishna) Four or more antenatal care visits (% of 51 83 68 6 last births in the past 5 years) (East Godavari) (YSR) Coverage of all basic vaccinations (% of 52 90 73 5 children 12–23 months) (Prakasam) (Krishna) Percentage of newborns breastfed 25.5 73.2 51.6 6 within 1 hour of birth (Krishna) (Prakasam) Percentage of children having any 54.9 72.6 63.2 7 anemia (<11.0 g/dl) (Chitttoor) (Vishakhapatnam ) Percentage of women having any 50.5 64 58.8 5 anemia (<12.0 g/dl) (Anantpur) (Vizianagaram) Source: NFHS 5. A wide network of subcenters and PHCs Nutrition Committees (VHSNCs) and deploying constitute the backbone of primary health care accredited social health activists (ASHAs) at the services in the state. The focus on primary care village level. To provide stability and security to service delivery and outreach is financed the ASHA cadre, the state has moved away from primarily through the NHM,14 while the state incentive-based payment of ASHAs to a fixed budget finances the establishment and most of honorarium of INR 10,000 per month, with a wide the human resource (HR) expenses. The state has network of subcenters. However, the been proactive in setting up Village Health and 14The NHM is a centrally sponsored scheme (CSS), where the Government of India (GoI) contributes 60 percent of the budget for AP and the remaining 40 percent is financed by the state. The NHM finances most of the service delivery activities and innovations in health systems. FinHealth Andhra Pradesh (India) 7 infrastructure and facilities at the subcenters for improved supervision, and significant continue to be a cause of concern. increase in budget allocations for primary care are some of the significant challenges highlighted PHCs offer the first level of clinical care for the by the Expert Committee on Health Reforms.15 population. While there have been significant improvements in primary care and public health Secondary care services are delivered through a outcomes in the state, PHCs continue to face network of three types of hospitals at the block, shortages of human resources and subdivisional, and district levels. The secondary infrastructure. Although 596 of 1,154 PHCs are care service delivery network comprises 251 declared as 24×7 PHCs, these are mostly single- hospitals with 16,410 beds administered by the doctor PHCs with 24×7 service a challenge. For APVVP, a special-purpose vehicle set up by the primary care in urban areas, the state has a state to manage secondary care hospitals. Details network of urban primary health centers of the hospitals managed by the APVVP are (UPHCs). All UPHCs have been converted into e- provided in Table 6. UPHC through digitization and availability of specialist teleconsultations. Poor infrastructure, need for strengthening outreach services, need Table 6: Number of facilities and beds under APVVP (by levels of facilities) Levels Total number of facilities Total number of beds District hospitals (150–450 beds) 17 4,450 CHC (30 beds) 131 3,930 CHC (50 beds) 46 2,300 Area hospital (100 beds) 48 4,800 Area hospital (150 beds) 2 300 Area hospital (200 beds) 1 200 Civil dispensaries 3 0 MCH 2 100 Chest disease hospital 1 60 Total 251 16,140 Source: APVVP administrative records. While AP is already witnessing the HIV continue to be among the top 15 causes of epidemiological transition toward years of life lost in the state.16 noncommunicable diseases (NCDs), communicable diseases continue to demand However, a significant challenge is shortage of policy attention. While NCDs constitute 60 HR at all levels of facilities that has a direct percent of the disease burden, communicable impact on service delivery outcomes, driving diseases have a share of 29 percent. Lower significant majority of the population to the respiratory infections, diarrheal diseases, private sector. Almost 51 percent vacancies at tuberculosis, preterm birth complications, and the CHC level, 58 percent vacancies in area hospitals, and 46 percent vacancies in district 15 Report of the Expert Committee on Health reforms. Andhra Pradesh, Department of Health, Medical & Family Welfare, 2019. 16 Indian Council of Medical Research, Public Health Foundation of India, and Institute of Health Metrics and Evaluation. India: Health of Nation’s States - The India State-level Disease Burden Initiative. New Delhi, India: ICMR, PHFI, and IHME; 2017 FinHealth Andhra Pradesh (India) 8 hospitals17 create significant strain on existing coordination challenges that affect service workforce and also drive people to seek health delivery and disrupt the referral chain. There are care from the private sector. Only 21.8 percent of nine wings/units under the DoHM&FW. While the total ailments are treated by the each of these wings is designed to handle government/public hospitals, while 52.3 percent specialized functions, over time these have are at private hospitals and 19.7 percent are created administrative verticals within the treated by private doctors/private clinics.18 In department, at times causing disruptions in the addition to HR shortages, convenience (for continuum of care, especially between the example, opening times) and perceived quality of primary and secondary care SDUs in the state. care can play a role in provider choice. Table 7 provides a list of the wings with the The multiplicity of institutional structures DoHM&FW along with a brief overview of their within the DoHM&FW creates governance and scope and jurisdiction. Table 7: Verticals within the DoHM&FW Verticals within the DoHM&FW Scope and jurisdiction DoPH&FW All primary care facilities, public health programs APVVP All secondary hospitals Institute of Preventive Medicine Implementation of food safety standards, water analysis and monitoring water quality, drug testing, and so on DME All medical colleges and attached hospitals, medical education, tertiary care APMSIDC Responsible for procurement (drugs and equipment) and civil works for the DoHM&FW AHCT Manages all health insurance programs State Health Society Planning and implementation of the NHM Andhra Pradesh State AIDS Control Society Implementation of the National AIDS Control Program Ayurveda, Yoga and Naturopathy, Unani, 729 institutions, 365 beds, 4 medical colleges, 130 Siddha and Homeopathy (AYUSH) dispensaries Primary care is managed and administered by the DoPH&FW and the State Health Society (with respect to the NHM). Therefore, all subcenters and PHCs and administration of all public health national programs fall within the jurisdiction of the DoHM&FW. The APVVP, set up as a special- purpose vehicle in 1986, is responsible for the administration of all 251 secondary-level hospitals that include CHCs, area hospitals, district hospitals, civil dispensaries, and a chest disease hospital. The state is cognizant of the systemic challenges and is trying its best to comprehensively address them. To augment the tertiary care capacity, the state has announced setting up of 16 new medical colleges with an estimated investment of INR 7,880 crores. Through the World Bank-supported APHSSP, the state is already focusing on improving quality of care, improving responsiveness of public health facilities, and increasing access to expanded package of primary care services. Few of the focus areas include screening for diabetes, hypertension, and cervical cancer at the primary care level; accreditation of PHCs and CHCs; online patient management system, e-subcenters, and so on. 17Source: Administrative data received from the APVVP as a part of this study. 18Key Indicators of Social Consumption in India: Health. NSS 75th Round (July 2017–June 2018). Ministry of Statistics and Program Implementation, Government of India, 2019. FinHealth Andhra Pradesh (India) 9 3.2 Health financing and expenditure trends The government health financing landscape in and 2019–20. Reductions in revised estimates AP is characterized by low budget allocations are on account of the state’s overall ways and and significantly lower budget utilization means position and the spending capacity of rates. Total government health expenditure as the DoHM&FW. See Table 8 for the state a share of GSDP ranged between 0.8 percent health budget and Table 9 for the NHM budget, and 0.9 percent of the GSDP between 2015–16 which is a subset of the state health budget. Table 8: State health budget and expenditure Parameters 2015–16 2016–17 2017–18 2018–19 2019–20 2020–21 2021–22 Budget estimate 3,714 6,082 7,004 8,447 11,381 11,404 13,815 Revised estimate 3,363 5,742 6,527 7,242 7,467 9,435 13,703 Expenditure 5,039 6,313 6,181 7,244 7,414 9,367 — Budget utilization (%) 136 104 88 86 65 82 — Source: Demand for Grant for the DoHM&FW, GoAP. Note: All figures are in INR crores. Table 9: NHM budget and expenditure NHM 2017–18 2018–19 2019–20 2020–21 Budget 1,602.41 1,534.61 2,220.24 2,501.61 Expenditure 1,420.95 1,512.05 1,667.97 2,012.89 Utilization (%) 89 99 75 80 Source: NHM administrative records. Note: All figures are in INR crores. The total government health spending is around percent. The per capita government spending on 5 percent of the total state expenditure. The health was INR 1,420 in 2019–20. The steep share of government expenditure on health increase in the revised estimate for 2020–21 and varied between 4.5 percent and 4.8 percent from the budget estimate for 2021–22 reflects the 2017–18 to 2018–20. Based on the revised intent to increase the spending as these are estimate for 2020–21, this has increased to 5.4 budget estimates. Figure 1: Per capita government spending on health (in INR) 3000 2617 2500 2000 1797 1395 1420 1500 1229 1197 988 1000 500 0 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 (RE) 2021-22 (BE) Source: State Budget Books, DoHM&FW Demand for Grants. Note: BE = Budget estimate. FinHealth Andhra Pradesh (India) 10 The composition of expenditure by sub- of the total expenditure under the demand for departments within the DoHM&FW has the DoHM&FW. The remaining are insignificant undergone a shift over the last six years in favor allocations for the Institute of Preventive of expenditure on family welfare and medical Medicine, AYUSH, and Drug Control education, with the expenditure on public Administration (Figure 2). Year-on-year change in health remaining almost stagnant in the last five expenditure by department is not just years. Medical Education, Public Health, and unpredictable but it also reflects a negative Family Welfare sub-departments, including the growth when adjusted for population and DoHM&FW secretariat, constitute 97.83 percent inflation. Figure 2: Expenditure by sub-departments within the DoHM&FW 3,225 3,146 2,828 3,500 2,383 3,000 1,951 1,935 2,500 1,794 1,737 1,385 1,381 1,363 1,353 1,349 1,328 2,000 1,500 1,201 842 631 591 545 532 1,000 500 - HM&FW Secretariat Medical Education Public Health & FW Dept Family Welfare Department Department 2015-16 2016-17 2017-18 2018-19 2019-20 Source: State budget books, Demand for Grant. The challenge of low budget allocations is respectively. The actual utilization is even lesser further aggravated by weak budget utilization and is difficult to estimate for systemic capacity. In FY2019–20, the budget utilization weaknesses in the PFM system, which shall be rate was 65 percent, down from 88 percent and discussed in Chapter 4. 86 percent in FY2017–18 and FY2018–19, Figure 3: Health budget utilization trends: 2016–17 to 2020–21 (revised estimate) 140% 120% 100% 80% 60% 40% 20% 0% HM&FW Medical Public Health & Family Welfare Institute of AYUSH Drug Control Total Budget Revenue Budget Capital Budget Secretariat Education FW Dept Department Preventive Administration Department Medicine 2016-17 2017-18 2018-19 2019-20 2020-21 (RE) FinHealth Andhra Pradesh (India) 11 Primary drivers of underutilization are high staff and the NHM, respectively, in 2019–20. Table 27 vacancies in the department and insufficient under section 4.5.2 on ‘Public Investment capacity to manage infrastructure projects. Management’ for further details. Utilization rates Utilization of capital outlay budgets was 8 for HR and a few other budget components are percent and 22 percent under the state budget presented in Table 10. Table 10. Utilization rates for select budget components under the NHM Select NHM budget 2018–19 2019–20 2020–21 components Budget Utilization Budget Utilization Budget Utilization Service delivery - facility based 178.96 45% 118.42 101% 149.43 95% Service delivery - community 113.82 51% 144.97 50% 216.63 68% based Infrastructure 120.99 52% 438.93 22% 147.75 68% Procurement 350.64 62% 263.86 73% 461.24 75% Human resource 357.11 38% 283.66 85% 431.11 53% Innovations 35.04 34% 51.98 66% 5.00 0 Source: Financial Management Report, NHM, AP. Note: All budget figures are in INR crores. Table 11: Share of expenditure on social services (%) Indicators 2014–15 2015-–16 2016–17 2017–18 Share of social services in total revenue expenditure 36.78 48.41 43.22 48.81 Share of social services in total capital expenditure 20.89 17.03 16.05 21.43 Source: Data from Socio Economic Survey 2020-21, Department of Planning, GoAP. Government budget in AP can best be described as a traditional budgeting system designed as a tool for financial compliance. It is input-based line item budgeting with detailed ex ante controls and rigid appropriation rules guided by the AP Budget Manual 2011 and AP Finance Code. FinHealth Andhra Pradesh (India) 12 3.3 Summary of previous work done on PFM analysis for health Between 2001 and 2006, a series of assessments 2006: Fiduciary risk assessment (DFID) on PFM aspects were undertaken within the Key findings DoHM&FW. This section presents a summary of key findings of these studies.19 • The state has a strong legal framework for budgeting. 2001: Impact and expenditure review (Health Systems Resource Center, UK Department for • PFM rules and regulations are archaic International Development [DFID]) and need modernization. Key findings • Autonomous bodies functioning outside the treasury system have limited • Plan funding has increased at a faster accountability mechanisms. pace than non-plan funding, which may lead to challenges in sustainability. • There are challenges in understanding the budget classification system at the • Primary care is relatively ignored. district and sub-district levels due to • Fund flow architecture is complex. multiple fund flow mechanisms. 2003: Functional review of the DoHM&FW • Primary care service delivery is (Catalyst Management Services) fragmented at the district level as there Key findings were at least six agencies handling the budget. • Organization of the department and its wings negatively affects planning, • Budget is comprehensive but not user monitoring, quality assurance, and HR friendly. management. • There are capacity gaps in the credible • Key posts are occupied by medical estimation of budgets and formulating professionals who do not have adequate costed programs and policies. experience or training in finance and • There is scope for improvement in the administration. reliability and format of monitoring 2006: Medium-Term Expenditure Framework reports. (MTEF, Institute of Health Systems) • There is need for uniform guidelines for The MTEF laid the foundation for improving the integrated financial management and health budget credibility in the coming years, monitoring of accounts. linking the budgeting exercise with sectoral • Internal control systems within the priorities that were articulated in the Health treasury are robust but fragmented, Sector Reform Strategy Framework. inconsistent, and weak in agencies that function outside the treasury system. • There is need for strengthening internal audits. • There is an absence of clear audit trail for procurement, weak management information system, and high staff turnover. 19 The keyfindings for all the studies are extracted from ‘Financial Management and Accountability Processes in DoHM&FW’ under the DFID supported Delivery of Improved Services in Administration (DISA) program. (Center for Good Governance, 2006). FinHealth Andhra Pradesh (India) 13 While expenditure reporting is timely and • Multiple budgets increase complexity. accurate, there is limited capacity for financial • Budget exercise at the sub-district level analysis. has collapsed. 2006: Strengthening Financial Management • There is need for simplification of budget Framework in DoHM&FW (DFID) classification system and fund flows The report on strengthening Financial through multiple budget heads for PHCs Management Framework made some specific with almost no capacity on financial recommendations that are listed below: management. • Develop budget planning and execution • There is need to focus on performance framework. and outcome budget. • Improve financial management capacity • Even within the DoHM&FW there are at different levels with the DoHM&FW. variations in fund flow system and • Set up internal audit process for the budget classification system. DoHM&FW. • Internal audit system is weak. • Set up financial management It is pertinent to note than most of the issues information system. highlighted in the assessment reports remain • Set up a Financial Management Unit relevant, as will be evident in Chapter 4. This under the Principal Secretary of the report attempts to tease out the service delivery DoHM&FW. links to each of these PFM systemic gaps. • Cost economic evaluations of expenditure and investments. • Undertake procurement review and reforms. 2006: ‘Financial Management and Accountability Processes in DoHM&FW’ under the DFID supported Delivery of Improved Services in Administration program (Center for Good Governance) Key findings • Organizational structure of the DoHM&FW has inherent contradictions and there is a need for restructuring. • Poor financial management capacity and qualified staff to handle financing functions are observed. • The functions of a drawing and disbursing officer (DDO) should be segregated from the PFM functions. • PFM rules and procedures are clearly laid down and codified. • There is no departmental manual to customize the PFM rules to the requirements of the DoHM&FW. FinHealth Andhra Pradesh (India) 14 4. Public financial management and health service delivery performance This chapter presents the detailed findings from management of physical inputs, operational the PFM assessment. The assessment using the supplies, accounting and reporting, and budget 24 domains (denoted as H1 to H24) in the evaluation. A summarized overview of the results FinHealth toolkit has been presented in seven is presented in Table 12 followed by detailed broad categories: strategic planning and findings and analysis. financing, budget preparation, budget execution, Table 12: Overview of results against the FinHealth assessment domains Area Description Current status and challenges Budget formulation Strategic planning and financing Weak, minimal involvement of health facilities, lack of H1 Sector planning coordination coordination, no standardized guidelines health facilities H2 Sector plan costing and financing None H3 External funding of the sector Limited Budget preparation H4 Annual budget preparation process Weak, minimal involvement of lower-level facilities Robust, facility-wise identification and tracking using H5 Budget classification DDO codes; no alignment between treasury and NHM codes H6 Forecasting of earmarked revenues Limited Medium-term perspective in expenditure H7 None budgeting H8 Transfers to subnational governments Delayed Budget execution Fund flow and purchasing H9 Predictability of in-year resource allocation Low H10 Collection of earmarked revenue for health Limited H11 Accounting for health sector revenues Robust H12 Purchasing arrangements Fragmented and weak H13 Payroll control High - IT based High for treasury expenses; limited for non-salary H14 Internal control of non-salary expenditure payments through non-treasury routes H15 Internal audit Understaffed, no centralized review Management of physical inputs and operational supplies H16 Staff recruitment Weak with high vacancies H17 Staff performance management Weak H18 Procurement management Systemic challenges that need immediate redressal H19 Public investment management No structured life cycle based approach Weak: poor maintenance of civil infrastructure, H20 Physical assets management weaknesses in drugs inventory management and record-keeping. FinHealth Andhra Pradesh (India) 15 Area Description Current status and challenges Accounting and budget evaluation Accounting and reporting Fragmented, partly manual, difficult to get a H21 Accounting, recording, and reconciliation consolidated overview Fragmented and need based, only NHM produces H22 Budget execution reports such reports every quarter; not available in the public domain. Oversight and transparency H23 External audit Robust None except the DoHM&FW budget and expenditure H24 Public access to health finance information Allocation, expenditure, audit reports of agencies under the DoHM&FW are not available in the public domain. 4.1 Strategic planning and financing This section of the report covers 3 of the 24 Therefore, PHCs have no links, either for planning domains in the FinHealth Assessment tool: (H1) or coordination with the next higher level of sector planning and coordination, (H2) sector referral facility, that is, the CHCs. This plan costing and financing, and (H3) external compromises comprehensive planning and funding of the sector. disrupts the spirit of the referral chain at the heart of India’s multilayered public health 4.1.1 SECTOR PLANNING delivery system. This also leads to service COORDINATION (H1) delivery gaps at the PHC level for which people may have to travel longer distances to higher A lack of comprehensive sectorwide planning levels of health facilities. This creates access results in no clear links between service delivery barriers as the direct and indirect cost of travel outcomes and government decision-making. adds to the already high out-of-pocket While the DoHM&FW is responsible for expenditure on account of seeking health care. sectorwide planning and stewardship of all government responses to health in the state, However, there are independent substructures there is no comprehensive sectorwide plan with that deal with planning for specialized functions clearly stated service delivery outcomes and related to tertiary care. For example, a high- targets. The NHM, which constitutes about 20– powered committee within the DME chaired by a 25 percent of the total government health retired High Court judge undertakes needs budget, and AYUSH are the only programs that assessment for setting up new medical colleges. prepare annual project implementation plans The committee provides recommendations to (PIPs). Absence of sectorwide planning makes it the Principal Secretary of the DoHM&FW for final more challenging to plan for reducing inequities decision. While the NHM and the APVPP perform and geographical disparities referred to in similar functions for the primary and secondary section 3.1 and track progress against such care, respectively, significant gaps are present in efforts. health service delivery at these levels, which are presented in later sections of this report. Highly fragmented institutional structures for health and the absence of a centralized cell to Staff at the SDU level have limited involvement coordinate plans lead to inefficiencies and also in planning. Therefore, service delivery needs as to the absence of a holistic approach to service perceived by the staff are not necessarily delivery needs. For example, PHCs are under the included in the plans. SDUs, especially those at jurisdiction of the DoPH&FW and managed by the bottom of the pyramid, such as the the office of the District Public Health Officer. subcenters and the PHCs, have negligible They fall outside the jurisdiction of the APVVP. involvement in planning. Mostly, their role is FinHealth Andhra Pradesh (India) 16 limited to sharing the HR cost estimate. More different from what is communicated to them than 50 percent of the facilities (n = 40) in the and that the service delivery and health facility primary survey state that their priorities are operational needs are not always met. Table 13: SDU engagement in planning Are priorities of your hospital different from the priorities indicated by the district /state? Responses PHC (31) CHC (7) AH (1) DH (1) Total (40) Yes 18 2 1 — 21 No 6 3 — 1 10 Don't know 7 2 — — 9 There is no SDU plan in the health sector in the not always captured in the plans. Service state, leading to gaps in facilities and delivery targets such as number of institutional infrastructure and poor maintenance of deliveries and immunizations are set at the state equipment in health facilities remaining level under the NHM. Districts disaggregate these unaddressed. The absence of comprehensive targets. Offices of the DMOH further SDU plans leads to gaps in services. In-depth disaggregate the targets by PHCs. PHC in-charges interviews with state officials indicate that are not involved in setting overall district targets higher-level facilities, especially the area and goals. Each PHC is divided into sectors of hospitals, district hospitals, and medical colleges, approximately 20,000 population, and each submit only their budget estimates but do not sector has two supervisors. Monthly targets are have any facility-specific documented plan. All provided for each sector and reviewed in sectoral planning for primary care facilities is done by the meetings. Each supervisor has a tour plan office of the District Medical Officer of Health finalized at the start of the month, but the budget (DMOH) at the district level. Higher-level health allocation is only INR 900 per supervisor for more facilities are only involved to the extent of than 20 days of travel each month. Medical sharing their annual budget estimates for salaries officers at the PHCs have no travel allowance. For and establishment costs. Interviews with example, District Hospital Tenali reports that due stakeholders at the sub-district levels revealed a to shortage of equipment and staff in the blood complete disenchantment with the planning bank unit (funded under the National AIDS process in a resource-constrained environment. Control Program) and absence of required skills, Discussions with the APVVP reveal that hospitals’ it is unable to organize regular blood donation involvement in planning is limited to sharing their camps, and the hospital collects only 400–450 HR requirements on an annual basis for units of blood against a monthly target of 600. budgeting. Apart from this, all planning for One Blood Collection Transportation Vehicle operations and management of these hospitals is (BCTV) is shared by two hospitals. The need for a done at the state level and limited to incremental dedicated BCTV was expressed more than two budget projections based on past trends. There is years ago, with no information yet on the status no mechanism that allows state-level officials to of the request. Further, the NHM Common have a granular understanding of facility-specific Review Mission 2019 report refers to challenges needs, especially related to infrastructure in operationalization of health and wellness required for delivering quality services. Neither centers and weak microplanning and execution does the budget planning process make use of of reproductive, maternal, newborn and child information on disease burden, socioeconomic health (RMNCH) services. Interviews with vulnerabilities, or previous performance in any hospital staff reveal that such gaps in service significant manner. delivery organization exist primarily because health facility in-charges have no say or stake in NHM planning systems are relatively better the planning process and their voices remain structured than planning under the state unheard. budget, though the service delivery needs are FinHealth Andhra Pradesh (India) 17 Box 1: Examples of infrastructure gaps due to no facility-level plan and budget Infrastructure gaps at the SDU level: Consequence of no facility-specific comprehensive plan and budget Responses from B. Mattam and Vontimitta PHCs in YSR Kadapa district: • Building repair is required. • Compound wall construction needed in both the sampled PHCs. • RO system available in all PHCs but not in use - drinking water is purchased from outside. • Congested infrastructure - no staff meeting room: difficult for staff and patients to sit during events/meetings organized with frontline workers. • No diet for inpatients except pregnant and lactating women: Area Hospital, Pulivendula. 4.1.2 SECTOR PLAN COSTING AND for the medium term. Underfinanced services and health facilities compel staff to provide FINANCING (H2) services under limited resources. This further There is no integrated sectoral plan and affects patients’ experience of seeking care in therefore no plan costing. Structured annual public hospitals and at times results in out-of- plans are prepared only for the NHM, which also pocket expenditure as well. Refer to section has systems for periodic review of performance 4.2.4, domain H7, on medium-term expenditure against the plan and quarterly financial reports planning for further details. shared with the GoI. All other wings prepare the progress updates as required for periodic internal The DoHM&FW has increased population review meetings chaired by the senior leadership coverage for risk protection through insurance of the DoHM&FW. The absence of a programs. Families below the poverty line have comprehensive sectoral plan leads to skewed been covered historically. The state has a long focus on financing service delivery targets with history of Aarogyasri Scheme which began in no mechanisms to ensure proportionate 2007 in the undivided Andhra Pradesh. In 2019, assessment of infrastructure, HR, and other the Dr YSR Aarogyasri merged with the national capacity financing needs for meeting the service Ayushman Bharat Pradhan Mantri Jan Arogya delivery targets. To illustrate, 46.1 percent of the Yojana (PMJAY), expanding the annual risk cover institutional deliveries in 2019–20 took place in to INR 500,000 per family for the identified private health facilities in the state.20 The vulnerable population. The Dr YSR Aarogyasri absence of a comprehensive bottom-up plan also Scheme and PMJAY together cover about 1.43 leads to wide interdistrict variations in health crore families,21 which is almost 100 percent outcomes that the state is unable to track and coverage22 of the state population. A scheme proactively intervene. Refer to Table 5 in section called Arogya Raksha was launched in 2017. 3.1. Under this voluntary scheme, even families above the poverty line (APL) can enroll at a Normative service delivery costs for preventive nominal annual premium of INR 1,200 per year and curative care are not available. Therefore, it per individual and get cashless hospitalization is difficult to estimate the financing gap for UHC. services for approximately 1,059 medical and In the absence of such evidence, the DoHM&FW surgical procedures through a network of over does not assess the year-on-year financing gap to 400 government and private hospitals. The ensure its constitutional commitment to quality annual risk cover is INR 200,000 per individual health care for all. Such analysis could lead to enrolled. More than 100,000 individuals in the development of a resource mobilization strategy APL category have voluntarily enrolled in the 20 International Institute for Population Sciences (IIPS) and ICF. 2021. “National Family Health Survey (NFHS-5), India, 2019- 20: Andhra Pradesh.� Mumbai: IIPS. 21 Andhra Pradesh State Profile - National Health Authority: https://pmjay.gov.in/andhra-pradesh. 22 Estimated state population in 2020: 5.29 crores (RGI projections, 2019); Average family size: 4.02 (Census 2011). FinHealth Andhra Pradesh (India) 18 scheme, of whom only 7,350 have an active membership. 4.2 Budget preparation 4.2.1 ANNUAL BUDGET 4.1.3 EXTERNAL FUNDING OF THE PREPARATION PROCESS (H4) SECTOR (H3) Reviewing the annual budgeting process is The DoHM&FW has significant investments for important as progress toward achieving the the health sector through the World Bank- sustainable development goals and UHC supported APHSSP. The APHSSP aims to improve depends predominantly on government the quality and responsiveness of public health spending. services and increase access of the population to an expanded package of primary health services. There are two budgeting systems and processes The project is supported by an International Bank within the DoHM&FW. These are effectively for Reconstruction and Development (IBRD) loan parallel and distinctly different systems, despite in the amount of US$328 million using an one being a subset of the other. This is one of the Investment Project Financing (IPF) with root causes of the misalignment between service Disbursement-Linked Indicators (DLIs) lending delivery financing needs and the budgeting for instrument for 2019 to 2025. The World Bank infrastructure and establishments that deliver support annually is equivalent to less than 5 such services. One is the budget for the entire percent of the DoHM&FW’s annual budget. department, including all central and state funds (hereinafter referred to as the ‘state health The key indicators measuring the three parts of budget’), and the other is the budget for the the project development objectives are (a) NHM (hereinafter referred to as the ‘NHM Increase in number of CHCs and PHCs with quality budget’), a CSS. The NHM budget is in design a certification (quality); (b) Increase in the average subset of the overall state health budget and all patient reported experience score funds for CSS are now routed through the (responsiveness); (c) Increase in percentage of treasury, but the budgeting process, timelines, patients diagnosed and at risk of hypertension and to a large extent, the personnel involved in and diabetes, managed as per protocol at the NHM budgeting are different from that of the subcenter or PHC (access); and (d) Increase in the state budget. Multiple planning and budgeting percentage of pregnant women who receive full processes cause inefficiency and consume more antenatal care (access). time of certain categories of officials. The World Bank support leverages the existing The budget preparation process of the state PFM systems of the state government for health budget component is guided by the AP financial management, with greater oversight on Budget Manual 2011 for the state budget and procurement and finances through operations follows an incremental budgeting approach. The manual and a project management unit like Budget Manual 2011, which runs to 620 pages, is structure. generic for the entire state finances and used by all the state government departments. It is comprehensive, and some of the major highlights include the following: • All rules for estimation of budget and expenditure control laid down by the Finance Department are included in detail in the budget manual, spread over approximately 65 pages, excluding annexes. • The template for the budget estimate includes the past two years’ data as well. FinHealth Andhra Pradesh (India) 19 For example, the template for FY2022– similar workshops are held with block 23 will include the original budget representatives. While the budgeting process estimate, revised estimates for FY2021– appears to be bottom up, the top-down 22, and expenditure for FY2020–21. structuring of programs, budget templates, and most of the unit rates by the GoI constrains the • Detailed guidelines are available for state or the district officials to innovate. Health making revised estimates that include facilities and districts primarily contribute by three options, and the estimating officers projecting their service delivery targets. There is are at liberty to choose the best option limited evidence related to in-year revision of for their situation. service delivery targets. However, under NHM The DoHM&FW does not have a sector-specific financing, if underachievement of targets leads budget manual to address the technicalities to underutilization of funds, it may affect the involved in sectoral budgeting, especially for quantum of resources that will be available in the health facilities/hospitals for which estimating remaining periods of the current year and the expenses for clinical and clinical support total resource envelope for the coming year. In services requires some expertise. Those involved such an eventuality, in-year resource availability in facility-level budgeting, either at the state or becomes unpredictable. the facility level, do not have formal training in For the state budget that constitutes over 70 estimating recurring costs of hospital operations percent of the overall health budget, integrated and supplies, including drugs and medical and annual operational plans are not prepared. surgical consumables. Discussions with officials Therefore, while service delivery components at the facility, district, and state levels reveal that under the NHM are implemented and monitored most such estimates are done at the state level as per approved district plans, there is no base for on an incremental basis. The estimation process monitoring the infrastructure, availability of HR, is not rooted in any technical assessment of the functionality, and maintenance of equipment in quantum of medical or surgical supplies or health facilities—all of which are critical for consumables in hospital as required by inpatient improved service delivery. This is a challenge loads for specific specialties, load and utilization perpetuated by the historical structure and split rates of operation theaters (OTs) or intensive of budgets into non-plan and plan budgets. While care units by specialties, and types of the names have changed to Committed and interventions/procedures at such hospitals. Establishment Expenditure and Schemes, Shortage of funds for facility operations and respectively, the intent and execution remain the shortage of medicines and consumables are same. inevitable. SDUs do not prepare overall operational plans The NHM budgeting process is exclusively and budgets. The absence of reliable SDU-level driven by the GoI NHM guidelines, although the budgets and expenditure data makes it difficult state NHM team has adapted the processes to to undertake any efficiency analysis studies that improve its operational efficiency. While the GoI could inform service delivery improvement issues its instructions for planning and budgeting strategies. Hospitals/health facilities do not have around November–December each year for the any individual operational plan and budget that coming plan period starting in April the following comprehensively covers all hospitals’ inputs and year, the state begins its process around October, outputs. The budgeting process is fragmented with a state-level planning workshop involving because salaries and non-salary expenditures are relevant district officials. The status of each budgeted under the state and NHM budgets, district is presented along with progress and gaps with different budget calendars, templates, and based on the health management information planning and budgeting guidelines. APVVP system (HMIS) data, state priorities are hospitals’ involvement in the state budgeting communicated, and districts submit their PIP and process is limited to sharing salary estimates for budgets within four to six weeks. For preparing the state budget. All other operational district plans and budgets at the district level, requirements, including drugs and medical FinHealth Andhra Pradesh (India) 20 consumables for hospitals, are estimated at the tender was awarded at INR 38 per patient per day state level based on historical trends and for three meals, thereby directly affecting the utilization data. One of the hospitals visited quality and quantity of food available to informed of an allocation of INR 40 per day per inpatients. patient for inpatient diet services, and the local Table 14: Availability of operational and budgeting guidelines at SDUs Responses PHC (31) CHC (7) AH (1) DH (1) Total (40) Yes, only for NHM 8 2 — — 10 Yes, only for the state budget 3 — — — 3 Yes, for both NHM and state budget 10 2 1 — 13 We do not receive any guidelines 10 3 — 1 14 A primary survey with 40 health facilities across they were not involved, and 4 were not aware of 11 districts revealed that 14 had not received any such plan. any planning/budgeting guidelines (see Table 14). During the survey, although 13 of the 40 Some voices from health facilities at the district facilities reported preparing overall and sub-district levels give a granular picture of comprehensive facility plans and budgets, there the small but important aspects that get ignored was no evidence of this in the facilities visited and under-resourced. These can be crucial for during qualitative fieldwork in Guntur district. Of quality service delivery at the health facilities. the 40 facilities surveyed, 9 responded that they Refer to Table 15. prepare plans only for the NHM, 10 of them said Table 15: Effects of not engaging health facilities in planning and budgeting - voices from health facilities We do not have any space for innovative planning. Facilities are mostly given targets. At times, Voice 1 the targets can be negotiated. Supervisors have a fixed monthly allowance of only INR 800 per travel for monitoring. This is Voice 2 inadequate for extensive field visits. There is no mobility support for medical officers in PHCs. We cannot undertake field visits. Voice 3 Monitoring and service quality gets affected. There is negligible or no budget provision for anything except salaries and electricity bills. In the Voice 4 PHC, we get INR 2,000 per month for stationery and supplies. We spend out of our pockets. Our computers are very old. They are painfully slow. It significantly affects our work. We have no Voice 5 budget to repair, upgrade, or replace them. We experience frequent breakdown of biometric devices. We do not have budgets for repair and Voice 6 maintenance. While the NHM budget resource envelope is resource envelope is communicated to the state, determined by the GoI, no specific ceilings are budget estimates from the districts are provided for the state budget. The state budget rationalized at the state level without consulting follows an incremental budgeting practice where the districts. A plan negotiation meeting takes every expenditure significantly higher than past place at the GoI level for the NHM PIP and trends must be justified. Since the NHM budget, where the plans are reviewed, and budgeting process begins well before the GoI budgets negotiated between the GoI and the indicates the resource envelope, once the state. Any budget reduction during negotiation at FinHealth Andhra Pradesh (India) 21 the central level for the NHM, or by the time of Approved budgets are significantly short of the budget finalization by the DoF at the state level, budgets proposed, leading to large resource has a direct impact on the budgets available for gaps in health facilities and directly affecting the spending units and therefore on service service delivery. The mean resource gap delivery. As mentioned earlier, spending units are between 2017 and 2020 for the APVVP was 41 not consulted during such reduced allocation percent and 37 percent for the DME; the gap in decisions. the NHM approvals between 2017 and 2020 was relatively lower at 13 percent (refer to Table 16). Table 16: Budgets proposed versus approved Unit Details 2017–18 2018–19 2019–20 2020–21 2021–22 Proposed 4,155 3,940 5,144 8,452 8,956 DME Reduction 38% 19% 26% 44% 45% Proposed 764 996 898 1,019 2,125 APVVP Reduction 35% 34% 24% 25% 61% Proposed 1,789 1,919 2,397 2,960 n.a. NHM Reduction 10% 20% 7% 15% n.a. Source: SHS, APVVP, and DME administrative records. Note: All figures are in INR crores. While the reductions in the DME and APVVP Further, almost 10 percent of the respondents in budgets are more likely on account of state fiscal exit interviews (n = 159) across 11 districts in the constraints and the quality of original budget state reported spending money out of their estimates, NHM reductions are typically due to pocket for seeking services in the health facilities. certain state priorities not being funded by the This is further corroborated by the fact that in GoI due to resource envelope constraints. Such 2017–18 only 21.8 percent (rural: 19.1 percent significant gaps in the DME and the APVVP and urban: 26.8 percent) of the people were budgets are among the critical reasons behind accessing government/public hospitals for service delivery gaps at health facilities across treatment of ailments and only 27.8 of the total the state. Lower budget utilization rates further hospitalizations (excluding childbirth) were in affect service delivery. See Table 8 and Table 9. public facilities.23 Box 2: Surgery in damp clothes Surgery in damp clothes: Consequence of no facility-specific comprehensive plan and budget This is the voice from a 300-bed district hospital. The hospital has 300 bedsheets in use, with about a 1,000 bedsheets in stock. The hospital does not have a mechanized laundry. It has only four dhobis (washermen) on its payroll. It is not possible for four men to clean 300 bedsheets every day, and therefore the bedsheets are changed every 3–4 days. This is unhygienic for patients. Surgeons report conducting surgeries in semi-wet clothes during the rainy season as the gowns take longer to dry in-house—a huge risk of infection for both patients and surgeons. Only OT linen is washed regularly. The hospital is expected to submit only the HR estimates as part of the annual planning and budgeting process. There is no institutional process or structure for capturing and financing the operational requirements of the hospital. This is despite reportedly having a system where District Coordinator for Hospital Services (DCHS) organizes monthly review meetings of all superintendents at the district level. 23Key Indicators of Social Consumption in India: Health, NSS 75th Round, July 2017-June 2018, Ministry of Statistics and Plan Implementation, Government of India. November 2019. FinHealth Andhra Pradesh (India) 22 Personnel involved in state budgets at the centralized approach to non-HR budgeting for facility level neither have the required hospitals. qualification nor adequate training on budget estimations, leading to the possibilities of The multiplicity of agencies and agency-wise unrealistic budgeting for health services. Of the budgeting practices lead to challenges in linking 40 facilities surveyed, only 12 facilities had staff budgets with sectoral outcomes. For example, with commerce/finance backgrounds involved in all hospitals under the APVVP receive funds budgeting, 7 had medical doctors, and the through the head of the department of the remaining 21 had staff with non-medical and APVVP through grants-in-aid from the non-finance backgrounds. None reported having DoHM&FW. They also receive funds under the received formal training or orientation in NHM for activities, HR, and infrastructure that budgeting in the last few years. Gaps in support service delivery outcomes. As a result, understanding of budget at the district and below secondary care outcomes cannot be linked to a levels and lack of training were also highlighted in single budgeting source. Likewise, for primary 200624 and has remained unaddressed since care at the district and facility levels, budgets are then. estimated both by the Directorate of Health Services (DHS) and the NHM. Under the state budget route, there are no district or facility budgets and therefore lack of The budget structure and budget formulation accountability for service delivery expenditure process do not allow linking and tracking of the and outcomes. Districts submit their budget budget to health sector priorities and service estimates to the state at the start of the year. At delivery outcomes. State budget is entirely the state level, facility-/district-level estimates structured based on inputs. While the NHM lose their identity. As a result, estimating district- budget is structured by programmatic pools level or even facility-level expenditure for (such as maternal health, child health, delivering a set of services is subject to a range of immunization, and NCDs), in practice more than assumptions. Therefore, the DoHM&FW does not 1,000 budget lines under the program effectively know the costs to deliver a set of services at reduce it to input-based budgeting and the different levels. Doing a resource assessment for review process does not allow for measuring improved quality services is even more program outcomes (say, for maternal health) challenging. Once the state budget is voted in the with the total investments made for maternal legislative assembly, the approved demand for health. the Health Department is available in the budget books that are instantly made available in the While the Finance Department has a Budget public domain. In due course, with necessary Portal, all facilities assessed and all user sub- approvals, the approved budget estimate also departments within the DoHM&FW informed gets reflected in the treasury portal called the that they submit estimates manually and in MS CFMS. Discussions with the office of the DME Excel spreadsheets. All individual estimates are reveal that maintenance of laboratory consolidated at the next higher level and equipment is a big challenge. With no periodic submitted through email/hardcopy. calibration of equipment, the quality of investigation reports is likely to be compromised, with direct implications for diagnosis and treatment outcomes. Short supply of reagents is another major concern. In the absence of a facility-specific budget, such hospital-specific needs are not generally captured, and even if they are on record, they tend to get lost in the 24 Report on Financial Management and Accountability Processes in the Department of Medical, Health and Family Welfare, Government of Andhra Pradesh, Centre for Good Governance, 2007. FinHealth Andhra Pradesh (India) 23 4.2.2 BUDGET CLASSIFICATION (H5) The state budget in AP follows a multitiered and structured classification system that broadly Budget classification is one of the fundamental complies with the Government Finance building blocks of a sound budget management Statistics (GFS) standards. The state budget system, as it determines the way the budget is manual acknowledges budget classification as a recorded, presented, and reported and, as such, vital link between budget outlays and has a direct impact on the transparency and functions/programs/schemes and ensures coherence of the budget.25 26 itemized control over expenditure. Table 17 provides the budget classification structure for all government transactions in AP, including for health. Table 17: Budget classification tiers No. of Tiers - Budget classification Details digits Major head 4 Functions of the government Sub-major head 2 Sub-functions Minor head 3 Program under each function/sub-function Group sub-head 2 Financing source (state, center. external) Sub-head 2 Scheme under each program/minor head Detailed head 3 Nature of expenditure, for example, office expenses (130) Sub-detailed head / object 3 Object of expenditure, for example, water and electricity head charges (133) However, the state budget classification its budget classification system and chart of structure does not permit the identification of accounts that are not aligned with the state budgets for individual health facilities or treasury budget classification system. There is no districts. The budget classification structure is a mapping of NHM budget codes with the state statistical classification of reporting designed for budget classification codes. In addition, frequent tracking allocation of resources, instead of changes in budget codes under NHM further service delivery outcome-based expenditure aggravate the problem and make time series classification structure. This makes it difficult to analysis of budget and expenditure data a more estimate the total health budget available for a complex exercise. Such misalignment leads to district or a health facility. However, once the significant challenges in slicing and dicing state budget is approved, allocations and financial data across financing streams. To expenditures for individual health facilities can illustrate, one has to navigate through 1,000– be tracked using the unique code for that 1,500 budget lines in the financial management facility’s DDO. This information is not available in report (FMR) of the NHM for functional or the public domain. This limitation has a direct economic classification of data. The NHM budget impact on reforms related to not only the structure tends toward program-based outcome-based budget but also institutionalizing classification. Further, frequent changes in FMR a culture of integrated physical and financial budget lines and codes also make it difficult to review and accountability. analyze service delivery expenditure trends over time. For an integrated economic and functional Misalignment between the state treasury analysis of health budget and spending, each of finances’ and NHM’s budget classification the NHM budget lines has to be mapped to the systems creates complexities in overall sectoral spending analysis. NHM, a central scheme, has 25 Budget Classification, Technical Notes and Manuals, Fiscal Affairs Department, IMF, 2009. 26 Andhra Pradesh Budget Manual 2011 (para 3.6). FinHealth Andhra Pradesh (India) 24 economic classification structure of the state Multiple classification systems for multiple health budget. sources of financing lead to a significantly high burden on health facilities with no or limited Input-based allocation with stringent financial management capacity. Different reappropriation controls leaves no room for budget classification structures of NHM and the health administrators and facility in-charges to state health budget lead to multiple adapt to the emerging needs. The NHM budget bookkeeping, multiple templates, and multiple has a relatively better space to re-appropriate reporting requirements. The inappropriate within program pools, but this flexibility also is qualification of people handling budget and limited to the district-level authorities. finances at the facility level has already been referred to under section 4.2.1. The cadre of finance/accounts staff appears to be largely ignored in the DoHM&FW HR planning. See Table 18. Table 18: Staff (excluding contractual and outsourced) available for accounts and finance related designations Details DME PH&FW FW IPM DCA AYUSH TOTAL Budget: 2021–22 (INR crores) 4,941 2,155 5,104 16 51 356 12,623 Total staff strength 8,289 20,876 11,511 146 269 2,559 43,650 Designations that include words 'accounts' or 'finance' and total staff against those positions: Accounts officer 1 1 1 1 — 1 5 Assistant accounts officer — 1 — — — — 1 Junior accounts officer — 3 — — — — 3 Accountant 17 — 3 1 — — 21 Assistant accountant — — 3 — — — 3 Share (%) 0.22 0.02 0.06 1.37 0.00 0.04 0.08 Source: Appendix A to the Budget Estimates 2021-22, Go AP. Note: DME: Director of Medical Education; PH&FW: Public Health & Family Welfare Department FW: Family Welfare Department; IPM: Institute of Preventive Medicine; DCA: Drug Control Authority AYUSH: Ayurvedic, Yunani, Siddha, Homeopathy. Exclusions: contractual employees, outsourced employees, NHM staff. The absence of dedicated finance and doctors spend substantial time every day in accounts staff means that medical staff are administration and accounting functions, burdened with these responsibilities. During distracting them from clinical services, the assessment, visits to PHCs revealed that program management, and oversight. Box 3: Budget classification structure and its impact on service delivery Budget classification structure: Impact on service delivery • While at the state level it becomes difficult to track total expenditure to deliver a program or certain health outcomes, at the facility level there are multiple budget lines for similar activities under different programs. • Health facility outputs and outcomes cannot be tracked with expenditure, and comparative efficiency analysis of health facilities cannot be undertaken without major assumptions. • Such structural challenges in service delivery monitoring lead to poor accountability at the health facility level. FinHealth Andhra Pradesh (India) 25 4.2.3 FORECASTING OF EARMARKED undertaken in 2001 with DFID support, followed by a series of expenditure reviews that finally led REVENUES (H6) to the MTEF for the health sector in 2006. After No revenue is earmarked for health in AP. The that, no such efforts have been made. Allocations state does not impose sin taxes and any other tax are incremental rather than need based. There is specifically for the health sector. All government no tool for the government to determine health services are financed out of the general service priority and ensure adequate financing of government tax revenue pool. priority health services for improved outcomes. Direct revenues generated by the state’s health The expenditure projection process is not sector are insignificantly small compared to the standardized across financing streams. This state’s total tax and nontax revenue receipts. affects budgets available for service delivery at Nominal receipts in the health sector are different levels. As mentioned earlier, most of classified as ‘Other Non-Tax Revenue’ under the the health facilities under the APVVP only project ‘Social Services’ subcategory. In 2019–20, the salary expenditure for the annual state budget, total receipts were INR 165.48 crores,27 equal to and all other operational expenses are estimated 5 percent of the state’s nontax revenues and only at the state level. On the other hand, all 0.1 percent of total revenue receipts. These institutions under the DME provide all salary and receipts are estimated at INR 359.10 crores for non-salary projections on an incremental basis. FY2021–22. Almost 86 percent of these receipts The same health facilities provide estimates are from the Employees State Insurance Scheme, primarily based on unit rates determined mainly and the remaining are primarily from tuition and by the GoI allocations. This lack of other fees from medical education and receipts standardization in expenditure projection across from public health laboratories. institutions and financing streams fragments perspective thinking and is a structural barrier to Three kinds of revenues are collected at the any kind of medium-term service delivery health facility or the institution level: nominal planning. user fee collections from patients by the hospital development societies (HDS) at the health The absence of a medium-term perspective facilities, student fees from teaching institutions, severely affects health service delivery. Most and insurance premium subscriptions by the health sector outcomes have an incubation AHCT. Sources of local revenues include period of more than a year and cannot be registration charges, rental income, parking optimally achieved without an outcome-specific charges, canteens, and shops within the hospital medium-term projection of resources required. premises. High vacancies, inadequate funds for repair and maintenance of facilities and equipment, 4.2.4 MEDIUM-TERM PERSPECTIVE periodic delays in receiving diagnostic test IN EXPENDITURE BUDGETING (H7) results, and inadequate budget for inpatient food in government hospitals are just a few of the While there were efforts on medium-term systemic challenges faced by health facilities in expenditure planning for health between 2001 AP. A lack of medium-term perspectives in and 2010, no such effort has been taken up after planning and expenditure budgeting is one of the the bifurcation of the state in 2014. An impact important factors leading to this situation. and expenditure review of the DoHM&FW was 27Detailed Estimates of Revenues and Receipts, Budget Books: 2021-22, volume 2, Government of Andhra Pradesh. Socio-economic Survey 2020-21, Planning Department, Government of Andhra Pradesh. FinHealth Andhra Pradesh (India) 26 Box 4: Impact of no medium-term perspective in expenditure budgeting Service delivery impact: Consequence of no medium-term perspective in expenditure budgeting • Space constraint for health and wellness centers to deliver comprehensive primary health care (13th CRM report, NHM, 2019). • The state does not have robust estimates of the investments needed to deliver comprehensive primary care services and the likely resource gap to meet the capital and recurring expenditure over time. • Once the comprehensive primary care delivery is operationalized state wide at the level of subcenters and PHCs, the impact on service mix at the CHC level and the costs thereof is not documented in a scientific manner. 4.2.5 TRANSFERS TO SUBNATIONAL exercise that takes three to four weeks to complete. All budget figures up to the GOVERNMENTS (H8) sub-detailed head are centrally entered into the CFMS portal. Through the CFMS AP has stringent state rules for allocating and portal, detailed entries are submitted to transferring funds to secretariat departments the Finance Department. (including the DoHM&FW) and distributing and • The Finance Department verifies and redistributing such funds up to the district and reconciles all entries and, after that, sub-district levels. The Finance Department issues online CBROs to each chief issues detailed instructions for distribution and controlling officer (CCO at the state levels preparation of CBRO. After the legislature - HODs), sub-controlling officers (SCO at approves the budget, this process is followed for the district level), and DDO (at the sub- distribution and redistribution of funds: district/facility levels). Copies of the • The Finance Department issues a CBRO detailed CBROs are also shared with the to the DoHM&FW. respective treasury and sub-treasury offices at all levels. • The DoHM&FW prepares detailed distribution statements for each HOD • Expenditure cannot be incurred unless and each DDO under the HODs allocating the Finance Department issues the the overall budget up to the sub-detailed CBROs head. Budget distribution is an intense Figure 4: Distribution of funds under the state budget after legislative approval in AP FinHealth Andhra Pradesh (India) 27 CBROs indicate quarterly releases as per NHM funds from the GoI to the state are stringent guidelines for the committed expenses supposed to be transferred through three that affect timely payments of budget lines instalments, but there are significant delays in where the expenditure is not uniformly spread transferring funds from the state treasury to the across quarters. Only 25 percent of the approved NHM account, affecting service delivery and budget is available for spending in the first outreach services. The three instalment amounts quarter, followed by the next 25 percent in the are 40 percent, 35 percent, and 25 percent, second quarter of a financial year. Funds are respectively. Preconditions for the transfer of available for spending in third quarter only if the funds are laid down. One of the conditions for expenditure against allocations in the previous each transfer is that dues against central share two quarters is 75 percent or more. Such are less than 2 percent. While there were no stringent allocation rules for each sub-detailed transfers from the GoI to the state in the first head cause operational inefficiencies. For quarter in three of the four years between 2017– example, an electricity bill of INR 30,000 in the 18 and 2020–21, funds are transferred from the first quarter cannot be paid if the annual budget state treasury to the NHM PD account with a for this head of accounts is INR 100,000 as the turnaround time of 79–125 days from the date of expenditure ceiling for the first quarter is only up receipt of funds from the GoI in each of these to INR 25,000. Releases for schemes are also four years. See Table 19 and Figure 5. In each of quarterly but are primarily dependent on the these four years, a portion of funds is transferred state’s fiscal position and conditional to GoI only in the first quarter of the next financial year. releases under the respective schemes. The delays are primarily on account of the fiscal Responses reveal that there have been condition of the state, which is further explained improvements in the timeliness of receiving the in the following paragraphs. CBROs. Table 19: Delays in fund transfer under the RMNCH and National Urban Health Mission (NUHM pools of the NHM (%) 2017–18 2018–19 2019–20 2020–21 Percentage of NHM funds transferred from: Period State to State to State to State to GoI to GoI to GoI to GoI to NHM PD NHM PD NHM PD NHM PD state state State State account account account account Quarter 1 0 0 0 0 49 0 0 0 Quarter 2 61 61 65 0 22 0 65 0 Quarter 3 28 9 25 65 17 49 25 65 Quarter 4 11 0 11 25 12 39 11 25 Quarter 5 — 30 — 11 — 12 — 11 Source: NHM administrative records. Note: Red font indicate delayed transfers. No transfers in quarter 1 are primarily on account balances from the previous year suffice to meet of delays in plan approval and meeting the first the first quarter expenses. instalment precondition. However, the unspent FinHealth Andhra Pradesh (India) 28 Figure 5: Delays in transfer of NHM central funds by the state 250 195 200 165 149 150 139 126 114 100 80 75 76 64 67 61 59 46 50 36 28 0 Instalment 1 Instalment 2 Instalment 3 Instalment 4 2017-18 2018-19 2019-20 2020-21 Source: SHS financial records, AP. Note: The time lag is estimated as the difference (in calendar days) between the date of transfer from the GoI to the date of transfer from the state treasury to the NHM PD account. Delays in fund transfers are on account of the could be eliminated as the funds flow from the fiscal position of the state and the procedures GoI only after the PIP is approved and the followed for such transfers. The state approval letter is issued from the GoI. Once GoI maintained the mandatory minimum daily cash funds are transferred, the transfer of the balance with the Reserve Bank of India for only corresponding state share is a federal obligation 115 and 145 of the 365 days during FY2018–19 of the state government. The issuance of BRO and FY2019–20, respectively, and depended (step 5) immediately upon receipt of funds from heavily on special drawing facility, ways and the GoI (step 1) could be considered after means advances, and overdrafts.28 The delays in assessing the extent of impact, if any, on internal fund transfers are inevitable. The history of control. The need for the DoHM&FW to issue delays continues across most states, including administrative sanction (step 6) may also be AP, even before 2017–18.29 Figure 6 presents the revisited for each transfer as the administrative different stages of the fund flow process from the sanction could be issued up front for the entire GoI to the PD account of the NHM. Prima facie, year, immediately after the GoI approves the steps 2 and 3 in Figure 6 appear redundant and plan and budget for the entire year. 28 Comptroller and Auditor General of India, State Finances Audit Report for the year ended 31 March 2019, Report no. 4 of 2020. Government of Andhra Pradesh. Comptroller and Auditor General of India, State Finances Audit Report for the year ended 31 March 2020, Report no. 3 of 2021. Government of Andhra Pradesh. 29 Budget Briefs: National Health Mission GoI: 2018–19, volume 10, issue 65, Centre for Policy Research. FinHealth Andhra Pradesh (India) 29 Figure 6: Flow of funds from the GoI to the implementing agency for NHM in AP For NHM transfers to sub-state levels, the NHM reappropriate budgets based on emerging needs team prepares district-wise allocations by the and meet the service requirements. six major program pools based on the GoI approvals. While the GoI issues approval for each Instead of transferring funds to the village-level of the 1,000–1,500 budget lines, the state team committees, they are managed at the PHC level. provides greater autonomy to district offices in All bills from the VHSNCs and the subcenters determining the expenditure pattern within their come to the PHCs, where they are entered pools. The office of the DMOH in each district manually. Understaffed PHCs find it challenging further distributes NHM funds to the PHCs. High to handle this function, and doctors report levels of rigid fragmentation in budget lines spending substantial time on administrative and within pools leave no flexibility to the SDU to accounting functions. Box 5: Impact of fund transfer practices on service delivery Service delivery impact: Consequence of current fund transfer practices • No flexibility to manage funds across budget lines depending on service delivery needs. Certain health facility needs may not be met while funds may be idle under another budget head. • Increased accounting tasks in SDUs that have limited accounting and administrative staff often burden health care workers and take time away from their service delivery functions. FinHealth Andhra Pradesh (India) 30 4.3 Budget execution 4.3.1 PREDICTABILITY OF IN-YEAR RESOURCE ALLOCATION (H9) After approval of the state health budget, ensure that approved allocations are usually distribution statements for available in time for the treasury route of districts/subordinate offices are prepared in spending. Analysis of quarter-wise fund advance for the entire year and submitted to release data from the DME and the APVVP the Director of Treasury and Accounts (DTA) reveals that the total funds available are for treasury authorization. The DTA releases uniformly spread over the quarters (Figure 7). the Budget Authorization Orders, which Figure 7: In-year availability of funds for the DME and APVVP 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Quarter 1 Quarter 2 Quarter 3 Quarter 4 Quarter 1 Quarter 2 Quarter 3 Quarter 4 APVVP DME (non-salary establishment expenses) 2017-18 2018-19 2019-20 2020-21 Source: APVVP and DME administrative records. It may be recalled that there are significant gaps related to reappropriations. The guidelines between the budget proposal and the approved indicate what is permissible and what is not at budget (Table 16, section 4.2.1), severely the level of the line department. However, affecting both quality of infrastructure and discussions with the department officials reveal comprehensive service delivery, especially in that this authority is vested solely with the hospitals. Reductions in proposed budgets also department controlling officer at the state level. mean that there is no significant deviation Subordinate offices (at the state and sub-state between the approved budget and the funds levels) do not have any flexibility or powers of released. reappropriation. As a result, personnel in charge of and accountable to service delivery outcomes At the facility level, there is no flexibility to have no flexibility to optimally use resources as transfer funds across budget lines, thereby per service delivery needs. directly compromising the flexibility needed for responsive service delivery. While there is Revised budgets during the year reflect a relatively greater flexibility under NHM funds at reduction in state health budget outlays across the district and state levels, state budgets and all its user departments. Reductions are on funds are regulated by stringent rules. The account of the overall fiscal situation of the state. budget manual provides detailed guidelines FinHealth Andhra Pradesh (India) 31 Table 20: Percentage change in revised estimate compared to the original budget estimate (%) Department 2016–17 2017–18 2018–19 2019–20 2020–21 HM&FW Secretariat −22 −5 −32 −15 −27 Medical Education Department 1 −5 −2 −16 −30 Public Health and FW Dept −2 −16 −15 −58 −33 Family Welfare Department −8 −3 −21 −37 22 Institute of Preventive Medicine −2 −12 −10 −17 −1 AYUSH −17 −12 −40 −45 −34 Drug Control Administration −18 15 −55 −71 −9 Total for DoHM&FW −6 −7 −14 −34 −17 There are wide variations in the frequency of statutory audits. It is pertinent to note that funds fund requisition by facilities. Of the 40 facilities of these committees also fall within the ambit of surveyed during the assessment, 8 reported the state’s Auditor General audit. Therefore, any making monthly requisitions, 14 reported assessment of total government health spending quarterly requisitions, and 11 requisition as and mostly does not include spending by health when they need funds. Surprisingly, six of the facilities out of these funds. responses indicate that the facilities were unaware of the frequency of fund requisition, Case-based service payments to public and one of them reported that it does so on a providers under different insurance programs in half-yearly basis. the state is a major provider-payment innovation, but the absence of any robust oversight mechanism compromises the 4.3.2 COLLECTION OF EARMARKED potential of such funds to improve services at REVENUES FOR HEALTH (H10) health facilities. While a transparent pricing HDS collect, retain, and use revenues (user fees) mechanism exists for this purpose, the system is as per state guidelines, but there is limited state characterized by high fragmentation levels. The oversight on the administration of these funds AHCT administers multiple insurance schemes for and the extent to which they are used for different population groups within the state. improving infrastructure and services as per Each scheme has its own benefits package and local needs. Each hospital has an HDS, and package rate list that is used for purchasing medical colleges have college development services from both private and public providers. societies (CDS). HDS and CDS have nominal local Such fragmentation in pricing and differential earnings through rental income, user charges, rates weaken the strategic purchasing capacity of and so on. There is no system of reporting against the state. Revenues are collected in subsidized the use of these funds. The DoHM&FW has no insurance premiums under three schemes oversight on these funds, and it would be administered by the AHCT: Arogya Raksha,30 challenging to determine the total quantum of Working Journalists’ Health Scheme,31 and funds with these societies at any point in time. Employee Health Scheme.32 Revenues collected These accounts are subject to statutory audits under different insurance schemes are presented that each facility is obliged to undertake. There is in Table 21 limited evidence of the timeliness, comprehensiveness, and quality of such . 30 Arogya Raksha: a scheme to assist families above poverty line from catastrophic illness. 31 Working Journalists’ Health Scheme - for registered working journalists and their dependents. 32 Employee Health Scheme: a scheme for all state government employees and their families, and pensioners. FinHealth Andhra Pradesh (India) 32 Table 21: Revenue collections under different health insurance schemes Schemes 2017–18 2018–19 2019–20 2020–21 2021–22a Arogya Raksha 1.88 6.27 1.88 1.61 0.18 Employee Health Scheme 110 43.7 110 169.15 68.45 Working Journalists' Health Scheme 2.1 0.8 2.1 3.41 0 Source: Administrative records of AHCT. Note: All figures are in INR crores. a. Collections up to June 2021. Revenue collection modalities vary across the administration of such funds. Facilities do not insurance schemes administered by the AHCT. project such revenues neither are they a part of Collections under the Arogya Raksha Scheme are the main budget estimates and fund flows. While credited into a designated bank account the state government determines the user fee administered by the AHCT. For the Working policy and the charges, facilities can determine Journalists’ Health Scheme and Employee Health the charges for incomes through space rental and Scheme, users directly pay revenues to the so on, within the hospital campus. Directorate of Treasury and the Information and While revenues directly deposited into the Public Relations Department of the GoAP. All treasury account are well regulated, nominal such funds collected by both these departments funds collected by HDS and CDS have much are then transferred to the respective PD weaker accounting and reporting systems. accounts of the two schemes under the There is no centralized oversight on such administrative control of the AHCT. collections. Each CDS and HDS is an independent Revenues collected by HDS, including earnings registered society with its own governing board. through insurance claims under the Aarogyasri The District Collector usually chairs the board. Scheme/PMJAY, are among the most flexible The accounts are expected to be maintained pool of funds available at the disposal of the based on standard accounting practices health facility in-charges. Limited oversight of applicable for all nongovernmental organizations such funds is a lost opportunity for improving registered under the Society’s Act. Each of these service quality and patient experience in accounts is subject to a statutory annual audit. hospitals. Many facilities in states like Tamil Nadu There is limited evidence at the level of the have used insurance funds for significantly DoHM&FW on the extent of compliance to improving patient amenities and benefits using accounting and auditing practices among all the such flexible funds. HDS and CDS that collect revenues. The DoHM&FW has no mechanism to track how such There are reported instances of in-kind funds are used for small and immediate patient contributions from individuals, although there is needs or facility requirements which are not no centralized record of these by health budgeted under any financing routes. facilities. For example, the Superintendent of Guntur General Hospital informed that there are HDS have significantly higher revenue- individual in-kind contributions for food, small generating potential through claims equipment, ventilators, baby warmers, and reimbursements under the state insurance minor building renovation. programs. Each HDS maintains a separate bank account for this purpose. There is no system to 4.3.3 ACCOUNTING FOR HEALTH project expected earnings and track pending SECTOR REVENUES (H11) dues from the AHCT. There is limited oversight on such earnings either from the AHCT or the User fee receipts at the HDS level are DoHM&FW, except broad expenditure guidelines decentralized, with limited oversight on the issued by the state for utilization of these funds. FinHealth Andhra Pradesh (India) 33 Box 6: Impact of current accounting practices Service delivery impact: Consequence of current accounting practices • Revenues earned by government health facilities level through insurance claim reimbursements are the most flexible and predictable source of revenue. • The absence of robust accounting and oversight mechanisms on utilization of such funds is compromising the opportunity for health facilities to innovatively spend such funds for those facility improvements and service delivery needs that are either not funded through existing financing streams or fund allocations are suboptimal. algorithm that help detect suspect cases and 4.3.4 PURCHASING ARRANGEMENTS prevent potential fraud. (H12) However, fragmentation of risk pools, benefits There are two types of purchasing package, and package prices may be reduced. arrangements in AP. Public and private providers Private provider perception about low package empanelled under the health insurance program prices may have consequences in continuing are reimbursed package rates against the claims under the scheme and limiting patient choice. of those insured under different insurance There are multiple schemes administered by the programs administered by the state. The other AHCT, each with a separate benefits package. purchasing arrangements are in the form of Beneficiary databases are also different. Package public-private partnerships (PPPs) for clinical and prices vary across schemes. About 34 percent of nonclinical support services in public hospitals in all households (1.63 crores) are covered under the state. the PMJAY scheme while the state scheme covers approximately 55 percent of the families.33 Purchasing arrangements under insurance Benefits package and package prices across both programs are governed by a robust IT platform the categories that together cover 89 percent of with internal checks and balances and a legal the families are different. Concerns related to agreement between the AHCT and the private low package prices and delayed payments have a providers. Eligibility criteria and minimum direct impact on service delivery. In May 2021, standards for empanelment are defined. Private media reports highlighted that private hospitals hospitals go through a process of pre- under the Aarogyasri Scheme are not treating empanelment assessment. They are empanelled COVID patients despite government instructions. under the schemes only after appropriate due Complaints from the public led to Vigilance diligence. Public hospitals are, however, Commission raids and follow-up actions.34 Even automatically empanelled. There is a robust IT before the pandemic, newspaper reports platform for the administration of the scheme. indicate that in August 2019 private hospitals The platform allows hospitals to submit pre- under Aarogyasri threatened to stop services if authorization requests, book procedures, and their dues under the scheme were not cleared by submit claims online in a paperless manner. The the government.35 Late payments can result in claims adjudication process is also online, hospitals seeking informal out-of-pocket following which the eligible claims amount is payment from insured patients. transferred online to the providers' bank accounts. The platform has triggers built into the 33 Source: https://pmjay.gov.in/states/states-glance, accessed November 14, 2021. 34 The New Indian Express. “46 Private Hospitals in Andhra Pradesh Booked for Overcharging Patients.� May 16, 2021, accessed November 14, 2021. https://www.newindianexpress.com/states/andhra-pradesh/2021/may/16/46-private-hospitals-in-andhra-pradesh- booked-for-overcharging-patients-2303147.html. 35 Empanelled hospitals threaten to stop treatment under Aarogyasri. The Hand India, accessed November 14, 2021. https://www.thehansindia.com/telangana/tsrtc-not-to-refer-staff-to-private-hospitals-713558?infinitescroll=1. FinHealth Andhra Pradesh (India) 34 Government health facilities are unable to services). Most of these PPPs are designed and optimize the benefits that accrue through claims tendered at the state level, primarily by the reimbursements from purchasing arrangements APMSIDC, while monitoring and contract under different insurance programs. Due to a management are done by the respective wings of shortage of funds, there are significant delays in the department such as the APVVP and DME. reimbursement of claims to government Service provision through PPP needs better hospitals. Given the constrained fiscal space, monitoring and accountability at the health prioritizing payments to private empanelled facility level. During patient exit interviews providers is understandable. There is no conducted as part of this assessment, almost 15 centralized overview or a system of tracking percent of the respondents (n = 105) reported claims dues to government hospitals, except that they paid out of pocket to get diagnostic within the AHCT. The DME and the APVVP that tests conducted from the private market as administer most government hospitals do not facilities were not available in the hospital. oversee the claim dues or the government hospitals’ utilization of these claim funds. For PPP agreements have provider incentives and example, during our field assessment in February disincentives with fragmented but strong IT- 2020, the Guntur General Hospital reported based tracking platforms. These are claims dues of approximately INR 9 crores from implemented through key performance the AHCT in addition to approximately INR 3 indicators (KPIs) with performance threshold crores worth of claims that were yet to be values and quantified financial incentives and submitted by the hospitals. disincentives. Almost all PPPs have an IT-based dashboard for tracking performance and Purchasing health services through other PPP calculating the KPI values used to determine models is quite prevalent in the state, although eligible payments to providers. there is an absence of a policy framework that promotes private investment and participation. There is no specific legislation or policy PPP arrangements range from clinical support document that governs purchasing such services (such as MRI, CT scan, dialysis, diagnostic arrangements. Although comprehensive, services) to nonclinical support services (such as existing central and state legislation to deal with linen and laundry, radio frequency identification the issues that may emerge lack sectoral (RFID) tagging of newborn children, specificity and make the government vulnerable transportation of dead bodies, and security to judicial interpretation of existing laws. Box 7: Impact of weak purchasing arrangements on service delivery Service delivery impact: Consequence of weak purchasing arrangements • There are challenges in empanelling and retaining good private providers due to delays in fund flows, resulting in less provider choice. • Providers are charging money from patients due to lack of consensus between the public regulators and private providers on package prices. • Ad hoc purchasing arrangements in the absence of a strategic purchasing framework lead to service disruptions with changes in policy decisions, for example, decision to withdraw from PPP and set up in- house diagnostic facilities. FinHealth Andhra Pradesh (India) 35 4.3.5 PAYROLL CONTROL (H13) Informatics Center (NIC) and includes details of approximately 11,000 contractual employees. All There are three categories of employees in the approved positions are fed into HRIS with health systems with three different payroll approved salary ceilings. Each DMHO submits the management methods: regular government attendance of all staff employed under her/his employees, outsourced employees, and jurisdiction through the HRIS portal and submits contractual employees. While outsourced signed hard copies to the NHM state office. employees are those whose recruitment and Signed hard/scanned copies of leave records payroll are managed by Andhra Pradesh increase staff’s administrative burden and cause Corporation for Outsourced Services (APCOS), inefficiencies. contractual employees are recruited directly by the DoHM&FW or any wing with the The APCOS has its own portal for HR and payroll DoHM&FW.36 management and is used for salary payments of all outsourced employees under the NHM, but The payroll of all government employees is that is preceded by manual leave record managed through the Human Resource tracking every month. Reportedly, the NHM has Management System (HRMS) module that is a approximately 500 outsourced employees part of the CFMS project. The HRMS includes all recruited through the APCOS—150 at the state automated processes related to employees’ level and the remaining 350 at the district and monetary and nonmonetary entitlements, sub-district levels. Districts submit signed service registers, generation of payrolls, among a hard/scanned copies of leave records to the state range of other functionalities.37 NHM office. Each month, all attendance details are fed into the APCOS HR portal by the state Facilities prepare multiple salary bills each NHM team with records of eligible salaries to be month, consuming time of health personnel in paid. This process reportedly takes about one facilities with limited accounts and week, and there are no delays in the release of administrative staff. All salary bills are generated monthly salaries. Personal details of each manually. One of the PHCs visited during employee, including their bank account and assessment reported generating five salary bills Aadhar details, are mapped in the APCOS HR each month as budgets are spread across five portal for direct electronic transfer of salaries different heads of accounts. A district-level into the bank accounts. Facility visits indicate hospital reported nine heads of accounts under delays of 10–30 days in salary release after a which salaries must be paid. All leave records are transfer. The delays are because of the maintained manually at sub-district-level processing of the last pay certificate and its facilities and submitted as an Excel file to the submission at the new place of joining. DCHS. The DCHS office makes approximately 600 entries each month. Salary bills are generated on The multiplicity of IT systems /portals for CFMS and printed, signed, scanned, and mailed generating payroll makes it difficult to have a to the office of the sub-treasury officer at the centralized overview of total personnel by mandal level for release of salary. Of the 31 PHCs categories and salary liabilities. Facilities have surveyed, 26 reported preparing 4–5 salary bills limited access to payroll data. While approved every month. positions, HR databases, and payrolls are linked, the system is highly fragmented. The NHM in AP has developed an independent Human Resource Information System (HRIS) Acute shortages in HR positions in the state are through which payroll is managed for all reflected in significant underspending on salary contractual employees but hard copy (scanned) budget lines. The actual expenditure for HR submissions have not been dispensed with. The under the NHM was only 38 percent in 2018–19 NHM HRIS has been designed by the National 36Wings of the DoHM&FW include different HODs, or district health authorities or health facilities. 37G.O. Ms.No.334 dated 13.12.2013, Finance (SPMC II) Department. https://fdhrms.cgg.gov.in/downloads/HRMS_DATA_GO.pdf, accessed August 26, 2021. FinHealth Andhra Pradesh (India) 36 (budget: INR 357.1 crores), 85 percent in 2019– Contractual salaries constitute approximately 20 (budget INR 283.66 crores), and only 53 11 percent of the total salary and wages booked percent in 2020–21 (budget: INR 431.12 crores). under the state health budget. This share was Vacancies have a direct impact on service around 5 percent (INR 114.37 crores) of the total delivery. This is further discussed in section 4.4.1. salary payouts (INR 2,141.11 crores) in 2015–16 and has steadily increased to 11 percent in 2019– 20. Box 8: Consequence of weak HR & payroll management practices Service delivery impact: Consequences of weak HR and payroll management practices • Motivation levels of existing workforce remain low. • Difficult to attract good talent from the market due to lower remuneration and uncertain tenure. • High vacancies and demotivated existing workforce have a direct impact on their productivity and quality of work. • Vacancies in positions for doctors and specialists directly affect access to services. People in remote areas travel longer distances for services, as pointed out earlier, for cesarian section deliveries. 4.3.6 INTERNAL CONTROLS ON NON- CFMS with her/his bank account details and mapped to the unique Aadhar ID. After necessary SALARY EXPENDITURE (H14) authorizations and approvals, funds are AP has extensive internal controls on non-salary electronically transferred from the treasury to expenditure guided by various codes and the beneficiaries’ bank account through the manuals. The AP Financial Code and the AP CFMS portal with required backward (treasury Treasury Code lay down extensive expenditure accounts) and forward (beneficiary/vendor) control rules. The CFMS platform, through which links. all treasury transactions occur, has three levels of To further strengthen internal control, control - the ‘maker’, ‘checker’, and ‘approver’. transactions of all central schemes and of Different desks perform this function. The CFMS independent entities take place directly through has a detailed budget and allocation figures up to the PD accounts38 instead of bank accounts. The the sub-detailed heads. The system does not multiplicity of bank accounts at the state and permit the booking of expenses beyond the funds district levels, especially under the NHM, allotted under each head. contributed to limited internal control on Stringent reappropriation rules and limitations financial transactions. The state government’s further act as a robust internal control measure decision to route all expenditure through the PD though they constrict flexibility at the spending accounts instead of the public financial unit level. The codes lay down the limits of management system (PFMS) for central schemes reappropriation and the levels of functionaries has strengthened internal control measures. In vested with relevant powers. No flexibility at the early 2021, the GoI has stipulated that a single service delivery level causes administrative nodal bank account shall be set up for each CSS challenges and constrains responsiveness to for all financial transactions. The impact of this service delivery needs. significant decision on AP’s internal control architecture and how the state The CFMS provides strict control on the negotiates/navigates through the changed rules vendor/beneficiary payment mechanism. Each are yet to be seen. beneficiary/vendor must be registered on the 38“Personal Deposit (PD) accounts are maintained in the state treasuries in the nature o f banking accounts… As per the AP Financial Code, purpose of the PD account is to enable Drawing Officers to incur expenditure pertaining to a scheme, for which funds are placed at their disposal, by transfer from the consolidated fund of the state.� Sourc e: State Financed Audit Report for the year ended 31 March 2019. CAG. FinHealth Andhra Pradesh (India) 37 All contracts are approved by specific Each health facility has a DDO who has access to committees that are set up within each agency the CFMS portal using her/his unique login ID. within the DoHM&FW. The powers and This allows the officer to access and track only authorities of each such committee are clearly those allocations and expenditures that have stated. All contracts are executed only with ex been allotted against that ID. ante approval of the committee having the relevant powers. Once contracts are issued, Despite well-established procedures, there are vendor details are registered on the respective gaps in record registers to verify and validate PD accounts/CFMS as appropriate. Prepayment some of the expenditure items. Internal control verification processes and approval are measures for verification of food served to segregated to avoid conflict of interest. patients and expenditure incurred appear weak. This was found in three hospitals in Guntur Most contracts for support services are made district that were visited as part of the centrally at the state level, and almost all assessment. Limited evidence was available payments are made centrally. This provides related to internal verification of diet registers. strong internal control on such expenditure. This is further validated by the February 2020 State authorities have access to IT-based press release of the Anti-Corruption Bureau platforms that assist in quantifying eligible (ACB) that mentions that out of 13 hospitals payments of vendors and PPP agencies against visited by the ACB in 13 districts, 6 hospitals were their performance and KPIs. For some PPP found to have irregularities related to inpatient contracts, two employees enter performance food. These were related to discrepancies in the scores based on their assessment at different quantity of food available to be served, the times, and the average score is taken. Multiple number of inpatients, and irregularities in diet scoring is done to reduce bias. All deductions and registers. Almost 50 percent of the inpatient incentives, if applicable, are calculated on the interviews (n = 39) conducted as a part of this dashboard and used for further payments. assessment reported not receiving any food during hospitalization. Instead, they had to make The DMOH office in each district has a four to their own arrangements. Likewise, the ACB five member account team that undertakes report cites fake trip entries in the logbook of a facility-level monitoring visits. These are non-usable ambulance in one of the hospitals for contractual staff recruited under the NHM. which fuel charges were being entered. In Insights from a team visit to Guntur district reveal another hospital, a non-roadworthy ambulance that each person is allotted four to five PHCs to was found for which logbooks were being visit each month. The visit includes random maintained and shown as an operational vehicle. verification of expenditure records. However, Of the 39 inpatients who were interviewed, 25 of there are no monitoring check lists and them reported reaching the health facility at their templates. This leads to subjectivity in service own expense. monitoring process and outputs. Box 9: Impact of weak internal control Service delivery impact: Consequence of weak internal controls - examples • Quantity and quality of inpatient food suffer due to irregularities and discrepancies in inpatient food registers at health facilities, with implications for patient recovery and well-being. Other issues include late meals, short supplies, diet contractors appointed without following due process, poor records in the diet register, and no authentication of entries in the diet register. These observations were found in 6 of the 13 hospitals checked by the ACB and recorded in its press note on surprise visits to government hospitals, dated February 27, 2020. • Weaknesses in fleet management records (for example, for ambulances) affect patient transportation and create leakage of scarce resources through fake trip entries and expenditures booked on fuel. FinHealth Andhra Pradesh (India) 38 4.3.7 INTERNAL AUDIT (H15) percent of the total health expenditure in the five years between 2015–16 and 2019–20. Although there is an internal audit section within the DoHM&FW, internal audit functions Complaints related to reduced payments and are weak and fragmented across agencies. Each lack of robust HR practices among third-party agency is supposed to have an internal audit agencies led to the formation of the APCOS. wing. Of these, the NHM and APMSIDC have Now all recruitments of outsourced employees structured processes of internal audits. The NHM are done through the APCOS only. The APCOS is has hired a chartered accountant (CA) firm that expected to streamline and better regulate undertakes monthly concurrent audits for each recruitment and payroll management of district. However, there were wide variations in outsourced employees. Requisitions for the responses from 40 facilities regarding the recruitment are placed by the HODs after frequency of concurrent audit under the NHM, as necessary sanctions and budget approvals. 13 facilities mentioned that the frequency is Streamlining and expediting recruitment of quarterly, 22 reported that it is annual, and 3 personnel are extremely critical to improve mentioned it is biannual. Of these 40 facilities, 26 service delivery. mentioned that they do not get a copy of the report. The APMSIDC has also appointed a CA There is a clear division of responsibilities firm for internal audit, and in addition to that, the between the HOD and the institutions alongside central team visits two to three divisions per three committees at different levels for quarter to verify bills and assess compliance. The recruitment. The DME recruits all doctors up to APVVP has an internal audit section within its the assistant professor level. The institutions finance wing, where 8 of the 13 sanctioned recruit staff nurses and other paramedical staff. positions in the internal audit wing are vacant. State, regional, and district committees are There is no internal audit function within the responsible for recruiting staff at the state, AYUSH directorate. regional, and district levels, respectively. All positions are advertised after approval as per the There is no health facility level internal audit. state guidelines. Health facilities are often visited only on a sample basis and are usually involved in responding to HR management practices for contractual audit queries. Facilities do not have access to the employees have major systemic gaps. Contracts concurrent audit reports of districts prepared are not renewed in time. This is due to absence under the NHM vertical. of a centralized mechanism to track renewal timelines and absence of a dedicated HR cell to 4.4 Management of physical manage the functions. Such delays in contract renewal inevitably lead to delays in salary inputs payments. These have a severe impact on staff motivation level and affect their productivity as 4.4.1 STAFF RECRUITMENT (H16) corroborated through staff responses during facility-level visits at the time of assessment. There is no dedicated cell or directorate within All positions have job descriptions, but the ones the DoHM&FW for HR, leading to fragmented for government employees are reportedly and weak recruitment practices. Although there outdated. HR manual for the government are specific guidelines for all recruitment, employees contains job descriptions, but it is a institutional capacities at the state and district legacy from the combined state of AP and levels, not just of the secretariat department but Madras, that is from the pre-1953 era. With also its agencies, severely compromise the significant changes in the health system structure recruitment timelines. It also affects HR and the evolution of the government response to management functions within the DoHM&FW. It health, the job descriptions have lost their is pertinent to note that the year-on-year relevance today. It is rarely referred to. None of expenditure on HR is in the range of 39–43 the doctors we interacted with at different FinHealth Andhra Pradesh (India) 39 facilities in Guntur district were aware of any job available. Sanctioned positions and staff description. Absence of updated and actionable vacancies together point toward grossly job descriptions leads to staff spending work inadequate service delivery and also services that hours responding to tasks in an ad hoc and are almost nonexistent at the secondary care intuitive fashion, without any clear performance level. While this response was prominent from benchmarks and accountability structures. the DME and the APVVP offices, data were received only from the APVVP. At the aggregate Sanctioned positions are grossly inadequate level, there are 46 percent staff vacancies in compared to the staffing norm and hospital district hospitals, 58 percent in area hospitals, strength at different levels of facilities at the and 51 percent in CHCs. As an illustration, Table secondary care level. Large vacancies further 22 and Table 23 present the sanctioned and accentuate the problem and have a direct impact vacant positions for select posts in different on the range, quantum, and quality of services levels of APVVP hospitals and DME institutions. Table 22: Sanctioned posts and vacancies for select positions in APVVP administered hospitals Select key positions in APVVP 17 district hospitals 51 area hospitals 177 CHC administered hospitals (4,450 beds) (5,300 beds) (6,230 beds) SP IP V SP IP V SP IP V Physiotherapist 14 6 57% 3 0 100% — — — Ophthalmic assistant/Refractionist 16 6 63% 27 1 96% — — — Civil surgeon specialist 169 70 59% 247 43 83% 48 7 85% Pharmacists (Grade I, II, Supervisors) 143 84 41% 216 86 60% 261 145 44% Staff nurse, Head nurse, Nursing 1,096 800 27% 1,419 874 38% 1,360 946 30% Sptd (Grade I, II) Source: APVVP records received in August 2021. Note: SP: Sanctioned posts; IP: in-position; V: Vacancy. Further, 16 of 27 positions in the Finance wing of the increased functions and workload at the the APVVP are vacant. The APVVP manages the health facilities. Responses from 13 of the 40 entire secondary care hospital delivery in the facilities indicate a lack of technical, state. Of the 40 facilities surveyed, 27 reported administrative, and financial management staff shortages and 20 of them mentioned that training. the number of sanctioned posts is less relative to FinHealth Andhra Pradesh (India) 40 Table 23: Sanctioned posts and vacancies for select positions in the DME administered institutions and hospitals Selected posts within the DME administered facilities as of Sanctioned In-position Vacancy (%) June 23, 2021 positions Anesthesiology technician 75 8 89 Anesthetist 5 3 40 Dark room assistant 52 21 60 Dhobi/washermen/women 89 43 52 Dietician 14 8 43 Lab attendant/technician (Grade I, II) 656 420 36 All nursing personnel 6,569 5,437 17 Pharmacist (supervisor, Grade I, II) 246 196 20 OT personnel (attendant, assistant, technician) 126 69 45 Total staff (regular + contractual + outsourcing) 16,230 12,083 26 Source: Data received from the DME. One of the key challenges in recruitment of Cognizant of the perennial challenges in specialists is that the salaries offered are not recruitment and high vacancies, in June 2021, competitive compared to market norms. It was the GoAP issued orders for streamlining the only in March 2021 that salary structures for process.39 The order acknowledges that the appointments in teaching institutions were recruitment has been “in an ad-hoc manner and brought at par with the University Grants without definitive timelines for notifications of Commission (UGC) pay scales, but some of the posts…� Under the instructions of the Chief UGC benefits are not available. The gross salary Minister, the Finance Department shall now of specialists at the level of assistant professor is release annual recruitment calendars for all posts around INR 1.25 lakhs per month. to be filled up on a regular, contractual, and outsourced basis. Such acute shortages in staff unquestionably lead to critical shortfalls in service delivery, In the 2021–22 recruitment calendar released by quality care, and patients’ experience. Some of the DoF, 64 percent of the posts to be recruited the responses received during in-depth are for the DoHM&FW. This demonstrates the interactions in facilities at different levels and prioritized intent of the state government to from administrators at the state level indicate a address this most significant gap in HR for health. range of service delivery gaps summarized in the A total of 6,481 posts are scheduled to be service delivery impact box at the end of this recruited in the current financial year, of which section. there are mid-level health providers and 523 staff nurses across different user departments within the DoHM&FW. Refer to Table 24. . 39Government Order: G.O.MS. No. 39 dated 18 June 2021, Finance (HR-I Plg. & Policy) Department, Government of Andhra Pradesh. FinHealth Andhra Pradesh (India) 41 Table 24: DoHM&FW recruitments planned for FY2021–22 User departments under the No. of Major highlights in the posts to be recruited DoHM&FW posts Director, PH & FW 469 Civil assistant surgeon (224), Staff nurse (188) Director, Medical Education 299 Lab technician grade II (54); Staff nurse (171) Commissioner Health / MD NHM 5,333 Mid-level health providers (5000); Civil assistant surgeon (196), Staff nurse(82) Commissioner, APVVP 333 Civil assistant surgeon (196), Staff nurse (82) APSMIDC 32 Assistant executive engineer (20) Director, Institute of Preventive 15 Sample taker (12) Medicine Total posts in the DoHM&FW 6,481 Total posts of GoAP in the 2021–22 10,143 recruitment calendar Source: G.O.MS. No. 39 dated 18 June 2021, Finance (HR-I Plg. & Policy) Department, Government of Andhra Pradesh. The staff at the facility level report delays in government employees, 10 of them mentioned salaries for both regular and contractual that the delay is between one and three months employees. Of the 40 facilities surveyed, 20 and 7 indicated delays of less than one month. At reported delays in government employees’ the same time there is significant underspending salaries and 14 reported delays in releasing in HR budgets (Table 25). salaries for contractual employees. Of the 20 responses that indicated delays in salaries for Table 25: Utilization trends for HR and training budget lines under the NHM Budget lines under the NHM 2018–19 2019–20 2020–21 Budget Utilization Budget Utilization Budget Utilization Human resource 357.11 38% 283.66 85% 431.11 53% Training 20.86 41% 43.25 83% 64.57 54% Source: Financial Management reports, NHM, AP. Note: All budget figures are in INR crores. FinHealth Andhra Pradesh (India) 42 Box 10: Impact of weaknesses in staff recruitment Service delivery impact: Consequence of weaknesses in staff recruitment • One out of every three patients interviewed (n = 161) as part of this assessment reported that doctors usually spend less than 5 minutes with them during consultation. Of these 161 responses, 114 patients were from PHCs and 37 percent mentioned the same. • Only 650 of 1,145 PHCs are conducting deliveries. The absence of round-the-clock staff at PHCs has resulted in low levels of public confidence. Of the 134,181 normal deliveries in AP in all PHCs, CHCs, area hospitals, and district hospitals put together, the share of deliveries in PHCs was only 20 percent. Only one out of every three cesarean sections was conducted in CHCs, and almost 66 percent were in area hospitals and district hospitals. • An insufficient number of specialists leads to clinical multitasking, where a doctor handles cases across specialties irrespective of the specialty in which s/he has been trained. • Delays in obtaining opinion in some cases, particularly from cardiologists, neurologists, and pulmonologists, at times risk patients’ lives in critical care and emergency settings. • The absence of equipment and infrastructure maintenance staff at the district level results in no planned preventive maintenance of assets. • The absence of structured training and professional development plan affects staff motivation levels and the quality of their outputs. • At one area hospital, a pediatrician was operating the CFMS and the doctor spends an average of 4 hours per day in non-clinical work. 4.4.2 STAFF PERFORMANCE While the government employees' conduct is well codified, no such code exists for contractual MANAGEMENT (H17) employees. All government employees are For government employees, staff performance governed by the provisions of Andhra Pradesh management system exists but is effectively Civil Services (Conduct) Rules 1964. The Andhra nonfunctional. All regular employees have a Pradesh Civil Services (Classification Control and system of annual appraisals where each Appeal) Rules, 1991, provide details on the employee writes a confidential report and imposition of major penalties on ‘government submits it to the supervisor. This is not followed servants’ of the state. However, these codes do regularly and is updated for all previous years at not explicitly link government staff performance the time of promotions. Promotions are usually with job descriptions or targets. based on the duration of service with little focus on performance and accountability. Of the 40 The AP Vigilance Commission has a set of facilities surveyed as a part of this assessment, 26 guidelines to govern disciplinary proceedings. mentioned that there is no effective Approximately 20 percent of all orders issued by performance appraisal system. This is likely to be the DoHM&FW in the last five years are from the a major disincentive for high-performing two vigilance cells. The document is called the A employees. Handbook on Disciplinary Proceedings for Disciplinary Authorities, Inquiring Authorities and The controlling officers are expected to Presenting Officers. undertake annual appraisals for contractual and outsourced employees, but the system is mainly nonfunctional. Mostly only a service satisfaction certificate is issued by the controlling officers at the time of contract renewal. There is a need for greater focus on staff accountability and performance incentives, and disincentives. FinHealth Andhra Pradesh (India) 43 The handbook is comprehensive and has 81 issued by the DoHM&FW between April 1, 2016 sections over 38 pages. The DoHM&FW has two and August 29, 2021 (4,624 government orders), vigilance cells within the secretariat department 915 orders were issued by the two vigilance cells that are agile in terms of their mandate. This is within the DoHM&FW. evident from the fact that between all orders Figure 8: Issues in staffing at the DoHM&FW, AP 4.5 Operational supplies The APMSIDC does not get any direct budgetary support from the government. Its operations are 4.5.1 PROCUREMENT MANAGEMENT financed out of overheads earned from the procurement it does. Overhead charges are 2 (H18) percent for equipment and 7 percent for all drugs All major procurements for different wings with procurement and civil construction works the DoHM&FW are done by the APMSIDC. The procured by the APMSIDC. APMSIDC has a civil, drugs, and infrastructure wing to undertake all such tasks. A finance wing All suppliers have to be registered on the presides over financial management and control procurement portal following state guidelines. functions. The centralized procurement agency Facilities are not required to access the suppliers’ was designed with the objective of ensuring database as they are merely the recipients of timely supplies of drugs, equipment supplies procured by the APMSIDC. The APMSIDC consumables, and execution of infrastructure website does not have a database of all contracts projects to ensure comprehensive and quality issued. service delivery at public health facilities. While procurement of drugs and consumables The APMSIDC does not prepare annual and related budget allocation principles are well procurement plans. It undertakes procurement regulated through government orders and as per requests from different wings of the guidelines, facilities continue to experience the DoHM&FW—NHM, APVVP, and the DME. These challenge of timely supplies. respective wings within the DoHM&FW estimate their requirements and, with necessary The state has an essential medicine list (EML) approvals, share the same with the APMSIDC for with 609 items prepared by a Standing Expert further procurement. Committee on EML. The list is periodically reviewed. To meet specific requirements of specialties and super specialties, an additional FinHealth Andhra Pradesh (India) 44 medicine list has been prepared. The APMSIDC from facilities is capped by the budget allocated has finalized rate contracts for 508 of 609 items for that facility. All individual items on the EML, on the EML that are valid for a two-year cycle their rate contract amounts, and the budget through a tendering process. Finalizing the rate allocated for each facility are entered into the e- contracts takes about four to five weeks. A Aushadhi platform. Each HOD scrutinizes and Manual on Standard Treatment consolidates indents from each facility under its Guidelines(DoHM&FW, AP, 2008) is followed for jurisdiction by April each year and shares the determining the EML. same with the APMSIDC. The APMSIDC has no role in the validation of demands. The annual There are clear guidelines for the distribution of procurement cycle for drugs is from July to June the budget for drugs among different user each year. The challenges in realistic forecasting departments.40 The DME and the Directorate of were highlighted in the NHM’s 13th CRM in 2019. Health each get 40 percent of the total allocation This resulted in overindenting, overstocking, and of drugs for the DoHM&FW. The APVVP gets 18 expiry of drugs in the health facilities visited by percent of the share, and the remaining 2 percent the CRM team. is allocated to the Institute of Preventive Medicine. There is no evidence for how these The APMSIDC places orders to its empanelled shares are determined nor whether they are vendors who deliver drugs to the district adequate given the patient load and service warehouses based on the demand. Standard delivery requirements in hospitals at different tender documents are available with the levels. APMSIDC for procurement. It takes about 75–80 days from the date of the work order for the Each HOD does facility-wise allocation of budget drugs to reach the warehouses. Surgical supplies based on detailed formulae. Budget allocations take around 60 days. There is one district to each PHC are done based on the total warehouse in each district managed by the population, the share of the rural population, and APMSIDC. Each warehouse has one executive the proportion of that facility’s outpatient engineer and two pharmacists to handle the department (OPD) and inpatient department operations. There is a Technical Evaluation (IPD) patient load to all PHCs in the state. For all Committee and a Financial Evaluation Committee other facilities administered by the DME and the for finalizing the tenders. APVVP, parameters include OPD and IPD load, bed strength, and the number of specialty There is a system of post-shipment quality departments in that hospital. control for drugs. Getting the laboratory test for each sample takes three to six weeks. After the Only 10–20 percent of the total allocation for supplies reach the district warehouse, samples drugs for each facility is available for local from each batch are transported back to the emergency procurement by facilities. For APMSIDC office at the state headquarters, where effective purchasing, the APMSIDC procures it is processed and sent to the empanelled drugs for 90 percent of the total budget allocated laboratories for testing. There are five such to each facility under the Directorate of Health laboratories: one each in AP, Rajasthan, Delhi, and 80 percent under the DME. There is no Noida, and Kolkata. It reportedly takes around 1 evidence to assess the extent of shortfalls, if any, week to 10 days for the samples to reach from in medicines in health facility and if the allocation the district warehouse to the laboratories via the for local purchase is adequate. APMSIDC state headquarters. e-Aushadhi, an IT application developed by the On receiving the test results, district Center for Development of Advanced warehouses supply medicines to each facility Computing (C-DAC), is used for procurement, with a predetermined delivery schedule. For this including demand estimation and inventory purpose, the warehouses have two vehicles that management. Quarterly demand estimation are owned, operated, and managed in-house. 40 Government order: G.O. Rt. No. 157 of 10 October 2009, Health =, Medical & Family Welfare (M1) Department. FinHealth Andhra Pradesh (India) 45 Earlier, this function was outsourced, causing • Eleven reported that they are compelled delays in the supply chain. to prescribe outside the EML as the list is not comprehensive. Facilities reported receiving the supplies once Local purchase practices are fragmented and left every quarter, and for collection of supplies in between, if there are shortfalls, medical officers to the initiative of the facility in-charges. For must pick up supplies from the district local procurement, facility-level rate contracts warehouse, for which there are no budgets are developed. The unit price of individual items available with the facilities. There is also a in these facility-level rate contracts varies in the provision of interdistrict and interfacility (within range of 10–20 percent. the district) loaning supplies to meet such Such systemic gaps in procurement and supply of shortfalls. drugs lead to nonavailability of drugs in hospitals. Monitoring of supplies at the facility level is According to the National Sample Survey (NSS) weak, resulting in stockouts of medicines. There 75th round, 47 percent of out-of-pocket expense for hospitalization in rural areas is for drugs and are guidelines for maintaining quarterly buffer stocks, despite which there are reported it is 54 percent in urban areas. stockouts. Discussions reveal that while intensive All equipment is e-procured by the APMSIDC monitoring of the procurement process at the based on the needs of different departments. senior management level has resulted in There is a range of systemic challenges that increased budget utilization over the years, there compromise the availability of medical is no institutionalized system for monitoring drug equipment and their maintenance in health distribution and record-keeping at the facility facilities. Some of these issues are discussed level. Feedback from health facilities about below. stockouts are as follows: • The DoHM&FW does not have a standard • Only 31 percent of the facilities surveyed list of equipment for different levels of (12 of 39) mentioned that all items in the facilities. Based on facility level-wise EML are available in the facility at all service delivery norms, no standard times. equipment list has been prepared. • The shortage is approximately 5 percent Technical specifications are also not or less according to 14 facilities, in the available. range of 5–10 percent according to 8 • HODs decide on the equipment facilities, and more than 10 percent procurement need in consultation with according to 5 facilities. the facilities and based on available • Discussions at CHC Sattenapalli during budgets. This is done in an ad hoc the World Bank team visit reveal that manner on a case-to-case basis. There is almost 30 percent of the items in the an annual assessment of equipment EML were not available at the facility. functioning status and procurement needs. • Of 38 facilities, only 11 mentioned that there were no stockouts of medicines, 7 • All procurement of equipment is done reported frequent stockouts, and 20 through the e-procurement portal of the stated that they experience stockouts state government. Tender norms are laid once in a while. down, about two weeks is provided for bidding, and the entire process is • Seventeen facilities responded that the regulated through the online quantities of medicines received are less procurement portal. There is a technical than that requisitioned. screening and short-listing process, and • Eleven facilities reported delays in short-listed results are published on the receipt of medicines. e-procurement portal. FinHealth Andhra Pradesh (India) 46 • A Bid Finalization Committee, chaired by The APMSIDC has a well-defined institutional the head of the DoHM&FW, takes final structure for managing large civil works decisions on all tenders. All technically projects. It has offices in each of the 13 districts short-listed bidders must do a product with a total staff strength of approximately 200. demonstration. The Bid Finalization Each district office has executive and deputy Committee finalizes the award of work engineers, whose numbers vary according to the based on the financial bid of those number of projects implemented in that district. agencies that have been short-listed and whose product demonstration has been There is a provision for recruiting professional successfully completed. The entire consulting firms for the design of large projects. process takes six to eight weeks to For example, agencies are recruited through a complete. With prior approval of the Bid tendering process to develop the technical and Finalization Committee, additional work financial detailed project reports (DPRs) of all orders are issued for further supplies of new medical colleges. The DPRs include the same equipment with exact estimation of capital costs and operational specifications, provided the vendor can expenditure liabilities on the state. However, for supply at the same rate. smaller projects, especially the lower level of facilities, the DPRs are prepared in-house. • Tenders are finalized based on lowest cost method, provided minimum E-tendering is done for all civil works projects, specifications and eligibility conditions and a high-level committee approves tenders. are met. This can compromise the quality The Principal Secretary of the DoHM&FW chairs of purchases. the high-powered committee; other members • The average number of procurement include the Principal Secretary Finance, requests from user departments ranges representative of the user department under the between 10 and 15 each year. The entire DoHM&FW, and the Chief Engineer of Roads and process cycle is repeated unless work has Building Department. The tendering process been awarded to any agency for the begins after administrative sanction orders are same equipment with the same issued. The tendering process takes 8–10 weeks. specifications. There is robust external control on large • There is no system for tracking projects as a strategy to minimize litigation risks equipment purchase requests and and promote transparency. All infrastructure neither is there any defined timeline. development and PPP projects of more than INR There is no system for coordination 100 crores must undergo a judicial preview. The between the facilities, the user judicial preview process is regulated by the AP departments administering those Infrastructure (Transparency through Judicial facilities, and the APMSIDC. One of the Preview) Act, 2019. A retired or a sitting judge of CHCs (Sattenapalli) visited during the the High Court heads the preview process. assessment reported having informed Observations of the committee are put in the the APVVP about three months earlier public domain. Feedback or reservations from that a new OT has been set up, but there the public are sought within one week. All was no equipment. CHC officials were observations and feedback are provided to the unaware of the progress of procurement. department and complied with before the release of the tender. Since the legislation, The APMSIDC does all procurement of agencies approximately 30 projects of the DoHM&FW for civil works. Civil works procurement capacity have undergone judicial preview and comments and systems are well defined. For FY2021–22, the have been received for about 5–10 of them. In APMSIDC is handling 198 projects worth INR addition, all procurements are subject to rigorous 12,936 crores with project cycles ranging performance and compliance audits by the between 15 (for CHCs) and 30 months (for offices of the Supreme Audit Institution (SAI). medical colleges). FinHealth Andhra Pradesh (India) 47 Structures for local procurement at the facility Weaknesses in procurement systems for drugs, level appear weak. Of the 40 facilities surveyed, civil works, and equipment are reflected in low only 21 reported having a procurement budget utilization under the NHM and directly committee, 14 said they did not have any such affect services, quality of treatment, and out-of- committee, and 5 were unaware. Of 37 facilities, pocket expenditure on drugs and diagnostics. 13 mentioned that they do not have a The last three years’ analysis reveals that while documented procurement guideline. While there appears to be a steady improvement in the discussions at the state level reveal that detailed utilization rates for medicine procurement, guidelines exist for using funds from all sources, equipment and civil works remain a major there is a lack of awareness and understanding of challenge (see Table 26). any such guidelines. Table 26: Utilization trends for procurement and infrastructure budget lines under the NHM Budget lines under the NHM 2018–19 2019–20 2020–21 Budget Utilization Budget Utilization Budget Utilization Procurement 351.160 62% 263.86 73% 461.24 75% Procurement of equipment 109.71 24% 62.54 31% 127.96 61% Procurement of drugs and supplies 88.06 52% 72.83 87% 184.09 91% National free diagnostic services 151.89 94% 126.99 85% 149.15 67% Procurement (others) 1.50 160% 1.50 101% 0.03 40% Infrastructure 121.37 52% 438.93 22% 147.75 68% Upgradation of existing facilities 113.59 55% 438.34 22% 7.65 82% New constructions 5.32 0% 0.00 — 136.36 66% Other construction/civil works 2.47 12% 0.59 18% 3.74 99% Source: Financial Management reports, NHM, AP Note: All budget figures are in INR crores. Low utilization under civil works is primarily on using the provisions under the Mahatma Gandhi account of land availability and challenges in National Rural Employment Generation program getting vendors for construction work of smaller to award work without tender. This strategy is levels of facilities in remote and hard-to-reach expected to expedite constructions works and areas. The state government has adopted a therefore also increase budget utilization. strategy to address this limitation. Land Construction of approximately 8,500 new availability and allocation are under the subcenters has already been handed over to the jurisdiction of the Panchayat Raj Department PRD. Similarly, for 355 urban health centers, (PRD). There have been delays in getting the land construction has been delegated to the Public and not enough bidders from the remote and Health and Municipal Engineering Department. hard-to-reach areas. This directly affects access The APMSIDC will continue to be responsible for to services and facilities in remote areas. constructing all facilities at the level of area hospitals and above. While this fragmentation is The state government has decided to address this expected to expedite the pace of work, it problem by distributing works to other increases the management and coordination departments that are in a better position to requirements among all these agencies and the address some of these challenges. In 2020–21, a NHM. decision was taken to transfer all civil construction work of subcenters to the PRD and all construction of CHCs to the Roads and Building Department. The PRD is not only in a better position to secure land in time but has also been FinHealth Andhra Pradesh (India) 48 4.5.2 PUBLIC INVESTMENT percent between 2016–17 and 2018–19, there has been a sudden sharp increase in the share of MANAGEMENT (H19) capital investment to the overall government Public investments in health are plagued by low health budget in 2019–20. However, the budget allocation for health investments and utilization against budget is extremely low, with even lower utilization, reflecting systemic gaps capital expenditure less than 5 percent of the in capacity to manage and optimize total health expenditure. See Table 27 and Figure investments. While the average budget share for 9. This has a direct impact on service coverage, capital expenditure has been in the range of 5–7 accessibility, and overall quality of care. Table 27: Capital outlay and expenditure under the demand of the DoHM&FW and the NHM budget Details 2016–17 2017–18 2018–19 2019–20 2020–21 2021–22 State capital health budget (Demand XVI) Budget estimate 477.26 446.38 467.04 2,440.68 2,167.89 2,464.63 Revised budget 387.47 277.81 173.18 256.52 589.32 — Expenditure (accounts) 393.70 196.95 174.93 204.41 NA — Utilization against budget estimate 82% 44% 37% 8% — — NHM infrastructure budget Budget — — 120.99 483.93 147.75 — Utilization — — 52% 22% 68% — Source: Demand for Grant no. XVI, DoHM&FW, Government of AP; FMR for NHM. Note: All figures are in INR crores; NHM reports before 2018–19 were differently organized. Figure 9: Capital budget and expenditure for health under the state budget 50% 44% 45% 37% 40% 35% 30% 27% 25% 21% 19% 20% 15% 8% 10% 6% 6% 6% 3% 2% 3% 5% 0% 2017-18 2018-19 2019-20 2020-21 Capital budget as a share of TGHB Capital expenditure as a share of TGHE Utilization of capital budget Source: State budget books. There is no public investment management framework where almost all projects have a life (PIM) framework for public investments in cycle ranging between more than one and three health. The absence of an institutional structure years. affects the level and quality of such investments. Except for new medical colleges, the state lacks Recently, the state government has set up the an institutional framework for supporting PIM. Andhra Pradesh Medical Education and Annual planning and budgeting cycles are Research Corporation (APMERC) for asynchronous with an investment planning strengthening and augmenting the medical college and tertiary hospital infrastructure and FinHealth Andhra Pradesh (India) 49 investment in the state. APMERC was health care institutions under its purview,� established through an ordinance,41 and the implying that the operations and management of Executive Committee was constituted in March these public assets may move from the DME to 2021. This is a three-member committee APMERC. Thirty-six years after the incorporation comprising the Vice Chairman and Managing of the APVVP via the APVVP Act legislated in Director of APMERC, CEO of the AHCT, and 1986, the secondary care hospital infrastructure Director Medical Education. As per the APMERC in the state continues to grapple with systemic Bill introduced in the Legislative Assembly on challenges in terms of financing, management, May 20, 2021,42 APMERC’s mandate is and quality service delivery. “revitalization of tertiary hospital and healthcare services; strengthening of existing hospitals and 4.5.3 PHYSICAL ASSETS nursing colleges; construction of new hospitals, MANAGEMENT (H20) medical colleges, and nursing colleges; raising funds for matters connected therewith and AP Financial Code guidelines for asset ancillary thereto.� In design, this is expected to management are used by all facilities boost tertiary care and teaching infrastructure in irrespective of the source of funding. The the state. In May 2021, the Chief Minister registers are manual and include age and inaugurated works for 14 medical colleges in the valuation of assets, among other required items. state toward fulfilling his election promise of one medical college in each of the 25 Lok Sabha While all inventory and supply chain of drugs are constituencies in the state. The state already has maintained on the e-Aushadhi platform 11 medical colleges. The total value of these developed by the C-DAC, there are wide gaps projects is estimated at INR 80,000 crores adding related to inventory management, stock 1,850 new seats for medical education in the registers, and reconciliation of stocks. This is an state. online inventory management solution. This comprehensive software links all health facilities However, there is no documented assessment and is used for online indents, monitoring of the impact of capital investments on the inventory levels, and budget ceiling allocated for medium- to long-term operational expenses. each facility after the annual budget is approved. The absence of this assessment and informed e-Aushadhi is a robust platform used by many decision with the DoF about the feasibility of states for inventory management. However, increasing the fiscal space for health to meet the some of the weaknesses were identified in the increased recurring liabilities under committed inventory record-keeping of drugs, as found in expenses is likely to result in expanded the ACB press release dated February 27, 2021, infrastructure being understaffed and under- in 8 of 13 hospitals visited by the ACB in all 13 resourced, thereby accentuating the chronic districts of the state. Issues included the systemic problems that plague the health following: systems, including but not limited to stalled projects and premature asset failure—all leading • There are discrepancies in stock levels as to high economic loss and opportunity cost for recorded in manual stock register for the state. medicines and on the e-Aushadhi portal that is used for managing distribution APMERC, while ambitious in design, may need and supply chain. to take lessons from the APVVP experience • Stock balances of medicines are not regarding what not to do to sustain itself as a appropriately maintained, medicine vibrant institutional structure for tertiary health recipient details are not mentioned in and education investment management. The the e-Aushadhi platform, and quantities APMERC Bill states that it shall be “the holding of certain medicines that are shown as corporation for all assets and revenues from 41 APMERC Ordinance No. 1 of 2021, Government of Andhra Pradesh. 42 LA Bill no. 4 of 2021. FinHealth Andhra Pradesh (India) 50 used in the register were found in the press release mentions an ambulance that was departmental storage point. found to be non-roadworthy, even while the logbook was maintained regularly, and the • The pharmacist at the outpatient counter vehicle was shown as running. Likewise, in the is not capturing details of patients to same hospital, freezers and AC units were not whom medicines are issued. working, directly degrading the quality of • Local purchase of medicines is done preserved blood, thereby risking patients’ lives. without a purchase order. In another hospital, the mortuary freezer was nonfunctional. There is no functionality tracking system for medical and non-medical equipment. AMC Infrastructure and vehicle maintenance systems obligations, especially in rural areas, are not met and related record-keeping need improvement. on time. There is no IT-enabled platform for There are inadequate or no funds available for reporting equipment breakdowns. During our general upkeep and maintenance of hospitals assessment visit to CHC Sattenapalli in February and utility services. Of the 39 exit interviews 2020, we found that there was no OT light for the conducted with inpatients across 11 districts, the past three years and air conditioners (ACs) were cleanliness of toilets was rated as average by nine not working in the only one operational theatre and poor by two of the respondents. Of the 161 that the CHC had. The ACB press release of exit interviews (inpatient and outpatients), about February 2020 indicates one facility in Kadapa 25 percent respondents gave an ‘average’ rating. district where the generator was not functioning Further, the ACB 2020 press release cites for three years, but this breakdown was not instances like collapsed compound walls and reported by the facility nor does the state have a mortuaries, bathrooms either not in working system of tracking the condition of such condition or with poor sanitation and hygiene, equipment. Such gaps in the system create and unhygienic maintenance of kitchen as few opportunities for fund leakages and examples that reflect the need for improvement misappropriation. For example, the same ACB in infrastructure maintenance. Refer to Box 11. Box 11: Consequence of no framework for public asset management Service delivery impact Consequence of no framework for public asset management • There is lack of maintenance, poor sanitary condition, and nonfunctional bathrooms (CHC Bhogapuram, Vizianagaram district). • Kitchen is located near the mortuary and in unhygienic condition - rats found in the kitchen (NTR Hospital, Anakapalle, Vishakhapatnam district). • Despite having 27 sanitary workers, sanitary condition of the hospital is poor, with bad smell emitting (Area Hospital, Gudivada, Krishna district). • Hospital premises were not in hygienic condition (Area Hospital, Gudur, Nellore district; CHC Rajampet, Kadapa district; District Hospital, Nandyala, Kurnool district). • Washrooms, toilets, and basin were in unhygienic condition (CHC Gooty, Anantapur district). • There were complaints of no drinking water from patients (Area Hospital, Gudur, Nellore district). • Freezer and AC are not working in the blood bank unit - essential for preservation of blood (CHC Rajampet, Kadapa district). • Condition of the mortuary is bad and freezer is not working (District Hospital, Nandyala, Kurnool district). • There was water leakage in the hospital (District Hospital, Nandyala, Kurnool district). Source: Anti-Corruption Bureau Press Note dated February 27, 2020: Surprise Checks Conducted over the Government Hospitals by the Anti-Corruption Bureau throughout Andhra Pradesh. FinHealth Andhra Pradesh (India) 51 4.6 Accounting and reporting budget codes. Previously, the state was reportedly planning an IT-based financial tracker, 4.6.1 ACCOUNTING, RECORDING, but this has not been successful. All registers and accounting records are manual. Program pool- AND RECONCILIATION (H21) wise ledgers are maintained at all levels. Accounts of all finances transacted through the treasury system follow the established Indian District-wise spending under the NHM can be Government Accounting Standards formulated available only through district-wise FMR or by the Government Accounting Standards DDO-wise data from the PD account statement. Advisory Board at the national level. The system These are unaudited figures. Each district has a and procedures for accounting, with internal statutory audit report for NHM expenditure, but checks and balances, are laid down by the SAI. that is not integrated with the treasury For the state, this is centrally controlled by the expenditure records. Neither the district FMRs office of the Principal Accountant General nor the district-wise expenditure details are (Accounts and Entitlements). All transactions available in the public domain. Such limitations take place through the CFMS portal, from where pose challenges for detailed expenditure analysis all transaction data are sourced. and insights into allocative and technical efficiencies and public spending productivity. However, for all agencies under the DoHM&FW, accounting practices vary although all The AHCT is the only agency that has an IT-based transactions occur through the respective PD accounting module. The module is not linked to accounts linked to the CFMS. As a part of the CFMS. The outputs from the accounting rationalizing accounting practices and ensuring module are manually uploaded into the CFMS. greater control, in 2018, bank accounts under various schemes managed by agencies have been Accounting at all HDS and CDS is primarily shifted to PD and green channel PD accounts, all manual. Accounting software is not used. linked to the CFMS. This has significantly Manual books of accounts are maintained, and improved the tracking of finances. This has quarterly reconciliation statements are reduced the payment turnaround time from prepared. There is no centralized mechanism to about 2 months to 15–20 days. track compliance to this requirement. There is no comprehensive process audit of the functioning Accounting practices at the APMSIDC vary of these accounts. The state does not know the across its verticals. It has four green channel PD quantum of unspent funds available with all the accounts: one each for drug procurement, NHM, HDS and CDS. This becomes important as, equipment procurement, and management of its through claims reimbursement, significant own funds. All drugs and equipment bills are portions of public funds are redirected to the centrally processed at the state level, and more flexible HDS route. payments are made to vendors through the respective PD accounts. For civil works, bill Health facilities, especially the PHCs, have to verification, entry, and payment processing are bear the brunt of fragmented manual done by the district offices of the APMSIDC. accounting practices, mainly under the NHM. Apart from maintaining manual ledgers for each NHM accounting has its peculiarity due to the of the six program pools under the NHM, in many different chart of accounts, budget structure, PHCs, manual ledgers are maintained for each and fund flow pattern. The number of entities subcenter and each VHSNC. Manual books that spend funds under the NHM is high: all maintained by PHCs include cash book, ledger, hospitals at all levels and all district offices, in acquittance register, salary bills, cheque book, addition to agencies such as the APMSIDC and and so on. There are concerns related to the others at the state level. Accounts are comprehensiveness and timeliness of updating maintained at each spending unit. Funds flow the records, as seen in more than one facility under different pools of the NHM, and during the field visit in Guntur district. expenditure is booked against 700 to 1,500 FinHealth Andhra Pradesh (India) 52 Facilities do not have access to petty cash for All utilization statements for the previous fiscal meeting sundry local expenditure. Our visit to year have to be submitted before July 31. Fund the Area Hospital Narasaraopet revealed that utilization certificates are required to be bills for sundry petty expenses are sent to the submitted by those institutions within the DCHS, and it usually takes two to three months DoHM&FW that receive grants/funds from the for the bills to be processed. treasury/sub-treasury and incur approved expenditure for a specific objective through a While there is a system for expenditure reports special-purpose vehicle using a PD account. For and reconciliation for each sub-department example, the State Health Society requires within the DoHM&FW, there is no consolidated utilization certificates for all NHM expenditure as overview of the entire department finances, a certification of the quantum of funds spent leading to weaknesses in overall expenditure exclusively for the purpose for which the grant monitoring. Each sub-department generates a was provided to such an institution. Timely monthly expenditure statement and undertakes receipt of utilization certificates is a perennial quarterly reconciliation of its accounts submitted challenge. These are prepared manually and to the office of the Auditor General. Driven by the signed by the respective authorities for GoI financial guidelines, the NHM has a detailed submission to the Auditor General office and the financial reporting structure. All spending units GoI for central funds. These submissions are use an Excel-based FMR to submit monthly FMRs required by the Auditor General office for consolidated at the next higher level. Districts reconciliation purposes and by the GoI for submit monthly NHM FMRs to the state. This is release of their central shares, wherever consolidated and submitted to the GoI every applicable. quarter. All FMRs are prepared manually. FMRs are prepared manually and are highly prone to Fragmented accounting practices do not provide data entry errors. There are no means to verify a consolidated overview of the DoHM&FW the accuracy of these entries, apart from expenditure. Due to cash basis accounting, reconciling the total expenditure with the statements generated through the treasury balance funds available for each unit at an accounts on the CFMS portal indicate transfers to aggregate level. Responses from the 40 facilities agencies as expenditure. Manual efforts have to surveyed across 13 districts reveal wide be made if actual expenditure at the level of each variations in practices related to reconciliation agency has to be identified. For example, to find statements. Only 50 percent of them reported out the total expenditure on medicines at the doing so monthly; other responses were state level, the department would have to access quarterly (5), annual (11), and some even do not data from three different sources and the know (3). Likewise, only 13 of 40 facilities expenditure on medicines through local mentioned undertaking the reconciliation procurement from the HDS of each health facility process for the treasury accounts. in the state. See Table 28. Table 28: Financing source and agencies managing expenditure on medicines Who Fund source Data source spends State budget APMSIDC APMSIDC records / PD account NHM budget APMSIDC APMSIDC records / PD account State budget Hospitals CFMS - extracting data from object for drugs for each DDO code Insurance Hospitals Each HDS account - manual records - no centralized overview FinHealth Andhra Pradesh (India) 53 There is no integrated financial management seen in Table 28. In the absence of an reporting for all operations under the integrated reporting environment, estimating DoHM&FW. Lack of integrated reporting the actual government health expenditure is affects result-based monitoring. It also affects an arduous task and requires granular the tracking of expenditure around critical allocation and expenditure data, most of which areas that affect service delivery and is not available in the public domain (see Table contribute to out-of-pocket expenditure, as 29). Table 29: Estimating total health expenditure in a fragmented accounting landscape Total health expenditure = (A-B-C) + (D-E-F) + G Where: Available in public domain A Expenditure in Demand for Grant for the DoHM&FW (DFG) Yes B All expenditure in DFG corresponding to NHM budget lines Yes C All expenditure in DFG corresponding to budget lines where No different agencies like the DME, APVVP, Institute of Preventive Medicine, etc have transferred funds to agencies like the APMSIDC D NHM expenditure No E Transfers from NHM to APMSIDC, PRD, R&BD, Municipal No Corporations F Transfers from NHM to all HDS account (untied funds) No G Actual expenditure incurred by agencies to whom funds have been No transferred for different purposes The detailed reporting template of the NHM Inadequate HR and the near absence of staff reflects all funds transferred to independent with an accounting/finance background further agencies for implementation as expenditure. compound the problem. In most offices, The FMR of the NHM, which captures granular especially at the district and sub-district levels, expenditure data for each budget line, reflects junior and senior assistants handle all the total funds transferred to independent agencies accounting functions instead of people with as expenditure. This is a system usually followed accounts or finance backgrounds. In recent in the treasury accounts, which is a cash basis memory, there has been no training on accounting system. Although the NHM follows an accounting and financial management. For accrual system of accounting, all funds accounts-related staff positions, refer to Table transferred to the APMSIDC for construction and 18. procurement, all funds transferred to different HDS as untied funds, and transfers to any other 4.6.2 BUDGET EXECUTION REPORTS agencies for implementation are reflected as (H22) expenditure. The actual expenditure will be less at any point in time, as these are the budget lines State PFM rules mandate the preparation of that have a history of low utilization. It is annual financial statements (AFS). For the state pertinent to note that through the CFMS, actual budget, AFS is prepared annually. The AFS expenditure at all these levels can be found out includes a consolidated overview of audited as all such accounts are linked to the CFMS, but accounts of the government, including audited such granular details are not captured in figures by all major codes with a two-year time expenditure reporting. They are not consolidated lag. The revised budget estimates for the in a meaningful way to provide evidence for previous years and the upcoming year’s budget informed budget and therefore not available in estimate are also included in the AFS. the public domain. FinHealth Andhra Pradesh (India) 54 Practices related to year-end financial reports of do look at the physical and financial progress all agencies within the DoHM&FW vary by together. source of financing. The NHM has an FMR template prescribed by the GoI. All facilities Consolidation of reports takes place at the submit a monthly FMR that is consolidated at the district and the state levels. It is a parallel district level and submitted to the state. The state exercise for each funding stream. The health NHM team prepares quarterly FMRs (with facilities, districts, and the state do not have a detailed line item-wise budget and expenditure) complete overview of the expenditure at any for submission to the GoI. Health facilities also point in time during the year. There is no system submit quarterly expenditure reports to their of consolidation of reports across financing administering authority, either the DME or the channels. There is no process of upstream APVVP, as appropriate. reporting and consolidation of HDS and CDS receipts and expenditure as these are designed Health facilities submit multiple in-year as independent registered bodies, each having its expenditure reports by sources of financing own governance structure. while having negligible capacity or dedicated human resources. The in-year reporting system Budget execution reports are limited to is not designed for integrated physical and government accounts only. These include all financial reporting. The reporting is therefore expenditure made to the private sector or handled as an administrative obligation rather nongovernmental organizations for services to than as a tool for performance review and course be delivered under a contract with the corrections. This capacity is not present at the DoHM&FW or any of its instrumentalities. facility level. However, at the state level, reviews 4.7 Budget evaluation 4.7.1 EXTERNAL AUDIT (H23) There is a robust system of external audits DoHM&FW’s capacity to respond to audit conducted by India’s SAI, the CAG of India queries and observations is weak and there through its state offices. The SAI undertakes are significant backlogs. SAIs share the audit annual financial audits of all government queries/paragraphs with the HODs, and based treasury accounts every year. The audit reports on the nature and jurisdiction, subordinate are available with a two-year time lag. offices, including health facilities, respond as Periodically on a sample basis, the SAI also required. All responses are consolidated at the conducts performance and outcomes audits. HOD level and submitted to the SAI office for However, the SAI does not undertake annual further action. CAG reports that as of audits of independent agencies within the December 31, 2019, the number of DoHM&FW such as the APMSIDC and AHCT. outstanding inspection reports and audit Accounts of such agencies are audited by the paragraphs are 280 and 3,327, respectively. As SAI as per its audit plan every few years. All SAI per CAG guidelines, audit entities (in this case audit reports are presented in the Public the DoHM&FW) are required to respond to Accounts Committee in the state legislature, observations made in the inspection reports. headed by the opposition party’s representative. This provides a robust institutional accountability mechanism. FinHealth Andhra Pradesh (India) 55 “Lack of action on IRs and audit paragraphs is fraught with the risk of perpetuating serious financial irregularities pointed out in these reports. It may also result in dilution of internal controls in the governance process, inefficient and ineffective delivery of public goods / services, fraud, corruption, and loss to public exchequer. State Government, therefore, needs to institute an appropriate mechanism to review and take expeditious action to address the concerns flagged in these IRs and audit paragraphs.� CAG Report on General Social and Economic Sectors and Public Sector Undertaking for the year ended 31 March 2019. Government of Andhra Pradesh. Report no. 1 of 2021. All independent agencies with the DoHM&FW, consisting of AFS, detailed statements of revenue including the HDS and the CDS, undertake and receipts, and detailed budget for each line annual statutory audits. Such statutory annual department, including the DoHM&FW. The audits are done through audit firms hired DoHM&FW detailed budget volume for FY2021– through a tendering process or from the list of 22 has 140 pages up to detailed head for each audits empanelled by the public auditor’s office. head of accounts. Lack of access to DDO-level None of these reports are available in the public data prevents expenditure analysis by health domain. There is no central repository of HDS and facilities and by districts. States such as CDS audit reports at the state level. Maharashtra, Uttar Pradesh, and Odisha have a significantly greater level of granular data openly The AP Vigilance Commission, through its accessible online. independent office, undertakes need-based inspections and due diligence that provides DDO-level information is not available in the additional control and public accountability. The public domain. For example, the heading Vigilance Commission organization structure ‘Expenditure’ for the NHM in the state budget indicates that it deputes one Chief Vigilance book does not indicate actual expenditure but Officer in each secretariat department (includes the funds transferred to the PD account of the DoHM&FW). A senior officer from the office of NHM. This gap significantly constrains budget each HOD is designated as the Vigilance Officer. data analysis. Random and/or trigger-based Vigilance Commission inspections keep officers on their Finances of agencies that implement most of the toes and generate significant media attention. services and undertake all procurement are not This institutional structure strengthens the public publicly available. Any fund moving out of the accountability framework within the state. treasury system (direct expenditure or transfer to other agencies for implementation) is reflected 4.7.2 PUBLIC ACCESS TO HEALTH as an expenditure from the treasury records due to the cash basis accounting. However, the actual FINANCE INFORMATION (H24) expenditure for the NHM will emerge from the While all budget and expenditure details of the statement of the NHM PD account. Such granular state government are available in the public information is not in the public domain. Table 30 domain up to the sub-detailed health level, provides an insight into the extent of financing DDO-level allocation, release, and expenditure information publicly available from different data are not available. Usually, within a few days wings of the DoHM&FW. of the budget being passed in the legislature, budget documents can be accessed on the DoF website. Budget documents include 33 volumes FinHealth Andhra Pradesh (India) 56 Table 30: Public (health) finance: What is and is not available in the public domain Availability status Health finance information in the public domain Health sector strategy and plan Does not exist Medium-term health budget Does not exist Annual report Does not exist State health finances Budget proposal No Approved budget and expenditure - state level Yes Budget and expenditure - district wise, DDO wise, health facility wise No Fund allocation/release No NHM finances Budget proposal No Approved budget and expenditure (state level) Yes (on the GoI website) Expenditure (district wise and health facility wise) No FMRs - detailed budget line expenditure No Fund allocation/release No Audit report, annual report No APMSIDC finances Budget proposal, approved budget No Receipts and expenditure by source No Audit report, annual report No AHCT finances Receipts and expenditure by source No Audit report, annual report No APVVP finances Receipts and expenditure by source No Audit report. annual report No Hospital-wise allocation, release, and expenditure No Wings within the DoHM&FW: DME, DHS, AYUSH, Public Health, Family Welfare, Institute of Public Health Budget proposal No Budget and expenditure - state level Yes Budget, release, expenditure - district wise, DDO wise, facility wise No Lack of public access to treasury and CSS service delivery level. FMRs or scheme-specific detailed expenditure data leads to further management information system of different challenges and makes any analytical exercise CSS is not available in the public domain. resource intensive. Transparency of public Neither are the audited reports of scheme- finances is one of the seven pillars of specific vertical societies that administer the performance in an orderly PFM system as per central schemes. Moreover, public access to the PFM performance indicators outlined in granular data on public spending is limited. In the Public Expenditure and Financial cases where public spending data are Accountability (PEFA) 2016.43 Whereas India available, it is often incomplete; has significantly advanced in ensuring all documentation is poor and not organized to budget documents, including state-level support analysis. Lack of navigational clarity audited expenditure data, are available in the and unfriendly user interface further public domain, there is almost no access to compound the problem. reliable expenditure data at the district or 43 As per PEFA 2016, the other six pillars of PFM are budget reliability; management of assets and liabilities; policy-based fiscal strategy and budgeting; predictability and control in budget execution; accounting and report; and external scrutiny and audit. FinHealth Andhra Pradesh (India) 57 5. Emerging insights and key messages: PFM and Health in Andhra Pradesh AP has achieved significant improvements in expenditure management and contribute health sector outcomes and has been one of the toward the standardization of PFM practices. top performing states in the health sector in Budgeting for health services and hospital India. But looking ahead, there appears to be a facilities has technicalities that the state need for strengthening PFM systems and better budget manual cannot capture. Staff aligning budget processes with service delivery involved in budgeting have no training for needs to optimize health outcomes. This chapter this purpose (H4). presents a synthesis of the detailed diagnosis that was presented in Chapter 4. The synthesis is 3. NHM and state budget classification summarized in 16 issues which are mapped to structures are misaligned. Weaknesses in different domains under which the assessment budget structure and classification include a took place. This synthesis is based on the three lack of interface between the functional and fishbone diagrams through which the causal links economic classification systems used for the have been established between sustainable state budget and the NHM budget and an development challenges and the related unmanageably large number of budget lines weaknesses in PFM architecture. under the NHM. This creates challenges for effective resource tracking and assessing 1. The absence of a state health policy, resource gaps for improved service delivery. medium-term strategy, and health Fund allocations under multiple heads and expenditure framework has contributed to programs at the facility level complicate challenges in meeting population health financial management tasks, especially at needs and resource planning for health lower levels of health facilities with systems and facilities. The annual planning inadequate staff (H5, H8). and budgeting process is effectively top down and fragmented. The level of 4. There are no costed plans for districts and integration between the state and the NHM health facilities. Suboptimal facility-level planning and budgeting process is weak. engagement in planning and inadequate Most of the strategies and targets are budget allocations lead to systemic gaps determined centrally, with minimal that affect service delivery. Compromise on involvement of lower levels of health a results-based management approach does facilities. Service delivery gaps and facility not allow linking results with expenditure. needs do not always get captured, affecting Optimizing expenditure efficiency at the service delivery and patient confidence in the service delivery level is a policy imperative, public health system (H1, H2, H4, H7). especially in a resource-constrained environment. Aspects such as the short 2. Sector-specific planning and budget supply of drugs, poor radiology facilities at manuals are also lacking, and weaknesses in PHCs, challenges in the supply of food to the annual planning and budgeting process hospital inpatients, and inadequate budget compound the problem. There is no for repair and maintenance lead to out-of- simplified manual/standard operating pocket expenses for patients. This reflects procedure (SOP) based on the Treasury Code, weaknesses in procurement and supply chain Finance Code, and the state budget manual. management. Facilities also report either no The manuals and codes are not translated or highly inadequate allocations for routine into health department-specific operational operational expenses such as stationery and checklists that can aid budget and office supplies (H2, H4, H9, H18, H20). FinHealth Andhra Pradesh (India) 58 5. Parallel institutional and management multiple agencies with varied contracting structures for hospitals and public health and payment processing modalities (H12). lead to challenges that affect integrated planning and oversight on the financing of 9. The availability of funds is unpredictable. services. The multiplicity of sub-departments There are delays in fund flow and substantial within health at the state level further delays in reimbursement of claims under the constrains budget optimization and Aarogyasri Scheme. There is limited evidence expenditure management. There is a need of cash flow projections, resource tracking, for integrating the planning and and integrated performance monitoring management functions of the primary- and against expenditure. Further, there are secondary-level health facilities to delays in beneficiary incentives as some strengthen the service delivery chain and banks, especially rural areas, are yet to be referral network. (H1, H4) linked to the CFMS (H8, H9). 6. There is minimal effort at the facility or the 10. Health financing decisions are too state level to maximize insurance claims’ centralized. Budget structures are highly revenue mobilization and utilization rigid, and financing under the NHM has opportunities for government hospitals. In gradually evolved into a rigid structure, with design, earnings through insurance claims almost no flexibility for local expenditure are the most predictable and flexible revenue decisions. Manual record-keeping and pool at the disposal of the facility in-charge, accounting at the lowest levels of health which can be used locally for improving facilities coupled with few dedicated and clinical and nonclinical facilities and patient trained staff for finance make financial experience in government hospitals. The management an arduous task for doctors opportunity of locally using these funds is who act as de facto finance managers at the compromised by delays in reimbursements PHC level. (H4, H8) to government hospitals and weak central oversight on fund utilization (H6, H11). 11. Weak HR management practices, including high vacancies, directly affect commitment, 7. The approach to private sector engagement satisfaction levels, and staff accountability is ad hoc without a strategic purchasing at all levels. Service delivery gaps are framework that aligns with health sector inevitable. Some of the major HR challenges policy goals. Over the years, the AHCT has are the shortage of medical and paramedical developed robust tools, systems, and staff, delays in salary release, and lack of processes for purchasing services from the adequate dedicated staff for finance and private sector. But the approach to private accounts for financial management functions sector engagement is fragmented and and multiple payroll management functions. handled by multiple agencies within the Performance management is more of an department. There are multiple platforms administrative prerequisite and lacks value. and monitoring dashboards, contract Capacity is further constrained by lack of management functions are also fragmented, training on finance and underspending of the and there are challenges around delayed overall training budget (H13, H16, H17). payments to private providers (H12). 12. Budget execution capacity is weak, 8. Purchasing arrangements are fragmented. especially of capital expenditure budget While the AHCT purchases services from the lines. The weaknesses in budget execution private sector under different insurance stem from multiple factors already described programs, other forms of private sector above, key among them being poor and engagement for specialized clinical support fragmented planning, unpredictable fund services, such as high-end diagnostics and flows, gaps in HR, and weaknesses in nonclinical support services, are handled by integrated monitoring and accountability for results (H9 to H15). FinHealth Andhra Pradesh (India) 59 13. There is a need for improved operational 15. Accounting practices and financial reporting efficiency in the procurement processes, outside the treasury system are especially for civil works and medical predominantly manual and lack equipment. Procurement systems are not standardization. State-level agencies, district fully aligned to either the sectoral priorities units, and all health facilities up to the PHC or the systemic weaknesses at the grassroots level have manual books of accounts. level. This is affecting service delivery in Accounting packages are not used. PHCs bear relation to its responsiveness to local needs the maximum brunt of manual accounting and the quality of services. Significant and records due to the multiplicity of underspending of civil works and equipment financing sources and budget codes and due budgets is evidence of the systemic gaps that to having the responsibility of maintaining need immediate corrective actions (H18). accounts of all subcenters and all VHSNCs under their jurisdiction (H21, H22). 14. There is a lack of standard internal audit protocols and tools across different 16. While external audit structures are robust, agencies under the DoHM&FW, and the allocations and expenditure details of the practice is highly fragmented. The NHM, implementing units are not available in the AHCT, and APVVP have varying internal audit public domain. The external audit conducted practices. While the NHM’s approach is by the SAI is robust, but the DoHM&FW’s relatively more structured as it hires an audit capacity to respond to audit observations for concurrent audit, other agencies like the appears to be a challenge. While state AHCT, APMSIDC, and the APVVP face budget and expenditure figures are available problems like staff vacancies, absence of a to the public up to the unit head level, budget budget for internal audit, and most releases are available in a nonuser-friendly importantly, no internal audit framework. way in the form of government orders that The DOHM&FW does not have a centralized can be downloaded from a dedicated portal. overview of compliance gaps on an ongoing It is challenging to aggregate and analyze this basis. Due to the absence of a robust internal information for meaningful insights. Release audit framework, there is limited evidence on and expenditure reports of the NHM, APVVP, the robustness of internal expenditure APMSIDC, and AHCT are not available in the control measures, though adequate internal public domain. Their audit reports are not expenditure control exists at all levels in the available either. Overall, these shortcomings design (H14, H15). hinder links between budget reporting and budget formulation through evidence-based policy making (H23, H24). Root cause of health budget’s inability to translate policy into action is presented through a fishbone approach in Figure 10. FinHealth Andhra Pradesh (India) 60 Figure 10: Fishbone analysis: Strategic planning, financing, and budgeting As already discussed, diagnosis and results reveal management. The causal link and the pathway is that one of the causes of service delivery gaps is presented in Figure 11 the weakness in budget execution and Figure 11: Fishbone analysis: Budget execution and service delivery gaps Further, weaknesses in budget tracking and health, it is imperative to ensure full value for accountability mechanisms affect health money from existing investments. Refer to Figure outcomes from existing investments. While 12 for a visual representation of the links of these governments advocate for more resources for gaps with service delivery results. FinHealth Andhra Pradesh (India) 61 Figure 12: Fishbone analysis: Monitoring and accountability structure’s impact on service delivery For effective preventive and curative health gaps lead to increased workload, inadequate services, a resilient health system needs infrastructure, and compromised services. integrated service delivery approach, From a patient’s perspective, it affects trust in adequate HR, functioning equipment, access public health facilities where patients do not to medicines and consumables, vibrant get the promised services—they turn to the information systems, adequate financing, and private health market for purchasing out of proactive leadership. There are varied degrees pocket. Therefore, reforming PFM systems of weaknesses in the AP health systems as using the service delivery lens as required for already analyzed in this report through the 24 ensuring service delivery outcomes should be FinHealth toolkit domains. From a health a policy priority. facility and service provider perspective, these Figure 13: Fishbone analysis: Summary of links between PFM issues and service delivery gaps FinHealth Andhra Pradesh (India) 62 6. Recommendations 1. Ensure functional integration of the DHS 5. Develop a Health Budget Manual and SOP. and the APVVP institutional structures to While the state budget manual is enable integrated planning, budgeting, and comprehensive regarding the general rules effective implementation. This will and procedures, the Health Budget Manual strengthen the primary to secondary care should capture the procedures in a simplified referral chain, allow for integrated and checklist form and provide sectoral optimal use of limited resources, and enable technicalities related to budget estimates for CHCs to have technical oversight on the health and hospitals. For example, how to PHCs. Planning and budgeting will become estimate the costs of medical and surgical more efficient. consumables, estimate expenditure on account of the electricity bills depending on 2. Reform budget classification system to the type of medical equipment and their ensure integration of or create an interface load, and estimate requirements of drugs between the budget classification systems based on patient load and service utilization of the state and NHM budgets. This will by specialties, and so on. The SOP shall guide facilitate comprehensive allocation decisions the DDO and SCOs in budget estimation and comprehensive tracking of budgets and processes, budget aggregation at the next expenditure by service delivery levels, SDUs, higher level, the process to be followed to and functional and economic classifications. validate estimates from subordinate offices, The state department’s computerized and so on. treasury system may institutionalize a unique code to capture location details of all 6. Transition from parallel planning and expenditures. The DoHM&FW would need to budgeting process to comprehensive, coordinate closely with the DoF and advocate integrated annual plans and budgets. for a change so that necessary modifications Develop integrated plans and budgets for can be made. each health facility and district. This should form the basis of developing comprehensive 3. Develop health policy and an MTEF for state plan and budget. Each item of the plan health. Experience from the previous MTEF and line of the budget can have columns for may be used to develop a medium-term different sources of funding. This approach framework as the basis for planning and will have the following benefits: planning the policy objectives. It is recommended that the DoHM&FW • Each health facility and district will have undertake this exercise in close collaboration its plan and budgets, which can be used with the DoF. to strengthen results-based accountability structures. 4. Develop normative costing of services at different levels of health care. While the • This will be a good tool to assess the normative costing should be based on resource gap for strategic detailed standard treatment protocols for activity/intervention. each package in the service delivery basket, • It will be easier to pull out NHM plans or it is important to track the deviation between any other plan as required depending on the normative and actual/current costs. This the source of financing. shall inform resource mobilization and allocation decisions and set the base for economic evaluations and efficiency studies. FinHealth Andhra Pradesh (India) 63 • The Report of the Comptroller and leakages, improve efficiency, and increase Auditor General of India on State accountability. A state-level central Finances Audit Report for the year ended command center dashboard could monitor 31 March 2019 clearly recommends that all internal processes, in-built algorithms can “the Department of Finance should the highlight variations and compliance gaps, budget preparation exercise, so that the and provide a risk score for each spending gaps between the budget estimates and unit (including health facilities). Those with actuals are bridged.� risk scores above a certain threshold may be subjected to specific internal audits. 7. Improve fund transfer turnaround time from treasury to the PD accounts for the 11. Strengthen AHCT as an integrated platform central and state shares of the NHM. The for strategic purchasing for health. Over the state government should prioritize fiscal years, the AHCT has developed robust tools, transfers under CSS in a time-bound fashion. systems, and processes for purchasing This could be done through process services from the private sector (H12). The optimization as explained in section 4.2.5. DoHM&FW can ensure efficiency gains through the following: 8. Streamline, modernize, and standardize accounting practices in agencies that • Develop a strategic purchasing policy operate outside the treasury system. framework for the health sector in the Agencies within the DoHM&FW such as the state. NHM, APMSIDC, and the autonomous HDS • Consolidate all private sector and the CDS should migrate their accounting engagement efforts under the aegis of practices to a web-based accounting the AHCT. enterprise resource planning (ERP) solution and have standardized accounting practices • Set up a dedicated PPP cell within the and uniform accounts books. AHCT for market assessment, design, and structuring, including technical, financial, 9. Develop centralized expenditure and legal structuring. management and tracking dashboard and • Integrate multiple PPP monitoring budget performance metrics for effective dashboards through a single-window budget implementation. Expenditure platform for a consolidated overview of management and tracking dashboard should all purchasing actions. provide real-time expenditure management information system and analysis by districts, • Reduce fragmentation in benefits spending units, levels of care, and economic package and pricing structures across and functional classifications. An attempt different health insurance programs should be made to link the results to HMIS managed by the AHCT. indicator results and initiate a culture of 12. Undertake business process reengineering integrated physical and financial tracking for for procurement, sample testing of drugs, better health outcomes. and improving of the supply chain system 10. Streamline internal control on non-salary for medicines and consumables. The expenditure through the ERP interface that turnaround time for district warehouses replaces the need for manual record sending samples for testing through the maintenance and strengthen internal APMSIDC state office and the drugs testing monitoring and budget execution. The ERP laboratory infrastructure within the state architecture should cover all aspects of needs to improve. Set up a mechanism for facility operations and services and should periodic prescription audits and beneficiary make manual records such as diet register audits to assess patients’ accessibility to and vehicle logbook obsolete. ERP platform medicines. Undertake a deep dive into the will improve internal controls, reduce drugs supply chain to identify areas for FinHealth Andhra Pradesh (India) 64 process improvement and improve access to on minimum competency requirements, medicines. and design courses in partnership with learning institutes. GoI’s iGOT platform 13. Strengthen the system for planned (https://diksha.gov.in/igot) may be preventive maintenance of medical considered for this purpose. This should equipment and increase allocations for lead to a continuous learning repair and maintenance. Set up a environment. mechanism for planned preventive maintenance of medical equipment at all • Set up a robust performance appraisal levels of health care facilities including use of framework for all employees. technology for tagging of equipment using • Assess staff requirements for accounting bar codes and RFID chips for tracking usage, and financial management work, repair, and warranties. The DoHM&FW may especially the health facilities, and pilot managed equipment contracts or the prioritize all such positions to relieve lease model for high-end expensive doctors from unwanted administrative equipment. This may not only reduce large and financial management tasks. one-time purchase expenditure but also • Rationalize pay structures and introduce transfer the onus of providing supplies and hard location incentives and so on. maintenance to the manufacturer. This practice is prevalent in the private sector. 15. Ensure adequate financial management capacity at the health facility level. Capacity 14. Strengthen HR management by setting up a augmentation could be in the form of cell or a directorate and use IT for deputing/recruiting accounts/administration centralized management and overview of all staff and filling up vacant positions. This HE. The HR Directorate shall perform the should be followed by training staff on following: budgeting, financial management, and financial reporting. • Develop a comprehensive HR policy and management framework. 16. Introduce a Public Investment Management • Develop a centralized database of all Framework for Health in the DoHM&FW to permanent, contractual, and outsourced optimize returns on investment for health employees - this database should have service delivery outcomes. The framework API-based links with the government’s should aim to prevent economic losses HRMS, NHM’s HRIS, and the payroll through project delays and premature asset platform used by APCOS for all failure. The framework will be expected to outsourced employees. strengthen health infrastructure governance over the entire investment cycle. It will • Undertake competency mapping for all include investments for primary, secondary, cadres of health care personnel, based and tertiary health care and the required on which all job descriptions can be legal and regulatory procedures for updated. Job descriptions should include investment. minimum required competencies and minimum training/skills development 17. Centralize all internal audit functions of the programs required to deliver the job. DoHM&FW operations within the secretariat department. Centralization will • Develop aggressive recruitment imply dissolving the internal strategies to fill up vacant positions, audit/concurrent audit cells within agencies including strengthening the cadre of such as the NHM and the APMSIDC. The accounts/finance management staff at centralized internal audit wing should be different levels in the health system. headed by an officer not less than the • Set up a learning management system, Secretary/Additional Secretary rank. It prescribe mandatory learnings focused should have a comprehensive internal audit FinHealth Andhra Pradesh (India) 65 framework and audit matrix for each 19. Improve transparency by publishing institution, depending on its functions and information in the public domain. Consider finances. It should have standard processes, putting all information listed under Table 30 standardized templates, and adequate staff in the public domain. or provision to recruit internal audit firms. The scope of internal audit should be The 19 recommendations provided above comprehensive to include, but not be limited have been categorized as short-term, to, the ongoing review of risks and controls, medium term, and long term based on their accounts audit, performance audit, and priority and the time that may be required to compliance audit at frequencies that the design and implement the recommendation. DoHM&FW may deem appropriate. • Short-term recommendations are those 18. Improve the capacity to track and respond that may be implemented within one to audit observations as per CAG guidelines. year - 6 of the 19 recommendations have Set up an Audit Para Management System been categorized as short term. (APMS) for management and tracking of all • Medium-term recommendations are documents related to audit paras and those that may be implemented within inspection reports. APMS shall be a web- two years - 11 of the 19 based portal to support audit management recommendations have been processes, assigning responsibility of categorized as medium term. responding to observations within the DoHM&FW, vetting, submitting replies, and • Long-term recommendations are those tracking. This will work as a financial audit that may be implemented within three tool and promote transparency and years - 1 of the 19 recommendations has accountability. It will also prevent the been categorized as long term. DoHM&FW from featuring as a defaulting auditee in the CAG audit reports. FinHealth Andhra Pradesh (India) 66 Table 31: Recommendations: short, medium, and long term No. Recommendations ST MT LT 1 Ensure functional integration of the DHS and the APVVP institutional structures to ✔︎ enable integrated planning, budgeting, and effective implementation 2 Reform budget classification system to ensure integration of or create an interface ✔︎ between the budget classification systems of the state and NHM budgets. 3 Develop health policy and an MTEF for health. ✔︎ 4 Develop normative costing of services at different levels of health care. ✔︎ 5 Develop a Health Budget Manual and SOP. ✔︎ 6 Transition from parallel planning and budgeting process to comprehensive, integrated ✔︎ annual plans and budgets. Develop integrated plans and budgets for each health facility and district. 7 Improve fund transfer turnaround time from treasury to the PD accounts for the ✔︎ central and state shares of the NHM. 8 Streamline, modernize, and standardize accounting practices in agencies that operate ✔︎ outside the treasury system. 9 Develop centralized expenditure management and tracking dashboard and budget ✔︎ performance metrics for effective budget implementation. 10 Streamline internal control on non-salary expenditure through ERP interface that ✔︎ replaces the need for manual record maintenance and strengthen internal monitoring and budget execution. 11 Strengthen AHCT as an integrated platform for strategic purchasing for health. ✔︎ 12 Undertake business process reengineering for sample testing of drugs and improving ✔︎ the supply chain system. 13 Strengthen the system for planned preventive maintenance of medical equipment and ✔︎ increase allocations for repair and maintenance. 14 Strengthen HR management by setting up a cell or a directorate and use IT for ✔︎ centralized management and overview of all HR. 15 Ensure adequate financial management capacity at the health facility level. ✔︎ 16 Introduce a Public Investment Management Framework for Health in the DoHM&FW ✔︎ to optimize returns on investment for health service delivery outcomes. 17 Centralize all internal audit functions of the DoHM&FW operations within the ✔︎ secretariat department. 18 Improve the capacity to track and respond to audit observations as per CAG ✔︎ guidelines through web-based system. 19 Improve transparency by publishing information the public domain. ✔︎ Note: ST = Short term (ST), MT = medium term, and LT = long term. FinHealth Andhra Pradesh (India) 67