Strategies for overcoming late payment of service providers : a case for North West Department of Health

Abstract

The non-payment of service providers within 30 days after service has been foregrounded as a great concern and a critical issue that must be addressed as soon as possible in order to ensure that there is a good relationship between the government and its service providers. The research is important as it may raise awareness of the actual contributors to non-payment of service providers within the stipulated time and to provide remedial action. A quantitative research method was used to collect data in this study. Due to time constraints the study could only focus on DOH Provincial office personnel in finance and excluded personnel from other directorates and the four district offices.The study may change the way people do their jobs in the supply chain process and payment of service providers. It may inform the Executive Authority of the importance of ensuring that the department addresses the lack of effective internal controls that assist the department in ensuring timely payments to service providers. It may also raise awareness among government employees on the implications of non-payment of service providers and their responsibility in ensuring that government settles its debts within the stipulated 30-day period. A majority of employees who participated in the survey think that invoices must be paid within 30 working days as opposed to 30 days after an invoice has been received; such an understanding has an influence on the urgency with which an employee processes a payment. Lack of effective internal controls that enable prompt payments to service providers contributes to the delay and the use of two financial systems also contributes to the delay in payments to service providers. Accruals carried over into the next financial year has a huge impact on the current year's budget and may result in the department not paying their service providers due to funds being depleted. The department must ensure that an invoice tracking systemis developed as well asthe establishment of a 30days' oversight sub-directorate in the department. Failure to comply with this legislation may result in interest being charged to the department,

andinterest charged on overdue accounts is classified as fruitless and wasteful expenditure. The Auditor-General recommended "that oversight structures be put in place to hold officials accountable for these transgressions. Fruitless and wasteful expenditure incurred in 2015-16 came to R41 .8m in the North West Province. The NWDOHaccounted for 36% of this, at R15.3m" for the 2015/16 financial years"(http://www.fin24.com/ Accessed 22 November 2016). It is critical that consequence management be applied, in order to decrease interest being charged and reduce the fruitless and wasteful expenditure figure.