South AfricanMedical Research Council

2011/2012 Annual ReportPresentation to the Parliamentary

Portfolio Committee on Health

31 October 2012

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Outline

• Research highlights

• Financial Reports

• Challenges facing the MRC

• Revitalising the MRC

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Research Highlights

South Africa’s proudest achievement:People living >10% longer than 5 years ago

- due to AIDS treatment

Deaths in children <5yrs: ↓ 43%(42 per 1000 live births in 2011)

Adults deaths: ↓20%(40% premature deaths in 2011)

Life expectancy: ↑ by 6 years(60 years in 2011)

Bradshaw D, Dorrington R, Laubscher R. Rapid Mortality Surveillance Report 2011. Medical Research Council

RESEARCH HIGHLIGHTS

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MRC shows that new TB drug is highly effective

MRC’s TB researchers part of the global effort – developed the first new drug against TB in several decades

TMC 207 (Bedaquiline) has a novel mechanism of action and potent activity against drug-resistant TB

Published in New England Journal of Medicine

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RESEARCH HIGHLIGHTS

MRC shows impact of new pneumonia vaccine in SA

MRC Respiratory & Meningeal Pathogens Research Unit produced the evidence to support the introduction of conjugate pneumococcal vaccine in SA

South Africa - only African country funding implementation of this vaccine for children

Pneumonia & respiratory deaths declining

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RESEARCH HIGHLIGHTS

RESEARCH HIGHLIGHTS

MRC finds that 20% of Women in S Africa have been raped

MRC Gender & Health Research Unit produced first description of extent of rape in SA: + 20% of women experienced forced sex

MRC research on gender-based violence received international recognition - served as the basis for WHO policy

Published in Lancet and Science

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MRC shows mother-to-child transmission of HIV reduced

to 2.7% in 2011

MRC’s Health Systems Research Unit undertook a national HIV survey to assess mother-to-child transmission

In 2011, only 2.7% of newborns acquired HIV from their mothers down from 25% ten years ago

Presented at the International AIDS Conference, Washington 2012

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RESEARCH HIGHLIGHTS

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Financial Report

STATEMENT OF FINANCAL PERFORMANCE

2012R’000

2011R’000

% (Increase/Decrease)

Revenue 538 565 527 691 2

Other Income 9 538 5 551 71

Operating Expenses (578 820) (552 799) 4

Operating Deficit (30 717) (19 556) 57

Investment Income 15 690 20 973 -25

Finance costs (118 ) (101 ) 17

(Deficit) surplus for the year (15 145) 1 316

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REVENUE BREAK DOWN

Revenue 2012R’000

%(Increase/ Decrease)

2011R’000

% (Increase/ Decrease)

Income from contracts, grants & services rendered

300 665 55.8 290 403 55

Government grants 237 889 44.2 237 288 45

More than 55% of total revenue now funded from external sources.

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ANALYSIS OF EXPENDITURE

2012R’000

2011R’000

%

Personnel 310 890 287 752 54

Collaborative Research 110 373 112 881 19

Other expenditure 157 677 152 267 27

578 940 552 900 100

Of total costs only 19% is allocated to extra-mural research with the balance to cover intra-mural and administration costs.

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STATEMENT OF FINANCIAL POSITION: 31/03/122012 2011

R RASSETSCurrent AssetsInventories 201 683 124 557Other financial assets 35 787 313 32 887 621Receivables from exchange transactions 31 498 886 28 455 805Cash and cash equivalents 314 349 575 410 336 417

381 837 457 471 804 400

Non-Current AssetsBiological assets that form part of an agricultural activity 1 325 200 975 000Property, plant and equipment 125 991 712 118 416 046Intangible assets 11 924 687 4 330 777Investments in controlled entities 2 2Other financial assets 1 135 042 952 918

140 376 643 124 674 743TOTAL ASSETS 522 214 100 596 479 143

STATEMENT OF FINANCIAL POSITION (continues)

LiabilitiesCurrent LiabilitiesFinance lease obligation 127 446 112 431Payables from exchange transactions 52 187 852 53 518 694VAT payable 1 463 943 1 121 745Provisions 10 208 324 6 732 087

Deferred income 166 865 544 228 970 264

230 853 109 290 455 221Non-Current LiabilitiesFinance lease obligation 8 198 135 644Retirement benefit obligation 1 332 000 1 080 000Earmarked funds 1 036 301 999 344

2 376 499 2 214 988

Total Liabilities 233 229 608 292 670 209

Net Assets 288 984 492 303 808 934Net AssetsReservesFair value adjustment assets available-for-sale reserve 2 179 564 1 858 370

Accumulated surplus 286 804 928 301 950 564

Total Net Assets 288 984 492 303 808 934

2012 2011R R

STATEMENT OF FINANCIAL POSITION (CONTINUES)

• Total assets declined by 12.5% from R596 479k to R522 214k due to decline in cash & cash equivalents.

• Net assets value decreased from R303 808k to R288 984k.

• Decline of 4.6% as a result of deficit for the year of R15 145k.

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CASH & INVESTMENTS

2012R’000

% (Increase/ Decrease)

2011R’000

Cash and cash equivalents 314 349 -23 410 336

Other financial assets 35 787 8 32 887

Total cash & investments 350 136 -21 443 223

Deferred income 166 866 -27 228 970

•Total cash & Investments declined by 21%.

•Total decrease of R93 087m

•Off-set mainly by reduction in deferred income of R62 104 and deficit of R15 145m.

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CASH FLOW

2012R’000

2011R’000

Net cash flows from operating activities (63 514) 41 236

Negative cash flow due mainly to timing of projects and contract deliverables.

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AG INTERNAL CONTROL DASHBOARD: 30/09/12

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LEADERSHIP

Movement from previous assessment: 1.a Provide effective leadership based on a culture of honesty, ethical business practices and

good governance, protecting and enhancing the best interests of the entity 1.b Exercise oversight responsibility regarding financial and performance reporting and

compliance and related internal controls 1.c Implement effective HR management to ensure that adequate and sufficiently skilled

resources are in place and that performance is monitored 1.d Establish and communicate policies and procedures to enable and support understanding

and execution of internal control objectives, processes, and responsibilities 1.e Develop and monitor the implementation of action plans to address internal control

deficiencies 1.f Establish an IT governance framework that supports and enables the business, delivers value

and improves performance

AG INTERNAL CONTROL DASHBOARD: 30/09/12

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FINANCIAL AND PERFORMANCE MANAGEMENT

Movement from previous assessment:

2.a Implement proper record keeping in a timely manner to ensure that complete, relevant and accurate information is accessible and available to support financial and performance reporting

2.b Implement controls over daily and monthly processing and reconciling of transactions

2.c Prepare regular, accurate and complete financial and performance reports that are supported

and evidenced by reliable information 2.d Review and monitor compliance with applicable laws and regulations

2.e Design and implement formal controls over IT systems to ensure the reliability of the systems

and the availability, accuracy and protection of information

AG INTERNAL CONTROL DASHBOARD: 30/09/12

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GOVERNANCE

Movement from previous assessment: 3.a Implement appropriate risk management activities to ensure that regular risk assessments,

including consideration of IT risks and fraud prevention, are conducted and that a risk strategy to address the risks is developed and monitored

3.b Ensure that there is an adequately resourced and functioning internal audit unit that identifies

internal control deficiencies and recommends corrective action effectively

3.c Ensure that the audit committee promotes accountability and service delivery through

evaluating and monitoring responses to risks and providing oversight over the effectiveness of the internal control environment including financial and performance reporting and compliance with laws and regulations

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Challenges facing the MRC

Challenges facing the MRC

MRC baseline grant grew + 3.5% pa in last 4 years

MRC is in a state of financial neglect

Shrinking budget

Heading for repeated budget deficits

MRC Budget < 10% of NIH funding to SA

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Skewed resource allocationsTotal 2012/13 MRC budget: R246million

•Intramural research: 43%•Administration budget: 38%•Extramural research : 19% (R67million)

Salaries comprise a major component of the budget provided to Intramural units – 87%

MRC’s 2012/13 budget “deficit” = R43million

Challenges facing the MRC

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MRC’s outdated organisational & funding approaches

• Funding to Universities seriously inadequate and the approaches outdated - cannot meet demands of a modern world-class research organisation

• MRC’s organisation structure developed incrementally - the current MRC is not adequately fit-for-purpose

• Lack of organisational coherence, incremental and opportunistic growth over time has led to outdated units, duplication and departments with inappropriate functions

• Example : The biggest change in health in SA is the NHI – the MRC has no research programme to generate data and evidence to guide this change and to support DoH in this initiative

Challenges facing the MRC

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Revitalising the MRC

“ In restructuring the Medical Research Council, the brief that I gave to the new President, Prof Slim Karim, is to ensure that the MRC becomes a world class medical research institution. However, not all research must and should be done at the MRC. The MRC must also partner with and develop centres of excellence outside itself.”

….Speech by the Honorable Minister of Health Dr Aaron Motsoaledi at the launch of the K-RITH building, 9 Oct 2012

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Revitalising the MRC: 3 key principles

• Centrality of scientific excellence through leading the generation of new knowledge

• Accept responsibility for building and facilitating all medical research in South Africa such that extramural and intramural research are equally important

• Intra-mural research prioritised to maximise impact on health and optimally utilise limited financial resources:– MRC can afford 12 intramural units

– Propose to prioritise on Top 10 causes of death in BoD

Revitalising the MRC

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What should the intramural research priorities be?Top 10 conditions in the burden of disease

Source: Dr Debbie Bradshaw, MRC Burden of Disease Unit

Revitalising the MRC

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1. The 3 key principles (Excellence, Fund Univ, BoD priorities)

2. Modernise the MRC: 12 Intramural units based on BoD 6 extramural funding mechanisms Strategic Health Innovation Initiative for new drugs & vaccines Improving MRC administration for efficiency & effectiveness Optimising lab and office space in MRC buildings

3. Implement new initiatives and create new: Streamlined policies Revamp peer-review system High quality and responsive Information Services

4. New finance: R160million for capital over 3 years

5. MRC budget has to double in 2 years – requested 50% increase in MRC budget this year from R246m to R371m

Revitalising the MRC

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Revitalising the MRC

Revitalising the MRC

We, the members of the Committee of Medical Deans of South Africa, …..

“… Congratulations on your bold vision for the MRC and the exciting plans you’ve put forward.

“We agree that restructuring the MRC along the lines proposed in the report, will go a long way to achieving well-funded, well-supported intra- and extramural units, which are equipped to do high impact research, train and mentor young scientists, and ensure capacity development in medical research in South Africa.”

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Thank you to Parliament and the DoH for supporting

and funding the MRC