Online version of the 2013-14 Department of Health Annual Report

Chief Financial Officer’s Report

Page last updated: 31 October 2014

The image is of John Barbeler, Chief Financial Officer.

I am pleased to provide this Chief Financial Officer’s Report including an overview of the Department’s 2013-14 financial results. The Department’s combined financial statements include the financial statements of the Therapeutic Goods Administration (TGA) and two departmental special accounts, the Office of the Gene Technology Regulator (OGTR) and the National Industrial Chemicals Notification and Assessment Scheme (NICNAS).

Machinery of Government changes

The Administrative Arrangements Order announced in September 2013 resulted in the transfer of the Ageing and Aged Care function and some Indigenous functions to the Department of Social Services and the Department of the Prime Minister and Cabinet respectively, and the Sports function returning to the Health portfolio. For the Department, this saw a net transfer out of some 1,300 staff.

The financial statements are impacted by this significant change to the Department’s operations, with the Ageing and Aged Care function reporting for only a part year. As a consequence, comparability with previous financial year information is reduced.

2013-14 financial results

In 2013-14 the Department oversaw 42 programmes, including part year for the Ageing and Aged Care and Sports programmes, on behalf of Government. Major administered items included:

  • Administered expenses of $44.9 billion primarily related to paying personal benefits of $35.2 billion for medical and pharmaceutical services and private health insurance rebates. Grants expenditure was $6.2 billion with the majority of these made to non-profit organisations ($4.4 billion).
  • Administered assets of $1.2 billion incorporating investments in health related agencies of $0.5 billion, and inventories of $0.2 billion predominantly being the National Medical Stockpile.
  • Administered liabilities of $2.6 billion principally relate to personal benefits of $1.9 billion and provisions for subsidies of $0.4 billion.

The Department successfully delivered its activities to support the programmes administered.

Consistent with the Budget Estimates the Department incurred an operating deficit, prior to unfunded depreciation, of $2.4 million. The Department remains in a net asset position as at 30 June 2014.

Key administered expenditure is illustrated in Figures 4 and 5 below.

The Auditor-General has provided the Department with an unmodified audit opinion for the 2013-14 financial statements. In conducting the 2013-14 financial statement audit the Auditor-General advised that the Department has in place appropriate financial controls which operate effectively. The Department’s business planning and budgeting framework ensured departmental resources are allocated to meet the Government’s priorities.

Figure 4: Breakdown of administered expenditure

Figure 4 is a pie graph which shows a breakdown of administered expenditure. Personal benefits expenditure makes up 78 per cent of the total administered expenditure and includes 43 per cent medical services, 20 per cent pharmaceutical services, 12 per cent private health insurance, and 3 per cent other services.

2013-14 Financial year
Total funds administered by the Department of Health: $44.9bn

Figure 5: Administered expenditure by category 2010-2014

Figure 5 is a vertical bar graph which summarises administered expenditure by category from 2010 to 2014. A steady increase of administered expenditure occurred between 2010 and 2013, with a decrease occurring in 2014.

Note: Financial year ending 30 June 2014 includes expenditure administered for Aged Care programmes to 11 October 2013. These programmes were transferred to the Department of Social Services under Machinery of Government changes.

Key business reforms

The Department’s key reforms to be better placed to meet future financial challenges include:

  • consolidation of grants administration activity into one division supported by a single grants management system; and
  • capture of all core data used by the Department in a single Enterprise Data Warehouse to inform analysis, strategy and policy.

Implementing an electronic document management system and parliamentary workflow system has improved business processes in the Department, as will the shift from Lotus Notes to Outlook. Providing corporate services to portfolio agencies will be further expanded in 2014-15.

Challenges ahead

The Department is facing a challenging environment in 2014-15 and over the forward estimates period, managing both the impact of a 2011-12 Strategic Review saves measure and wider Government savings targets.

The Department’s internal governance framework supports sound decision making in navigating future financial challenges.

From 1 July 2014, the use and management of public resources is governed by the Public Governance, Performance and Accountability Act 2013 (PGPA Act). The PGPA Act aims to improve performance, accountability, risk management and service delivery across Government.

Adopting the PGPA principles, the Department will take a risk-based approach to reviewing and streamlining where appropriate, its financial control and compliance systems, processes and reporting frameworks.

The programme of key business reforms and process improvements whilst maintaining robust budgetary expense controls will enable the Department to operate within agreed resources for 2014-15 and meet financial sustainability requirements.

The Department’s limited capital budget requires strong governance over the prioritisation of projects to meet the challenge of maintaining the existing asset base and deliver efficiencies through process improvement projects.

2013-14 financial statements

Information on the Department’s financial result can be obtained in Part 4 of the Annual Report including an analysis of the Department’s current year financial performance.

The image is of John Barbeler’s signature.

John Barbeler
Chief Financial Officer
October 2014