Portfolio overview

The Health and Aged Care portfolio works towards achieving better health and wellbeing for all Australians, now and for future generations. A total of 19 entities make up the portfolio.

The Department of Health and Aged Care is the lead entity in the portfolio. It is responsible for achieving the Australian Government’s health outcomes in the areas of health system policy, design and innovation; health access and support services; sport and recreation; individual health benefits; regulation, safety and protection; and ageing and aged care. This includes administering programs and services, such as Medicare and the Pharmaceutical Benefits Scheme, and forming partnerships with the states and territories, as well as other stakeholders. Further information is available from the department’s website.

The remaining 18 entities in the portfolio are responsible for the delivery of programs, including aged care accreditation services, digital health reforms, the development and reporting of health and welfare data, nuclear safety, supporting the integrity of sport, funding medical research, managing blood supplies, cancer research, pricing and funding public hospitals, national safety and quality standards and clinical care standards, and food safety.

In the 2023–24 Portfolio Budget Statements (PBS) for the Health and Aged Care portfolio, the aggregated budgeted expenses for 2023–24 total $109.0 billion. The PBS contain budgets for those entities in the general government sector (GGS) that receive appropriations directly or indirectly through annual appropriation Acts.

The level of budgeted departmental and administered expenses, and the average staffing level for entities in the GGS within this portfolio are shown in Figure 1. The Department of Health and Aged Care represents the largest proportion of portfolio expenses, and administered expenses of the Department are the most material component, representing 95 per cent of the entire portfolio’s expenses.

Figure 1: Health and Aged Care portfolio – total expenses and average staffing level by entity

Portfolio expenses and staffing level

Source: ANAO analysis of 9 May 2023–24 Portfolio Budget Statements.

Audit focus

In determining the 2023–24 audit work program, the ANAO considers prior-year audit and other review findings and what these indicate about portfolio risks and areas for improvement. The ANAO also considers emerging risks from new investments or changes in the operating environment.

The primary risks identified for the portfolio relate to establishing effective governance — including adherence to legal requirements, rules and frameworks, and establishing appropriate levels of planning and transparency — while delivering health care programs.

Specific risks in the Health and Aged Care portfolio relate to governance, service delivery, grants administration, procurement and regulation.

Governance

The department played a central role in the COVID-19 pandemic response, including through large scale stockpiling and distribution of medical equipment and vaccines. Audits conducted between 2020–21 and 2022–23 demonstrated that the department delivered required goods and services, but often with limited implementation planning, risk management and due diligence, particularly in the early stages of the pandemic. The ANAO’s program of audits examining the government’s COVID-19 response has highlighted the risk of inadequate crisis preparedness.

Recent audits in the department have highlighted shortfalls in transparency. There have been deficiencies in record-keeping, evaluation, performance measurement, and performance reporting. There has been insufficient data to demonstrate achievement of outcomes and assurance over the completeness and accuracy of third-party data. Failing to systematically use lessons learned to inform program delivery is a further risk.

The COVID-19 pandemic accelerated reform in the health sector, including new health care models and rapid adoption of digital health records and technology. A risk is portfolio entities’ effective management of these changes and information security.

Service delivery

The department is reliant on other Australian Government entities for the delivery of programs, including for the administration of Medicare and aged care payments, grants and digital health services. There is a risk that service expectations are not appropriately established or monitored. The delivery of Australia’s health services also requires collaboration with state and territory governments, private sector health systems and industry. Effective consultation and coordination with stakeholders is a key risk.

The department is responsible for improving the quality, distribution and planning of the Australian health workforce. An insufficient and poorly distributed health workforce constrains the sector from achieving its objectives, including in implementing the recommendations of the Royal Commission into Aged Care Quality and Safety. A risk exposed through the COVID-19 pandemic is the quality of the department’s coordination of services in an emergency to residential aged care facilities and to Aboriginal and Torres Strait Islander peoples.

Grants administration

Health and Aged Care portfolio entities award and administer thousands of grants and grant-like arrangements annually. Appropriate adherence to legal requirements, including the Commonwealth Grants Rules and Guidelines and the Federation Funding Agreements Framework, is a risk to effective public administration in the portfolio.

Procurement

A key challenge and risk for the department and other portfolio entities is achieving value for money and conducting procurements in accordance with the Australian Government procurement framework. In the Health and Aged Care portfolio, procurement is often characterised by sole or limited provider markets; urgency; substantial usage of Commonwealth Procurement Rule exemptions; and diverse procurement objectives including promoting national self-sufficiency and security. These characteristics heighten the risk that value for money is not achieved or cannot be demonstrated. Audits have highlighted issues with planning, transparency and record-keeping, adherence to the Commonwealth Procurement Rules and contract management.

Regulation

The department and other portfolio entities are responsible for ensuring service providers comply with requirements for funded programs. In the health sector, this includes compliance of health providers with the Medicare Benefits Schedule and Pharmaceutical Benefits Schedule. A key risk in the health and aged care sector is preventing, identifying and addressing health and aged care provider non-compliance, such as incorrect claiming, inappropriate practice and fraud. Recent audits have found inadequate assessment of integrity risks.

Previous performance audit coverage

The ANAO’s performance audit activities involve the independent and objective assessment of all or part of an entity’s operations and administrative support systems. Performance audits may involve multiple entities and examine common aspects of administration or the joint administration of a program or service.

During the performance audit process, the ANAO gathers and analyses the evidence necessary to draw a conclusion on the audit objective. Audit conclusions can be grouped into four categories:

  • unqualified;
  • qualified (largely positive);
  • qualified (partly positive); and
  • adverse.

In the period between 2018–19 to 2022–23 entities within the Health and Aged Care portfolio were included in tabled ANAO performance audits 25 times. The conclusions directed toward entities within this portfolio were as follows:

  • none were unqualified;
  • 17 were qualified (largely positive);
  • six were qualified (partly positive); and
  • two were adverse.

Figure 2 shows the number of audit conclusions for entities within the Health and Aged Care portfolio that were included in ANAO performance audits between 2018–19 and 2022–23 compared with all audits tabled in this period.

Figure 2: Audit conclusions 2018–19 to 2022–23: entities within the Health and Aged Care portfolio compared with all audits tabled

 

Source: ANAO data

The ANAO’s annual audit work program is intended to deliver a mix of performance audits across seven audit activities: governance; service delivery; grants administration; procurement; policy development; regulation and asset management and sustainment. These activities are intended to cover the scope of activities undertaken by the public sector. Each performance audit considers a primary audit activity. Figure 3 shows audit conclusions by primary audit activity for audits involving entities in the Health and Aged Care portfolio.

Figure 3: Audit conclusions by activity for audits involving entities within the Health and Aged Care portfolio, 2018–19 to 2022–23

 

Source: ANAO data.

Performance statements audit

The audit of the 2022–23 Department of Health and Aged Care annual performance statements is being conducted following a request from the Minister for Finance on 16 January 2023, under section 40 of the Public Governance, Performance and Accountability Act 2013. The audit is conducted under section 15 of the Auditor-General Act 1997.

The 2022–23 audit is an initial engagement which increases the inherent risk due to unknowns around the overall quality of performance statements preparation processes. Given the complexity in the department’s operating environment, it is expected this initial engagement will be high risk.

Key risks for the department’s performance statements that the ANAO has highlighted include:

  • the appropriateness of the performance measures and targets;
  • the maturity of performance statements preparation processes; and
  • the overall completeness of the performance information.

Financial statements audits

Overview

Entities within the Health and Aged Care portfolio, and the risk profile of each entity, are shown in Table 1.

Table 1: Health and Aged Care portfolio entities and risk profile

 

Type of entity

Engagement risk

Number of higher risks

Number of moderate risks

Material entities 

Department of Health and Aged Care

Non-corporate

High

5

4

National Blood Authority

Non-corporate

Low

0

1

National Health and Medical Research Council

Non-corporate

Low

0

2

Non-material entities 

Aged Care Quality and Safety Commission

Non-corporate

Low

 

Australian Commission on Safety and Quality in Health Care

Corporate

Low

Australian Digital Health Agency

Corporate

Moderate

Australian Institute of Health and Welfare

Corporate

Low

Australian National Preventive Health Agency

Non-corporate

Low

Australian Radiation Protection and Nuclear Safety Agency

Non-corporate

Low

Australian Sports Commission

Corporate

Moderate

Australian Sports Foundation Limited

Company

Low

Cancer Australia

Non-corporate

Low

Food Standards Australia New Zealand

Corporate

Low

Independent Health and Aged Care Pricing Authority

Corporate

Low

National Health Funding Body

Non-corporate

Low

National Mental Health Commission

Non-corporate

Low

Organ and Tissue Authority

Non-corporate

Low

Professional Services Review

Non-corporate

Low

Sport Integrity Australia

Non-corporate

Low

         

Material entities

Department of Health and Aged Care

The Department of Health and Aged Care is responsible for achieving the Australian Government’s health and ageing policy priorities through evidence-based policy, program administration, research, regulatory activities, and partnerships with other government entities, consumers and stakeholders. The Department of Health and Aged Care’s budgeted personal benefits and subsidies for 2023–24 account for around 82 per cent of total budgeted expenses and 75 per cent of total liabilities. The total budgeted assets are just over $8.8 billion, with 23 per cent attributable to inventories and 14 per cent attributable to receivables, as shown in Figure 4.

Figure 4: Department of Health and Aged Care’s total budgeted financial statements by category ($’000)

 
 

Source: ANAO analysis of 9 May 2023–24 Portfolio Budget Statements.

There are nine key risks for the Department of Health and Aged Care’s 2022–23 financial statements that the ANAO has highlighted for specific audit coverage, including four risks that the ANAO considers potential key audit matters (KAMs).

  • The payment of aged care subsidies as the assessment of residents’ ongoing care needs is performed by the residential aged care provider. Aged care subsidy payments are also calculated by multiple, complex information technology systems and are underpinned by complex regulatory requirements. (KAM – Accuracy of personal benefits and subsidies)
  • The payment of personal benefit health care entitlements as these payments are based on information provided by the payment recipients and may be significantly impacted by delays in recipients providing correct or updated information and/or provision of incorrect information resulting in invalid payments. (KAM – Accuracy of personal benefits and subsidies)
  • The calculation of payables and provisions for outstanding claims for medical services and pharmaceuticals and pharmaceutical services due to the uncertainty associated with claim experience and patterns. (KAM – Valuation of personal benefits provisions)
  • Accounting for transactions related to the National Medical Stockpile due to the nature, size and complexity of the inventory transactions and the judgement applied in determining impairment losses. (KAM – Valuation of Inventories)
  • The management of grant payments due to diversity of the grant programs administered by the department with differing eligibility and reporting requirements.
  • The estimation of subsidy provisions and payables due to the significant professional judgement applied in the selection and application of key assumptions related to the nature of claims, claim patterns and experience.
  • The complexity of pharmaceutical benefit scheme drug recoveries due to the diversity of the risk sharing arrangements entered into with pharmaceutical companies. The risk sharing arrangements differ in respect to the entitlements for recovery and the calculation of the amount recoverable.
  • Accounting for revenue from the Therapeutic Goods Administration activities due to the judgement involved in relation to revenue recognition due to timing issues.
  • Addressing the risk of management override of controls.

National Blood Authority

The National Blood Authority is responsible for securing the supply of safe and affordable blood products, including through national supply arrangements and coordination of best practice standards within agreed funding policies under the national blood arrangements.

The National Blood Authority’s total budgeted assets for 2023–24 are just under $589.4 million, with 20 per cent of these attributable to inventories, as shown in Figure 5.

Figure 5: National Blood Authority’s budgeted financial statements by category ($’000)

 
 

Source: ANAO analysis of 9 May 2023–24 Portfolio Budget Statements.

The key risk for the National Blood Authority’s 2022–23 financial statements that the ANAO has highlighted for specific audit coverage relates to significant judgements and assumptions involved in the valuation of blood and blood products, which are reported as assets.

National Health and Medical Research Council

The National Health and Medical Research Council is the Australian Government’s key entity for managing investment in, and integrity of, health and medical research. The National Health and Medical Research Council is also responsible for developing health advice for the Australian community, health professionals and governments, and for providing advice on ethical practice in health care and in the conduct of health and medical research.

The National Health and Medical Research Council’s total budgeted expenses for 2023–24 are $1.0 billion, with 93 per cent of these expenses attributable to grants, as shown in Figure 6. Budgeted intangible assets are $19.0 million, accounting for around seven per cent of total budgeted assets.

Figure 6: National Health and Medical Research Council’s budgeted financial statements by category ($’000)

 
 

Source: ANAO analysis of 9 May 2023–24 Portfolio Budget Statements.

There are two key risks for the National Health and Medical Research Council’s 2022–23 financial statements that the ANAO has highlighted for specific audit coverage.

  • The management of, and accounting for, a range of grant payments, which constitute a significant expense reported in the National Health and Medical Research Council’s financial statements and are susceptible to fraud.
  • The judgements and assumptions involved in the assessing the impairment of internally generated intangible assets relating to the National Health and Medical Research Council’s new grants management system.