Health, Disability and Ageing portfolio

In determining the 2025–26 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 ANAO had regard to the final report of the capability review of the Department of Health, Disability and Ageing that was endorsed by the Australian Public Service Commissioner in July 2023. 

The primary risks identified by the ANAO for the portfolio relate to establishing effective governance — including adherence to legal requirements, rules and frameworks — while delivering health, disability and aged care programs.

Specific risks in the Health, Disability and Ageing portfolio relate to governance, service delivery, grants administration, procurement, regulation, and asset management and sustainment.

Governance

There is a risk within the department of legislative non-compliance in its administration of approximately 60 health and aged care programs.  Previous audits have identified that there is a risk within the department of non-compliance with public sector rules frameworks and finance law. 

Recent audits in the department have highlighted shortfalls in evaluation, performance measurement, and performance reporting. There are risks that significant investments in delivery models for primary care, such as through urgent care clinics and Primary Health Networks, are implemented with limited evaluation.  There have been insufficient data to demonstrate achievement of outcomes in major programs ; annual performance statements that do not include sufficient performance information about key programs; a lack of clearly defined performance measures and methodologies; and limits in assurance over the completeness and accuracy of third-party data, upon which its annual performance statements are reliant. 

The portfolio was subject to a machinery of government change on 13 May 2025, which transferred responsibility for disability and carers to the Health portfolio. Embedding robust governance for these new functions will need to be a focus. Machinery of government changes require close management to ensure continuity of business, management of risk and cost and support to the government, employees and stakeholders.

Service delivery

The department is reliant on other Australian Government entities, such as Services Australia, for the delivery of programs, including for the administration of Medicare and aged care payments, the Pharmaceutical Benefits Scheme, grants and digital health services. There are risks associated with the coordination of activities. 

The department jointly administers the public health system with the states and territories. The delivery of Australia’s health services 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 has responsibilities for supporting a skilled, diverse, well-distributed and sustainable primary care; aged care; mental health; regional, rural and remote; and First Nations 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 key risk is the department’s engagement and coordination with other Australian Government agencies and sectors in developing a strategic whole-of-government approach to the care and support workforce. 

In delivering its services the department is responsible for accurately calculating refunds, entitlements and subsidies. There are risks to payment accuracy from multiple information technology systems, manual processes, reliance on information provided by recipients and complex regulatory requirements. 

Information and communications technologies (ICT) maintenance and enhancements are critical for effective service delivery in the department, including for the implementation of the new Aged Care Act that commenced on 1 July 2025. The 2024–25 Federal Budget included $1.2 billion over five years (from 2023–24) for required digital systems. In February 2024, the Digital Transformation Agency gave three aged care ICT projects low to medium delivery confidence assessments, and identified issues and risks that had not been addressed. 

Grants administration

Health, Disability and Ageing Care portfolio entities award and administer thousands of grants and grant-like arrangements annually across a diverse range of grant programs. Appropriate adherence to legal requirements, including the Commonwealth Grants Rules and Principles, the Federation Funding Agreements Framework, and the Commonwealth Fraud and Corruption Control Framework, is a risk to effective public administration in the portfolio. 

Procurement

A key risk for the department and portfolio entities is achieving value for money and conducting procurements in accordance with the Commonwealth Procurement Rules. In the Health, Disability and Ageing Care portfolio, procurement is often characterised by sole or limited provider markets; urgency; substantial usage of Commonwealth Procurement Rules 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 adherence to the Commonwealth Procurement Rules and quality of 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, and of aged care providers with relevant legislation. There are risks associated with effective coordination between the department and independent regulators; regulatory capture; and maintaining robust investigation practices. 

A key risk in the health, disability and aged care sectors is preventing, identifying and addressing health, disability and aged care provider non-compliance, such as incorrect claiming, inappropriate practice and fraud. There are risks to maintaining effective regulation in a period of significant sector reforms for the department and portfolio agencies such as the Aged Care Quality and Safety Commission and the NDIS Quality and Safeguards Commission. 

Asset management and sustainment

A risk for the department and portfolio entities relates to the management of inventories and other assets, including intangible assets. The 2023–24 financial statements audit included moderate findings related to the department’s inventory and other asset management, including a need to strengthen its controls around stock taking, capitalisation, impairment and valuation processes. 

Overview

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

Table 1: Health, Disability and Ageing portfolio entities and risk profile

Department of Health, Disability and Ageing

The Department of Health, Disability and Ageing 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, Disability and Ageing’s budgeted personal benefits and subsidies for 2025–26 account for around 83 per cent of total budgeted expenses and 70 per cent of total liabilities. The total budgeted assets are $11.3 billion, 21 per cent attributable to receivables, as shown in Figure 4.

Figure 4: Department of Health, Disability and Ageing’s total budgeted financial statements by category ($’000)

Source: ANAO analysis of 2025–26 Portfolio Budget Statements.

The Department of Health, Disability and Ageing has been classified by the ANAO as a high risk engagement. This engagement risk rating reflects the number and quantum of key areas of financial statements risk that will be a focus of the audit, as well as the: complexity of the environment in which the Department operates; the broad range and complex nature of the programs administered; and the high number of enterprise risks that impact the financial statements.

There are ten key risks for the Department of Health, Disability and Ageing’s 2024–25 financial statements that the ANAO has highlighted for specific audit coverage, including three risks that the ANAO considers potential key audit matters (KAMs).

• The payment of personal benefit health care entitlements 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 benefit health care entitlements)
• 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 benefit provisions)
• The payment of aged care subsidies are calculated by multiple, complex information technology systems and are underpinned by complex regulatory requirements. (KAM – Accuracy of aged care subsidies)
• The governance of legal and other matters having implications on the financial statements. Weaknesses in the governance relating to the assessment and reporting of legal matters increases the risk that the financial statements are materially misstated and/or payments made or receipts collected on behalf of the government are not supported by legislative authority.
• 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.
• 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.
• 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 2025–26 $660.9 million, with 22 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 2025–26 Portfolio Budget Statements.

There are three key risks for the National Blood Authority’s 2024–25 financial statements that the ANAO has highlighted for specific audit coverage.

• The significant judgements and assumptions involved in the valuation of blood and blood products, which are reported as assets.
• The accuracy of the reported expenses for the supply of blood and blood products and services, under the National Blood Agreement.
• The management of the National Blood Authority’s special account, the National Blood Account.

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 2025–26 are $1.1 billion, with 94 per cent of these expenses attributable to grants, as shown in Figure 6. Budgeted intangible assets are $16.5 million, accounting for around five 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 2025–26 Portfolio Budget Statements.

There are two key risks for the National Health and Medical Research Council’s 2024–25 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.

Australian Hearing Services

Australian Hearing Services (Hearing Australia) is a corporate Commonwealth entity established under the Australian Hearing Services Act 1991. Hearing Australia is responsible for the provision of research and hearing services through a network of 189 hearing centres and community visits. Services provided include subsidised hearing services to eligible clients under the Australian Government’s Hearing Services Program.

Hearing Australia’s total actual revenue for 2023–24 was $257.6 million, with 91 per cent attributable to revenue from contracts with customers, as shown in Figure 5.

Figure 7: Australian Hearing Services’ actual financial statements by category ($’000)

Source: ANAO analysis of Australian Hearing Services 2023–24 annual report.

The key risks for Hearing Australia 2024–25 financial statements that the ANAO has highlighted for specific audit coverage are:

• The revenue recognition from contracts with customers due to complexity and significant judgement applied by management in determining these balances.
• Completeness and accuracy of transactional data within the recently implemented financial management system, Microsoft Dynamics.