Health, Disability and Ageing | Australian National Audit Office (ANAO)

Portfolio overview

The Health, Disability and Ageing Portfolio is responsible for improving the health and wellbeing of Australians in the areas of health, disability and aged care. In addition to the Department of Health, Disability and Ageing, the portfolio includes 18 entities and five statutory office holders.

The Department of Health, Disability and Ageing is the lead entity in the portfolio. It is specifically responsible for achieving the Australian Government’s health outcomes in the areas of health system policy, design and innovation; health access and support services; services and policy for the National Disability Insurance Scheme and foundational supports; individual health benefits; services and policy for carers; 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.

In the 2026–27 Portfolio Budget Statements (PBS) for the Health, Disability and Ageing portfolio – excluding the NDIA and NDIS Commission – the aggregated budgeted expenses for 2026–27 total $177.3 billion. Audit considerations for portfolio entity’s NDIA and the NDIS Commission are discussed separately in the National Disability Insurance Scheme overview.

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 – excluding the NDIA and NDIS Commission – are shown in Figure 1. The Department of Health, Disability and Ageing represents the largest proportion of portfolio expenses, and administered expenses of the Department are the most material component, representing 98 per cent of the entire portfolio’s expenses.

Figure 1: Health, Disability and Ageing portfolio – total expenses and average staffing level by entity

Source: ANAO analysis of 2026–27 Portfolio Budget Statements.

Audit focus

In determining the 2026–27 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 by the ANAO for the portfolio relate to achieving and demonstrating value for money in the delivery of health, disability and aged care programs during a period of significant reform.

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 health, disability and aged care programs, including large and complex payment arrangements, which could undermine the integrity of financial reporting and public confidence. 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, including annual performance statements that do not include sufficient performance information about key programs; insufficient data to demonstrate achievement of outcomes in major programs; a lack of clearly defined performance measures and methodologies; and limits in assurance over the completeness and lack of assurance over the 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 to the health and ageing portfolio. The Australian Centre for Disease Control was established as a statutory authority on 1 January 2026, at which time relevant functions transferred from the department to the new entity. The Australian National Preventive Health Agency was abolished on 1 January 2026. Machinery of government changes require close management to ensure business continuity; 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 and the Aged Care Quality and Safety Commission, for the delivery of and assurance over programs, including for Medicare, the Pharmaceutical Benefits Scheme (PBS), grants, residential and in home aged care, 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. A key risk is the department’s coordination with other Australian Government agencies and jurisdictions in developing a strategic whole-of-government approach to the care and support economy, including in relation to pricing under the new Aged Care Act that commenced on 1 November 2025.

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 portfolio, including for the implementation of the new Aged Care Act. The 2024–25 Federal Budget included $1.2 billion over five years (from 2023–24) for required digital systems. In March 2026 the Digital Transformation Agency gave two tier one aged care ICT projects with a combined budget of over $900 million, delivery confidence assessments of medium-high (compared to low and medium-low in 2025).

There are risks associated with new technologies. A single assessment system for aged care commenced in December 2025 using a rules-based algorithm to determine eligibility, creating risks to accurate assessments of older persons’ needs. The increasing use of artificial intelligence in entities’ business processes and by external actors poses risks associated with data security, privacy, benefits integrity and algorithmic bias.

Grants administration

Health, disability and ageing portfolio entities award and administer thousands of grants and grant-like arrangements annually across a diverse range of programs, including nearly $2 billion to Primary Health Networks to support primary and mental health care. 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.

The department relies on third parties to deliver essential health programs, including Medicare urgent care clinics, mental health clinics, in-home and residential aged care and digital mental health. Recent audits have identified risks associated with the department’s level of assurance over the quality of program delivery by third parties.

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 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 program requirements. The portfolio includes standards-setters such as Food Standards Australia New Zealand. There are risks associated with effective stakeholder consultation; regulatory capture; maintaining robust investigative practices; effectively managing potential fraud; the transparency of regulator performance; managing regulatory burden and supporting sector sustainability; and effective coordination between the department and independent regulators.

Recent Royal Commissions into aged care quality and safety (2021) and violence, abuse, neglect and exploitation of people with disability (2023) have resulted in a period of significant sectoral reform. There are risks associated with embedding changes to regulatory policy (for the department) and regulatory practice (for entities in the portfolio with regulatory functions such as the department and the Aged Care Quality and Safety 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 ANAO has identified inventory-related risks for the department, National Blood Authority and Australian Hearing Services , including in relation to inventory valuation and IT general controls for the National Medical Stockpile. In the National Blood Authority, the geographical spread of blood inventory and the reliance on service providers to manage inventory holdings presents risks to secure supply.

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 2021–22 and 2025–26 entities within the Health, Disability and Ageing portfolio were included in tabled ANAO performance audits 24 times. The conclusions directed toward entities within this portfolio were as follows:

none were unqualified;
13 were qualified (largely positive);
nine were qualified (partly positive); and
two were adverse.

Figure 2 shows the number of audit conclusions for entities within the Health, Disability and Ageing portfolio that were included in ANAO performance audits between 2021–22 and 2025–26 compared with all audits tabled in this period.

Figure 2: Audit conclusions 2021–22 to 2025–26: entities within the Health, Disability and Ageing

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, Disability and Ageing portfolio.

Figure 3: Audit conclusions by activity for audits involving entities within the Health, Disability and Ageing portfolio, 2021–22 to 2025–26

Source: ANAO data.

Performance statements audit

The audit of the 2025–26 Department of Health, Disability and Ageing annual performance statements is being conducted following a request from the Minister for Finance on 29 September 2025 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 Department of Health, Disability and Ageing is in its fourth year of inclusion in the annual performance statements audit program and the engagement risk has been assessed as high.

This engagement risk rating reflects the results from the 2024–25 performance statements audit, including a qualified audit conclusion for Outcome 3 Ageing and Aged Care and performance measures 1.2A and 1.2C for mental health, unresolved significant findings, as well as: potential weaknesses in alignment with key activities and program objectives; performance measures being based on a range of complex activities with data reliance from different systems and third parties; and a complex operating environment impacted by the recent machinery of government changes.

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

the appropriateness and completeness of key activities, performance measures and targets;
design and construct of performance measures and targets; and
the maturity of performance statements preparation processes.

Financial statements audits

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

	Type of entity	Engagement risk	Number of higher risks	Number of moderate risks
Material entities
Department of Health, Disability and Ageing	Non-corporate	High	4	6
National Blood Authority	Non-corporate	Low	0	3
National Health and Medical Research Council	Non-corporate	Medium	0	3
Australian Hearing Services (Hearing Australia)	Corporate	Low	2	0
Non-material entities
Aged Care Quality and Safety Commission	Non-corporate	Low
Australian Centre for Disease Control	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 Radiation Protection and Nuclear Safety Agency	Non-corporate	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
Office of the Inspector-General of Aged Care	Non-corporate	Low
Organ and Tissue Authority	Non-corporate	Low
Professional Services Review	Non-corporate	Low

Material entities

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 2026–27 account for around 63 per cent of total budgeted expenses and 75 per cent of total liabilities. The total budgeted assets are $8.3 billion, 40 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 2026–27 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 2025–26 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 valuation of indemnity provisions due to the significant judgments relating to the amount and timing of future claims;
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;
The impact of the recent machinery of Government change in May 2025, removing the Sport related functions, gaining disability policy, including the National Disability Insurance Scheme (NDIS) and Foundational Supports, and the creation of the Australian Centre for Disease Control; and
Addressing the risk of ineffective compliance programs supporting the major administered payments.

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 2026–27 are $699.1 million, with 21 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 2026–27 Portfolio Budget Statements.

There are three key risks for the National Blood Authority’s 2025–26 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 2026–27 are $1.1 billion, with 93 per cent of these expenses attributable to grants, as shown in Figure 6. Budgeted intangible assets are $14.1 million, accounting for around four 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 2026–27 Portfolio Budget Statements.

There are three key risks for the National Health and Medical Research Council’s 2025–26 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 assessing the impairment of internally generated intangible assets relating to the National Health and Medical Research Council’s grants management system.
Transition to a new Financial Management Information 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 revenue for 2024–25 was $285.7 million, with 92 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 2024–25 annual report.

There are two key risks for Hearing Australia 2025–26 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 financial management system, Microsoft Dynamics.