Read an overview of the Health portfolio including details of key activities, expenses and staffing levels. The audit focus section outlines the influences on the ANAO’s allocation of financial audit resources and the selection of performance audit topics and other activities. Also included is a list of material and non-material entities within the portfolio with their corresponding risk profile and key risks. Any risks that are considered key audit matters (KAMs) by the ANAO are separately identified.

Portfolio overview

The Health portfolio covers a range of policy and program areas aimed at achieving better health and ageing outcomes for Australians; supporting equitable, efficient and high-quality health and aged care systems; and improving opportunities for better outcomes in sport.

The Department of Health is the lead entity in the portfolio and is responsible for achieving the Australian Government’s health priorities through the development of policy; administering programs and services, including Medicare, the Pharmaceutical Benefits Scheme and aged care; managing health expenditure; progressing reforms to Australia’s health system; and undertaking regulatory and compliance activities. Further information is available from the department’s website at www.health.gov.au.

In addition to the Department of Health, there are 18 entities within the portfolio that 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, food safety and hospital pricing.

In the 2018–19 Portfolio Budget Statements (PBS) for the Health portfolio, the aggregated budgeted expenses for 2018–19 total $72.83 billion. The PBS contain budgets for those entities in the general government sector (GGS) that receive appropriations directly or indirectly through the 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 represents the largest proportion of the portfolio’s expenses, and administered expenses are the most material component, representing 97% of the entire portfolio’s expenses.

Figure 1: Health portfolio — total expenses and average staffing level by entity

Bar chart showing the average staffing level and expenses for entities in the portfolio.

Source: ANAO analysis of 2018–19 PBS Budget related papers.

Audit focus

The environment in which the Department of Health and the other entities within the portfolio operate involves a range of policy issues, including an ageing population; increasing consumer expectations around health services; the prevalence of complex and chronic health conditions; the continued growth in government health expenditure, including the costs of implementing reforms; and the increasing globalisation of health risks.

Specific characteristics and risks within the portfolio that influence the ANAO’s allocation of financial audit resources and the annual selection of performance audit topics and other activities include the:

  • quality and sustainability in the aged care sector to address the needs of Australia’s ageing population;
  • ongoing delivery of the National Digital Health Strategy by the Australian Digital Health Agency and its role in the management of the My Health Record system and other technology driving change in health care;
  • distribution of roles and responsibilities in the delivery of Australia’s health services, including programs to address issues such as illicit drug use, obesity and alcoholism. This necessitates collaboration between the Australian Government, the state and territory jurisdictions and a range of stakeholders in the private sector;
  • implementation of reforms designed to improve the sustainability of Australia’s health system;
  • active collection and analysis of data to support the development of evidence-based policy advice to government;
  • high volume of health-related benefits processed by the Department of Human Services on behalf of the Department of Health using ageing IT systems, and the potential impact of the digital reform agenda;
  • importance of well-targeted licensing, regulation and compliance activities to help support and protect the integrity of the health system;
  • maintenance of financial management and reporting arrangements for grant payments; and
  • valuation methodology used to estimate the government’s liability under the medical indemnity program and the valuation of blood and blood products.

Considering the identified risks, expenditure and diversity of the portfolio, the ANAO has planned four performance audits and one assurance review for 2018–19.

Financial statements audits and other audit engagements

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

Table 1: Health portfolio entities and risk profile

 

Type of entity

Risk of material misstatement

Number of higher risks

Number of moderate risks

Material entities  

Department of Health

Non-corporate

Moderate

3

3

Australian Sports Commission

Corporate

Low

0

2

National Blood Authority

Non-corporate

Low

0

2

National Health and Medical Research Council

Non-corporate

Low

1

2

Non-material entities  

Australian Aged Care Quality Agency

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 Anti-Doping Authority

Non-corporate

Low

Australian Sports Foundation Limited

Company

Low

Cancer Australia

Non-corporate

Low

Food Standards Australia New Zealand

Corporate

Low

 

Independent Hospital Pricing Authority

Non-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 Scheme

Non-corporate

Low

     

Material entities

Department of Health

The Department of Health is responsible for achieving the Australian Government’s health and ageing priorities through evidence-based policy advice, program administration, research, regulatory activities, and partnerships with other government entities, consumers and stakeholders.

The department’s total budgeted expenses for 2018–19 are just over $69.65 billion, with 66 per cent of these expenses attributable to personal benefits payments, as shown in Figure 2.

Figure 2: Department of Health’s total budgeted expenses by category ($’000)

Source: ANAO analysis of 2018–19 PBS Budget related papers.

The six key risks for the Department of Health’s financial statements that have been highlighted for specific audit coverage, including those that are considered key audit matters (KAMs) by the ANAO, are the:

  • payment of aged care subsidies to nursing home providers based on Aged Care Funding Instrument assessments prepared by the same providers, which involve judgements regarding the level of care (KAM – Accuracy of payments of personal benefits and subsidies);
  • high volume of transactions processed by the Department of Human Services on behalf of the Department of Health using ageing IT systems for personal benefit payments, including the Medicare Benefits Scheme, the Pharmaceutical Benefits Scheme and the private health insurance rebate (KAM – Accuracy of payments of personal benefits and subsidies);
  • estimation of revenue under the Therapeutic Goods Act 1989, which involves judgements and assumptions related to the assessment of application, assessment and inspection fees, and associated exemptions;
  • complexity and judgements involved in calculating Pharmaceutical Benefits Scheme drug recovery revenue using data sourced from the Department of Human Services (KAM – Completeness and accuracy of Pharmaceutical Benefits Scheme recoveries);
  • estimation of outstanding claims under medical indemnity schemes, including midwife professional indemnity schemes, involve complex assumptions and judgements (KAM – Valuation of personal benefits provisions and subsidies provisions); and
  • management of, and accounting for, a range of grant payments maintained through multiple systems and arrangements (KAM – Accuracy of payments of personal benefits and subsidies).

Australian Sports Commission

The Australian Sports Commission (ASC) is responsible for leading and supporting the development of a cohesive and effective sport sector that enables more people to play sport, and enables Australian athletes and teams to succeed on the world stage.

The ASC’s total budgeted expenses for 2018–19 are just over $346 million, with 61 per cent of these expenses attributable to grant payments, as shown in Figure 3.

Figure 3: Australian Sports Commission’s total budgeted expenses by category ($’000)

Source: ANAO analysis of 2018–19 PBS Budget related papers.

The two key risks for the ASC’s financial statements are the:

  • judgements and assumptions involved in the valuation and reporting of land and buildings, and property, plant and equipment, and potential liabilities resulting from potential changes to the ASC’s operations and business investment strategy; and
  • payments of grants that involve manual intervention and are made in accordance with agreed terms and conditions.

National Blood Authority

The National Blood Authority (NBA) 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 NBA’s total budgeted expenses for 2018–19 are just over $1.26 billion, with 99 per cent of these expenses attributable to supplier expenses and grants, as shown in Figure 4.

Figure 4: National Blood Authority’s total budgeted expenses by category ($’000)

Source: ANAO analysis of 2018–19 PBS Budget related papers.

The two key risks for the NBA’s financial statements are the:

  • judgements and assumptions involved in the valuation of blood and blood products reported as assets; and
  • employee provisions, due to judgements and assumptions involved and the issues identified in the prior year related to the accuracy of payroll data.

National Health and Medical Research Council

The National Health and Medical Research Council (NHMRC) is the Australian Government’s key entity for managing investment in, and integrity of, health and medical research. NHMRC 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.

NHMRC’s total budgeted expenses for 2018–19 are just under $945 million, with 94 per cent of these expenses attributable to grants, as shown in Figure 5.

Figure 5: National Health and Medical Research Council’s total budgeted expenses by category ($’000)

Source: ANAO analysis of 2018–19 PBS Budget related papers.

The three key risks for NHMRC’s financial statements are the:

  • management of, and accounting for, a range of grants payments that constitute a significant expense reported in NHMRC’s financial statements and are susceptible to fraud;
  • judgements and assumptions involved in the management of non-financial and intangible assets; and
  • timely, complete and accurate recognition of revenue, due to agreements with other entities that require judgements and assessments of milestones.