Entity overview

The responsibility for veterans’ affairs programs and policy resides within the Defence portfolio, and includes support for veterans and war widows and widowers, serving and former members of the Australian Defence Force, certain Australian Federal Police officers with overseas service, and Australian participants in British nuclear tests and their dependants.

The Department of Veterans’ Affairs (DVA) is the primary service delivery entity with responsibility for implementing programs to assist the veteran and ex-service communities, including repatriation, rehabilitation and compensation, and war graves. Further information is available from the department’s website at dva.gov.au.

The Australian War Memorial (AWM), is a separate material entity with responsibility for repatriation, rehabilitation and compensation, war graves and maintaining and developing the memorial and its archive.

Audit considerations for the Defence portfolio are discussed separately.

In the 2021–22 Portfolio Budget Statements (PBS) for the Veterans’ Affairs portfolio, the aggregated budgeted expenses for 2021–22 total $13.76 billion. The PBS contain budgets for those entities in the general government sector (GGS) that receive appropriations directly or indirectly through the annual appropriation Aacts.

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. DVA represents the largest proportion of the portfolio’s expenses, and of this, administered expenses are the most material component, representing 96 per cent of the entire portfolio’s expenses.

Figure 1: Veterans’ Affairs portfolio – total expenses and average staffing level by entity

Source: ANAO analysis of 2021–22 PBS.

Audit focus

In determining the 2021–22 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, and reforms or changes in the operating environment.

Specific risks relate to governance, service delivery, asset management, and sustainment and financial management.

Governance

DVA is currently undertaking the most comprehensive set of reforms in decades, with the aim of significantly improving the effectiveness and efficiency of veterans’ services. Recent audit work identified that monitoring and evaluation of reforms has been partially effective, with a need for more systematic monitoring and reporting of progress against all commitments, including savings needed.

DVA is responsible for the administration of personal benefit payments to more than 225,500 veterans and more than 100,000 dependants in accordance with legislative requirements. The high level of reliance on voluntary disclosure of information by recipients exposes the department to the risk that payments are made based on incorrect or incomplete information. Effective management of claims requires strong compliance controls and quality assurance processes.

Service delivery

Audit work undertaken has highlighted instances of excessively long periods to process claims from veterans and their dependants, as well as a lack of internal reporting on efficiency. This may indicate inefficient work practices and inadequate management oversight and action when service standards are not being met.

DVA’s reliance on the Department of Defence to provide data to support claims requires active management to address the risk that decisions are delayed when required data is not obtained in a timely manner.

Outsourcing service delivery, and use of information technology (IT) systems in another agency such as Services Australia, does not reduce accountability. DVA needs to ensure that service and quality control expectations are agreed and maintained, and that its business is appropriately prioritised to provide assurance that policy objectives are being met.

Asset management and sustainment

The department’s significant investment in a program of veteran-centric reform is seeking to transform DVA to improve the way it supports veterans and Defence personnel. This program of work includes significant IT system changes involving both risk and opportunity. Recent audit work identified weaknesses in planning, with decision-makers not fully informed about budget and operational pressures likely to be created by reform.

Any automated payment system creates specific risks in IT asset management and embedded compliance controls, as well as governance risks to ensure quality standards are met.

The collection held by the Australian War Memorial is an asset of substantial financial, historical, academic and cultural value to the Australian people. Recent audit work identified deficiencies in the Australian War Memorial’s collections management framework.

Financial management

The reliable measurement and monitoring of assumptions and calculations underpinning the assessment of military compensation provision, including assumptions relating to future trends in medical costs, permanent incapacity, and inflation rates, are critical to Defence and DVA, considering the impact of rehabilitation on the overall performance of the compensation scheme and the financial sustainability of the provision.

 


Financial statements and other audit engagements

Overview

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

Table 1: Veterans’ Affairs portfolio entities and risk profile

 

Type of entity

Risk of material misstatement

Number of higher risks

Number of moderate risks

Financial statements — material entities 

Department of Veterans’ Affairs

Non-corporate

Moderate

3

1

Australian War Memorial

Corporate

Low

1

0

Other audit engagements (including Auditor-General Act 1997 sections 15 and 20 engagements)

Defence Service Homes Insurance Scheme

Department of Veterans’ Affairs performance statements audit

     

Material entities

Department of Veterans’ Affairs

The Department of Veterans’ Affairs (DVA) is responsible for developing and implementing programs to assist the veteran and ex-service communities. This includes granting pensions, allowances and other benefits, and providing treatment under the Veterans’ Entitlements Act 1986; the administration of benefits and arrangements under the Military Rehabilitation and Compensation Act 2004; administering the Defence Service Homes Act 1918 and the War Graves Act 1980; and conducting commemorative programs to acknowledge the service and sacrifice of Australian servicemen and women.

DVA’s total budgeted expenses for 2021–22 are $13.7 billion, with personal benefits and healthcare payments representing 55.6 per cent and 43.7 per cent, respectively, as shown in (Figure 2).

Figure 2: Department of Veterans’ Affairs’ total budgeted expenses by category ($’000)

Note a: Depreciation and amortisation, insurance claims, grants, and payments to corporate entities

Source: ANAO analysis of 2021–22 PBS.

Financial statements

There are three key risks for DVA’s 2020–21 financial statements that the ANAO has highlighted for specific audit coverage, including one risk that the ANAO considers a potential key audit matter (KAM).

  • The judgements involved in the selection of data, assumptions and calculations underpinning the actuarial assessment of the personal benefits and health care (military compensation) provision balances. (KAM – Valuation of personal benefit and healthcare provisions)
  • The accuracy of personal benefit expense based on a complex legislative environment and information provided by veterans and their dependants.
  • The accuracy of healthcare expenses based on a complex legislative environment and information provided by veterans and their dependants.

Performance statements audit

  • The ANAO will audit DVA’s 2020–21 annual performance statements as a continuation of the Minister for Finance’s August 2019 request under section 40 of the Public Governance, Performance and Accountability Act 2013 to conduct a pilot audit. The audit will be conducted under section 15 of the Auditor-General Act 1997.
  • The ANAO has highlighted two key risks for DVA’s performance statements:
    • completeness and accuracy of the results in the performance statement where reporting against performance measures is reliant on the receipt of information from third parties; and
    • the retention of records to support the reported results of performance criteria.

Australian War Memorial

The Australian War Memorial (AWM) has responsibility for commemorating, interpreting and understanding the Australian experience of war and its enduring impact through maintaining and developing the national memorial and its collection, and exhibiting historical material, and undertaking commemorative ceremonies and research.

The AWM’s total budgeted expenses for 2021–22 are $57.4 million, with employee benefits and supplier expenses representing 49 per cent and 28 per cent, respectively, as shown in (Figure 3).

Figure 3: Australian War Memorial’s total budgeted expenses by category ($’000)

Source: ANAO analysis of 2021–22 PBS.

The AWM’s key risk for its 2020–21 financial statements is the valuation of the national collection, due to the complexity in valuing a large collection of unique heritage and cultural items of significant value.

Potential audits

Recently tabled