Audit focus

In determining the 2019–20 audit work program, the ANAO considers prior-year audit and other review findings and what these indicate about portfolio risks and areas for improvement, and emerging risks from new investments, reforms or operating environment changes. In the Veterans’ Affairs portfolio, considerations predominantly relate to service delivery, both through internal and outsourced delivery, to ensure veterans are supported through timely and accurate DVA payments and services. This creates specific risks in IT asset management and embedded compliance controls and governance risks to ensure quality standards are met.

Service delivery

Audit work has highlighted some 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 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, as it should also do with internal delivery.

Asset management and sustainment

The department’s significant investment in its Veteran Centric Reform program is seeking to transform DVA to improve the way it supports veterans and Defence personnel. This program of work includes significant IT system changes, which expose the department to both risk and opportunity. Clear planning and close monitoring of progress will be essential to success.

Governance

DVA administers personal benefit payments to veterans in a changing legislative environment, and places a high level of reliance on voluntary disclosure of information by recipients. This exposes the department to the risk of making payments based on incorrect or incomplete information, and requires strong compliance controls and quality assurance.

Portfolio 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. Further information is available from the department’s website at www.dva.gov.au.

DVA, together with the Australian War Memorial (AWM), has responsibility for repatriation, rehabilitation and compensation, war graves and maintaining and developing the AWM. Audit considerations for the Defence portfolio are discussed separately.

In the 2019–20 Portfolio Budget Statements (PBS) for the Veterans’ Affairs portfolio, the aggregated budgeted expenses for 2019–20 total $11.65 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 is 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 PBS 2019–20 Budget related papers pre–machinery-of-government changes announced on 29 May 2019.

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

Material entities 

Department of Veterans’ Affairs

Non-corporate

Moderate

3

2

Australian War Memorial

Corporate

Low

0

1

Other audit engagements (including Auditor-General Act 1997 section 20 engagements)

Defence Service Homes Insurance Scheme

     

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 legislation; 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 2019–20 are just under $11.6 billion, with personal benefits and healthcare payments representing 55 per cent and 40 per cent, respectively, as shown in Figure 2.

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

 

Source: ANAO analysis of PBS 2019–20 Budget related papers pre–machinery-of-government changes announced on 29 May 2019.

The five key risks for DVA’s 2018–19 financial statements that the ANAO has highlighted for specific audit coverage in 2019–20, including those that the ANAO considers potential Key Audit Matters (KAMs), are the:

  • exercising of judgements involved in the assumptions and calculations underpinning the actuarial assessment of the military compensation provision (KAM – Valuation of personal benefit and healthcare provisions);
  • accuracy of personal benefit and healthcare payments based on a complex legislative environment and information provided by veterans and their dependants;
  • continuing effectiveness of the IT control environment as the department’s financial management information system, human resources management information system, and personal benefits and healthcare systems transition to Services Australia during the year under new shared services arrangements;
  • valuation and reporting of non-financial assets, including the assessment of any indicators of impairment of legacy IT systems as a result of the arrangements to transition to Services Australia’s systems; and
  • impact of legislative changes involving digital readiness, and the introduction of non-liability healthcare provisions on claims processing, assessment and payment arrangements.

Australian War Memorial

The Australian War Memorial (AWM) is responsible for maintaining and developing the national memorial to Australians who have lost their lives in wars or warlike operations; developing, maintaining and exhibiting a national collection of historical material; and conducting and fostering research into Australian military history.

The AWM’s total budgeted expenses for 2019–20 are just under $58 million, with employee benefits and supplier expenses representing 45 per cent and 35 per cent, respectively, as shown in Figure 3.

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

 

Source: ANAO analysis of PBS 2019–20 Budget related papers pre–machinery-of-government changes announced on 29 May 2019.

The AWM’s key risk for its 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 performance audits

In progress performance audits