Veterans’ Affairs portfolio

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.

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 2022–23 Portfolio Budget Statements (PBS) for the Veterans’ Affairs portfolio, the aggregated budgeted expenses for 2022–23 total $13.8 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. 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 29 March 2022–23 PBS.

In determining the 2022–23 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, reforms or changes in the operating environment.

The primary risk identified for the portfolio relates to DVA’s ability to provide efficient and effective support, services and information for its clients.

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

Governance

DVA is undertaking a transformation program with the aim of significantly improving the effectiveness and efficiency of veterans’ services. Successful delivery of change programs requires good planning, execution and monitoring.

• 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 in accordance with legislative requirements. As at 30 June 2021, DVA delivered benefits to 263,165 recipients. 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.

It is important for entities to have effective risk management practices for cyber security. This includes conducting assessments of the effectiveness of security controls, security awareness training, and adopting a risk-based approach to prioritise improvements to cyber security. Weaknesses in the implementation and operation of governance and monitoring processes relating to cyber security increase the risk of unauthorised access to systems and data held by entities.

Service delivery

Audit work undertaken has highlighted instances of 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 received funding for an additional 470 staff over four years as part of the 2020–21 budget. 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

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.

Recent audit work identified deficiencies in the Australian War Memorial’s collections management framework.  The establishment of proper processes for planning and procurement are necessary to support the effective delivery of the current $498 million re-development project ‘Our Continuing Story’.

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. 

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

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 liabilities for 2022–23 are $50.3 billion, with personal benefits provisions and health and other provisions representing 52 per cent and 47 per cent, respectively, as shown in (Figure 2). Personal benefits expenses account for 56 per cent of total budgeted expenses, and health care payments account for almost 39 per cent.

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

Source: ANAO analysis of 29 March 2022–23 PBS.

Financial statements

There are three key risks for DVA’s 2021–22 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 expenses 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.

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 assets for 2022–23 are just under $1.9 billion, with property, plant and equipment and land and buildings representing 65 per cent and 30 per cent, respectively, as shown in Figure 3.

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

Source: ANAO analysis of 29 March 2022–23 PBS.

The AWM’s key risks for its 2021–22 financial statements are the valuation of the national collection, due to the complexity in valuing a large collection of unique heritage and cultural items of significant value, and the capitalisation of redevelopment costs in view of the significant expansion of gallery spaces, improvement and modernisation of memorial buildings, and enhancement of visitor experience.