Entity overview

The Veterans’ Affairs Portfolio is responsible for developing government policy and implementing programs to fulfil Australia’s obligations to veterans, war widows or widowers, families, serving and former members of the Australian Defence Force, certain Australian Federal Police officers with overseas service and Australian participants in British nuclear tests in Australia and their families and dependents.

The Department of Veterans’ Affairs (DVA) is responsible for supporting the wellbeing of those who serve or have served in the defence of our nation and their families, through the development and implementation of programs that assist the veteran and ex-service communities. The programs and services can be broadly grouped into three main areas: care, compensation and commemoration. Further information is available from the department’s website.

The Australian War Memorial (AWM) is responsible for maintaining and developing the national memorial to Australians who have died in wars or warlike operations. It also develops, maintains and exhibits a national collection of historical material and conducts research into Australian military history.

DVA and the AWM are formally part of the Defence Portfolio.

In the 2023–24 Portfolio Budget Statements (PBS) for the Veterans’ Affairs portfolio, the aggregated budgeted expenses for 2023–24 total $14.3 billion. 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 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 95 per cent of the entire portfolio’s expenses.

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

Portfolio expenses and staffing level

Source: ANAO analysis of 9 May 2023–24 Portfolio Budget Statements.

Audit focus

In determining the 2023–24 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 for the portfolio relate to DVA’s ability to resolve the backlog of claims for compensation while maintaining decision making quality and implementing legislative, policy and program changes arising out of the interim report recommendations of the Royal Commission into Defence and Veteran Suicide.

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

Governance

DVA is undertaking a modernisation program with the aim of significantly improving the effectiveness and efficiency of veterans’ services, including legislative reform in response to the interim report recommendations of the Royal Commission into Defence and Veteran Suicide. Successful delivery of change programs requires sound planning, consultation, 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. 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, particularly with the large number of new participants as DVA reduces the backlog of compensation claims awaiting assessment.

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. In the October 2022-23 Budget, DVA received funding for 500 additional frontline staff to address the claims backlog, which was to respond to the recommendations of the Royal Commission into Defence and Veteran Suicide. In the 2023—24 budget, DVA received $64.1 million to maintain its workforce for a further year to meet its claims processing requirements.

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. Robust governance arrangements will be required as DVA and the Department of Defence develop and embed the improved information sharing arrangements recommended in the Interim Report of the Royal Commission into Defence and Veteran Suicide.

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.

Establishing and implementing effective monitoring and reporting arrangements to ensure value for money and achievement of project outcomes will remain important as the AWM progresses its large-scale $550 million re-development project.

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. In the 2023—24 budget, DVA received $254.1 million over four years to modernise and maintain its ICT systems, including the replacement of the system that facilitates payments to veterans, families and service providers.

The establishment of proper processes for planning and procurement are necessary to support the effective delivery of the new galleries and collections within the re-development project.

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.

Performance statements audit

The audit of the 2021–22 DVA annual performance statements will be conducted following a request from the Minister for Finance on 9 December 2021, under section 40 of the Public Governance, Performance and Accountability Act 2013. The audit will be conducted under section 15 of the Auditor-General Act 1997.

The ANAO has highlighted the following key risks for DVA’s performance statements:

  • prior year qualification relating to 2 of the 43 performance measures in the DVA 2020–21 Annual Performance Statements, with respect to insufficient evidence to support the result for these two measures;
  • maintaining adequate workpapers and documentary evidence to support the reported result and key disclosures in the annual performance statements; and
  • maintaining adequate IT general controls for systems used to support the preparation of the annual performance statements.

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 2018-19 to 2022-23 entities within the Veterans’ Affairs portfolio were included in tabled ANAO performance audits 3 times. The conclusions directed toward entities within this portfolio were as follows:

  • none were unqualified;
  • three were qualified (largely positive);
  • none were qualified (partly positive); and
  • none were adverse.

Figure 2 shows the number of audit conclusions for entities within the Veterans’ Affairs portfolio that were included in ANAO performance audits between 2018-19 and 2022–23 compared with all audits tabled in this period.

Figure 2: Audit conclusions 2018–19 and 2022–23: entities within Veterans’ Affairs portfolio compared with all audits tabled

 

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 Veterans’ Affairs portfolio.

Figure 3: Audit conclusions by activity for audits involving entities within Veterans’ Affairs portfolio, 2018–19 to 2022–23

 

Source: ANAO data.

Performance statements audit

The audit of the 2022–23 Department of Veterans’ Affairs (DVA) annual performance statements is being conducted following a request from the Minister for Finance on 16 January 2023, 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.

DVA has been included in the assurance audit program for the audit of annual performance statements since the commencement of the pilot in 2019-20. There is one carried over category A finding and one carried over moderate finding reported as a result of the 2022–23 interim audit procedures, relating to weaknesses in record keeping practices that support the reporting of reliable and verifiable results and quality assurance processes to support the timely delivery of high quality performance statements.

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

  • overall completeness of the performance information and that the performance statements accurately present DVA’s performance in achieving its purposes in the reporting period;
  • appropriateness of the performance measures and targets; and
  • the maturity of the performance statements preparation processes.

Financial statements audits

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

Engagement risk

Number of higher risks

Number of moderate risks

Material entities 

Department of Veterans’ Affairs

Non-corporate

Moderate

3

0

Australian War Memorial

Corporate

Low

1

1

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

Defence Services Home 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 Act 2004; determining and managing claims relating to defence service under the Safety, Rehabilitation and Compensation (Defence-related Claims) Act 1998 (DRCT); 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 2023–24 are $46.7 billion, with personal benefits provisions and health and other provisions representing 51 per cent and 48 per cent, respectively, as shown in Figure 4. Personal benefits expenses account for 51 per cent of total budgeted expenses, and health care payments account 30 for per cent.

Figure 4: Department of Veterans’ Affairs’ total budgeted financial statements by category ($’000)

 
 

Source: ANAO analysis of 9 May 2023–24 Portfolio Budget Statements.

There are three key risks for the Department of Veterans’ Affairs 2022–23 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 and the inclusion in 2021–22 of a $3.65 billion risk margin adjustment due to the level of uncertainty in the provision. (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 2023–24 are just over $1.8 billion, with property, plant and equipment and land and buildings representing 68 per cent and 28 per cent, respectively, as shown in Figure 5.

Figure 5: The Australian War Memorial’s budgeted financial statements by category ($’000)

 
 

Source: ANAO analysis of 9 May 2023–24 Portfolio Budget Statements.

There are two key risks for the AWM’s 2022–23 financial statements that the ANAO has highlighted for specific audit coverage.

  • The valuation of the national collection, due to the complexity in valuing a large collection of unique heritage and cultural items of significant value.
  • 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.

Potential audits