Read an overview of the Veterans' Affairs 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 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 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, and has responsibility for implementing programs to assist the veteran and defence force communities. Further information is available from the department’s website.

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 2018–19 Portfolio Budget Statements (PBS) for the Veterans’ Affairs portfolio, the aggregated budgeted expenses for 2018–19 total $11.33 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

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

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

  • legislative environment, incorporating specific conditions for the provision of benefits to veterans and defence personnel, such as healthcare and rehabilitation services, income support and compensation;
  • diverse range of administered entitlements, and the reliance placed on voluntary disclosure of information by recipients and providers;
  • changing demographics and care needs of eligible recipients, with the mental health of veterans representing a priority;
  • judgement involved in the assumptions and calculations underpinning the estimates of the future cost of military compensation;
  • ageing IT systems used to process a significant number of high-volume, low-value transactions;
  • new shared services arrangements with the Department of Human Services; and
  • significance of the Australian War Memorial and its national collection as a national resource.

Considering the identified risks, expenditure and previous recent coverage, the ANAO has not planned targeted performance audits within the portfolio for 2018–19.

Financial statements audits and other audit engagements

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

2

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 implementing programs to assist the veteran and defence force communities.

DVA’s total budgeted expenses for 2018–19 are just over $11.25 billion, with personal benefits and healthcare payments representing 52 per cent and 43 per cent, respectively, as shown in Figure 2.

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

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

The five key risks for DVA’s financial statements that have been highlighted for specific audit coverage, including one that is considered a key audit matter (KAM) by the ANAO, 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 the Department of Human Services (DHS) 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 DHS systems; and
  • impact of legislative changes involving digital readiness, and the introduction of non-liability healthcare provisions on claim 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 the Australian military.

The AWM’s total budgeted expenses for 2018–19 are just under $72 million. Depreciation and amortisation, employee benefits and supplier expenses each equally represent 33 per cent of the AWM’s total budgeted expenses for 2018–19, as shown in Figure 3.

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

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

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

  • valuation of the national collection, due to complexity in valuing a large collection of unique heritage and cultural items of significant value; and
  • valuation of land and buildings with a specialised nature.