Chief Financial Officer's Report

Chief Financial Officer John Barbeler I am pleased to provide this Chief Financial Officer Report, an overview of the department’s 2010-11 financial results and financial improvement in recent years.

2010-11 Financial Results

During the 2010-11 financial year the department continued to build on a sound financial position. The department successfully delivered its business plan activity and reported a modest departmental operating surplus, $1.4 million (the ninth surplus in the past ten years), and in doing so met the requirements of Government to manage within the resources provided. The department remains in a net asset position as at 30 June 2011 and has maintained respectable levels of cash liquidity.

The department oversees 48 programs on behalf of Government. Major administered items for 2010-11 include:

Administered expenses of $44.7 billion primarily related to the payment of subsidies of $7.9 billion for residential, aged care and community programs; personal benefits of $31.0 billion for Medicare services, pharmaceutical services and affordability and choice of health care initiatives; and grants of $4.8 billion with the majority of these made to non-profit organisations ($3.3 billion).
Administered assets of $0.9 billion incorporating investments in other portfolio entities of $0.3 billion including Health Workforce Australia ($0.2 billion) and $0.2 billion in inventories predominantly being the National Medical Stockpile.
Administered liabilities of $2.9 billion principally related to personal benefits of $1.9 billion.

The Auditor-General has provided the department with an unqualified audit opinion for the 2010-11 financial statements. In conducting the 2010-11 financial statement audit, the Auditor-General advised that the department has in place appropriate financial controls which operate effectively.

The achievement of a positive 2010-11 departmental operating result demonstrates the department’s effective management of Budget appropriations and cost pressures. The department’s business planning and budgeting framework has operated effectively to ensure departmental resources are allocated to meet the Government’s priorities.

Figure 1: Revenue / Expenses

Figure 1: Revenue / Expenses
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Figure 2: Surplus / Deficit

Figure 2: Surplus / Deficit
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The department has continued to undertake significant capital expenditure primarily in the area of software development and staff accommodation fit out.

The department’s cash management position has remained solid with an excess of current assets over current liabilities at 30 June 2011 of $41.0 million. This provides a strong financial position to meet future Budget appropriation and cost pressures.

Improving Financial Position

Over the last 10 years the department has proven its ability to support and respond effectively to a number of significant policy reforms while continuing to meet its financial obligations and improve on past performance. Key trends for the department’s financial position for the past 10 years are illustrated in Figures 1, 2, 3 and 4.

Strategic Review

In 2010, the Australian Government commissioned a review of the administrative arrangements in the Health and Ageing portfolio (strategic review). A thorough analysis of the portfolio has been undertaken, including examination of its approach to program and grant management and corporate services. The outcomes of the strategic review have been incorporated into the 2011-12 Portfolio Budget Statements.

Challenges Ahead

Financial challenges facing the department in 2011-12 and future years include financial implications of the initiatives associated with implementing strategic review recommendations.

Figure 3: Assets, Liabilities and Net Equity Trend

Figure 3: Assets, Liabilities and Net Equity Trend

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Figure 4: Current Assets and Liabilities

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The department is well positioned to meet these and other future financial challenges through the existing governance framework which includes a proven internal business planning and budgeting model and a delegation’s framework supporting sound financial decision making.

2010-11 Financial Statements

Further information on the department’s financial result can be obtained in Part 5 of the Annual Report including an analysis of the department’s current year financial performance.

[Signed in Hard Copy and PDF versions.]
John Barbeler Chief
Financial Officer

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