Chief Financial Officer's Report

I am pleased to provide this Chief Financial Officer Report, including an overview of the Department’s 2011-12 financial results and financial improvement in recent years.

2011-12 Financial Results

During the 2011-12 financial year, the Department continued to build on a sound financial position. The Department successfully delivered its planned activities and reported a modest departmental operating surplus of $0.194 million, and in doing so met the requirements of Government to manage within the resources provided.¹⁷ The Department remains in a net asset position as at 30 June 2012 and has maintained respectable levels of cash liquidity.

Figure 1 Revenue / Expenses

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The Department oversees 42 programs on behalf of Government. Major administered items for 2011-12 include:

Administered expenses of $49.7 billion primarily related to the payment of subsidies of $9.0 billion for residential, aged care and community programs; personal benefits of $33.6 billion for Medicare services, pharmaceutical services and affordability and choice of health care initiatives; and grants of $6.1 billion with the majority of these made to non-profit organisations ($3.8 billion).
Administered assets of $1.0 billion incorporating receivables of $0.4 billion, inventories of $0.2 billion predominantly being the National Medical Stockpile and $0.1 billion in internally developed software to support the Personally Controlled Electronic Health Record system.
Administered liabilities of $3.4 billion principally related to personal benefits of $2.3 billion and provisions for subsidies of $0.5 billion.

The Auditor-General has provided the Department with an unmodified audit opinion for the 2011-12 financial statements. The ANAO notes that the Department has effective risk management practices and internal controls in place which is demonstrated by an Audit Committee with a focus on risk.

The achievement of a positive 2011-12 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.

The Department has continued to undertake significant capital expenditure primarily in the area of software development including the establishment of an Enterprise Data Warehouse to be provided as part of the National Health Reform agenda.

The Department’s cash management position has remained solid with an excess of current assets over current liabilities at 30 June 2012 of $50.9 million. This provides a strong financial position to meet future Budget appropriation and cost pressures.

Figure 2 Surplus / Deficit

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Note:

Expenses for 2010-11 and 2011-12 have been reported after the elimination of unfunded depreciation expense under the net cash appropriation framework.
Expenses for 2011-12 have been adjusted for unfunded increases in employee provisions.

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

The Department continues to improve the efficiency of business activities and supporting infrastructure as a result of the Strategic Review of administrative arrangements in the Department. Further progress in this area is a priority in 2012-13, transforming the Department to be a more contemporary, efficient and effective organisation.

Figure 3 Assets, Liabilities and Net Equity Trend

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Figure 4 Current Assets and Liabilities

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Challenges Ahead

Financial challenges facing the Department in 2012-13 and future years include financial implications of the initiatives associated with implementing Strategic Review recommendations.

The Department is well positioned to meet these and other future financial challenges through the existing governance and risk management frameworks which includes an enhanced internal business planning and budgeting model, and a delegation’s framework supporting sound financial decision making.

2011-12 Financial Statements

Further information on the Department’s financial result can be obtained in Part 4 of the Annual Report including an analysis of the Department’s current year financial performance.

John Barbeler
Chief Financial Officer

September 2012

The surplus of $0.194 million includes the elimination of unfunded expenses, that is depreciation expense and adjustment to employee provisions due to discount rate movements.

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