Annual Report - Department of Health and Ageing Financial Statements

Financial Performance – Departmental

The Department recorded a $20m consolidated operating surplus for 2006-07
Operating Result - Departmental
The Department of Health and Ageing achieved a consolidated operating surplus of $20.0 million for 2006-07.

The operating result was primarily driven by:
$13.9 million operating surplus for the core Department;
$5.4 million operating surplus for the Therapeutic Goods Administration;
$0.8 million operating surplus for the National Industrial Chemicals Notification and Assessment Scheme; and
$0.1 million operating deficit for the Office of Gene Technology.
During 2006-07, the Department’s appropriation and section 31 revenue significantly increased. However, due to slower than expected staff recruitment and associated delays in related expenditure, 2006-07 expenses did not increase to the forecast levels.

The Therapeutic Goods Administration operating surplus was a reflection of increased revenue which had resulted from higher submission rates and lower than anticipated expenses associated with the establishment of the Australia New Zealand Therapeutic Products Authority.

Agency transfers and change in funding arrangements during 2006-07
Agency Transfer
The National Health and Medical Research Council was created as a separate agency on 1 July 2006. Appropriations received by the Department in the 2006-07 budget along with assets and liabilities were transferred to the National Health and Medical Research Council as of this date.

Total 2006-07 departmental revenue increased by $61m
Revenue - Departmental
During 2006-07, total revenue for the consolidated Department increased by $61.2 million (11%) from $568.7million in 2005-06 to $629.9 million. The increase was largely attributable to:
the core Department receiving $42.9 million additional Revenues from Government, which was primarily due to $53.6 million for new budget measures and was offset by the transfer of $19.6 million appropriation to the National Health and Medical Research Council following the establishment of this business unit as a separate agency. The majority of the new measures related to initiatives in Mental Health ($15.6 million), Ageing and Aged Care Complaints Resolution ($12.2 million), other Ageing and Aged Care measures ($9.9 million), Health Workforce ($6.4 million), Private Health Insurance ($3.8 million), Indigenous Health ($3.3 million) and Pharmaceutical Benefits Scheme Reforms ($2.3 million); and
the Therapeutic Goods Administration reporting a $2.3 million net increase in Revenues from Government which mainly related to funding for the establishment of the Australia New Zealand Therapeutic Products Authority.

Total 2006-07 departmental expenses increased by 8% During 2006-07, operating expenses increased by $43.3 million (8%) from $566.6 million in 2005-06 to $609.9 million. The change was largely attributable to a $42.1 million increase in core Department employee expenses which were a result of:
an overall increase in average staffing levels to support new measures; and
the financial impact of annual salary increases.

Departmental net assets increased by $42.4 million
Assets And Liabilities – Departmental
The Department reported strong net asset growth with net assets increasing by $42.4 million to $79.6 million.

During 2006-07 total assets increased by $52.6 million from $211.7 million in 2005-06 to $264.3 million. The increase was mainly due to:
the $129.3 million appropriation receivable (operational) reflected an increase of $25.7 million, and this increase was primarily related to the annual operating surplus; and
the appropriation receivable (equity injection) increased by $18.3 million to $34.2 million, primarily a result of undrawn capital appropriation for the Aged Care new payment system and office accommodation projects that have been delayed. Total liabilities increased by $10.1 million from $174.6 million in 2005-06 to $184.7 million in 2006-07. The change was largely attributable to the increased employee provisions of $8.6 million to $101.2 million, which primarily related to:
the flow-on impact of an increase in average staffing levels;
general salary increases; and
an increase in the additional day accrued for salary and related expenditure at the end of the 2006-07 financial year.

The Department’s net asset position has improved over the last eight years
Sustainability
An eight year summary of the Department’s assets, liabilities and equity position is provided in the graph below. Graph showing Assets, Liabilities & Net Equity Trend for 1999-00 to 2006-07
Since 2001-02, the Department’s net asset position has significantly improved as a result of:
small annual operating surpluses generated over recent financial years;
the impact of receiving significant capital funding to support the infrastructure necessary to accommodate the new staffing growth; and
the implementation of new policy initiatives which have included funding for associated IT infrastructure, software application development and property accommodation fit-out.
This solid financial performance is notwithstanding the Department also providing internal funds of approximately $20 million for leasehold office accommodation fit-out in Woden ($16.8 million), Brisbane ($1.6 million) and Sydney ($2 million), and in addition funding for internal systems and software developments.

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Financial Performance – Administered

Revenues administered on behalf of Government
Administered Revenues
Total 2006-07 administered revenues were $313.5 million. Major revenue items included:
$40.6 million taxation revenue, comprising the levy imposed on eligible doctors to raise revenue towards the Incurred But Not Reported liability for the United Medical Protection Support Payment ($13.2 million) and the Run-Off Cover Scheme Support Payment arrangements ($27.4 million).
$29.5 million recoveries, comprising the collection of moneys recoverable from individuals after the settlement of personal injury claims; and
$243.3 million other Revenue, which mainly related to revenues collected from Private Health Insurance Administration Council for Private Health Insurance Administration levies.

Total administered expenses increased by $2.8 billion
Administered Expenses
During 2006-07, the total administered expenses increased by $2.8 billion, and this was a result of:
personal benefits expenses increased by $1.4 billion (6.8%) to $21.7 billion. This was mainly due to the increased Medicare Benefits Scheme expenditure. The scheme funds access to medical services, including diagnostic services and in 2006-07 cost $11.7 billion compared to $10.8 billion in 2005-06;

grant expenses increased by $0.9 billion (7.2%) to $13.8 billion;

subsidy expenses marginally increased by $0.4 billion to $5.5 billion; and

supplier expenses increased by $44.8 million to $179.3 million.

Total administered assets increased by $81.4 million
Assets and Liabilities – Administered
Total administered assets increased by $81.4 millionfrom $373.5 million in 2005-06 to $454.9 million. This increase was mainly a result of inventory additions.
Administered liabilities ($2.4 billion) remained consistent with the previous financial year.

Financial Performance – Departmental
The Department recorded a $20m consolidated operating surplus for 2006-07	Operating Result - Departmental The Department of Health and Ageing achieved a consolidated operating surplus of $20.0 million for 2006-07. The operating result was primarily driven by: $13.9 million operating surplus for the core Department; $5.4 million operating surplus for the Therapeutic Goods Administration; $0.8 million operating surplus for the National Industrial Chemicals Notification and Assessment Scheme; and $0.1 million operating deficit for the Office of Gene Technology. During 2006-07, the Department’s appropriation and section 31 revenue significantly increased. However, due to slower than expected staff recruitment and associated delays in related expenditure, 2006-07 expenses did not increase to the forecast levels. The Therapeutic Goods Administration operating surplus was a reflection of increased revenue which had resulted from higher submission rates and lower than anticipated expenses associated with the establishment of the Australia New Zealand Therapeutic Products Authority.
Agency transfers and change in funding arrangements during 2006-07	Agency Transfer The National Health and Medical Research Council was created as a separate agency on 1 July 2006. Appropriations received by the Department in the 2006-07 budget along with assets and liabilities were transferred to the National Health and Medical Research Council as of this date.
Total 2006-07 departmental revenue increased by $61m	Revenue - Departmental During 2006-07, total revenue for the consolidated Department increased by $61.2 million (11%) from $568.7million in 2005-06 to $629.9 million. The increase was largely attributable to: the core Department receiving $42.9 million additional Revenues from Government, which was primarily due to $53.6 million for new budget measures and was offset by the transfer of $19.6 million appropriation to the National Health and Medical Research Council following the establishment of this business unit as a separate agency. The majority of the new measures related to initiatives in Mental Health ($15.6 million), Ageing and Aged Care Complaints Resolution ($12.2 million), other Ageing and Aged Care measures ($9.9 million), Health Workforce ($6.4 million), Private Health Insurance ($3.8 million), Indigenous Health ($3.3 million) and Pharmaceutical Benefits Scheme Reforms ($2.3 million); and the Therapeutic Goods Administration reporting a $2.3 million net increase in Revenues from Government which mainly related to funding for the establishment of the Australia New Zealand Therapeutic Products Authority.
Total 2006-07 departmental expenses increased by 8%	During 2006-07, operating expenses increased by $43.3 million (8%) from $566.6 million in 2005-06 to $609.9 million. The change was largely attributable to a $42.1 million increase in core Department employee expenses which were a result of: an overall increase in average staffing levels to support new measures; and the financial impact of annual salary increases.
Departmental net assets increased by $42.4 million	Assets And Liabilities – Departmental The Department reported strong net asset growth with net assets increasing by $42.4 million to $79.6 million. During 2006-07 total assets increased by $52.6 million from $211.7 million in 2005-06 to $264.3 million. The increase was mainly due to: the $129.3 million appropriation receivable (operational) reflected an increase of $25.7 million, and this increase was primarily related to the annual operating surplus; and the appropriation receivable (equity injection) increased by $18.3 million to $34.2 million, primarily a result of undrawn capital appropriation for the Aged Care new payment system and office accommodation projects that have been delayed. Total liabilities increased by $10.1 million from $174.6 million in 2005-06 to $184.7 million in 2006-07. The change was largely attributable to the increased employee provisions of $8.6 million to $101.2 million, which primarily related to: the flow-on impact of an increase in average staffing levels; general salary increases; and an increase in the additional day accrued for salary and related expenditure at the end of the 2006-07 financial year.
The Department’s net asset position has improved over the last eight years	Sustainability An eight year summary of the Department’s assets, liabilities and equity position is provided in the graph below. Since 2001-02, the Department’s net asset position has significantly improved as a result of: small annual operating surpluses generated over recent financial years; the impact of receiving significant capital funding to support the infrastructure necessary to accommodate the new staffing growth; and the implementation of new policy initiatives which have included funding for associated IT infrastructure, software application development and property accommodation fit-out. This solid financial performance is notwithstanding the Department also providing internal funds of approximately $20 million for leasehold office accommodation fit-out in Woden ($16.8 million), Brisbane ($1.6 million) and Sydney ($2 million), and in addition funding for internal systems and software developments.