The PHOFAs are bilateral funding agreements between the Commonwealth and each State and Territory. They provide broadbanded and specific purpose funding from the Australian Government to the States and Territories for a range of public health programs. The first PHOFAs were for two years (1997-98 and 1998-99). The current (second) set of PHOFAs cover five years (1999-2000 to 2003-2004). The third, and current, PHOFAs also cover five years, from 2004-2005 to 2008-2009. Text of the individual Agreements is available.

Key features of the Public Health Outcome Funding Agreements are:

agreement on the level and distribution of Australian Government assistance provided through the broadbanded funding mechanism;
agreement on key principles, values, and general processes to be pursued throughout the operation of the agreements;
agreement on performance indicators including outcome, impact and process measures for each of the programs for which Australian Government funding has been provided;
States and Territories have the flexibility to use pooled Australian Government-State/Territory funds according to local needs and priorities to achieve the agreed targets and outcomes; and
delineation of roles and responsibilities for each level of Government in working towards the achievement of these national objectives.

Australian Government Assistance to States and Territories under the PHOFAs

Total Australian Government assistance to States and Territories over the five years of the current Agreements is $812 million (adjusted annually for indexation).

The distribution of the Australian Government broadbanded funding between the States and Territories is based on a resource allocation formula, and includes supplementary funding to ensure that no State or Territory will be worse off in the first year of the current PHOFAs (2004-2009). The resource allocation formula takes account of a range of factors including: State and Territory population numbers and proportion of Aboriginal and Torres Strait people, levels of mortality, socio-economic factors, and other factors that affect the cost of delivering services in the individual State or Territory. This formula has been developed to reflect key determinants of health and wellbeing in communities.

Why broadband?

The decision to broadband the Specific Purpose Payments for public health was taken by Government in 1996 and reflects the broader directions agreed by Health and Community Services Ministers for health system reform.

The chief advantage of broadbanding some public health payments to States and Territories lies in allowing States and Territories the flexibility to manage local service funding needs and priorities within the total pool of funds allocated to them.

The Outcomes Focus

Reviews such as the Joint Committee of Public Accounts' (JCPA) Report 342 in 1995 expressed concern that the focus in the Australian Government's administration of payments to States and Territories had been primarily on inputs and processes rather than on outcomes for clients. This focus, they suggested, led to uncertainty about whether the Australian Government's policy objectives were being met, despite that being the purpose of the funding.

Consequently, the PHOFAs are outcomes based agreements, focusing on the achievement of agreed outcomes and do not generally tie the States and Territories to specific activities, or to match funding. The States and Territories are, however, required to adhere to certain principles and to continue commitment under the national strategies covered by the PHOFAs. The Australian Government's approach to the management of funds, identification of outcomes, the monitoring of performance, and States’ and Territories' approach to the planning, organisation and delivery of population health activities, are underpinned by the following principles: equity and access; best practice; participation and partnership; Government commitment to infrastructure; and integration with primary health care.
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The current PHOFAs (2004-2009), include a focus on the following outcome areas:

Communicable Diseases (particularly HIV/AIDS);
Cancer Screening; and
Health Risk factors, focusing on alcohol and tobacco use, women’s health, and sexual and reproductive health.

Nationally consistent performance indicators were developed for the second PHOFA by a multilateral working party making more comparative studies on performance possible from 1999-2000.

Performance Monitoring

The monitoring approach for the PHOFAs has focused on streamlining administrative arrangements between the Australian, State and Territory Governments in order to:

capture the intent, purpose, and objectives of the programs with a few key indicators;
ensure that the focus of Australian Government-State/Territory administrative relationships is on the achievement of outcomes rather than on inputs;
highlight the continuing commitment by the Australian Government to the fundamental principles of the broadbanded programs;
provide an accountability mechanism for Australian Government public health funding; and
trigger joint Australian Government-State/Territory problem solving in the event of an indicator showing the development of a problematic population health situation.

The performance indicators are based on the objectives of the programs covered under the PHOFAs. Each indicator is specified by stating the program outcome, the performance indicator, and the reporting requirements. All States and Territories report on their performance against the indicators on an annual basis.

Accountability under the PHOFAs

The performance monitoring data is the major source of accountability information under the PHOFAs. States and Territories have also agreed to provide statements of revenue, expenditure and compliance for the expenditure of funding provided by the Australian Government, within five months of the end of each financial year.

Information exchanges under the performance monitoring and financial accountability initiatives, together with the results of the National Public Health Expenditure Project, provide a solid basis under which to review achievements.

Public Health Funding

The PHOFAs represent only one part of the Australian Government's funding of population health activity. Funding for population health activity is diverse and comprises contributions from States and Territories, local government, non-government organisations and in some cases industry. The Australian Government invests in population health activity through PHOFA funding, direct grants to States and Territories, direct grants to community organisations and through supporting population health activity undertaken by GPs and their Divisions.

National Expenditure on Public Health

The Australian Government and the States and Territories are committed to the development of comprehensive public health expenditure information, in relation to programs covered by the PHOFAs, to assist in understanding and improving the cost-effectiveness of public health activities and to provide greater transparency and accountability by both levels of government. All jurisdictions are participating, under the auspice of the National Public Health Partnership, in the National Public Health Expenditure Project to develop agreed national definitions and reporting procedures for public health expenditure by State, Territory and Australian Governments.

The Australian Institute of Health and Welfare (AIHW) is undertaking this Project. The Australian Government, along with all the States and Territories, is represented on the Technical Advisory Group which advises on definitional and methodological issues relating to the measurement of public health expenditure. The following Public Health Expenditure Reports have been published:

Public Health Outcome Funding Agreements (PHOFAs)

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