Part 4.2: 2018-19 Financial Statements
Table of contents
Independent Auditor’s Report
Statement by the Secretary and Chief Financial Officer
Overview
Departmental Statement of Comprehensive Income
Departmental Statement of Financial Position
Departmental Statement of Changes in Equity
Departmental Cash Flow Statement
Note 1: Departmental operating result reconciliation
Note 2: Departmental explanation of budget variances
Note 3: Departmental cash flow reconciliation
Note 4: Employees
Note 5: Key management personnel remuneration
Note 6: Related party transactions
Note 7: Departmental suppliers, other expenses and payables
Note 8: Departmental income and receivables
Note 9: Departmental appropriation income and receivable
Note 10: Departmental cash and financial instruments
Note 11: Departmental property, plant and equipment and intangibles
Note 12: Fair value measurement
Note 13: Departmental aggregate assets and liabilities
Note 14: Departmental contingent assets and liabilities
Note 15: Departmental appropriations
Note 16: Therapeutic Goods Administration
Note 17: Restructuring
Administered Schedule of Comprehensive Income
Administered Schedule of Assets and Liabilities
Administered Reconciliation Schedule
Administered Cash Flow Statement
Note 18: Administered explanation of budget variances
Note 19: Administered cash flow reconciliation
Note 20: Administered transfer payments
Note 21: Administered suppliers and other expenses and payables
Note 22: Administered Corporate Commonwealth Entities
Note 23: Administered income, debtors and loans
Note 24: Administered cash and financial instruments
Note 25: Administered non-financial assets
Note 26: Administered aggregate assets and liabilities
Note 27: Administered contingent assets and liabilities
Note 28: Administered appropriations
Note 29: Compliance with statutory requirement for payments from the Consolidated Revenue Fund
Note 30: Special accounts
Note 31: Regulatory charging summary
Independent Auditor’s Report
Statement by the Secretary and Chief Financial Officer
Overview
1. Objectives of the Department of Health
The Department of Health (the Department) is a not-for-profit Australian Government controlled entity. The objective of the Department is to lead and shape Australia’s health system and sporting outcomes through evidence based policy, well targeted programs and best practice regulation. In 2019 the Department was structured to meet the following six outcomes:
Outcome 1: |
Health System Policy, Design and Innovation |
Outcome 2: |
Health Access and Support Services |
Outcome 3: |
Sport and Recreation |
Outcome 4: |
Individual Health Benefits |
Outcome 5: |
Regulation, Safety and Protection |
Outcome 6: |
Ageing and Aged Care |
The continued existence of the Department in its present form and with its present programs is dependent on Government policy and on continued funding by Parliament for the Department’s administration and programs.
The Department’s activities contributing toward these outcomes are classified as either departmental or administered. Departmental activities involve the use of assets, liabilities, income and expenses controlled or incurred by the Department in its own right. Administered activities involve the management or oversight by the Department, on behalf of the Government, of items controlled or incurred by the Government.
The Department is responsible for the following administered activities on behalf of the Government:
- payment of subsidies for residential, aged care and community programs;
- payment of personal benefits for Medicare and pharmaceutical services as well as for affordability and choice of health care initiatives; and
- payment of grants, with the majority of these made to non-profit organisations.
2. Basis of Preparation of the Financial Statements
The financial statements are general purpose financial statements and are required by section 42 of the Public Governance, Performance and Accountability Act 2013 (PGPA Act).
The financial statements and notes have been prepared in accordance with:
- the Public Governance, Performance and Accountability (Financial Reporting) Rule 2015; and
- Australian Accounting Standards and Interpretations – Reduced Disclosure Requirements issued by the Australian Accounting Standards Board (AASB) that apply for the reporting period.
The financial statements and notes have been prepared on an accrual basis and are in accordance with the historical cost convention, except for certain assets held at fair value. Except where stated, no allowance is made for the effect of changing prices on the results or the financial position. The financial statements are presented in Australian dollars.
Administered revenues, expenses, assets, liabilities and cash flows reported in the administered schedules and related notes are accounted for on the same basis and using the same policies as for Departmental items, except as otherwise stated. |
Items of a similar nature together with disclosure of the relevant accounting policy are grouped together in the notes to the financial statements. The accounting policy disclosures have been shaded blue to distinguish them from other commentary.
The Department’s financial statements include the financial records of the departmental special accounts, the Therapeutic Goods Administration (TGA), the Office of the Gene Technology Regulator (OGTR) and the National Industrial Chemicals Notification and Assessment Scheme (NICNAS).
All transactions between the departmental ledgers have been eliminated from the departmental financial statements.
Comparative figures
Comparative figures have been adjusted, where required, to conform to changes in presentation of the financial statements.
3. New Australian Accounting Standards
Adoption of new Australian Accounting Standard requirements
The Department adopted all new, revised and amending standards and interpretations that were issued by the AASB prior to the sign-off date and are applicable to the current reporting period. The adoption of these standards and interpretations did not have a material effect, and are not expected to have a future material effect on the Department’s financial statements.
During the period, the Department adopted AASB 9 Financial Instruments which did not materially change the disclosure of financial assets and liabilities.
Future accounting standard requirements
The following new, revised and amending standards and interpretations were issued by the AASB prior to the signing of the statement by the Secretary and Chief Financial Officer:
New standard |
Expected impact |
AASB 15 Revenue from Contracts with Customers |
No material change to revenue recognised during a reporting period. Significant increase to carrying values of unearned revenue related to contracts in progress. |
AASB 1058 Income of Not-for-Profit Entities |
No material impact anticipated. |
AASB 16 Leases |
An overall increase in expenses related to lease agreements in reporting periods following adoption with progressive decrease in expenses toward the end of the lease agreements. Leases identified are limited to leases for property and motor vehicles. |
All other new, revised, and amending standards or interpretations that have been issued by the AASB prior to sign‑off date that are applicable to the future reporting period(s) are not expected to have a future material financial impact on the Department’s financial statements.
4. Significant Accounting Judgements and Estimates
Except where specifically identified and disclosed, the Department has determined that no accounting assumptions and estimates have a significant risk of causing a material adjustment to carrying amounts of assets and liabilities within the next accounting period.
5. Transactions with the Australian Government as Owner
Equity injections
Amounts appropriated which are designated as ‘equity injections’ for a year (less any formal reductions) and Departmental Capital Budgets (DCBs) are recognised directly in contributed equity in that year.
Restructuring of administrative arrangements
Net assets received from or relinquished to another Government entity under a restructuring of administrative arrangements are adjusted at their book value directly against contributed equity.
During the reporting period Departmental staff transferred to the Department of Social Services (DSS) to participate in the Community Services Grants Hub.
The Government established the independent Aged Care Quality and Safety Commission, effective 1 January 2019. The agency incorporated the functions of the Aged Care Complaints Commissioner, formerly part of the Department.
The financial impact of the restructuring arrangements is reported in detail at Note 17: Restructuring.
No administered functions were transferred to or from the Department under restructure arrangements during the financial year.
6. Taxation
The Department is exempt from all forms of taxation except Fringe Benefits Tax (FBT) and the Goods and Services Tax (GST).
Revenues, expenses, assets and liabilities are recognised net of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office.
7. Events after the reporting period
TGA special account annual charges 2018-19
Sponsors of certain products on the Australian Register of Therapeutic Goods during the 2018-19 year have until 15 September 2019 to apply for exemption from the annual charges for the year. An estimate of the value of the exemptions has been incorporated in 2018-19 revenues.
My Aged Care systems asset transfer
The Department and DSS are in the process of confirming arrangements to transfer responsibility for the Aged Care Gateway IT systems application platform from DSS, scheduled to occur in the 2020 financial year.
Administered Inventory $11.1m of administered inventory held in the National Medical Stockpile will pass its expiry date during the period July to October 2019 (2018: $1.7m). |
Departmental Statement of Comprehensive Income
for the period ending 30 June 2019
Notes |
ACTUAL 2019 $'000 |
ACTUAL 2018 $'000 |
BUDGET 2019 $'000 |
|||
NET COST OF SERVICES |
||||||
EXPENSES |
||||||
Employee benefits |
533,383 |
511,041 |
544,486 |
|||
Suppliers |
334,256 |
294,478 |
308,861 |
|||
Depreciation and amortisation |
34,240 |
30,474 |
34,090 |
|||
Grants |
24,931 |
- |
- |
|||
Other expenses |
2,253 |
4,253 |
2,500 |
|||
Total expenses |
929,062 |
840,246 |
889,937 |
|||
OWN-SOURCE INCOME |
||||||
Revenue |
194,778 |
185,436 |
193,799 |
|||
Gains |
412 |
955 |
870 |
|||
Total own-source income |
195,190 |
186,391 |
194,669 |
|||
Net cost of services |
733,873 |
653,855 |
695,268 |
|||
Revenue from Government |
705,401 |
658,441 |
670,975 |
|||
(Deficit)/surplus attributable to the Australian Government |
(28,471) |
4,586 |
(24,293) |
|||
OTHER COMPREHENSIVE INCOME |
||||||
Items not subject to subsequent reclassification to net cost of services |
||||||
Changes in asset revaluation surplus |
- |
2,541 |
- |
|||
Total other comprehensive income |
- |
2,541 |
- |
|||
Total comprehensive (loss)/income attributable to the Australian Government |
(28,471) |
7,127 |
(24,293) |
The above statement should be read in conjunction with the accompanying notes.
Departmental Statement of Financial Position
as at 30 June 2019
Notes |
ACTUAL 2019 $'000 |
ACTUAL 2018 $'000 |
BUDGET 2019 $'000 |
|||
ASSETS |
||||||
Financial assets |
||||||
Cash and cash equivalents |
104,373 |
100,591 |
99,452 |
|||
Appropriations receivable |
65,850 |
54,868 |
- |
|||
Trade and other receivables |
16,258 |
16,896 |
20,139 |
|||
Receivable from Government |
24,931 |
- |
- |
|||
Accrued revenue |
9,851 |
5,431 |
2,160 |
|||
Total financial assets |
221,263 |
177,786 |
121,751 |
|||
Non-financial assets |
||||||
Land and buildings |
49,597 |
55,067 |
47,186 |
|||
Property, plant and equipment |
6,096 |
6,210 |
5,859 |
|||
Intangibles |
120,160 |
117,899 |
131,104 |
|||
Prepayments |
13,305 |
15,474 |
27,477 |
|||
Lease incentives |
8,530 |
9,338 |
- |
|||
Total non-financial assets |
197,689 |
203,988 |
211,626 |
|||
Total assets |
418,951 |
381,774 |
333,377 |
|||
LIABILITIES |
||||||
Payables |
||||||
Supplier payables |
90,788 |
73,498 |
56,787 |
|||
Employee payables |
10,560 |
5,413 |
4,616 |
|||
Other payables |
41,384 |
44,088 |
49,055 |
|||
Total payables |
142,732 |
122,998 |
110,458 |
|||
Provisions |
||||||
Employee provisions |
160,344 |
148,101 |
142,712 |
|||
Other provisions |
32,309 |
30,347 |
30,179 |
|||
Total provisions |
192,653 |
178,448 |
172,891 |
|||
Total liabilities |
335,386 |
301,447 |
283,349 |
|||
Net assets |
83,566 |
80,327 |
50,028 |
|||
EQUITY |
||||||
Contributed equity |
302,795 |
271,086 |
299,010 |
|||
Asset revaluation reserve |
37,746 |
37,747 |
35,206 |
|||
Accumulated deficit |
(256,976) |
(228,506) |
(284,188) |
|||
Total equity |
83,566 |
80,327 |
50,028 |
The above statement should be read in conjunction with the accompanying notes.
Departmental Statement of Changes in Equity
as at 30 June 2019
ACTUAL 2019 $'000 |
ACTUAL 2018 $'000 |
BUDGET 2019 $'000 |
||||
ACCUMULATED DEFICIT |
||||||
Opening balance |
||||||
Balance carried forward from previous period |
(228,506) |
(233,092) |
(259,895) |
|||
(Deficit)/surplus attributable to the Australian Government |
(28,471) |
4,586 |
(24,293) |
|||
Closing balance as at 30 June |
(256,978) |
(228,506) |
(284,188) |
|||
ASSET REVALUATION RESERVE |
||||||
Opening balance |
||||||
Balance carried forward from previous period |
37,748 |
35,206 |
35,206 |
|||
Other comprehensive income |
- |
2,541 |
- |
|||
Closing balance as at 30 June |
37,748 |
37,748 |
35,206 |
|||
CONTRIBUTED EQUITY |
||||||
Balance carried forward from previous period |
271,086 |
252,569 |
271,086 |
|||
Transactions with owners |
||||||
Equity injection - appropriations |
19,246 |
7,422 |
19,017 |
|||
Departmental Capital Budget |
12,708 |
11,095 |
8,907 |
|||
Restructuring1 |
(245) |
- |
- |
|||
Total transactions with owners |
31,709 |
18,517 |
27,924 |
|||
Closing balance as at 30 June |
302,795 |
271,086 |
299,010 |
|||
TOTAL EQUITY |
||||||
Opening balance |
||||||
Balance carried forward from previous period |
80,328 |
54,682 |
46,397 |
|||
Comprehensive (loss)/gain for the period |
(28,471) |
7,127 |
(24,293) |
|||
Transactions with owners |
31,709 |
18,517 |
27,924 |
|||
Closing balance as at 30 June |
83,566 |
80,327 |
50,028 |
1 Refer to Note 17 – Restructuring for details
The above statement should be read in conjunction with the accompanying notes.
Departmental Cash Flow Statement
for the period ending 30 June 2019
Notes |
ACTUAL 2019 $'000 |
ACTUAL 2018 $'000 |
BUDGET 2019 $'000 |
|||
OPERATING ACTIVITIES |
||||||
Cash received |
||||||
Appropriations |
804,138 |
746,701 |
745,323 |
|||
Sale of goods and rendering of services |
195,788 |
181,068 |
191,882 |
|||
Net GST received |
30,920 |
25,797 |
20,570 |
|||
Other |
- |
- |
1,635 |
|||
Total cash received |
1,030,845 |
953,566 |
959,410 |
|||
Cash used |
||||||
Employees |
(517,472) |
(515,999) |
(548,966) |
|||
Suppliers |
(348,663) |
(307,395) |
(307,488) |
|||
Net GST paid |
- |
- |
(20,570) |
|||
Section 74 receipts transferred to the Official Public Account |
(125,387) |
(107,463) |
(64,192) |
|||
Grants |
(24,931) |
- |
- |
|||
Other |
(595) |
(1,123) |
(8,097) |
|||
Total cash used |
(1,017,048) |
(931,980) |
(949,313) |
|||
Net cash from operating activities |
13,797 |
21,586 |
10,097 |
|||
INVESTING ACTIVITIES |
||||||
Cash received |
||||||
Proceeds from sales of property, plant and equipment |
- |
1 |
- |
|||
Total cash received |
- |
1 |
- |
|||
Cash used |
||||||
Purchase of property, plant, equipment and intangibles |
(32,463) |
(30,856) |
(35,301) |
|||
Total cash used |
(32,463) |
(30,856) |
(35,301) |
|||
Net cash (used by) investing activities |
(32,463) |
(30,855) |
(35,301) |
|||
FINANCING ACTIVITIES |
||||||
Cash received |
||||||
Appropriations - Equity injection |
11,479 |
3,146 |
19,017 |
|||
Appropriations - Departmental capital budget |
10,969 |
10,992 |
8,907 |
|||
Total cash received |
22,448 |
14,138 |
27,924 |
|||
Net cash from financing activities |
22,448 |
14,138 |
27,924 |
|||
Net increase in cash held |
3,782 |
4,869 |
2,720 |
|||
Cash and cash equivalents at the |
||||||
- beginning of the reporting period |
100,591 |
95,722 |
96,732 |
|||
- end of the reporting period |
104,373 |
100,591 |
99,452 |
The above statement should be read in conjunction with the accompanying notes.
Note 1: Departmental operating result reconciliation
The Government funds the Department on a net cash appropriation basis, where appropriation revenue is not provided for depreciation and amortisation expenses. Depreciation and amortisation is included in the Department’s cost recovered operations to the extent that it relates to those activities.
The Department’s accountability for its operating result is at its result net of unfunded depreciation and amortisation.
2019 $'000 |
2018 $'000 |
||
Total comprehensive (loss)/gain |
(28,471) |
7,127 |
|
Unfunded depreciation and amortisation |
|||
Total depreciation |
34,240 |
30,474 |
|
Less cost recovered depreciation |
|||
NICNAS |
(645) |
(508) |
|
TGA |
(7,518) |
(6,846) |
|
Net unfunded depreciation |
26,077 |
23,120 |
|
Comprehensive (loss)/surplus net of unfunded depreciation and amortisation |
(2,395) |
30,247 |
The total comprehensive loss includes the impact of the accounting adjustment for the application of prevailing bond rates to the Department's employee entitlements which increased 2018-19 expenses by $14.26m.
Note 2: Departmental explanation of budget variances
General Commentary
AASB 1055 Budgetary Reporting requires explanations of major variances between the original budget as presented in the 2018-19 Portfolio Budget Statements (PBS) and the final 2019 outcome. The information presented below should be read in the context of the following:
- the original budget was prepared before the 2018 final outcome could be known. As a consequence, the opening balance of the statement of financial position was estimated and in some cases variances between the 2019 final outcome and budget estimates can in part be attributed to unanticipated movement in the prior year period balances;
- the Department’s executive maintained its long term financial management plan to increase cash reserves and improve financial sustainability. A key element of the plan is to target a modest operating surplus net of end of year accounting adjustments and unfunded depreciation and amortisation;
- variances attributable to factors which would not reasonably have been identifiable at the time of the budget preparation, such as revaluation or impairment of assets or reclassifications of asset reporting categories have not been included as part of this analysis;
- the Department considers that major variances are those greater than 10% of the estimate. Variances below this threshold are not included unless considered significant by their nature;
- variances relating to cash flows are a result of the factors detailed under expenses, own source income, assets or liabilities. Unless otherwise individually significant or unusual, no additional commentary has been included;
- the departmental budget was prepared under the Commonwealth budgeting framework where revenue is not appropriated for depreciation and amortisation expenses, except as funded through cost recovered activity; and
- the Budget is not audited.
Net cost of services
The Department’s total expenses for 2018-19 were higher than budgeted. The Department incurred non-budgeted expenses for grants and higher levels of expenses for suppliers largely as a result of a change in the delivery arrangements for the My Aged Care gateway system. These increases were in part offset by a reduction in employee expenses through a combination of resource transfers within the Commonwealth and the effective management of staffing levels for compliance with the Government’s staffing strategies.
The Government provided additional revenue through the Budget and Additional Estimates process largely for the Department to:
- provide Health portfolio input to the Royal Commission into Aged Care Quality and Safety;
- address pressures on medicinal cannabis license assessment and compliance activities driven by higher than expected demand; and
- implement three mandatory quality indicators in residential aged care.
The other significant variations to the Department’s appropriation revenue in 2018-19 were:
- the reclassification of administered expenses to departmental with regards to the My Aged Care IT system; and
- the transfer of resources to the newly established Aged Care Quality and Safety Commission for the aged care complaints function and to the Department of Social Services Community Grants Hub for grants administration.
Financial assets
The Department’s year-end financial asset position was higher than budgeted primarily due to higher than anticipated opening balances for the year. Appropriation receivable and cash and cash equivalents also increased during the year largely related to the operating result, which was a surplus prior to year-end non-cash accounting adjustments, these include adjustments to employee provisions and lease straight line adjustments. Higher than budgeted supplier liabilities has also impacted the department’s year-end financial asset position. The Department has recorded a $24.9m receivable from Government in respect of non-budgeted expenses for grants.
Non-financial assets
The Department estimated higher levels of acquisition of non-financial assets than were achieved during the year.
Liabilities
Total provisions and payables are higher than budget with supplier and employee payables both higher than budget offset in part by lower other payables. The greater than anticipated supplier payables relates to timing of end of year supplier payments.
The Department experienced a significant increase in employee provisions in 2018-19 largely as a result of the application of actuarial adjustments and the impact of lower than anticipated bond rates.
Departmental cash flows
The Department makes payments when due and obtains funds from the Official Public Account in a just-in-time manner to make these payments as they fall due. The timing of payments, particularly for suppliers, will be dependent on the receipt of the goods and services and their related invoices and so can vary between reporting periods.
The cash flows from investing activities essentially relate to outflows associated with the purchase of non-financial assets being property, plant and equipment and intangibles. These outflows are funded through capital appropriation and equity injections from Government and through funds received through the sale of regulatory services. Investment in capital projects may extend across multiple reporting periods.
Note 3: Departmental cash flow reconciliation
2019 $'000 |
2018 $'000 |
||
Reconciliation of cash and cash equivalents as per Statement of Financial Position to Cash Flow Statement |
|||
Report cash and cash equivalents as per |
|||
Cash Flow Statement |
104,373 |
100,591 |
|
Statement of Financial Position |
104,373 |
100,591 |
|
Discrepancy |
- |
- |
|
Reconciliation of net cost of services to net cash from operating activities |
|||
Net cost of services |
(733,873) |
(653,855) |
|
Add revenue from Government |
705,401 |
658,441 |
|
Adjustment for non-cash items |
|||
Gain on sale of assets |
- |
(1) |
|
Depreciation/amortisation |
34,240 |
30,474 |
|
Net write-down of non-financial assets |
1,547 |
2,443 |
|
Movements in assets and liabilities |
|||
Assets |
|||
Decrease/(increase) in net receivables |
(25,768) |
(17,890) |
|
Decrease/(increase) in other financial assets |
(4,419) |
(3,271) |
|
Decrease/(increase) in other non-financial assets |
2,977 |
2,160 |
|
Liabilities |
|||
Increase/(decrease) in employee provisions/payables |
17,146 |
(4,286) |
|
Increase/(decrease) in supplier payables |
18,114 |
14,528 |
|
Increase/(decrease) in other payables |
(3,531) |
(7,188) |
|
Increase/(decrease) in other provisions |
1,963 |
31 |
|
Net cash from operating activities |
13,797 |
21,586 |
Note 4: Employees
2019 $'000 |
2018 $'000 |
||
Note 4A: Employee benefits |
|||
Wages and salaries |
356,060 |
355,128 |
|
Superannuation: |
|||
Defined contribution plans |
39,634 |
33,940 |
|
Defined benefit plans |
38,276 |
40,635 |
|
Leave and other entitlements |
91,812 |
75,811 |
|
Separation and redundancies |
7,601 |
5,527 |
|
Total employee benefits |
533,383 |
511,041 |
|
Note 4B: Employee payables |
|||
Wages and salaries |
3,915 |
4,207 |
|
Superannuation |
4,932 |
241 |
|
Separations and redundancies |
1,713 |
965 |
|
Total employee payables |
10,560 |
5,413 |
|
Note 4C: Employee provisions |
|||
Leave |
159,802 |
147,615 |
|
Separations and redundancies |
542 |
486 |
|
Total employee provisions |
160,344 |
148,101 |
Accounting policy Liabilities for ‘short-term employee benefits’ (as defined in AASB 119 Employee Benefits) and termination benefits due within 12 months of the end of reporting period are measured at their nominal amounts. Other long-term employee benefits are measured as the net total of the present value of the defined benefit obligation at the end of the reporting period minus the fair value at the end of the reporting period of plan assets (if any) out of which the obligations are to be settled directly. The liability for employee benefits includes provisions for annual leave and long service leave. No provision has been made for sick leave as all sick leave is non-vesting and the average sick leave taken in future years by employees of the Department is estimated to be less than the annual entitlement for sick leave. The leave liabilities are calculated on the basis of employees’ remuneration at the estimated salary rates that will be applied at the time the leave is taken, including the Department’s employer superannuation contribution rates to the extent that leave is likely to be taken during service rather than paid out on termination. The liability for long service leave and annual leave expected to be settled outside of 12 months of the balance date has been determined by reference to the work of an actuary as at May 2018. The estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and inflation. The Department recognises a payable for separation and redundancy where an employee has accepted an offer of a redundancy benefit and agreed a termination date. A provision for separation and redundancy is recorded when the Department has a detailed formal plan for the payment of redundancy benefits. The provision is based on the discounted anticipated costs for identified employees engaged in the redundancy program. Under the Superannuation Legislation Amendment (Choice of Funds) Act 2004, employees of the Department are able to become a member of any complying superannuation fund. A complying superannuation fund is one that meets the requirements under the Income Tax Assessment Act (1997) and the Superannuation Industry (Supervision) Act 1993. The Department’s staff are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), the PSS accumulation plan (PSSap) or other compliant superannuation funds with the rates of contribution being set by the Department of Finance on an annual basis. The CSS and PSS are defined benefit schemes for the Australian Government. The PSSap and other compliant superannuation funds are defined contribution schemes. The liability for defined benefits is recognised in the financial statements of the Australian Government and is settled by the Australian Government in due course. This liability is reported in the Department of Finance’s administered schedules and notes. The Department makes employer contributions to the employee superannuation schemes at rates determined by an actuary to be sufficient to meet the current cost to the Government. The Department accounts for the contributions as if they were contributions to defined contribution plans. The liability for superannuation recognised as at 30 June represents outstanding contributions for the number of days between the last pay period in the financial year and 30 June. |
Note 5: Key management personnel remuneration
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly. The Department has determined the key management personnel to be the Secretary, the Chief Medical Officer (CMO) and all Deputy Secretaries. Key management personnel also include officers who have acted as the CMO or a Deputy Secretary and have exercised significant authority in planning, directing and controlling the activities of the Department.
Key management personnel remuneration is reported in the table below:
2019 $'000 |
2018 $'000 |
||
Key management personnel remuneration |
|||
Short-term employee benefits |
3,416 |
3,520 |
|
Post-employment benefits |
555 |
593 |
|
Other long-term employee benefits |
329 |
312 |
|
Total key management personnel remuneration expenses 1 |
4,300 |
4,425 |
The total number of key management personnel that are included in the above table is 12 (2018: 14).
Remuneration information for executives and other highly paid officials is included in the Annual Report in Part 3.2: People.
1 The above key management personnel remuneration excludes the remuneration and other benefits of the Portfolio Minister. The Portfolio Minister's remuneration and other benefits are set by the Remuneration Tribunal and are not paid by the Department
Note 6: Related party transactions
Related party relationships
The entity is an Australian Government controlled entity. Related parties to this entity are key management personnel including the Portfolio Minister and Executive Government, and other Australian Government entities.
Transactions with related parties
Given the breadth of Government activities, related parties may transact with the government sector in the same capacity as ordinary citizens. Such transactions include receipt of a Medicare rebate, Medicare bulk billing provider payments, pharmaceutical benefits or a zero real interest loan for aged care providers. These transactions have not been separately disclosed in this note.
Significant transactions with related parties can include:
- the payments of grants or loans;
- purchases of goods and services;
- asset purchases, sales transfers or leases;
- debts forgiven; and
- guarantees.
Giving consideration to relationships with related entities and transactions entered into during the reporting period by the entity, it has been determined that there are no related party transactions to be separately disclosed.
Note 7: Departmental suppliers, other expenses and payables
2019 $'000 |
2018 $'000 |
||
Note 7A: Suppliers |
|||
Goods and services supplied or rendered |
|||
Contractors and consultants |
80,140 |
53,776 |
|
Information technology costs |
106,208 |
91,538 |
|
Services delivered under contract or others |
32,231 |
38,852 |
|
Property |
16,132 |
15,551 |
|
Travel |
11,107 |
9,523 |
|
Training and other staff related expenses |
6,072 |
5,327 |
|
Legal |
8,264 |
3,011 |
|
Committees |
3,581 |
4,208 |
|
Other |
15,061 |
15,187 |
|
Total goods and services supplied or rendered |
278,797 |
236,973 |
|
Other suppliers |
|||
Operating lease rentals |
51,580 |
52,235 |
|
Workers compensation premiums |
3,879 |
5,270 |
|
Total other suppliers |
55,459 |
57,505 |
|
Total suppliers |
334,256 |
294,478 |
|
Note 7B: Other expenses |
|||
Write-down and impairment of assets |
|||
Impairment of financial instruments |
111 |
689 |
|
Impairment of land and buildings |
- |
1 |
|
Impairment of property, plant and equipment |
211 |
33 |
|
Impairment on intangibles |
1,335 |
2,408 |
|
Payments made on behalf of Portfolio entities 1 |
595 |
1,121 |
|
Act of Grace payments |
- |
1 |
|
Total other expenses |
2,253 |
4,253 |
1 Payments made on behalf of Portfolio entities are recovered in full, refer Note 8A.
2019 $'000 |
2018 $'000 |
||
Note 7C: Commitments |
|||
Lease commitments |
|||
Operating leases1 |
618,195 |
345,704 |
|
Total commitments |
618,195 |
345,704 |
|
Minimum lease payments expected to be settled |
|||
Within 1 year |
51,420 |
42,329 |
|
Between 1-5 years |
179,804 |
216,381 |
|
More than 5 years |
386,971 |
86,994 |
|
Total leases |
618,195 |
345,704 |
1 The operating lease commitments mainly relate to property lease payments.
Note: Commitments are not reported in the Statement of Financial Position.
Accounting policy A distinction is made between finance leases and operating leases. Finance leases effectively transfer from the lessor to the lessee substantially all the risks and benefits incidental to ownership of leased assets. An operating lease is a lease that is not a finance lease. In operating leases, the lessor effectively retains substantially all such risks and benefits. Operating lease payments are expensed on a straight-line basis which is representative of the pattern of benefits derived from the leased assets. |
2019 $'000 |
2018 $'000 |
||
Note 7D: Other payables |
|||
Lease incentive |
19,825 |
25,333 |
|
Unearned income |
20,732 |
18,755 |
|
Other |
827 |
- |
|
Total other payables |
41,384 |
44,088 |
|
Note 7E: Other provisions |
|||
Provision for surplus lease space |
- |
526 |
|
Provision for restoration |
1,683 |
1,840 |
|
Provision for lease straightlining |
30,627 |
27,981 |
|
Total other provisions |
32,309 |
30,347 |
|
Accounting policy Lease Incentives Lease incentives taking the form of ‘free’ leasehold improvements and rent holidays are recognised as liabilities. These liabilities are reduced on a straight-line basis by allocating lease payments between rental expense and reduction of the lease incentive liability. Provision for Restoration Obligation Where the Department has a contractual obligation to undertake remedial work upon vacating leased properties, the estimated cost of that work is recognised as a liability. An equal value asset is created at the same time and amortised over the life of the lease of the underlying leasehold property. |
Note 7F: Reconciliation of movement in other provisions |
|||||||
Provision for surplus lease space |
Provision for restoration1 |
Provision for lease straightlining2 |
Total |
||||
$'000 |
$'000 |
$'000 |
$'000 |
||||
As at 1 July 2018 |
526 |
1,840 |
27,981 |
30,347 |
|||
Additional provisions made |
- |
- |
3,424 |
3,424 |
|||
Amounts used |
(239) |
(81) |
(779) |
(1,099) |
|||
Amounts reversed |
(287) |
(77) |
- |
(364) |
|||
Total as at 30 June 2019 |
- |
1,683 |
30,627 |
32,309 |
1 The Department currently has four (2018: six) agreements for the leasing of premises which have provisions requiring the entity to restore the premises to their original condition at the conclusion of the lease. The Department has made a provision to reflect the present value of this obligation
2 The Department holds a provision for lease straight lining on ten leases.
Note 8: Departmental income and receivables
2019 $'000 |
2018 $'000 |
||
Note 8A: Revenue |
|||
Sale of goods and rendering of services |
|||
Sale of goods |
2,818 |
1,274 |
|
Rendering of services |
189,341 |
181,487 |
|
Recoveries received from Portfolio entities |
595 |
1,121 |
|
Financial statement audit services |
880 |
860 |
|
Other revenue |
1,144 |
694 |
|
Total own-source revenue |
194,778 |
185,436 |
Financial statement audit services were provided free of charge to the Department by the Australian National Audit Office (ANAO) and are recorded at the fair value of resources received. No other services were provided by the auditors of the financial statements.
Note 8B: Gains |
|||
Gains from sale of assets |
|||
Infrastructure, plant and equipment |
|||
Proceeds from sale |
- |
1 |
|
Other gains |
412 |
954 |
|
Total gains |
412 |
955 |
|
Accounting policy Revenue Revenue from the sale of goods is recognised when:
Revenue from rendering of services is recognised by reference to the stage of completion of contracts at the reporting date. The revenue is recognised when the:
Trade receivables, loans and other receivables that are held for the purpose of collecting the contractual cash flows where the cash flows are solely payments of principal and interest, that are not provided at below-market interest rates, are subsequently measured at amortised cost using the effective interest method adjusted for any loss. On 1 July 2015 the TGA introduced the annual charges exemption scheme to provide relief from annual charges until a product on the Australian Register of Therapeutic Goods commences generating turnover. Under this scheme, which is detailed in the regulations covering therapeutic goods, some of the charges in respect of 2018‑19 may not be known until the end of the declaration period on 15 September 2019. While there is some uncertainty in the revenue calculation for the financial year, the uncertainty is reducing as the scheme progresses and annual data is accumulated. Gains Gains from disposal of non-current assets are recognised when control of the asset has passed to the buyer. Resources received free of charge are recognised as gains when, and only when, a fair value can be reliably determined and the services would have been purchased if they had not been donated. Use of those resources is recognised as an expense. Resources received free of charge are recorded as either revenue or gains depending on their nature. Contributions of assets at no cost of acquisition or for nominal consideration are recognised as gains at their fair value when the asset qualifies for recognition, unless received from another Government entity as a consequence of a restructuring of administrative arrangements. |
2019 $'000 |
2018 $'000 |
||
Note 8C: Receivables |
|||
Trade and other receivables |
|||
Goods and services receivable |
13,267 |
15,152 |
|
GST receivable from the Australian Taxation Office |
3,850 |
2,744 |
|
Total trade and other receivables (gross) |
17,117 |
17,896 |
|
Less impairment allowance 1 |
(859) |
(1,000) |
|
Total trade and other receivables (net) |
16,258 |
16,896 |
1 The impairment allowance relates to receivables for goods and services.
Credit terms for goods and services were within: the Department 30 days (2018: 30 days), TGA 28 days (2018: 28 days).
Note 9: Departmental appropriation income and receivable
2019 $'000 |
2018 $'000 |
||
Note 9A: Revenue from Government |
|||
Appropriations |
|||
Departmental appropriations |
705,401 |
658,441 |
|
Total revenue from Government |
705,401 |
658,441 |
|
Note 9B: Appropriations receivable |
|||
Existing programs |
49,289 |
47,813 |
|
Undrawn equity injection |
14,719 |
6,952 |
|
Departmental Capital Budget |
1,842 |
103 |
|
Total appropriations receivable |
65,850 |
54,868 |
Appropriations receivable undrawn are appropriations controlled by the Department but held in the Official Public Account under the Government's just-in-time drawdown arrangement.
Accounting policy Revenue from Government Amounts appropriated for Departmental appropriations for the year (adjusted for any formal additions and reductions) are recognised as Revenue from Government when the Department gains control of the appropriation, except for certain amounts that relate to activities that are reciprocal in nature, in which case revenue is recognised only when it has been earned. Appropriations receivable are recognised at their nominal amounts. |
Note 10: Departmental cash and financial instruments
2019 |
2018 |
||
$'000 |
$'000 |
||
Note 10A: Cash and cash equivalents |
|||
Cash and cash equivalents |
|||
Cash in special accounts |
103,329 |
99,136 |
|
Cash on hand or on deposit |
1,044 |
1,455 |
|
Total cash and cash equivalents |
104,373 |
100,591 |
|
Note 10B: Financial instruments |
|||
Financial assets under AASB 139 |
|||
Loans and receivables |
|||
Goods and services receivable |
15,152 |
||
Less: Impairment allowance |
(1,000) |
||
Total loans and receivables |
14,152 |
||
Financial assets under AASB 9 |
|||
Financial assets at amortised cost |
|||
Receivables |
13,267 |
||
Less: Impairment allowance |
(859) |
||
Total assets at amortised cost |
12,408 |
||
Net gains or losses on financial assets |
|||
Financial assets at amortised cost |
|||
Impairment |
(111) |
(689) |
|
Net gains or (losses) on financial assets at amortised cost |
(111) |
(689) |
|
Note 10C: Financial liabilities |
|||
Financial liabilities measured at amortised cost |
|||
Trade creditors |
90,788 |
73,498 |
|
Total financial liabilities measured at amortised cost |
90,788 |
73,498 |
Note 10D: Classification of financial instruments |
||||||||
Financial asset class |
Note |
AASB 139 original classification |
AASB 9 new classification |
AASB 139 carrying amount at |
AASB 9 carrying amount at |
|||
Cash and cash equivalents |
||||||||
Cash in special accounts |
Held to maturity |
Amortised cost |
99,136 |
99,136 |
||||
Cash on hand or on deposit |
Held to maturity |
Amortised cost |
1,455 |
1,455 |
||||
Trade receivables |
Loans and receivables |
Amortised cost |
14,152 |
14,152 |
||||
Total financial assets |
114,743 |
114,743 |
||||||
Accounting policy Cash and equivalents Cash and cash equivalents are:
Financial assets With the implementation of AASB 9 Financial Instruments for the first time in 2019 the department classifies its departmental financial assets, which are trade receivables, as financial assets measured at amortised cost. Financial assets are recognised when the department becomes a party to the contract and has a legal right to receive cash. Comparatives have not been restated on initial application. Financial assets at amortised cost Financial assets included in this category need to meet two criteria:
Amortised cost is determined using the effective interest method. Supplier and other payables are recognised at amortised cost and are recognised to the extent that the goods or services have been received and irrespective of having been invoiced. Impairment of Financial Assets Financial assets are assessed for impairment at the end of each reporting period. Financial assets held at amortised cost - if there is objective evidence that an impairment loss has been incurred for items held at amortised cost, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the asset’s original effective interest rate. The carrying amount is reduced by way of an allowance account. The loss is recognised in the Statement of Comprehensive Income. |
Note 11: Departmental property, plant and equipment and intangibles
Reconciliation of the opening and closing balances for 2019 |
||||||
Land and buildings |
Property, plant and equipment |
Computer software - internally developed |
Computer software - purchased |
Total intangibles |
Total |
|
$'000 |
$'000 |
$'000 |
$'000 |
$'000 |
$'000 |
|
As at 1 July 2018 |
||||||
Gross book value |
56,168 |
6,426 |
245,500 |
4,496 |
249,996 |
312,589 |
Accumulated depreciation/ amortisation and impairment |
(1,100) |
(216) |
(128,553) |
(3,543) |
(132,096) |
(133,413) |
Total as at 1 July 2018 |
55,067 |
6,210 |
116,947 |
953 |
117,899 |
179,177 |
Additions |
||||||
Purchase or internally developed |
4,763 |
1,517 |
26,183 |
- |
26,183 |
32,463 |
Depreciation and amortisation |
(10,233) |
(1,419) |
(22,264) |
(324) |
(22,587) |
(34,240) |
Impairments recognised in net cost of services |
- |
(211) |
(1,335) |
- |
(1,335) |
(1,547) |
Total as at 30 June 2019 |
49,597 |
6,096 |
119,531 |
629 |
120,160 |
175,853 |
Total as at 30 June 2019 represented by |
||||||
Work in progress |
4,685 |
- |
26,808 |
- |
26,808 |
31,493 |
Gross book value |
56,246 |
7,647 |
243,440 |
4,496 |
247,935 |
311,828 |
Accumulated depreciation/ amortisation and impairment |
(11,333) |
(1,551) |
(150,717) |
(3,867) |
(154,584) |
(167,469) |
Total as at 30 June 2019 |
49,597 |
6,096 |
119,531 |
629 |
120,160 |
175,852 |
Accounting policy Acquisition of assets Assets are recorded at cost on acquisition except as stated below. The cost of acquisition includes the fair value of assets transferred in exchange and liabilities undertaken. Financial assets are initially measured at their fair value plus transaction costs where appropriate. Assets acquired at no cost, or for nominal consideration, are initially recognised as assets and income at their fair value at the date of acquisition, unless acquired as a consequence of restructuring of administrative arrangements. In the latter case, assets are initially recognised as contributions by owners at the amounts at which they were recognised in the transferor’s accounts immediately prior to the restructuring. Asset recognition threshold Purchases of property, plant and equipment are recognised initially at cost in the Statement of Financial Position, except for information technology equipment purchases costing less than $500 (TGA $2,000), leasehold improvements costing less than $50,000 (TGA $10,000), and all other purchases costing less than $2,000, which are expensed in the year of acquisition (other than when they form part of a group of similar items which are significant in total). The initial cost of an asset includes an estimate of the cost of dismantling and removing the item and restoring the site on which it is located. This is particularly relevant to ‘make good’ provisions in property leases taken up by the Department where there exists an obligation to restore the property to prescribed conditions. These costs are included in the value of the Department’s leasehold improvements with a corresponding provision for the ‘make good’ recognised. Revaluations Following initial recognition at cost, property, plant and equipment are carried at latest value less subsequent accumulated depreciation and accumulated impairment losses. Valuations are conducted with sufficient frequency to ensure that the carrying amounts of assets do not differ materially from the assets’ fair values as at the reporting date. The regularity of independent valuations depends upon the volatility of movements in market values for the relevant assets. An independent valuation of all property, plant and equipment was carried out by JLL as at 31 May 2018 and a desktop review to assess fair value was conducted as at 30 June 2019. Revaluation adjustments are made on a class basis. Any revaluation increment was credited to equity under the heading of Asset Revaluation Reserve except to the extent that it reversed a previous revaluation decrement of the same class that was previously recognised in the surplus/deficit. Revaluation decrements for a class of assets are recognised directly in the surplus/deficit except to the extent that they reversed a previous revaluation increment for that class. Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the asset is restated to the revalued amount. Assets held for sale Property plant and equipment owned by the Department to provide computing services to the TGA is at, or nearing, end-of-life. The Department will sell to its IT service provider, dispose or retain the items but given the uncertainty around the treatment for individual assets, in accordance with AASB 5 Non‑current Assets Held for Sale and Discontinued Operations, the assets are recorded as being in use as at 30 June 2019. Depreciation Depreciable property, plant and equipment assets are written-off to their estimated residual values over their estimated useful lives to the Department using, in all cases, the straight-line method of depreciation. Leasehold improvements are depreciated on a straight-line basis over the lesser of the estimated useful life of the improvements or the unexpired period of the lease, including any applicable lease options available. Depreciation rates (useful lives), residual values and methods are reviewed at each reporting date and necessary adjustments are made in the current, or current and future reporting periods, as appropriate. Depreciation rates applying to each class of depreciable asset are based on the following useful lives:
The recoverable amount of an asset is the higher of its fair value less costs of disposal and its value in use. Value in use is the present value of the future cash flows expected to be derived from the asset. Where the future economic benefit of an asset is not primarily dependent on the asset’s ability to generate future cash flows, and the asset would be replaced if the entity were deprived of the asset, its value in use is taken to be its depreciated replacement cost. Impairment All assets were assessed for impairment as at 30 June 2019. Where indications of impairment exist, the asset’s recoverable amount is estimated and an impairment adjustment made if the asset’s recoverable amount is less than its carrying amount. De-recognition An item of property, plant and equipment is de-recognised upon disposal or when no further future economic benefits are expected from its use or disposal. Intangibles The Department’s intangibles comprise internally developed software for internal use and purchased software. These assets are carried at cost less accumulated amortisation and accumulated impairment losses. The Department recognises internally developed software costing more than $100,000 and purchased software costing more than $500 (TGA $100,000). Software is amortised on a straight-line basis over its anticipated useful life. The useful lives of the Department’s software are:
All software assets were assessed for indications of impairment as at 30 June 2019. |
Note 12: Fair value measurement
Accounting policy The Department’s assets are held for operational purposes, not for the purposes of deriving a profit. As allowed for by AASB 13 Fair Value Measurement, quantitative information on significant unobservable inputs used in determining fair value is not disclosed. Assets held at fair value include leasehold improvements and property, plant and equipment but exclude assets under construction. Assets not held at fair value include intangibles and assets under construction. The Department reviews its valuation model each year via a desktop exercise with a formal revaluation undertaken every three years: the last comprehensive revaluation was undertaken in 2018. If during the conduct of the desktop valuation, indicators of a particular asset class change materially, that class is subject to specific valuation in the reporting period. Both the comprehensive revaluation and the desktop review were undertaken by JLL. The categories of fair value measurement are: Level 1: quoted prices (unadjusted) in active markets for identical assets that the entity can access at measurement date. Level 2: inputs other than quoted prices included within level 1 that are observable for the asset, either directly or indirectly. Level 3: unobservable inputs. Departmental assets are held at fair value and are measured at category levels 2 or 3 with no fair values measured at category level 1. Leasehold improvements are predominately measured at category level 3 and the valuation methodology used is Depreciated Replacement Cost (DRC). Under DRC the estimated cost to replace the asset is calculated, with reference to new replacement price per square metre, and then adjusted to take into account its consumed economic benefit (accumulated depreciation). The consumed economic benefit has been determined based on the professional judgement of JLL with regard to physical, economic and external obsolescence factors. For all leasehold improvement assets, the consumed economic benefit is determined based on the term of the associated lease. Property, plant and equipment is measured at either category level 2 or 3. The valuation methodology is either market approach or DRC, based on replacement cost for a new equivalent asset. The significant unobservable inputs used in the fair value measurement of PPE assets are the market demand and JLL professional judgement. |
Note 13: Departmental aggregate assets and liabilities
2019 $'000 |
2018 $'000 |
||
Assets expected to be recovered in |
|||
No more than 12 months |
234,567 |
179,607 |
|
More than 12 months |
184,384 |
202,167 |
|
Total assets |
418,951 |
381,774 |
|
Liabilities expected to be settled in |
|||
No more than 12 months |
185,815 |
165,928 |
|
More than 12 months |
149,571 |
135,519 |
|
Total liabilities |
335,386 |
301,447 |
Note 14: Departmental contingent assets and liabilities
Guarantees |
Claims for damages or costs |
Total |
||||
2019 |
2018 |
2019 |
2018 |
2019 |
2018 |
|
$'000 |
$'000 |
$'000 |
$'000 |
$'000 |
$'000 |
|
Contingent assets |
||||||
Balance from previous period |
- |
- |
- |
150 |
- |
150 |
Rights expired |
- |
- |
- |
(150) |
- |
(150) |
Total contingent assets |
- |
- |
- |
- |
- |
- |
Contingent liabilities |
||||||
Balance from previous period |
5,000 |
5,000 |
- |
645 |
5,000 |
5,645 |
Obligations expired |
(5,000) |
- |
- |
(645) |
(5,000) |
(645) |
Total contingent liabilities |
- |
5,000 |
- |
- |
- |
5,000 |
Net contingent (liabilities) |
- |
(5,000) |
- |
- |
- |
(5,000) |
Accounting Policy Contingent liabilities and contingent assets are not recognised in the statement of financial position but are reported in the relevant notes. They may arise from uncertainty as to the existence of a liability or asset, or represent an asset or liability in respect of which the amount cannot be reliably measured. Contingent assets are disclosed when settlement is probable but not certain, and contingent liabilities are disclosed when settlement is greater than remote. The Department applies Accounting Standard AASB 137 Provisions, Contingent Liabilities and Contingent Assets in determining disclosure of contingent assets and liabilities. Quantifiable contingencies Quantifiable contingent assets The Department had no quantifiable contingent assets as at 30 June 2019 (2018: $NIL). Quantifiable contingent liabilities Claims for damages and costs The schedule of contingencies reports no contingent liabilities in respect of claims for damages/costs as at 30 June 2019 (2018: $NIL). Guarantees The schedule of contingencies reports no contingent liabilities in respect of claims for payments as at 30 June 2019 (2018: $5.000m). Unquantifiable contingencies Unquantifiable contingent assets and liabilities At 30 June 2019 the Department was involved in a number of litigation cases before the courts. The Department has been advised by its solicitors that it is not possible to quantify amounts relating to these cases and the information is not disclosed on the grounds that it might seriously prejudice the outcomes of these cases. The Department has provided indemnities to its transactional bankers in relation to any claims made against the bank resulting from errors in the Department’s payment files. There were no claims made during the year. Significant remote contingencies The Department did not have any significant remote contingencies in either reporting year. |
Note 15: Departmental appropriations
Table A: Annual and Unspent Appropriations ('Recoverable GST exclusive') |
|||
2019 $'000 |
2018 $'000 |
||
DEPARTMENTAL |
|||
Ordinary Annual Services |
|||
Annual appropriation1,2 |
726,804 |
659,018 |
|
Capital budget3 |
13,376 |
11,095 |
|
Receipts retained under PGPA Act - Section 74 |
125,388 |
107,463 |
|
Transfers of appropriations under PGPA Act - Section 75 - annual appropriation |
(50,286) |
- |
|
Transfers of appropriations under PGPA Act - Section 75 - capital budget |
(668) |
- |
|
Total appropriation |
814,614 |
777,576 |
|
Appropriation applied (current and prior years) |
(803,340) |
(763,044) |
|
Variance4 |
11,274 |
14,532 |
|
Unspent appropriations |
|||
Own unspent appropriation balance |
48,223 |
49,371 |
|
Closing unspent appropriation balance |
48,223 |
49,371 |
|
Balance comprises appropriations as follows: |
|||
Appropriation Act (No. 1) 2017-2018 |
- |
47,813 |
|
Appropriation Act (No. 1) 2017-2018 - Cash at bank5 |
- |
1,455 |
|
Appropriation Act (No. 3) 2017-2018 - Departmental Capital Budget (DCB) |
- |
103 |
|
Appropriation Act (No. 1) 2018-2019 |
42,030 |
- |
|
Appropriation Act (No. 1) 2018-2019 - Cash at bank5 |
1,044 |
- |
|
Appropriation Act (No. 3) 2018-2019 |
3,307 |
- |
|
Appropriation Act (No. 3) 2018-2019 - Departmental Capital Budget (DCB) |
1,842 |
- |
|
Total unspent appropriation - ordinary annual services |
48,223 |
49,371 |
1 There were no amounts temporarily quarantined from 2019 or 2018 departmental ordinary annual services appropriations.
2 There were no amounts withheld under section 51 of the PGPA Act from 2019 or 2018 departmental ordinary annual services appropriations.
3 Departmental Capital Budgets are appropriated through Appropriation Acts (No. 1,3) and Supply Acts (No. 1,3). They form part of ordinary annual services and are not separately identified in the Appropriation Acts.
4 The variance of $11,274,000 for departmental ordinary annual services primarily represents the timing difference of payments to suppliers and employees.
5 Cash at bank mainly relates to deposits made on 30 June, subject to Section 74 of the PGPA Act (annotated Appropriation Act No. 1).
2019 $'000 |
2018 $'000 |
||
Other Services - Equity |
|||
Annual appropriation1,2 |
19,246 |
7,422 |
|
Total appropriation |
19,246 |
7,422 |
|
Appropriation applied (current and prior years) |
(11,479) |
(3,146) |
|
Variance3 |
7,767 |
4,276 |
|
Unspent appropriations |
|||
Own unspent appropriation balance |
14,719 |
6,952 |
|
Closing unspent appropriation balance4 |
14,719 |
6,952 |
|
Balance comprises appropriations as follows: |
|||
Appropriation Act (No. 2) 2016-2017 |
- |
600 |
|
Appropriation Act (No. 2) 2017-2018 |
- |
1,296 |
|
Appropriation Act (No. 4) 2017-2018 |
2,447 |
4,560 |
|
Appropriation Act (No. 6) 2017-2018 |
- |
496 |
|
Appropriation Act (No. 2) 2018-2019 |
12,043 |
- |
|
Appropriation Act (No. 4) 2018-2019 |
229 |
- |
|
Total unspent appropriation - other services - equity |
14,719 |
6,952 |
1 There were no amounts temporarily quarantined from 2019 or 2018 departmental other services - equity appropriations.
2 There were no amounts withheld under section 51 of the PGPA Act from 2019 or 2018 departmental other services – equity appropriations.
3 The variance of $7,767,000 for departmental equity primarily relates to delayed commencement of projects funded in 2018‑19 Additional Estimates.
4 This balance is net of $11,778,000 which is permanently quarantined under section 51 of the PGPA Act. The total unspent appropriations gross of quarantined amounts under section 51 of the PGPA Act is $26,497,000.
Note 16: Therapeutic Goods Administration
Note 16A: Therapeutic Goods Administration overview
The Therapeutic Goods Administration (TGA) contributes to Outcome 5: Regulation, Safety and Protection. The TGA recovers the cost of all activities undertaken within the scope of the Therapeutic Goods Act 1989 from industry through fees and charges.
Included below is financial information for the TGA special account. The balance of the special account represents a standing appropriation from which payments are made for the purposes of the special account. The TGA special account is reported in Note 30: Special accounts.
Therapeutic goods are regulated to ensure that medicinal products and medical devices in Australia meet standards of safety, quality and efficacy at least equal to that of comparable countries. These products and devices should be made available in a timely manner and the regulatory impact on business kept to a minimum. This is achieved through a risk management approach to pre-market evaluation and approval of therapeutic products intended for supply in Australia, licensing of manufacturers and post market surveillance.
TGA receives payment for evaluation services in advance of service delivery, which can extend across financial years. TGA estimates the stage of service completion and recognises the matching revenue. Revenue reported for 2018-19 includes an estimate for annual charges.
2019 $'000 |
2018 $'000 |
||
Note 16B: TGA Comprehensive income |
|||
Expenses |
|||
Employee benefits |
93,618 |
75,802 |
|
Consultants and contractors |
13,108 |
18,474 |
|
Corporate Services |
36,044 |
36,142 |
|
Other |
8,405 |
8,221 |
|
Depreciation and amortisation |
7,518 |
6,846 |
|
Write-down and impairment of assets |
1,448 |
2,895 |
|
Total expenses |
160,141 |
148,380 |
|
Revenues |
|||
Sale of goods and rendering of services |
159,000 |
152,905 |
|
Other revenue and gains |
48 |
1 |
|
Total own-source revenue |
159,048 |
152,906 |
|
Revenue from Government |
2,257 |
2,439 |
|
Surplus on continuing operations |
1,164 |
6,965 |
|
2019 $'000 |
2018 $'000 |
||
Note 16C: TGA Financial Position |
|||
Assets |
|||
Financial assets1 |
86,616 |
82,082 |
|
Non-financial assets |
30,021 |
34,607 |
|
Total assets |
116,637 |
116,690 |
|
Liabilities |
|||
Payables |
28,433 |
33,368 |
|
Provisions |
25,320 |
21,601 |
|
Total liabilities |
53,753 |
54,970 |
|
Equity |
|||
Contributed equity |
2,029 |
2,029 |
|
Asset revaluation reserve |
9,138 |
9,138 |
|
Retained surplus |
51,717 |
50,554 |
|
Total Equity |
62,884 |
61,720 |
1 Includes cash balance of $76.501m which is disclosed in Note 30: Special accounts.
Note 17: Restructuring
2019 $'000 |
2019 $'000 |
||
Functions in relation to: |
Grants management function, Department of Social Services1 |
Aged Care Complaints Commissioner, Aged Care Quality and Safety Commission2 |
|
Assets relinquished |
|||
Appropriation receivable |
7,529 |
4,893 |
|
Total assets relinquished |
7,529 |
4,893 |
|
Liabilities relinquished |
|||
Employee provisions |
7,546 |
4,923 |
|
Total liabilities relinquished |
7,546 |
4,923 |
|
Net (liabilities) relinquished |
(17) |
(30) |
1 To support the Community Services Grants Hub within the Department of Social Services, staff and related assets and liabilities were transferred from the Department during 2018-19.
2 From 1 January 2019, the Government established an independent Aged Care Quality and Safety Commission combining the functions of the former Australian Aged Care Quality Agency and the Department’s Aged Care Complaints Commissioner. Staff and related assets and liabilities were transferred during 2018-19.
Administered Schedule of Comprehensive Income
for the period ended 30 June 2019
Notes |
ACTUAL 2019 $'000 |
ACTUAL 2018 $'000 |
BUDGET 2019 $'000 |
|||
NET COST OF SERVICES |
||||||
Expenses |
||||||
Grants |
9,181,314 |
7,721,904 |
9,176,365 |
|||
Personal benefits |
46,174,150 |
44,599,704 |
45,631,261 |
|||
Subsidies |
12,659,007 |
11,762,424 |
12,644,690 |
|||
Suppliers |
1,020,337 |
999,016 |
698,858 |
|||
Payments to corporate Commonwealth entities |
644,096 |
510,005 |
582,970 |
|||
Other expenses |
31,669 |
39,156 |
30,749 |
|||
Total expenses |
69,710,573 |
65,632,209 |
68,764,893 |
|||
Income |
||||||
Special accounts revenue |
36,442,177 |
34,779,233 |
35,482,104 |
|||
Recoveries |
2,640,141 |
2,943,418 |
2,816,034 |
|||
Other revenue |
418,836 |
214,966 |
98,559 |
|||
Total income |
39,501,154 |
37,937,617 |
38,396,697 |
|||
Net cost of services |
30,209,419 |
27,694,592 |
30,368,196 |
|||
Deficit |
(30,209,419) |
(27,694,592) |
(30,368,196) |
|||
OTHER COMPREHENSIVE INCOME |
||||||
Items not subject to subsequent reclassification to net cost of services |
||||||
Changes in administered investment reserves |
(61,239) |
(42,272) |
- |
|||
Total other comprehensive income/(loss) |
(61,239) |
(42,272) |
- |
|||
Total comprehensive loss |
(30,270,658) |
(27,736,864) |
(30,368,196) |
|||
The above schedule should be read in conjunction with the accompanying notes. |
For budgetary reporting information refer to Note 18. The original budget is the budget published in the 2018‑19 Portfolio Budget Statements. The budget statement information has been reclassified and presented on a consistent basis with the corresponding financial statement. |
Administered Schedule of Assets and Liabilities
as at 30 June 2019
Notes |
ACTUAL 2019 $'000 |
ACTUAL 2018 $'000 |
BUDGET 2019 $'000 |
|||
ASSETS |
||||||
Financial assets |
||||||
Cash and cash equivalents |
794,505 |
559,100 |
119,932 |
|||
Accrued recoveries revenue |
1,080,356 |
1,368,959 |
801,896 |
|||
Loans and other receivables |
983,193 |
755,494 |
561,766 |
|||
Investments |
496,222 |
482,642 |
542,558 |
|||
Total financial assets |
3,354,276 |
3,166,195 |
2,026,152 |
|||
Non-financial assets |
||||||
Inventories held for distribution |
117,139 |
115,765 |
117,238 |
|||
Total non-financial assets |
117,139 |
115,765 |
117,238 |
|||
Total assets administered on behalf of Government |
3,471,415 |
3,281,960 |
2,143,390 |
|||
LIABILITIES |
||||||
Payables |
||||||
Suppliers |
(27,976) |
(35,635) |
(22,765) |
|||
Subsidies |
(111,919) |
(105,740) |
(37,590) |
|||
Personal benefits |
(1,082,711) |
(1,027,893) |
(998,562) |
|||
Grants |
(423,909) |
(312,088) |
(308,460) |
|||
Total payables |
(1,646,515) |
(1,481,356) |
(1,367,377) |
|||
Provisions |
||||||
Subsidies |
(430,000) |
(441,000) |
(450,000) |
|||
Personal benefits |
(898,879) |
(1,074,260) |
(1,057,773) |
|||
Total provisions |
(1,328,879) |
(1,515,260) |
(1,507,773) |
|||
Total liabilities administered on behalf of Government |
(2,975,394) |
(2,996,616) |
(2,875,150) |
|||
Net assets/(liabilities) |
496,021 |
285,344 |
(731,760) |
|||
The above schedule should be read in conjunction with the accompanying notes. |
||||||
For budgetary reporting information refer to Note 18. The original budget is the budget published in the 2018‑19 Portfolio Budget Statements. The budget statement information has been reclassified and presented on a consistent basis with the corresponding financial statement. |
Administered Reconciliation Schedule
2019 $'000 |
2018 $'000 |
||
Opening assets less liabilities as at 1 July |
285,344 |
(557,722) |
|
Adjusted opening assets less liabilities |
285,344 |
(557,722) |
|
Net cost of services |
|||
Income |
39,501,154 |
37,937,617 |
|
Expenses |
|||
Payments to entities other than corporate Commonwealth entities |
(69,066,477) |
(65,122,204) |
|
Payments to corporate Commonwealth entities |
(644,096) |
(510,005) |
|
Other comprehensive income |
|||
Revaluations transferred to/(from) reserves |
(61,239) |
(42,272) |
|
Transfers (to)/from Australian Government |
|||
Appropriation transfers from the Official Public Account (OPA) |
|||
Administered assets and liabilities appropriations |
|||
Payments to entities other than corporate Commonwealth entities |
63,948 |
44,893 |
|
Payments to corporate Commonwealth entities |
37,453 |
54,533 |
|
Appropriations for ordinary annual services |
|||
Payments to entities other than corporate Commonwealth entities |
9,757,198 |
8,549,464 |
|
Payments to corporate Commonwealth entities |
643,837 |
510,429 |
|
Special appropriations (unlimited) |
|||
Payments to entities other than corporate Commonwealth entities |
23,100,753 |
22,093,488 |
|
Special appropriations (limited) |
|||
Refund of receipts (section 77 of the PGPA Act) |
18,105 |
583 |
|
Net GST appropriations |
26,114 |
(6,220) |
|
Appropriation transfers to OPA |
|||
Transfers to OPA |
(3,166,073) |
(2,667,240) |
|
Closing assets less liabilities as at 30 June |
496,021 |
285,344 |
Administered Cash Flow Statement
for the period
Notes |
2019 $'000 |
2018 $'000 |
||
OPERATING ACTIVITIES |
||||
Cash received |
||||
Recoveries |
2,741,568 |
2,538,031 |
||
Net GST received |
609,189 |
577,889 |
||
Special accounts receipts |
36,442,177 |
34,779,233 |
||
Other |
402,947 |
109,595 |
||
Total cash received |
40,195,881 |
38,004,748 |
||
Cash used |
||||
Grants |
(9,712,541) |
(8,285,896) |
||
Subsidies |
(12,660,510) |
(11,712,886) |
||
Personal benefits |
(46,321,044) |
(44,585,662) |
||
Suppliers |
(1,054,915) |
(1,011,194) |
||
Payments to corporate Commonwealth entities |
(643,837) |
(510,005) |
||
Total cash used |
(70,392,847) |
(66,105,643) |
||
Net cash used by operating activities |
(30,196,966) |
(28,100,895) |
||
INVESTING ACTIVITIES |
||||
Cash received |
||||
Repayments of advances and loans |
30,924 |
32,649 |
||
Total cash received |
30,924 |
32,649 |
||
Cash used |
||||
Advances and loans made |
(6,638) |
(29,451) |
||
Equity injections to corporate Commonwealth entities |
(37,453) |
(54,533) |
||
Purchase of investments |
(35,798) |
(15,409) |
||
Total cash used |
(79,889) |
(99,393) |
||
Net cash used by investing activities |
(48,965) |
(66,744) |
||
Net decrease in cash held |
(30,245,931) |
(28,167,639) |
||
Cash and cash equivalents at the beginning of the reporting period |
559,100 |
146,809 |
||
Cash from Official Public Account |
||||
Appropriations |
33,519,893 |
31,153,964 |
||
Special Accounts |
5,607 |
12,524 |
||
Capital appropriations |
101,402 |
99,426 |
||
Administered GST appropriations |
626,462 |
567,504 |
||
Total cash from Official Public Account |
34,253,364 |
31,833,418 |
||
Cash to Official Public Account |
||||
Special Accounts |
(5,607) |
(12,524) |
||
Return of GST appropriations to the Official Public Account |
(600,348) |
(573,724) |
||
Other |
(3,166,073) |
(2,667,240) |
||
Total cash to Official Public Account |
(3,772,028) |
(3,253,488) |
||
Cash and cash equivalents at the end of the reporting period |
794,505 |
559,100 |
||
The above schedule should be read in conjunction with the accompanying notes. |
Accounting policy Revenue collected by the Department for use by the Government rather than the Department is administered revenue. Collections are transferred to the OPA maintained by the Department of Finance. Conversely, cash is drawn from the OPA to make payments under Parliamentary appropriation on behalf of Government. These transfers to and from the OPA are adjustments to the administered cash held by the Department on behalf of the Government and are reported as such in the Administered Cash Flow Statement and in the Administered Reconciliation Schedule. |
Note 18: Administered explanation of budget variances
Administered expenses
Total administered expenses for 2018-19 were significantly higher than the original budget, driven largely by the increase in personal benefits and supplier expenses. Personal benefits expenses relate to a range of program groups, most of which are funded through appropriations relating to demand. Growth in personal benefits expenditure is consistent with the revised budget included in the Portfolio Additional Estimates, and is attributable to the ongoing Government commitment to guaranteeing Medicare and improving access to medicines, including increasing new or amended PBS listings as well as adding new MBS items.
Significantly higher supplier expenses against the original budget related to aged care programs, which were initially budgeted against grants, with the resulting underspend against grants masked by other programs overspending against the original grants budget. This issue was corrected in the revised budget included in the Portfolio Additional Estimates.
Administered revenues
The key driver of the variance in administered revenue in 2018-19 was the Medicare Guarantee Fund (MGF) special account. The original budget represents the initial annual funding allocation for this special account, however a second tranche of funding was transferred into the MGF special account late in the year based on PBS and MBS growth and variations in funding requirements. The Medical Research Future Fund (MRFF) special account also received a substantial funding allocation in 2018-19, reflecting an accelerated rate of grant activity in the funded programs.
Other revenue was also higher than the original budget. Other revenue represents revenue transactions that are not standard or predictable in nature, such as acquittals of prior year grants and returns of overpaid benefits, and are difficult to budget for effectively, as past performance is not indicative of future patterns.
The PBS drug recoveries arising from cost sharing agreements between the Commonwealth and pharmaceutical companies were lower than originally anticipated due to the changing pattern of use, particularly reducing demand for the high value Hepatitis C drugs.
Administered assets
The total value of assets administered on behalf of the Commonwealth at 30 June 2019 was significantly higher than the original budget. The key driver of this variance was cash and cash equivalents, relating to the unspent portion of the 2018-19 funding allocation remaining in the MGF special account, which varies based on the timing and quantum of payments in the last week of the financial year. This remaining funding was utilised in the first week of 2019-20.
Accrued PBS drug recoveries and other receivables have also contributed to the increase. Due to the nature of these items, the value of accruals and debtors at the end of the year fluctuates with no predictable pattern based on the timing of invoicing and billing cycles and past performance.
Administered liabilities
The total value of liabilities administered on behalf of the Commonwealth at 30 June 2019 was in excess of the budget. This increase was largely driven by higher grants and suppliers liabilities, as funding and procurement activities were impacted by the timing of the caretaker period associated with the federal election in the last quarter of 2018-19.
This was partially mitigated by lower personal benefits liabilities due to the reduction in the payment lag for claims submitted via PBS Online from 9-16 days to 2-9 days which was implemented in March 2019.
Note 19: Administered cash flow reconciliation
2019 $'000 |
2018 $'000 |
||
Reconciliation of cash and cash equivalents as per Administered Schedule of Assets and Liabilities to Administered Cash Flow Statement |
|||
Cash and cash equivalents as per: |
|||
Administered Cash Flow Statement |
794,505 |
559,100 |
|
Administered Schedule of Assets and Liabilities |
794,505 |
559,100 |
|
Discrepancy |
- |
- |
|
Reconciliation of net cost of services to net cash used by operating activities |
|||
Net cost of services |
(30,209,419) |
(27,694,592) |
|
Adjustment for non-cash items |
|||
Net write-down of assets |
25,850 |
26,564 |
|
Inventory adjustments |
35 |
13 |
|
Concessional loans discount and unwinding |
(4,831) |
(6,942) |
|
Movements in assets and liabilities |
|||
Assets |
|||
Decrease/(increase) in net receivables |
60,430 |
(522,292) |
|
Decrease/(increase) in inventories |
(24,917) |
(24,917) |
|
Liabilities |
|||
Increase/(decrease) in suppliers payable |
(9,228) |
12,794 |
|
Increase/(decrease) in subsidies payable |
6,179 |
54,444 |
|
Increase/(decrease) in personal benefits payable |
54,818 |
51,919 |
|
Increase/(decrease) in grants payable |
90,498 |
(5,373) |
|
Increase/(decrease) in subsidies provision |
(11,000) |
(9,000) |
|
Increase/(decrease) in personal benefits provision |
(175,381) |
16,487 |
|
Net cash used by operating activities |
(30,196,966) |
(28,100,895) |
Note 20: Administered transfer payments
2019 $'000 |
2018 $'000 |
||
Note 20A: Grants |
|||
Grants paid |
|||
Public sector |
|||
Australian Government entities (related entities) |
787,639 |
749,636 |
|
Private sector |
|||
Profit and non-profit organisations |
8,377,839 |
6,957,205 |
|
Overseas |
15,836 |
15,063 |
|
Total grants paid |
9,181,314 |
7,721,904 |
|
Grants payable |
|||
Public sector |
|||
Australian Government entities (related entities) |
15,183 |
17,781 |
|
Private sector |
|||
Profit and non-profit organisations |
408,726 |
294,307 |
|
Total grants payable |
423,909 |
312,088 |
|
Accounting policy The Department administers a number of grant schemes on behalf of the Government. Grant liabilities are recognised to the extent that (i) the services required to be performed by the grantee have been performed or (ii) the grant eligibility criteria have been satisfied, but payments due have not been made. Settlement is made according to the terms and conditions of each grant. This is usually within 30 days of performance or eligibility. All grants liabilities are expected to be settled within 12 months of the balance date. |
2019 $'000 |
2018 $'000 |
||
Note 20B: Personal Benefits |
|||
Personal benefits paid |
|||
Direct personal benefits paid |
|||
Private health insurance |
6,061,728 |
6,010,185 |
|
Total direct personal benefits paid |
6,061,728 |
6,010,185 |
|
Indirect personal benefits paid |
|||
Medical services |
24,512,427 |
23,609,384 |
|
Pharmaceuticals and pharmaceutical services |
11,942,377 |
11,794,308 |
|
Primary care practice incentives |
339,931 |
342,852 |
|
Hearing services |
538,443 |
514,330 |
|
Targeted assistance |
149,760 |
146,043 |
|
Aged care |
2,559,322 |
2,122,271 |
|
Other |
70,162 |
60,331 |
|
Total indirect personal benefits paid |
40,112,422 |
38,589,519 |
|
Total personal benefits paid |
46,174,150 |
44,599,704 |
|
Personal benefits payable |
|||
Direct personal benefits payable |
|||
Private health insurance |
466,829 |
470,693 |
|
Total direct personal benefits payable |
466,829 |
470,693 |
|
Indirect personal benefits payable |
|||
Medical services |
472,014 |
409,441 |
|
Pharmaceuticals and pharmaceutical services |
13,654 |
3,094 |
|
Aged care |
65,275 |
77,272 |
|
Other |
64,939 |
67,393 |
|
Total indirect personal benefits payable |
615,882 |
557,200 |
|
Total personal benefits payable |
1,082,711 |
1,027,893 |
|
Personal benefits provisions |
|||
Outstanding claims |
|||
Medical services |
753,316 |
738,455 |
|
Pharmaceuticals and pharmaceutical services |
145,563 |
335,805 |
|
Total personal benefits provisions |
898,879 |
1,074,260 |
|
Accounting policy Personal benefits are the current transfers for the benefit of individuals or households, directly or indirectly, that do not require any economic benefit to flow back to Government. The Department administers a number of personal benefits programs on behalf of the Government that provide a range of health care entitlements to individuals. These include, but are not limited to:
Personal benefits are assessed, determined and paid by Services Australia in accordance with provisions of the relevant legislation under delegation from the Department. All personal benefits liabilities are expected to be settled within 12 months of the balance date. In the majority of cases the above payments are initially based on the information provided by customers and providers. Both the Department and Services Australia have established review mechanisms to identify overpayments made under various schemes. The recognition of receivables and recovery actions take place once the overpayments are identified. Significant accounting judgements and estimates Medicare payments processed by Services Australia on behalf of the Department are either reimbursements to patients, made after medical services have been received from a doctor, or payments made directly to doctors through the bulk billing system. At any point in time, there are thousands of cases where a medical service has been rendered, but the Medicare payment has not yet been made. Services Australia has been using the ‘Winters’ methodology to estimate the value of these outstanding claims. Under the Winters methodology, a number of models are used to estimate the outstanding Medicare claims liabilities. The model preferred by the industry, and consistently applied in past financial statements of the Department, is Model 5. Model 5 comprises two major components: chain ladder modelling and time series modelling. Under Model 5, user defined parameters are applied to smooth the time series observations and make predictions about future payment values. As the parameters are user defined it is reasonable to assume that different users of the model may make different choices, and therefore arrive at different estimates of the outstanding liability. In order to validate the parameters used, actual payment data has been compared to previous estimates using various parameters to predict the liability. The model weights recent payment experience more heavily and is therefore self-adjusting for emerging trends. |
2019 $'000 |
2018 $'000 |
||
Note 20C: Subsidies |
|||
Subsidies paid |
|||
Subsidies in connection with |
|||
Aged care |
12,566,487 |
11,673,223 |
|
Medical indemnity |
83,021 |
79,306 |
|
Other |
9,499 |
9,895 |
|
Total subsidies paid |
12,659,007 |
11,762,424 |
|
Subsidies payable |
|||
Subsidies in connection with |
|||
Aged care |
105,373 |
99,722 |
|
Medical indemnity |
6,543 |
6,018 |
|
Other |
3 |
- |
|
Total subsidies payable |
111,919 |
105,740 |
|
Accounting policy The Department administers a number of subsidy schemes on behalf of the Government. Subsidies liabilities are recognised to the extent that (i) the services required to be performed by the recipient have been performed or (ii) the eligibility criteria have been satisfied, but payments due have not been made. All subsidies liabilities are expected to be settled within 12 months of the balance date. |
Subsidies provisions |
||||
Balance as at 30 June 2018 |
Claims paid |
Administered Schedule of Comprehensive Income Impact |
Balance as at 30 June 2019 |
|
$'000 |
$'000 |
$'000 |
$'000 |
|
Medical Indemnity Liabilities |
||||
Incurred But Not Reported Scheme |
26,000 |
(6,239) |
(7,761) |
12,000 |
High Cost Claims Scheme |
323,000 |
(70,368) |
62,368 |
315,000 |
Run-Off Cover Scheme |
92,000 |
(8,225) |
19,225 |
103,000 |
Total |
441,000 |
(84,832) |
73,832 |
430,000 |
Accounting policy Medical Indemnity schemes are administered by the Department under the Medical Indemnity Act 2002 and the Midwife Professional Indemnity (Commonwealth Contribution) Scheme Act 2010. The Department administers the following medical indemnity schemes:
The payments for medical indemnity are managed by Services Australia, the service delivery entity, on behalf of the Department through its Medicare program. The Australian Government Actuary (AGA) estimated the provision for future payments for the medical indemnity schemes administered by the Department. At the reporting date, provision for future payment was recognised for IBNRS, HCCS, and ROCS. No provision was recognised for ECS, MPIS or MPIRCS as, to date, no payment has been made against these schemes, they could not be reliably measured and are reported as a contingent liability in Note 27. No provision was recognised for the PSS as the nature and timing of payments associated with this scheme are based on a relatively predictable pattern of annual payments that must be settled within 12 months of the end of a premium period. The methods used by the AGA to estimate the liability under the different schemes are as follows: General The AGA has relied on projections that have been prepared by the appointed actuaries to the five medical indemnity insurers (MIIs) and provided to the Commonwealth under the relevant provisions of the Medical Indemnity Act 2002 and the Midwife Professional Indemnity (Commonwealth Contribution) Scheme Act 2010. Payment information from the Medicare program complemented the projection. Where appropriate, adjustments have been made to those projections as described below. The methods used by the AGA to estimate the liability under the different schemes are as follows: IBNRS The IBNRS provides for payments to Avant Mutual Group for claims made in relation to its IBNR liability at 30 June 2002. Some claims that will be payable under the IBNRS may also be eligible for payment under the HCCS. The AGA has carried out chain ladder modelling using the payments data. The results of this analysis have been compared to the projections prepared by the industry actuaries. The results closely match and, as a result, the AGA has largely relied on industry projections to estimate the liability. ROCS ROCS provides free run-off cover for specific groups of medical practitioners including those retired and over 65, on maternity leave, retired for more than three years, retired due to permanent disability or the estates of those that have died. This scheme is funded through the collection of support payments imposed as a tax on MIIs. The AGA has developed an independent ROCS actuarial model which estimates the total annual accruing ROCS cost to the Australian Government. The model output is used to check against industry actuaries’ projections. For the estimate of the outstanding ROCS liability as at 30 June 2019, the AGA has relied on the projections from the actuary of each of the MIIs, but has adjusted the IBNRS component on comparison with the projections from its own ROCS internal model. Given that the majority of the claims anticipated under this scheme have not yet been made, the AGA noted a relatively high level of uncertainty in the estimate. HCCS Under HCCS, the Government pays 50% of the cost of claims made to all MIIs that exceed a specified threshold, up to the limit of the practitioner’s insurance. The threshold to be applied depends on the date of notification of the claim, as follows:
The AGA has relied on the projections of the industry actuaries but has made adjustments in respect of claims which are also eligible for the IBNRS and/or ROCS to ensure overall consistency of the estimates. Significant accounting judgements and estimates The nature of the medical indemnity liability estimates is inherently, and unavoidably, uncertain. The uncertainty arises for the following reasons:
The experience of the medical indemnity claims cycle indicates that claims and subsequent payments can take a number of years to mature and settle. The Department has used a 1% per annum discount rate in the calculation of the estimate for the current year. This discount rate was derived from the Commonwealth bonds yield curve based on the revised average observed liability duration of five years for the medical indemnity payments. This discount rate is deemed to be more appropriate than the ten year bond yield at 30 June 2019, which was 1.3%. A discount rate of 2.3% was used last year, which was derived using the same method. A sensitivity analysis was undertaken by moving the discount rate either up or down to the nearest full percentage point. Increasing the discount rate to 2% would result in a discounted liability estimate which is about 4.9% ($21m) less than the base estimate. On the other hand, decreasing the discount rate to 0% would result in a liability estimate which is about 5.8% ($25m) higher than base estimate. |
2018-19 |
2017-18 |
|||
discounted |
discounted |
discounted |
discounted |
|
0% |
1%1 |
2% |
2.3% |
|
$m |
$m |
$m |
$m |
|
Incurred But Not Reported |
13 |
12 |
12 |
26 |
High Cost Claims Scheme |
330 |
315 |
302 |
323 |
Run-Off Cover Scheme |
112 |
103 |
95 |
92 |
Total |
455 |
430 |
409 |
441 |
1 1% was used as the basis of estimation in 2018-19.
Note 21: Administered suppliers and other expenses and payables
2019 $'000 |
2018 $'000 |
||
Note 21A: Suppliers |
|||
Services rendered |
|||
Consultants |
27,207 |
26,493 |
|
Contract for services |
935,663 |
897,373 |
|
Travel |
1,146 |
1,417 |
|
Communications and publications |
15,763 |
36,610 |
|
Committee related expenses |
3,661 |
3,988 |
|
Other |
36,897 |
33,135 |
|
Total services rendered |
1,020,337 |
999,016 |
|
Suppliers payable |
|||
Trade creditors and accruals |
27,976 |
35,635 |
|
Total suppliers payable |
27,976 |
35,635 |
|
Note 21B: Other Expenses |
|||
Other expenses |
|||
Write-down and impairment of assets |
|||
Impairment on financial instruments |
2,342 |
2,163 |
|
Write-off of inventories |
23,508 |
24,401 |
|
Payments to Special Accounts |
5,607 |
12,524 |
|
Other |
212 |
68 |
|
Total other expenses |
31,669 |
39,156 |
Note 22: Administered Corporate Commonwealth Entities
2019 $'000 |
2018 $'000 |
|||
Note 22A: Appropriations |
||||
Appropriations transferred to corporate entities |
||||
Australian Institute of Health and Welfare |
33,322 |
28,078 |
||
Food Standards Australia New Zealand |
17,158 |
16,961 |
||
Australian Sports Commission |
374,346 |
267,904 |
||
Australian Digital Health Agency |
219,270 |
197,062 |
||
Total appropriations transferred to corporate entities |
644,096 |
510,005 |
||
Note 22B: Investments |
||||
Investments in portfolio entities |
||||
Equity interest - Australian Institute of Health and Welfare |
(i) |
73,748 |
30,323 |
|
Equity interest - Food Standards Australia New Zealand |
(ii) |
7,683 |
7,900 |
|
Equity interest - Australian Commission on Safety and Quality in Health Care |
(iii) |
3,719 |
2,838 |
|
Equity interest - Australian Sports Commission |
(iv) |
222,935 |
289,345 |
|
Equity interest - Australian Sports Foundation Ltd |
(v) |
6,335 |
4,625 |
|
Equity interest - Independent Hospital Pricing Authority |
(vi) |
12,768 |
12,737 |
|
Equity interest - Australian Digital Health Agency |
(vii) |
110,033 |
112,577 |
|
Total investments in portfolio entities |
437,221 |
460,345 |
||
Other investments |
||||
Biomedical Translation Fund - Brandon Capital Partners |
18,946 |
8,420 |
||
Biomedical Translation Fund - OneVentures Management |
21,669 |
4,491 |
||
Biomedical Translation Fund - BioScience Managers |
18,386 |
9,386 |
||
Total other investments |
59,001 |
22,297 |
||
Total investments |
496,222 |
482,642 |
||
Accounting policy Payments to corporate Commonwealth entities from amounts appropriated for that purpose are classified as administered expenses, equity injections or loans to the relevant portfolio entity. The appropriation to the Department is disclosed in Table A of Note 28. |
(i) The Australian Institute of Health and Welfare informs community discussion and decision making through national leadership and collaboration in developing and providing health and welfare statistics and information. |
||||
(ii) The Food Standards Australia New Zealand protects and informs consumers through the development of effective food standards, in a way that helps stimulate and support growth and innovation in the food industry. |
||||
(iii) The Australian Commission on Safety and Quality in Health Care works to lead and coordinate national improvements in safety and quality in health care across Australia. |
||||
(iv) The Australian Sports Commission manages, develops and invests in sport at all levels. It works closely with a range of national sporting organisations, state and local governments, schools and community organisations to ensure sport is well run and accessible. |
||||
(v) The Australian Sports Foundation Ltd assists sporting, community, educational and other government organisations to raise funds for the development of sports infrastructure. |
||||
(vi) The Independent Hospital Pricing Authority was established on 1 July 2014 to contribute to significant reforms to improve Australian public hospitals. A major component of these reforms is the implementation of national Activity Based Funding (ABF) for Australian public hospitals. The implementation of ABF provides incentives for efficiency and increases transparency in the delivery and funding of public hospital services across Australia. |
||||
(vii) The Australian Digital Health Agency was established on 1 July 2016 to improve health outcomes for Australians through the delivery of digital healthcare systems and the national digital health strategy for Australia. |
||||
Other investments The Biomedical Translation Fund (BTF) is an equity co-investment venture capital program announced in the National Innovation and Science Agenda to support the development of biomedical ventures in Australia. The BTF Program will help translate biomedical discoveries into high growth potential companies that are improving long term health benefits and national economic outcomes. It is delivered by the Department of Industry, Innovation and Science (AusIndustry) on behalf of the Department through licensed private sector venture capital fund managers. |
Accounting policy Administered investments represent corporate Commonwealth entities within the Health portfolio. Administered investments in subsidiaries, joint ventures and associates are not consolidated because their consolidation is only relevant at the whole-of-Government level. Administered investments other than those held for trading are classified as fair value – other comprehensive income equity instruments and are measured at their fair value as at 30 June 2019. Fair value has been taken to be the Australian Government’s proportional interest in the value of net assets of each licensed investment fund, based on the latest available audited trust accounts and increased by the value of new investments acquired during the reporting period. None of the investments are expected to be recovered within 12 months. |
Note 23: Administered income, debtors and loans
2019 $'000 |
2018 $'000 |
||
Note 23A: Special Accounts |
|||
Special accounts revenue |
|||
Medicare Guarantee Fund (Health) special account |
36,233,451 |
34,774,894 |
|
Medical Research Future Fund special account |
204,863 |
- |
|
Other special accounts |
3,863 |
4,339 |
|
Total special accounts revenue |
36,442,177 |
34,779,233 |
|
Note 23B: Recoveries |
|||
Recoveries received |
|||
Medical and pharmaceutical benefits and health rebate schemes |
4,670 |
99,694 |
|
PBS drug recoveries |
2,241,955 |
2,358,863 |
|
Aged care recoveries, cross-billings and budget neutrality adjustments |
393,018 |
484,209 |
|
Other recoveries |
498 |
652 |
|
Total recoveries received |
2,640,141 |
2,943,418 |
|
Accrued recoveries revenue |
|||
Personal benefits |
|||
Pharmaceutical benefits |
1,031,543 |
1,297,766 |
|
Aged care |
12,595 |
14,971 |
|
Medicare benefits |
8,444 |
25,241 |
|
Other personal benefits |
529 |
418 |
|
Subsidies |
|||
Medical indemnity |
2,352 |
2 |
|
Aged care |
24,844 |
30,512 |
|
Other |
49 |
49 |
|
Total accrued recoveries revenue |
1,080,356 |
1,368,959 |
|
Accounting policy All administered revenues are revenues relating to the course of ordinary activities performed by the Department on behalf of the Australian Government. As such, administered appropriations are not revenues of the individual entity that oversees distribution or expenditure of the funds as directed. Special accounts revenue is recognised when the Department gains control of the relevant amounts. Recoveries are recognised on an accrual basis and relate to:
All accrued recoveries revenue is expected to be recovered within 12 months. |
2019 $'000 |
2018 $'000 |
||
Note 23C: Other Revenue, Receivables and Loans |
|||
Other revenue |
|||
Levies and taxes |
21,285 |
20,202 |
|
Interest from loans |
13,662 |
13,035 |
|
Other |
383,889 |
181,729 |
|
Total other revenue received |
418,836 |
214,966 |
|
Other receivables |
|||
Trade and other miscellaneous receivables |
674,756 |
465,286 |
|
GST receivable from the Australian Taxation Office |
50,742 |
33,469 |
|
Total other receivables |
725,498 |
498,755 |
|
Advances and loans |
|||
Aged care facilities |
|||
Nominal value |
311,615 |
314,577 |
|
Less: Unexpired discount |
(39,685) |
(44,515) |
|
Total advances and loans |
271,930 |
270,062 |
|
Accounting policy Loans were made to approved providers under the Aged Care Act 1997 for an estimated period of 12 years. No security is generally required. Interest rates are linked to the Consumer Price Index. Interest payments are due on the 21st day of each calendar month. |
Total loans and other receivables (gross) |
997,428 |
768,817 |
|
Aged as follows |
|||
Not overdue |
822,863 |
678,375 |
|
Overdue by: |
|||
0 to 30 days |
28,943 |
35,698 |
|
31 to 60 days |
4,769 |
1,848 |
|
61 to 90 days |
2,681 |
1,097 |
|
More than 90 days |
138,172 |
51,799 |
|
Total overdue |
174,565 |
90,442 |
|
Total loans and other receivables (gross) |
997,428 |
768,817 |
|
Less impairment allowance |
(14,235) |
(13,323) |
|
Total loans and other receivables (net) |
983,193 |
755,494 |
|
Loans and other receivables - past due but not impaired |
160,330 |
77,119 |
|
Accounting Policy Credit terms for goods and services were 30 days (2018: 30 days). |
Reconciliation of the Impairment Allowance |
|||
2019 |
2018 |
||
$'000 |
$'000 |
||
Opening balance |
(13,323) |
(12,481) |
|
Amounts written off |
71 |
222 |
|
Amounts recovered and reversed |
1,853 |
1,110 |
|
Increase recognised in net cost of services |
(2,836) |
(2,174) |
|
Closing balance |
(14,235) |
(13,323) |
Accounting Policy The entire impairment allowance relates to debts aged more than 90 days. |
Note 24: Administered cash and financial instruments
2019 $'000 |
2018 $'000 |
||
Note 24A: Financial Assets |
|||
Cash and cash equivalents |
|||
Cash on hand or on deposit |
38,931 |
5,212 |
|
Cash in special accounts |
755,574 |
553,888 |
|
Total cash and cash equivalents |
794,505 |
559,100 |
|
Financial assets under AASB 139 |
|||
Loans and receivables |
|||
Accrued recoveries revenue |
1,296,326 |
||
Other receivables |
451,963 |
||
Advances and loans |
270,062 |
||
Total loans and receivables |
2,018,351 |
||
Available-for-sale financial assets |
|||
Investments in portfolio agencies |
460,345 |
||
Other investments |
22,297 |
||
Total available-for-sale financial assets |
482,642 |
||
Total financial assets under AASB 139 |
2,500,993 |
||
Net gains or losses on financial assets |
|||
Loans and receivables |
|||
Interest revenue |
13,035 |
||
Impairment |
(2,163) |
||
Net gains or losses on loans and receivables |
10,872 |
||
Financial assets under AASB 9 |
|||
Financial assets at amortised cost |
|||
Accrued recoveries revenue |
1,029,687 |
||
Other receivables |
660,521 |
||
Advances and loans |
271,930 |
||
Total financial assets at amortised cost |
1,962,138 |
||
Financial assets at fair value through other comprehensive income |
|||
Investments in portfolio agencies |
437,221 |
||
Other investments |
59,001 |
||
Total financial assets at fair value through other comprehensive income |
496,222 |
||
Total financial assets under AASB 9 |
2,458,360 |
||
Net gains or losses on financial assets |
|||
Financial assets at amortised cost |
|||
Interest revenue |
13,662 |
||
Impairment |
(2,342) |
||
Net gains or losses on financial assets at amortised cost |
11,320 |
||
2019 $'000 |
2018 $'000 |
||
Note 24B: Financial Liabilities |
|||
Financial liabilities measured at amortised cost |
|||
Trade creditors |
27,976 |
35,635 |
|
Grants payable |
423,909 |
312,088 |
|
Total financial liabilities measured at amortised cost |
451,885 |
347,723 |
|
Total financial liabilities |
451,885 |
347,723 |
|
Classification of financial assets on the date of initial application of AASB 9 |
|||||
Financial assets class |
Notes |
AASB 139 original classification |
AASB 9 new classification |
AASB 139 carrying amount at 1 July 2018 $'000 |
AASB 9 carrying amount at 1 July 2018 $'000 |
Accrued recoveries revenue |
Loans and receivables |
Amortised cost |
1,296,326 |
1,296,326 |
|
Other receivables |
Loans and receivables |
Amortised cost |
451,963 |
451,963 |
|
Advances and loans |
Loans and receivables |
Amortised cost |
270,062 |
270,062 |
|
Investments in portfolio agencies |
Available-for-sale equity instruments |
FVOCI Equity instruments |
460,345 |
460,345 |
|
Other investments |
Available-for-sale equity instruments |
FVOCI Equity instruments |
22,297 |
22,297 |
|
Total financial assets |
2,500,993 |
2,500,993 |
Note 25: Administered non-financial assets
2019 $'000 |
2018 $'000 |
||
Note 25: Inventory |
|||
National Medical Stockpile |
|||
Opening balance |
115,765 |
115,262 |
|
Add purchases |
24,944 |
24,925 |
|
Less deployment |
(35) |
(13) |
|
Less impairment |
(23,508) |
(24,401) |
|
Add stocktake adjustments and other movements |
(27) |
(8) |
|
Closing balance |
117,139 |
115,765 |
|
Accounting policy The Department’s inventories relate to the National Medical Stockpile (the Stockpile). The Stockpile is a strategic reserve of medicines, vaccines, antidotes and protective equipment available for use as part of the national response to a public health emergency. It is intended to augment State and Territory Government reserves of key medical items in a health emergency, which could arise from terrorist activities or natural causes. Inventories held for distribution are valued at cost, adjusted for any loss of service potential. Not all inventories are expected to be distributed in the next 12 months. Costs incurred in bringing each item of the Stockpile to its present location and condition include purchase cost plus other reasonably attributable costs, such as overseas shipping and handling and import duties, less any bulk order discounts and rebates received from suppliers. |
Note 26: Administered aggregate assets and liabilities
2019 $'000 |
2018 $'000 |
||
AGGREGATE ASSETS AND LIABILITIES |
|||
Assets expected to be recovered in |
|||
No more than 12 months |
2,626,864 |
2,467,985 |
|
More than 12 months |
844,551 |
813,975 |
|
Total assets |
3,471,415 |
3,281,960 |
|
Liabilities expected to be settled in |
|||
No more than 12 months |
(2,618,389) |
(2,640,448) |
|
More than 12 months |
(357,005) |
(356,168) |
|
Total liabilities |
(2,975,394) |
(2,996,616) |
Note 27: Administered contingent assets and liabilities
Indemnities |
Claims for costs |
Aged Care Accommodation Bond Guarantee Scheme |
Total |
|||||
2019 $'000 |
2018 $'000 |
2019 $'000 |
2018 $'000 |
2019 $'000 |
2018 $'000 |
2019 $'000 |
2018 $'000 |
|
Contingent assets |
||||||||
Balance from previous period |
- |
- |
16,200 |
20,000 |
- |
- |
16,200 |
20,000 |
New contingent assets recognised |
- |
- |
200 |
6,200 |
- |
- |
200 |
6,200 |
Assets recognised |
- |
- |
(5,800) |
(10,000) |
- |
- |
(5,800) |
(10,000) |
Total contingent assets |
- |
- |
10,600 |
16,200 |
- |
- |
10,600 |
16,200 |
Contingent liabilities |
||||||||
Balance from previous period |
45,000 |
73,000 |
16,444 |
20,245 |
- |
- |
61,444 |
93,245 |
New contingent liabilities recognised |
16,300 |
- |
200 |
6,218 |
- |
- |
16,500 |
6,218 |
Re-measurement |
6,000 |
(28,000) |
- |
- |
- |
- |
6,000 |
(28,000) |
Liabilities recognised |
- |
- |
(35) |
(2) |
- |
- |
(35) |
(2) |
Obligations expired |
- |
- |
(5,965) |
(10,017) |
- |
- |
(5,965) |
(10,017) |
Total contingent liabilities |
67,300 |
45,000 |
10,644 |
16,444 |
- |
- |
77,944 |
61,444 |
Net contingent liabilities |
(67,300) |
(45,000) |
(44) |
(244) |
- |
- |
(67,344) |
(45,244) |
Quantifiable Contingent Assets Claims for costs The Schedule of contingencies reports contingent assets in respect of claims for costs of $10.6m (2018: $16.2m). Quantifiable Contingent Liabilities Indemnities The table on the previous page reports contingent liabilities in respect of medical indemnity payments under the High Cost Claims Scheme of up to $51m (2018: $45m) and $16.3m (2018: $NIL) relating to indemnities granted to a service provider in respect of early termination of subcontracting arrangements. Claims for costs The table also reports a contingent liability in respect of claims for costs of up to $10.644m (2018: $16.444m). Unquantifiable Contingent Assets Legal action seeking compensation The Department is engaged in legal action against certain pharmaceutical companies to recover savings denied to the Commonwealth because interim injunctions granted to these companies in unsuccessful patent litigation delayed generic versions of drugs being listed on the Pharmaceutical Benefits Scheme. This thereby delayed statutory and price disclosure related price reductions for these drugs. Public Hospital Funding The Auditor-General Report No.26 2018-19 (ANAO audit report) Australian Government Funding of Public Hospital Services — Risk Management, Data Monitoring and Reporting Arrangements identified the potential for duplicate payments for the same public hospital service through funding under the Medicare Benefits Schedule and through public hospital funding under the National Health Reform Agreement. The Department of Health has agreed to identify and prevent potential duplicate payments, including Medicare Benefits Schedule payments, by the Australian Government for public hospital services; and identify and recover past duplicate payments to the maximum extent permitted by law. At this stage any potential recoveries are unquantifiable. Unquantifiable Contingent Liabilities Aged Care Accommodation Bond Guarantee Scheme A Guarantee Scheme has been established through the Aged Care (Accommodation Payment Security) Act 2006 and Aged Care (Accommodation Payment Security) Levy Act 2006. Under the Guarantee Scheme, if a provider becomes insolvent or bankrupt and is unable to repay outstanding accommodation payment balances to aged care residents, the Australian Government will repay the balances owing to each resident. In return, the residents' rights to pursue the defaulting provider for recovery of the accommodation payment funds transfers to the Government. In the event the Government cannot recover the full amount from the defaulting provider, it may levy all providers holding accommodation payment balances to recoup the shortfall. It is not possible to quantify the Australian Government's contingent liability in the event that the Guarantee Scheme is activated. The Department has implemented risk mitigation strategies which should reduce the risk of default and thereby activation of the Guarantee Scheme. |
From the latest available information, the maximum contingent liability, in the unlikely event that all providers defaulted, is $27.5 billion. Since the Guarantee Scheme was introduced, it has been activated eleven times requiring payment of $43.57m. It is difficult to predict if the past patterns of payments are indicative of future payments. The Guarantee Scheme was not activated during the period ended 30 June 2019, however the Department is aware of the potential for it to be activated in respect of one provider currently in administration. The quantum of potential refunds cannot be estimated at this stage, but the total value of accommodation bonds held by the affected provider is estimated at $130m. Diagnostic Products Agreement The Australian Government has provided an indemnity to a review of certain matters in relation to the Diagnostics Products Agreement. The indemnity provides certain specified members of the review the same level of indemnity as Australian Government officers for the purpose of the review. For the period ended 30 June 2019 no claims have been made (2018: $NIL). Medical Indemnity Services Australia delivers the Exceptional Claims Scheme (ECS) on behalf of the Australian Government. Under this scheme, the Australian Government reimburses medical indemnity insurers for 100% of the cost of private practice claims that are above the limit of their medical indemnity insurance contract limit, which is typically $20m. To be covered by the ECS, practitioners must have medical indemnity insurance cover to at least a threshold of $15m for claims arising from incidents notified between 1 January to 30 June 2003 and $20m for claims notified from 1 July 2003. At 30 June 2019, the Department had received no notification of any incidents that would give rise to claims under the ECS scheme. However, the nature of these claims is such that there is usually an extended period between the date of the medical incident and notification to the insurer. For the period ended 30 June 2019 no claims have been made or notified (2018: $NIL). CSL Ltd Under existing agreements, the Australian Government has indemnified CSL Ltd for certain existing and potential claims made for personal injury, loss or damage suffered through therapeutic and diagnostic use of certain products manufactured by CSL Ltd. For the period ended 30 June 2019 no claims have been made (2018: $NIL). The Australian Government has indemnified CSL Ltd for a specific range of events that occurred during the Plasma Fractionation Agreement from 1 January 1994 to 31 December 2004, where alternative cover was not arranged by CSL Ltd. For the period ended 30 June 2019 no claims have been made (2018: $NIL). |
Australian Red Cross Blood Service Under certain conditions the Australian Government, States and Territories jointly provide indemnity for the Australian Red Cross Blood Service through a cost sharing arrangement for claims, both current and potential, regarding personal injury and loss of life. Under a Memorandum of Understanding between governments and the Blood Service, the blood and blood products liability cover for the Blood Service remains in force until all parties agree to terminate the arrangements from an agreed date. The existing Deed of Agreement between the Commonwealth and the Australian Red Cross Society (ARCS), in relation to the operations of the Blood Service, includes certain indemnities and limited liability in favour of ARCS. For the period ended 30 June 2019 no claims have been made (2018: $NIL). Vaccines Under certain conditions the Australian Government has provided an indemnity for the supply of certain vaccines to the suppliers of the vaccines. The contracts under which contingent liability is recognised will expire in October 2020 and June 2025 respectively. However, until replacement stock is sourced the contingent liability for use of the vaccine currently held remains with the Commonwealth. For the period ended 30 June 2019 no claims have been made (2018: $NIL). Human Pituitary Hormone Program Under certain conditions the Australian Government has provided indemnity for the supply of growth hormones manufactured from human pituitary glands and human pituitary gonadotropin manufactured before 31 December 1985. For the period ended 30 June 2019 no claims have been made (2018: $NIL). The Australian Medical Association This is an agreement between the Australian Medical Association Ltd (AMA), the Commonwealth, Australian Private Hospitals Association Ltd and Private Healthcare Australia for participation in and support of the Private Mental Health Alliance. In respect of identified information collected, held or exchanged by the parties in connection with the National Model for the Collection and Analysis of a Minimum Data Set with Outcome Measures in Private, Hospital-based Psychiatric Services each party has agreed to indemnify each other in respect of any loss, liability, cost, claim or expense, misuse of Confidential Information or breach of the Privacy Act 1988. The AMA's liability to indemnify the other parties will be reduced proportionally to the extent that any unlawful or negligent act or omission of the other parties or their employees or agents contributed to the loss or damage. For the period ended 30 June 2019 no claims have been made (2018: $NIL). Significant Remote Contingencies The Department did not have any significant remote contingencies this year or prior year. |
Note 28: Administered appropriations
Table A: Annual and Unspent Appropriations ('Recoverable GST exclusive') |
|||
2019 $'000 |
2018 $'000 |
||
ADMINISTERED |
|||
Ordinary Annual Services - Administered items |
|||
Annual appropriation1,2 |
10,320,073 |
8,977,100 |
|
Receipts retained under PGPA Act - Section 74 |
5,679 |
16,935 |
|
Total appropriation |
10,325,752 |
8,994,035 |
|
Appropriation applied (current and prior years)4 |
(9,762,877) |
(8,566,399) |
|
Variance3 |
562,875 |
427,636 |
|
Unspent appropriations |
|||
Own unspent appropriation balance |
1,321,789 |
826,361 |
|
Closing unspent appropriation balance5 |
1,321,789 |
826,361 |
|
Balance comprises appropriations as follows: |
|||
Appropriation Act (No. 1) 2015-20166 |
- |
67,448 |
|
Appropriation Act (No. 1) 2016-20177 |
74,236 |
67,527 |
|
Appropriation Act (No. 3) 2016-20177 |
8,276 |
24,910 |
|
Appropriation Act (No. 1) 2017-2018 |
329,053 |
562,978 |
|
Appropriation Act (No. 3) 2017-2018 |
66,094 |
84,019 |
|
Appropriation Act (No. 5) 2017-2018 |
14,060 |
19,479 |
|
Appropriation Act (No. 1) 2018-2019 |
364,880 |
- |
|
Appropriation Act (No. 3) 2018-2019 |
465,190 |
- |
|
Total unspent appropriation - ordinary annual services - administered items |
1,321,789 |
826,361 |
|
1 There were no amounts temporarily quarantined from 2019 or 2018 administered ordinary annual services appropriations. 2 In 2018 administered ordinary annual services appropriations $21,617,000 of the Appropriation Act (No. 1) 2017-2018 was permanently quarantined under section 51 of the PGPA Act. This represents a loss of control of the appropriations and therefore these amounts were not reported as available above. 3 The administered ordinary annual services items variance of $562,875,000 relates to the utilisation of retained funding from 2018 during 2019 (the former section 11 of the Appropriation Acts). 4 Services Australia spent money from the CRF on behalf of the Department under a payment authority. The money spent has been included in the table above. 5 This balance is net of $182,625,483 which is permanently quarantined under section 51 of the PGPA Act, of which $21,617,000 relates to 2018 appropriations and $161,008,483 to 2017 appropriations. The total unspent appropriations gross of quarantined amounts under section 51 of the PGPA Act is $1,504,414,483. 6 This balance lapsed on 1 July 2018 in accordance with the repeal date of the underlying Appropriation Acts. 7 These balances will lapse on 1 July 2019 when the underlying Appropriation Acts are repealed. |
|||
2019 $'000 |
2018 $'000 |
||
Ordinary Annual Services - Payments to corporate Commonwealth entities |
|||
Annual appropriation |
644,096 |
510,429 |
|
Total appropriation |
644,096 |
510,429 |
|
Appropriation applied (current and prior years) |
(643,837) |
(510,429) |
|
Variance1 |
259 |
- |
|
Other services - Administered assets and liabilities |
|||
Annual appropriation |
120,133 |
25,000 |
|
Total appropriation |
120,133 |
25,000 |
|
Appropriation applied (current and prior years) |
(63,949) |
(44,893) |
|
Variance2 |
56,184 |
(19,893) |
|
Unspent appropriations |
|||
Own unspent appropriation balance |
183,473 |
222,421 |
|
Closing unspent appropriation balance |
183,473 |
222,421 |
|
Balance comprises appropriations as follows: |
|||
Appropriation Act (No. 4) 2015-20163 |
- |
95,133 |
|
Supply Act (No. 2) 2016-20174 |
52,083 |
52,083 |
|
Appropriation Act (No. 2) 2016-20174 |
31,839 |
72,917 |
|
Appropriation Act (No. 2) 2017-2018 |
2,097 |
2,288 |
|
Appropriation Act (No. 2) 2018-2019 |
2,321 |
- |
|
Appropriation Act (No. 4) 2018-2019 |
95,133 |
- |
|
Total unspent appropriation - other services - administered assets and liabilities |
183,473 |
222,421 |
|
Other Services - Payments to corporate Commonwealth entities |
|||
Annual appropriation |
39,023 |
54,533 |
|
Total appropriation |
39,023 |
54,533 |
|
Appropriation applied (current and prior years) |
(37,453) |
(54,533) |
|
Variance1 |
1,570 |
- |
|
1 These variances represent the value of 2018-19 funding not transferred to the relevant CCEs before the balance date. 2 The administered other services assets and liabilities variance of $56,184,000 relates largely to the utilisation of prior year funding for the investment in the Biomedical Translation Fund. 3 This balance lapsed on 1 July 2018 in accordance with the repeal date of the underlying Appropriation Acts. 4These balances will lapse on 1 July 2019 when the underlying Appropriation Act are repealed. |
|||
Table B: Special Appropriations Applied ('Recoverable GST exclusive') |
|||
Appropriation applied |
|||
Authority |
2019 $'000 |
2018 $'000 |
|
Aged Care (Accommodation Payment Security) Act 2006 |
- |
83 |
|
Aged Care Act 1997 |
15,043,797 |
13,678,701 |
|
Health Insurance Act 1973 |
14,326 |
309,229 |
|
National Health Act 1953 |
1,524,249 |
1,760,120 |
|
Medical Indemnity Act 2002 |
93,495 |
75,838 |
|
Private Health Insurance Act 2007 |
6,065,591 |
6,017,801 |
|
Dental Benefits Act 2008 |
322,446 |
333,993 |
|
Medicare Guarantee Act 2017 |
- |
- |
|
Health and Other Services (Compensation) Act 1995 |
- |
- |
|
Medical Indemnity Agreement (Financial Assistance - Binding Commonwealth Obligations) Act 2002 |
- |
- |
|
Midwife Professional Indemnity (Commonwealth Contribution) Scheme Act 2010 |
- |
- |
|
Public Governance, Performance and Accountability Act 2013 s.77 |
18,105 |
583 |
|
Total special appropriations applied |
23,082,009 |
22,176,348 |
|
1 Services Australia drew money from the CRF on behalf of the Department against the following special appropriations: Aged Care Act 1997; Health Insurance Act 1973; National Health Act 1953; Medical Indemnity Act 2002; Dental Benefits Act 2008; and Private Health Insurance Act 2007. |
Table C: Disclosure by Agent in Relation to Annual and Special Appropriations ('Recoverable GST exclusive') |
|||
2019 $'000 |
2018 $'000 |
||
Department of Social Services |
|||
Total receipts |
39,885 |
36,839 |
|
Total payments |
(39,885) |
(36,839) |
|
The Department made wage supplementation payments from the Social and Community Services Pay Equity Special Account administered by the Department of Social Services (DSS) to eligible social and community services workers during 2019 and 2018. |
Note 29: Compliance with statutory requirement for payments from the Consolidated Revenue Fund
Section 83 of the Constitution provides that no amount may be paid out of the Consolidated Revenue Fund except under an appropriation made by law.
The Department has primary responsibility for administering legislation related to health care. Payments totalling about $59 billion in 2018-19 were authorised against Special Appropriations, including special accounts, by the Department in accordance with a range of frequently complex legislation. Most of the payments are administered by Services Australia under the Medicare program on behalf of the Department. In the vast majority of cases Services Australia relies on information or estimates provided by customers and medical providers to calculate and pay entitlements. If an overpayment occurs a breach of section 83 could result despite future payments being adjusted to recover the overpayment. In addition, simple administrative errors can lead to breaches of section 83.
Due to the number of payments made, the reliance that must be placed on external control frameworks and the complexities of the legislation governing these payments, the risk of a section 83 breach cannot be fully mitigated. Certain legislation administered by the Department contains specific or objective criteria that rely on information from recipients and provides for the recovery of overpayments which are actively managed.
The reported section 83 breaches represent only a very small portion of payments, both in number and in value, and the Department is committed to implementing measures to ensure that the possibility of unintentional breaches of section 83 has as low a financial risk and impact as possible.
The Department has developed an approach for assessing the alignment of payment processes with legislation. During 2019, the Department:
- included consideration of processes to minimise the risk of section 83 breaches as part of any review of legislation or administrative processes;
- received assurance from Services Australia that action has been undertaken to detect and prevent potential breaches of section 83;
- continued its ongoing reviews of special accounts by internal audit as part of its rolling compliance program;
- obtained legal advice, as appropriate, to resolve questions of potential non-compliance; and
- identified legislative/procedural changes to reduce the risk of non-compliance in the future.
Special Appropriations
The Department administers 12 pieces of legislation, as disclosed in Note 28 Table B, with Special Appropriations involving statutory requirements for payments. Of this legislation, some payments have been identified as having either actual or potential breaches of section 83 and the Department will continue to review these.
The legislation where actual breaches occurred in the 2018-19 year was:
Health Insurance Act 1973
Services Australia have advised that during 2018-19, 313 instances have been identified with a total value of $243,911.65 where the payment made was not authorised by section 125(1) of the Health Insurance Act 1973 for the Medicare Easyclaim Programme.
Special Accounts
Currently the Department has nine Special Accounts, as disclosed in Note 30. Seven are assessed as low risk for actual or potential non-compliance with section 83, one is assessed as medium risk and one is assessed as medium to high risk.
The Special Account where actual breaches occurred in the 2018-19 year was:
Medicare Guarantee Fund
Services Australia have advised that during 2018-19 there have been three overpayments with regards to the Remote Area Aboriginal Health Services with a total value of $110,796.85.
Continued Focus
The Department will continue to review legislation and New Policy Proposals that create or modify payment eligibility and to ensure that business rules and process are in place to minimise the risk of breaches of section 83. In addition, the Department will continue ongoing reviews of special accounts by internal audit as part of its rolling compliance program.
Note 30: Special accounts
Services for Other Entities and Trust Moneys Account1 |
Australian Immunisation Register Account2 |
Human Pituitary Hormones Account3 |
||||
2019 $'000 |
2018 $'000 |
2019 $'000 |
2018 $'000 |
2019 $'000 |
2018 $'000 |
|
Balance brought forward from previous period |
17,376 |
19,135 |
1,957 |
4,616 |
2,256 |
2,371 |
Timing adjustments related to prior years |
29 |
(119) |
- |
- |
- |
- |
Increases |
||||||
Appropriation credited to special account |
8,564 |
12,447 |
7,161 |
3,222 |
- |
- |
Other increases |
15,279 |
7,674 |
3,744 |
4,014 |
- |
- |
Total increases |
23,842 |
20,121 |
10,905 |
7,236 |
- |
- |
Available for payments |
41,247 |
39,137 |
12,862 |
11,852 |
2,256 |
2,371 |
Decreases |
||||||
Administered |
- |
- |
9,499 |
9,895 |
246 |
115 |
Total administered decreases |
- |
- |
9,499 |
9,895 |
246 |
115 |
Relevant Money |
19,207 |
21,761 |
- |
- |
- |
- |
Total relevant money decreases |
19,207 |
21,761 |
- |
- |
- |
- |
Total decreases |
19,207 |
21,761 |
9,499 |
9,895 |
246 |
115 |
Total balance carried to the next period |
22,040 |
17,376 |
3,363 |
1,957 |
2,010 |
2,256 |
1 Establishing Instrument: Public Governance, Performance and Accountability Act 2013; section 78 Appropriation: Public Governance, Performance and Accountability Act 2013; section 78 Purpose: to disburse amounts held on trust or otherwise for the benefit of a person other than the Commonwealth; disburse amounts in connection with services performed on behalf of other government bodies that are not non-corporate Commonwealth entities; to repay amounts where an Act or other law requires or permits the repayment of an amount received; to reduce the balance of the special account (and, therefore the available appropriation for the special account) without making a real or notional payment. 2 Establishing Instrument: Public Governance, Performance and Accountability Act 2013; section 78 Appropriation: Public Governance, Performance and Accountability Act 2013; section 78 Purpose: to make incentive payments to recognised vaccination providers who notify the Australian Immunisation Register that they have completed immunisations for children up to seven years of age, through the National Immunisation Program. 3 Establishing Instrument: Public Governance, Performance and Accountability Act 2013; section 78 Appropriation: Public Governance, Performance and Accountability Act 2013; section 78 Purpose: for expenditure through grants and other payments for:
|
Sport and Recreation Account4 |
Therapeutic Goods Administration Account5 |
Gene Technology Account6 |
||||
2019 $'000 |
2018 $'000 |
2019 $'000 |
2018 $'000 |
2019 $'000 |
2018 $'000 |
|
Balance brought forward from previous period |
517 |
596 |
73,326 |
62,604 |
8,412 |
8,259 |
Increases |
||||||
Appropriation credited to special account |
- |
- |
2,257 |
2,439 |
7,506 |
7,544 |
Other increases |
119 |
325 |
159,480 |
150,563 |
218 |
143 |
Total increases |
119 |
325 |
161,737 |
153,002 |
7,724 |
7,687 |
Available for payments |
636 |
921 |
235,063 |
215,606 |
16,136 |
15,946 |
Decreases |
||||||
Departmental |
- |
- |
158,562 |
142,280 |
7,377 |
7,534 |
Total departmental decreases |
- |
- |
158,562 |
142,280 |
7,377 |
7,534 |
Administered |
352 |
404 |
- |
- |
- |
- |
Total administered decreases |
352 |
404 |
- |
- |
- |
- |
Total decreases |
352 |
404 |
158,562 |
142,280 |
7,377 |
7,534 |
Total balance carried to the next period |
284 |
517 |
76,501 |
73,326 |
8,759 |
8,412 |
4 Establishing Instrument: Public Governance, Performance and Accountability Act 2013; section 78 Appropriation: Public Governance, Performance and Accountability Act 2013; section 78 Purpose: to undertake sport and recreation related projects of common interest to the Sport and Recreation Ministers' Council, its successor or subordinate bodies, and that benefit all or a majority of members. 5 Establishing Instrument: Therapeutic Goods Act 1989 Appropriation: Public Governance, Performance and Accountability Act 2013; section 80 Purpose: The purpose has been set out in section 45 of the Therapeutic Goods Act 1989 and are:
6 Establishing Instrument: Gene Technology Act 2000 Appropriation: Public Governance, Performance and Accountability Act 2013; section 80 Purpose: for the receipt of all moneys and payment of all expenditures and disbursements related to all operations of the Gene Technology Regulator. |
Industrial Chemicals Account7 |
Medical Research Future Fund Account8 |
Medicare Guarantee Fund9 |
||||
2019 |
2018 |
2019 |
2018 |
2019 |
2018 |
|
$'000 |
$'000 |
$'000 |
$'000 |
$'000 |
$'000 |
|
Balance brought forward from previous period |
17,398 |
18,055 |
16,594 |
47,916 |
532,564 |
- |
Increases |
||||||
Appropriation credited to special account |
331 |
322 |
204,863 |
- |
36,233,451 |
34,774,894 |
Other increases |
17,388 |
16,928 |
- |
- |
- |
- |
Total increases |
17,719 |
17,250 |
204,863 |
- |
36,233,451 |
34,774,894 |
Available for payments |
35,117 |
35,305 |
221,457 |
47,916 |
36,766,015 |
34,774,894 |
Decreases |
||||||
Departmental |
17,049 |
17,907 |
- |
- |
- |
- |
Total departmental decreases |
17,049 |
17,907 |
- |
- |
- |
- |
Administered |
- |
- |
207,698 |
31,322 |
36,029,857 |
34,242,330 |
Total administered decreases |
- |
- |
207,698 |
31,322 |
36,029,857 |
34,242,330 |
Total decreases |
17,049 |
17,907 |
207,698 |
31,322 |
36,029,857 |
34,242,330 |
Total balance carried to the next period |
18,068 |
17,398 |
13,759 |
16,594 |
736,158 |
532,564 |
7 Establishing Instrument: Industrial Chemicals (Notification and Assessment) Act 1989 Appropriation: Public Governance, Performance and Accountability Act 2013; section 80 Purpose: for the receipt of all moneys and payment of all expenditures and disbursements related to all operations of the National Industrial Chemicals Notification and Assessment Scheme 8 Establishing Instrument: Medical Research and Future Fund Act 2015 Appropriation: Public Governance, Performance and Accountability Act 2013; section 80 Purpose: to provide grants of financial assistance to support medical research and medical innovation. The Medical Research Future Fund Health Special Account was established on 26 August 2015. 9 Medicare Guarantee Fund (Health) Special Account Establishing Instrument: Medicare Guarantee Act 2017 Appropriation: Public Governance, Performance and Accountability Act 2013; section 80 Purpose: to secure the ongoing funding of the Medicare Benefits Schedule and the Pharmaceutical Benefits Scheme. The Medicare Guarantee Fund (Health) Special Account was established on 26 June 2017. |
Note 31: Regulatory charging summary
2019 $'000 |
2018 $'000 |
||
Amounts applied |
|||
Departmental |
|||
Annual appropriations |
20,229 |
27,519 |
|
Special appropriations (including special account) |
175,089 |
169,413 |
|
Own source revenue |
4,722 |
4,888 |
|
Administered |
|||
Annual appropriations |
7,445 |
2,329 |
|
Total amounts applied |
207,485 |
204,148 |
|
Expenses |
|||
Departmental |
195,919 |
193,553 |
|
Administered |
7,556 |
2,671 |
|
Total expenses |
203,475 |
196,224 |
|
Revenue |
|||
Departmental |
179,811 |
174,301 |
|
Administered |
21,984 |
16,659 |
|
Total external revenue |
201,795 |
190,960 |
|
Amounts written off |
|||
Departmental |
49 |
79 |
|
Total amounts written-off |
49 |
79 |
|
The department has reviewed its compliance with the requirements of the regulatory charging summary and determined that the calculation should be made on an accrual, not cash, basis. The 2018 comparative has been restated.
Regulatory charging activities:
The Therapeutic Goods Administration funds are used to undertake activities to evaluate the safety, quality and efficacy of medicines, medical devices and biologicals available for supply in, or export from Australia.
National Industrial Chemicals Notification and Assessment Scheme charges are levied for registration or assessment of chemicals across Australia.
The Prostheses Listing arrangements refer to the activities involved in listing prostheses and their benefits for the purposes of private health insurance reimbursement.
The National Joint Replacement Registry facilitates the collection of data that provides a prospective case series on all joint replacement surgery undertaken in Australia.
Administered revenue only is recorded for the Private Health Insurance Ombudsman Levy.
Listing of medicines on the Pharmaceutical Benefits Scheme and designated vaccines on the National Immunisation Program are subject to regulatory charges.
Medicinal cannabis: Licence and permit applications for the cultivation and manufacture of Australian produced medicinal cannabis products.
Assessment and certification for Private Health Insurance 2nd Tier Private Hospital Default Benefits has been cost recovered for the first time, commencing 1 January 2019. All amounts included for that activity are for the period 1 January to 30 June 2019.
Documentation for the above activities is available at:
www.tga.gov.au/cost-recovery-implementation-statement
www.nicnas.gov.au/about-us/how-we-work/cris-implementation-statement-2018-2019
www.pbs.gov.au/info/industry/listing/elements/fees-and-charges
www.odc.gov.au/publications/cost-recovery-implementation-statement-regulation-medicinal-cannabis
Visit
https://www.transparency.gov.au/annual-reports/department-health/reporting-year/2018-2019-31