Health and Aged Care | Australian National Audit Office (ANAO)

Portfolio overview

The Health and Aged Care portfolio works towards achieving better health and wellbeing for all Australians, now and for future generations. A total of 20 entities make up the portfolio.

The Department of Health and Aged Care is the lead entity in the portfolio. It is responsible for achieving the Australian Government’s health outcomes in the areas of health system policy, design and innovation; health access and support services; sport and recreation; individual health benefits; regulation, safety and protection; and ageing and aged care. This includes administering programs and services, such as Medicare and the Pharmaceutical Benefits Scheme, and forming partnerships with the states and territories, as well as other stakeholders. Further information is available from the department’s website .

The remaining 19 entities in the portfolio are responsible for the delivery of programs, including aged care accreditation services, digital health reforms, the development and reporting of health and welfare data, nuclear safety, supporting the integrity of sport, funding medical research, managing blood supplies, cancer research, pricing and funding public hospitals, national safety and quality standards and clinical care standards, and food safety.

In the 2024–25 Portfolio Budget Statements (PBS) for the Health and Aged Care portfolio, the aggregated budgeted expenses for 2024–25 total $115.3 billion. The PBS contain budgets for those entities in the general government sector (GGS) that receive appropriations directly or indirectly through annual appropriation Acts.

The level of budgeted departmental and administered expenses, and the average staffing level for entities in the GGS within this portfolio are shown in Figure 1. The Department of Health and Aged Care represents the largest proportion of portfolio expenses, and administered expenses of the Department are the most material component, representing 97 per cent of the entire portfolio’s expenses.

Figure 1: Health and Aged Care portfolio – total expenses and average staffing level by entity

Source: ANAO analysis of 2024–25 Portfolio Budget Statements.

Audit focus

In determining the 2024–25 audit work program, the ANAO considers prior-year audit and other review findings and what these indicate about portfolio risks and areas for improvement. The ANAO also considers emerging risks from new investments or changes in the operating environment.

The ANAO had regard to the final report of the capability review of the Department of Health and Aged Care that was endorsed by the Australian Public Service Commissioner in July 2023. The review identified nine priority areas for capability improvement: integrated strategic policy development capabilities; use of data to inform policy; systemic consideration of the health and aged care workforce; increased knowledge about the providers the department funds and regulates; readiness for future healthcare delivery; learning the lessons from the COVID-19 pandemic; collaborative and enduring relationships with the states and territories; improved communication and engagement with the community; and building and empowering the mid-level of the department .

The primary risks identified for the portfolio relate to establishing effective governance — including adherence to legal requirements, rules and frameworks — while delivering health care programs.

Specific risks in the Health and Aged Care portfolio relate to governance, service delivery, grants administration, procurement and regulation.

Governance

There is a risk within the department of legislative non-compliance in its administration of approximately 60 health and aged care programs . There is a risk within the department of non-compliance with public sector rules frameworks and finance law .

Recent audits in the department have highlighted shortfalls in evaluation, performance measurement, and performance reporting . There has been insufficient data to demonstrate achievement of outcomes and limits in assurance over the completeness and accuracy of third-party data . Failing to systematically use lessons learned, including from the COVID-19 pandemic response, to inform program delivery is a risk .

Service delivery

The department is reliant on other Australian Government entities, such as Services Australia, for the delivery of programs, including for the administration of Medicare and aged care payments, grants and digital health services. There are risks associated with the establishment of clear roles and responsibilities, the maintenance of effective communication channels and the management of shared risk, including legal risk .

The delivery of Australia’s health services also requires collaboration with state and territory governments, private sector health systems and industry. Effective consultation and coordination with stakeholders, including states and territories and the community, is a key risk .

The department has committed to building a skilled, diverse, well-distributed and sustainable nursing and midwifery workforce . An insufficient and poorly distributed health workforce constrains the sector from achieving its objectives, including in implementing the recommendations of the Royal Commission into Aged Care Quality and Safety . A key risk is the department’s engagement and coordination with other Australian Government agencies and sectors in developing a strategic whole-of-government approach to the care and support workforce .

Grants administration

Health and Aged Care portfolio entities award and administer thousands of grants and grant-like arrangements annually. Appropriate adherence to legal requirements, including the Commonwealth Grants Rules and Guidelines and the Federation Funding Agreements Framework, is a risk to effective public administration in the portfolio .

Procurement

A key risk for the department and portfolio entities is achieving value for money and conducting procurements in accordance with the Commonwealth Procurement Rules. In the Health and Aged Care portfolio, procurement is often characterised by sole or limited provider markets; urgency; substantial usage of Commonwealth Procurement Rules exemptions; and diverse procurement objectives including promoting national self-sufficiency and security. These characteristics heighten the risk that value for money is not achieved or cannot be demonstrated. Audits have highlighted issues with adherence to the Commonwealth Procurement Rules and contract management .

Regulation

The department and other portfolio entities are responsible for ensuring service providers comply with requirements for funded programs. In the health sector, this includes compliance of health providers with the Medicare Benefits Schedule and Pharmaceutical Benefits Schedule, and of aged care providers with relevant legislation. A key risk in the health and aged care sector is preventing, identifying and addressing health and aged care provider non-compliance, such as incorrect claiming, inappropriate practice and fraud. Recent audits have found inadequate assessment of integrity risks . Effective coordination between the department and independent regulators is also a risk .

Previous performance audit coverage

The ANAO’s performance audit activities involve the independent and objective assessment of all or part of an entity’s operations and administrative support systems. Performance audits may involve multiple entities and examine common aspects of administration or the joint administration of a program or service.

During the performance audit process, the ANAO gathers and analyses the evidence necessary to draw a conclusion on the audit objective. Audit conclusions can be grouped into four categories:

unqualified;
qualified (largely positive);
qualified (partly positive); and
adverse.

In the period between 2019–20 to 2023–24 entities within the Health and Aged Care portfolio were included in tabled ANAO performance audits 26 times . The conclusions directed toward entities within this portfolio were as follows:

none were unqualified;
17 were qualified (largely positive);
seven were qualified (partly positive); and
two were adverse.

Figure 2 shows the number of audit conclusions for entities within the Health and Aged Care portfolio that were included in ANAO performance audits between 2019–20 and 2023–24 compared with all audits tabled in this period.

Figure 2: Audit conclusions 2019–20 to 2023–24: entities within the Health and Aged Care portfolio compared with all audits tabled

Source: ANAO data

The ANAO’s annual audit work program is intended to deliver a mix of performance audits across seven audit activities: governance; service delivery; grants administration; procurement; policy development; regulation and asset management and sustainment. These activities are intended to cover the scope of activities undertaken by the public sector. Each performance audit considers a primary audit activity. Figure 3 shows audit conclusions by primary audit activity for audits involving entities in the Health and Aged Care portfolio.

Figure 3: Audit conclusions by activity for audits involving entities within the Health and Aged Care portfolio, 2019–20 to 2023–24

Source: ANAO data.

Performance statements audit

The audit of the 2023–24 Department of Health and Aged Care annual performance statements is being conducted following a request from the Minister for Finance on 18 July 2023, under section 40 of the Public Governance, Performance and Accountability Act 2013. The audit is conducted under section 15 of the Auditor-General Act 1997.

The Department of Health and Aged Care is in its second year of inclusion in the annual performance statements audit program and the engagement risk has been assessed as high.

The key risks for the Department of Health and Aged Care’s performance statements that the ANAO has highlighted include:

the appropriateness and completeness of performance measures and targets;
the lack of clear read between the Department of Health and Aged Care’s key documents including Portfolio Budget Statements, Corporate Plan and Annual Report; and
the maturity of performance statements preparation processes.

Financial statements audits

Overview

Entities within the Health and Aged Care portfolio, and the risk profile of each entity, are shown in Table 1.

Table 1: Health and Aged Care portfolio entities and risk profile

	Type of entity	Engagement risk	Number of higher risks	Number of moderate risks
Material entities
Department of Health and Aged Care	Non-corporate	High	5	5
National Blood Authority	Non-corporate	Low	0	2
National Health and Medical Research Council	Non-corporate	Low	0	2
Non-material entities
Aged Care Quality and Safety Commission	Non-corporate	Low
Australian Commission on Safety and Quality in Health Care	Corporate	Low
Australian Digital Health Agency	Corporate	Moderate
Australian Institute of Health and Welfare	Corporate	Low
Australian National Preventive Health Agency	Non-corporate	Low
Australian Radiation Protection and Nuclear Safety Agency	Non-corporate	Low
Australian Sports Commission	Corporate	Moderate
Australian Sports Foundation Limited	Company	Low
Cancer Australia	Non-corporate	Low
Food Standards Australia New Zealand	Corporate	Low
Independent Health and Aged Care Pricing Authority	Corporate	Low
National Health Funding Body	Non-corporate	Low
National Mental Health Commission	Non-corporate	Low
Office of the Inspector-General of Aged Care	Non-corporate	Low
Organ and Tissue Authority	Non-corporate	Low
Professional Services Review	Non-corporate	Low
Sport Integrity Australia	Non-corporate	Low

Note a: Sourced from Public Governance, Performance and Accountability Act 2013 (Flipchart of PGPA Act) Commonwealth entities and companies (Department of Finance) as at 1 March 2024.

Material entities

Department of Health and Aged Care

The Department of Health and Aged Care is responsible for achieving the Australian Government’s health and ageing policy priorities through evidence-based policy, program administration, research, regulatory activities, and partnerships with other government entities, consumers and stakeholders.

The Department of Health and Aged Care’s budgeted personal benefits and subsidies for 2024–25 account for around 83 per cent of total budgeted expenses and 69 per cent of total liabilities. The total budgeted assets are $10.7 billion, with 13 per cent attributable to inventories and 14 per cent attributable to receivables, as shown in Figure 4.

Figure 4: Department of Health and Aged Care’s total budgeted financial statements by category ($’000)

Source: ANAO analysis of 2024–25 Portfolio Budget Statements.

The Department of Health and Aged Care has been classified by the ANAO as a high risk engagement. This engagement risk rating reflects the number and quantum of key areas of financial statements risk that will be a focus of the audit, as well as the: complexity of the environment in which the Department operates; the broad range and complex nature of the programs administered; and the high number of enterprise risks that impact the financial statements.

There are ten key risks for the Department of Health and Aged Care’s 2023–24 financial statements that the ANAO has highlighted for specific audit coverage, including four risks that the ANAO considers potential key audit matters (KAMs).

The payment of personal benefit health care entitlements are based on information provided by the payment recipients and may be significantly impacted by delays in recipients providing correct or updated information and/or provision of incorrect information resulting in invalid payments. (KAM – Accuracy of personal benefit health care entitlements)
Accounting for transactions related to the National Medical Stockpile due to the nature, size and complexity of the inventory transactions and the judgement applied in determining impairment losses. (KAM – Valuation of Inventory)
The calculation of payables and provisions for outstanding claims for medical services and pharmaceuticals and pharmaceutical services due to the uncertainty associated with claim experience and patterns. (KAM – Valuation of personal benefit provisions)
The payment of aged care subsidies are calculated by multiple, complex information technology systems and are underpinned by complex regulatory requirements. (KAM – Accuracy of aged care subsidies)
The governance of legal and other matters having implications on the financial statements. Weaknesses in the governance relating to the assessment and reporting of legal matters increases the risk that the financial statements are materially misstated and/or payments made or receipts collected on behalf of the government are not supported by legislative authority.
The management of grant payments due to diversity of the grant programs administered by the department with differing eligibility and reporting requirements.
The estimation of subsidy provisions and payables due to the significant professional judgement applied in the selection and application of key assumptions related to the nature of claims, claim patterns and experience.
The complexity of pharmaceutical benefit scheme drug recoveries due to the diversity of the risk sharing arrangements entered into with pharmaceutical companies. The risk sharing arrangements differ in respect to the entitlements for recovery and the calculation of the amount recoverable.
Accounting for revenue from the Therapeutic Goods Administration activities due to the judgement involved in relation to revenue recognition due to timing issues.
Addressing the risk of management override of controls.

National Blood Authority

The National Blood Authority is responsible for securing the supply of safe and affordable blood products, including through national supply arrangements and coordination of best practice standards within agreed funding policies under the national blood arrangements.

The National Blood Authority’s total budgeted assets for 2024–25 $668.0 million, with 20 per cent of these attributable to inventories, as shown in Figure 5.

Figure 5: National Blood Authority’s budgeted financial statements by category ($’000)

Source: ANAO analysis of 2024–25 Portfolio Budget Statements.

There are two key risks for the National Blood Authority’s 2023–24 financial statements that the ANAO has highlighted for specific audit coverage.

The significant judgements and assumptions involved in the valuation of blood and blood products, which are reported as assets.
The management of the National Blood Authority’s special account, the National Blood Account.

National Health and Medical Research Council

The National Health and Medical Research Council is the Australian Government’s key entity for managing investment in, and integrity of, health and medical research. The National Health and Medical Research Council is also responsible for developing health advice for the Australian community, health professionals and governments, and for providing advice on ethical practice in health care and in the conduct of health and medical research.

The National Health and Medical Research Council’s total budgeted expenses for 2024–25 are $1.1 billion, with 94 per cent of these expenses attributable to grants, as shown in Figure 6. Budgeted intangible assets are $19.9 million, accounting for around seven per cent of total budgeted assets.

Figure 6: National Health and Medical Research Council’s budgeted financial statements by category ($’000)

Source: ANAO analysis of 2024–25 Portfolio Budget Statements.

There are two key risks for the National Health and Medical Research Council’s 2023–24 financial statements that the ANAO has highlighted for specific audit coverage.

The management of, and accounting for, a range of grant payments, which constitute a significant expense reported in the National Health and Medical Research Council’s financial statements and are susceptible to fraud.
The judgements and assumptions involved in the assessing the impairment of internally generated intangible assets relating to the National Health and Medical Research Council’s new grants management system.