Results of 2016–17 Audits: Public Hospitals

Victoria’s public hospital sector is made up of 86 hospitals and 23 controlled entities.

This report outlines the results of, and observations arising from, our financial audits of the entities within the sector, and our observations, for the year ended 30 June 2017.

We also assess the sector’s financial performance during the 2016–17 reporting period and assess its sustainability as at 30 June 2017.

Data dashboards

We have developed four data dashboards, which are interactive visualisation tools summarising the financial statement data for all Victorian public hospitals. They have been grouped into the following cohorts:

• metropolitan
• regional
• rural
• small rural.

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Ordered to be published

VICTORIAN GOVERNMENT PRINTER November 2017

PP No 348, Session 2014–17

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Victoria's public hospital sector is made up of 86 hospitals and 23 controlled entities.

This report outlines the results of our financial audits of these entities, and our observations, for the year ended 30 June 2017. We also analyse the financial results and outcomes of the sector.

Conclusion

The financial reports of entities in the hospital sector are reliable. The Parliament and community can have confidence in these reports.

Overall, the sector is operating within its funding envelope, and the rate at which new assets are being added to its asset base exceeds the rate at which existing assets are being consumed, as measured by annual depreciation.

Findings

Results of audits

Financial report audit opinions

To date, we have issued 108 clear audit opinions to Victoria's 86 public hospitals and 22 of their 23 controlled entities, for the financial year 2016–17. This positive outcome, consistent with last year, means the financial reports of the sector continue to be materially correct and reliable.

Also consistent with last year, all but one of the reports were finalised within legislated time frames. This shows that the sector is continuing to prepare its financial reports in a timely manner. This year, Bendigo Health Care Group missed the deadline, because it needed to finalise the complex accounting treatment and disclosures related to its new hospital.

The audit opinion for The Royal Children's Hospital Foundation Trust Funds remains outstanding. This is because we are conducting an ongoing review of the trust funds' audit reporting requirements.

Key audit themes

In 2016–17, we identified three common key financial reporting risks across the 86 public hospitals:

• implementation of the new requirement for public sector entities to disclose significant related-party transactions under Australian Accounting Standard AASB 124 Related Party Disclosures
• the ongoing challenge of valuing non-current physical assets using current replacement cost methodologies
• the accuracy of employee expenses and the valuation of employee leave entitlements due to the complexity of awards and terms and conditions of employment.

Our audit procedures addressed these risks, and we are satisfied that they have been mitigated.

Internal control issues

In our financial audits, we consider the internal controls relevant to financial reporting and assess whether entities have appropriate controls to manage the risks that their financial reports will not be complete and accurate.

Overall, hospitals' internal controls remain adequate for ensuring reliable financial reporting. However, we also continue to find instances where important internal controls are weak and need improvement.

This year, we identified 34 new control issues that we rated as either extreme or high risk, across 11 hospitals. The relevant hospitals have accepted these issues and are actively working to resolve them.

At the start of the 2016–17 financial year, there were 151 unresolved internal control issues across the sector. We raised these issues with hospital management in earlier audit cycles. During the year, hospitals resolved 69 per cent of these issues. There are seven unresolved prior-year high-risk issues, across six hospitals. Management at these hospitals is proactively managing the risks arising from these control weaknesses while they work to address the original issue.

We remain concerned that—in line with prior periods—most of the control weaknesses we find relate to IT system environments, payroll, and expenditure and accounts payable areas. These issues increase the risk of data in public hospital systems being lost, stolen or inaccessible. They also increase the risk of undetected fraudulent payments.

Compliance with the Health Purchasing Policy framework

Health Purchasing Victoria (HPV) was set up by the state government to work with hospitals to:

• strengthen their procurement policies and frameworks
• provide training to improve procurement functions
• negotiate with suppliers to deliver goods and services to public hospitals through collective purchasing arrangements.

In 2014, HPV implemented the Health Purchasing Policy (HPP) framework to help achieve these aims. As part of our 2016–17 financial audits, we assessed compliance with each of the five policies under the HPP framework across the 76 public hospitals that were required to comply. These policies are:

• HPP 1 Procurement Governance
• HPP 2 Procurement Strategic Analysis
• HPP 3 Market Approach
• HPP 4 Contract Management and Asset Disposal
• HPP 5 Collective Purchasing.

By fully implementing the HPP framework, public hospitals can improve their procurement governance, processes and management. This will help them to achieve best value when purchasing supplies and services.

Overall, hospitals comply with most elements of the HPP framework. However, the rate of compliance was higher on some policies than others. We found hospitals had implemented the requirements of HPP 4 and 5 the best.

More work is required for hospital management to fully comply with all elements of the framework. Weaknesses we identified included:

• lack of a finalised procurement governance framework
• poor strategic analysis of procurement needs, including a lack of complexity and capability assessments
• multiple or decentralised contract registers, which weaken contract oversight
• not obtaining an exemption from HPV to enable the use of alternative suppliers for goods and services.

Financial sustainability

We analysed the financial sustainability of the public hospital sector using audited data for the past five financial years. We used two key indicators:

• net result—measures the surplus or deficit as a percentage of the total revenue generated in the financial year
• physical asset replacement—measures new assets acquired as a percentage of depreciation expenditure in the financial year.

Sector level

This year, the sector generated a combined net surplus of $493.9 million (compared with a $114.8 million deficit in 2015–16). This equated to 3.1 per cent of the sector's revenue (−0.8 per cent in 2015–16). This surplus for the sector was because of the significant capital income received by the Bendigo Health Care Group for its new hospital.

The funding model for public hospitals is mainly activity-based—it is set up so that the cost of providing services to the public is constrained to the funding provided to the sector. This break-even model means that the net result—the difference between income and expenditure—will typically be close to zero.

Over the past five years, the net result for the sector has been +/−5 per cent of break even. This indicates that, in the longer-term, the funding model is operating as intended, as the sector is generally working within its means.

Although the sector results are positive, they can vary considerably between individual public hospitals and over time.

For the 2016–17 financial year, 55 public hospitals nearly broke even, spending within 5 per cent of their total generated revenue. However, 20 hospitals generated a deficit of greater than 5 per cent of revenue. The hospitals generating a surplus or deficit vary from year to year, and individual results are influenced by factors such as capital funding for large projects.

The sector also needs to fund the renewal and replacement of its physical assets in a timely way. Run-down assets may affect the quality of service that patients receive and can result in higher long-term costs.

The sector acquired $1.5 billion of new or replacement assets in 2016–17 ($1.9 billion in 2015–16). Over the past five years, the sector spent on average $1.59 on new or replacement assets for each $1 of recorded depreciation. This indicates the sector has a low financial sustainability risk when it comes to its service delivery assets.

Responses and submissions

We have consulted with the Department of Health and Human Services (DHHS), HPV and the public hospitals named in this report, and we considered their views when reaching our audit conclusions. As required by section 16(3) of the Audit Act 1994, we gave a draft copy of this report to those agencies and asked for their submissions or comments. We also provided a copy of the report to the Department of Premier and Cabinet.

The following is a summary of those responses. The full responses are included in Appendix A.

The Department of Health and Human Services has provided a response for inclusion in this report, noting our findings.

Responses from Austin Health, Eastern Health, The Royal Women's Hospital and Timboon and District Healthcare Service provide additional information regarding their management letter issues. All of the hospitals state that they have resolved or are resolving the issues.

Health Purchasing Victoria comments on our findings of the sector's compliance with the Health Purchasing Policy framework. Also, Austin Health, Beaufort and Skipton Health Service and Northern Health provide additional information regarding their compliance with the Health Purchasing Policy framework.

The Royal Children's Hospital Foundation Trust Funds provides information on the outcome of an independent audit of their financial report for the year ending 30 June 2017.

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Victoria has 86 public hospitals, some of which control a further 23 entities. These are listed in Appendix B.

Figures 1A and 1B show the locations and level of expenditure by each of the public hospitals operating in Victoria during the 2016–17 financial year.

Figure 1A
Location and expenditure of Victoria's regional and rural public hospitals, 2016–17

Source: VAGO.

Figure 1B
Location and expenditure of Victoria's metropolitan public hospitals, 2016–17

Note: Where hospitals have multiple locations, only the main hospital site is shown.

Source: VAGO.

1.1 Legislative framework

Public hospitals are established under the Health Services Act 1988 and governed by a board, which is directly accountable to the Minister for Health. DHHS oversees these hospitals on behalf of the minister, including monitoring the quality of the services they provide.

The board sets the strategic direction for the hospital within the government's policy framework, ensuring it:

• is managed effectively and efficiently
• provides high-quality care and service delivery
• meets the needs of the community
• meets its financial and non-financial targets.

Designated as 'public bodies', public hospitals must comply with Part 7 of the Financial Management Act 1994 (FMA), as well as with any general or specific direction given by the Minister for Finance.

They are also subject to the Public Administration Act 2004, which provides a framework for governance in the public sector.

1.2 Public hospitals funding model

Health services, including public hospitals, are funded under the National Health Reform Agreement between the Commonwealth and the state government.

Public hospitals are funded through activity‑based funding (ABF) and block funding models.

A key element of the ABF model is that funding is allocated according to the number and types of activities that the hospital performs in treating patients. Hospitals receive funding for specific activities—for example, treating acute admitted patients, providing emergency services, operating specialist clinics and providing post-operative care.

Where it is not practical to fund activities through the ABF model, hospitals receive block funding. This model is used for services such as small rural hospitals and non‑admitted mental health services, as well as to fund teaching, training and research.

Typically, metropolitan hospitals—which treat a greater number of acute patients and perform more complex procedures than rural hospitals—receive most of their funding through the ABF model. Conversely, small rural hospitals —which treat more patients requiring aged and community care—receive mostly block funding.

Figure 1C provides an overview of these funding models.

Figure 1C
The flow of activity-based and block funding to Victoria's 86 public hospitals

1.3 Report structure

In this report, we discuss the outcomes of our financial audits of the 86 public hospitals and their 23 controlled entities, for the year ending 30 June 2017. Appendix B lists all 109 entities included in the sector.

We also identify key financial reporting and internal control issues, and analyse the financial performance and position of Victoria's public hospitals.

Figure 1D outlines the structure of the report.

Figure 1D
Report structure

Source: VAGO.

We undertake our financial audits according to section 8 of the Audit Act 1994 and the Australian Auditing Standards. These audits are paid for by each entity.

We used the results of these audits in preparing this report. The cost of preparing this report was $377 400, which is funded by Parliament.

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Independent auditor's reports add credibility to management's financial reports by providing reasonable assurance that the information reported is reliable and accurate.

A clear audit opinion—included at the front of the independent auditor's report—confirms that the financial report presents fairly the transactions and balances for the reporting period, in accordance with the requirements of relevant accounting standards and applicable legislation.

All entities in the public hospital sector are required to follow Australian Accounting Standards and the financial reporting requirements of Part 7 of thee FMA in preparing their financial reports. This consistency in how public hospitals account for and report on their financial results and enables comparison between entities in the health sector.

2.1 Financial report audit opinions

We issued 108 clear audit opinions to 86 public hospitals and 22 of their controlled entities for the financial year ended 30 June 2017. This positive outcome means the financial reports of the sector are materially correct and reliable.

The audit opinion for the Royal Children's Hospital Foundation Trust Funds remains outstanding. This is because we are conducting an ongoing review of the trust funds' audit reporting requirements.

Appendix B lists the public hospital sector entities we audited, and the dates on which our audit opinions were issued.

Timeliness

Timely financial reporting enables informed decision-making and facilitates the accountability process between management and stakeholders. The later financial reports are produced after the end of the financial year, the less useful they become.

Public hospitals are required to finalise their financial reports and have them audited within 12 weeks from the end of the financial year. Figure 2A shows that public hospitals took a median time of eight weeks to certify their 2016–17 financial reports. This is consistent with the previous financial year.

Figure 2A
Number of weeks taken after 30 June for hospitals to certify their financial reports for financial years 2015–16 and 2016–17

Source: VAGO.

While almost all public hospitals certified their financial reports within the legislated 12-week time frame, one hospital in each of the last two financial years did not meet the statutory deadline. For the financial year ending 30 June 2017, Bendigo Health Care Group missed the deadline. For the previous financial year, it was the Peter MacCallum Cancer Centre.

In both cases, significant building projects—undertaken through public private partnerships (PPP)—were in progress. PPPs are complicated arrangements, involving multiple stakeholders. As well as the hospital, this can include the state government, departments, private consortiums and third-party experts.

In each case, the financial reporting delay was due to consultation with the PPP stakeholders to finalise the complex accounting treatments for these arrangements.

2.2 Key audit themes

Each financial year, as we plan our financial audit work across the sector, we seek to identify key audit risks. These risks, if not addressed, may lead to potential material misstatements in financial reporting. We communicate these risks in our audit strategy documents, which are presented to those charged with governance at each public hospital prior to the end of the financial year.

The homogeneous nature of hospitals means that there are often common risk themes across the sector. This year, the most common key audit risks we identified were:

• the implementation of Australian Accounting Standard AASB 124 Related Party Disclosures
• the valuation of non-current physical assets
• employee expenses and the valuation of employee leave entitlements.

Implementation of AASB 124

In their financial statements for the year ended 30 June 2017, not-for-profit entities were required to apply AASB 124 Related Party Disclosures for the first time. This meant that all government entities needed to disclose information about material related-party relationships and transactions that may have affected their financial performance or position. The application of AASB 124 created challenges for both those preparing financial reports and auditors, in making sure that the new accounting standard was met and that the information disclosed was complete and accurate.

Across the public sector, material related-party relationships that required disclosure included:

• key management personnel (KMPs) and their close family members
• Cabinet ministers and their close family members
• other entities controlled by either Cabinet ministers or KMPs
• all other state-controlled entities.

DHHS provided comprehensive guidance to hospitals on how to approach and adopt AASB 124.

While all public hospitals met the standard and made adequate related-party disclosures in their financial reports, we found that many had not prepared for this new standard in a timely manner.

This was partly due to a poor understanding of the new disclosure requirements of AASB 124, resulting in additional unforeseen work being required by those preparing the financial reports and auditors.

The poor understanding resulted in a low level of identification of the related parties that might be included in this disclosure. All hospitals identified DHHS as a significant party that they transacted with, but very few named anyone else—including other public hospitals. While the disclosures that hospital made were materially accurate, they could have been significantly improved through a more thorough identification process.

Physical asset fair value assessments and revaluations

At 30 June 2017, the 86 public hospitals held $14.2 billion worth of physical assets (compared with $13.5 billion in 2015–16). The change in the value of the assets held reflects:

• an increase of $1.5 billion worth of new assets ($1.9 billion in 2015–16)
• an increase of $111 million in the value of existing assets ($235 million in 2015–16)
• a decrease of $858 million due to depreciation ($795 million in 2015–16).

To comply with Australian Accounting Standards, each Victorian public sector entity must annually determine and disclose the fair value of its infrastructure, property, plant and equipment assets in its financial report. The fair value is the price the entity would expect to receive for the asset if it were to sell the asset in an orderly transaction between market participants.

There are two common valuation methods used across the public hospital sector to calculate fair value:

• Market approach—reflects market sales of similar land assets.
• Current replacement cost—reflects the expected cost in today's dollars of replacing assets to a similar standard and at a similar age. This method tends to be used to value items such as buildings and medical equipment.

To ensure consistency of approach, hospitals must comply with Financial Reporting Direction 103F Non-Financial Physical Assets, issued by the Minister for Finance.

As the total value of the infrastructure, property, plant and equipment usually represents a significant percentage of a public hospital's total assets, we allocate a significant amount of time and effort to checking these fair values. Since they are only estimates and may involve significant management judgement, there is a high risk of material financial report errors.

Overall, we found that all public hospitals had appropriately valued their physical assets at 30 June 2017.

Employee expenses and employee leave entitlements

Employee expenses and employee leave entitlements make up a significant portion of public hospitals' expenses and liabilities respectively. Employee expenses made up $9.7 billion (63 per cent) of the public hospital sector's expenditure for the year ending 30 June 2017 ($9.0 billion in 2015–16). Hospitals also held $2.7 billion in liabilities for leave entitlements ($2.5 billion in 2015–16).

Public hospitals are subject to complex contracts, awards and enterprise agreements. In any given year, a number of these agreements expire and are renegotiated, often with changes to existing working conditions. The use of contractors and temporary, casual and agency employees is common practice to accommodate fluctuations in the demand for services. The calculation of employees' leave entitlements involves a number of variables, including assumptions about wage growth, movements in the Consumer Price Index and estimates of the likelihood that employees will remain with a hospital long enough to be entitled to long service leave. These factors increase the audit risk for these items.

Through our audit work, we are satisfied that items relating to employee expenses and employee leave entitlements at all 86 public hospitals have not been materially misstated.

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Effective internal controls help entities to reliably and cost-effectively meet their objectives. Strong internal controls are a prerequisite for delivering sound, accurate and timely external financial reports.

In our annual financial audits, we consider the internal controls relevant to financial reporting and assess whether entities have managed the risk that their financial reports will not be complete and accurate. Poor internal controls make it more difficult for entity management to comply with relevant legislation and increase the risk of fraud and error.

3.1 Internal control observations

We found that the public hospitals' internal controls that we identified and tested were adequate for ensuring reliable financial reporting. However, we also found instances where important internal controls were weak and needed improvement.

As required by Australian Auditing Standards, we communicate significant internal control issues to the board of the relevant public hospital, often through its audit committee. We assign each issue a risk rating for possible impact and likelihood—Appendix C describes these ratings.

Across all our 2016–17 public hospital audits, we identified 136 internal control issues (90 in 2015–16), which we assessed as extreme, high or medium risks. Figure 3A provides a breakdown of these issues.

Figure 3A
Internal controls issues at public hospitals, by area and risk rating, 2016–17

Source: VAGO.

Of these internal control issues, 32 per cent related to the IT systems environment, including inappropriate user access, a lack of system support and weaknesses in disaster recovery plans. These issues increase the risk that data held in public hospitals' information technology systems may be compromised or lost.

A further 28 per cent related to weaknesses in payroll, expenditure and accounts payable systems, including inadequate checks of master-file changes, poor separation of duties across staff roles, and incomplete time sheet approval processes. These issues increase the risk of fraudulent payments and may make them harder to detect. At 10 of the hospitals, this risk was increased by poor processes for reviewing journal entries.

The 34 issues we rated as extreme and high risk in 2016–17 (compared to no extreme- and 20 high‑risk issues identified in 2015–16) occurred across 11 hospitals—see Figure 3B. In line with the risk rating descriptions in Appendix C, we urge management of these entities to address these issues promptly, in order to reduce their exposure to fraud and error. All of the relevant hospitals are actively working to resolve these issues.

Figure 3B
Public hospitals with extreme- and high-risk rated issues identified in 2016–17 audits, by category

(a) Includes one extreme-risk rated issue.

Source: VAGO.

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A financially sustainable entity is one that can maintain operations over the long-term using existing revenue and expenditure policies. The entity should be able to absorb short-term fluctuations in income and expenditure due to reasonably foreseeable internal and external factors. We can assess an entity's financial sustainability by examining past and projected trends in financial data and key indicators.

In this part of the report, we analyse the financial sustainability of the public hospital sector using data for the past five financial years. We assess this data against two key indicators:

• net result—measures the surplus or deficit achieved by an entity as a percentage of the total revenue generated in the financial year
• physical asset replacement—compares new assets in the financial year to depreciation expenditure for the same period, showing whether physical assets are being replaced at the rate they are being used.

More information on these two indicators—including how they are calculated and benchmarked—is included in Appendix D. Appendix D also provides the results for the 86 public hospitals against these two key indicators over the five financial years to 30 June 2013 to 2017.

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We have consulted with DHHS, HPV and the public hospitals named in this report, and we considered their views when reaching our audit conclusions. As required by section 16(3) of the Audit Act 1994, we gave a draft copy of this report, or relevant extracts, to those agencies and asked for their submissions and comments. We also provided a copy of the report to the Department of Premier and Cabinet.

Responsibility for the accuracy, fairness and balance of those comments rests solely with the agency head.

Responses were received as follows:

• DHHS
• Austin Health
• Beaufort and Skipton Health Service
• Eastern Health
• HPV
• Northern Health
• The Royal Children's Hospital Foundation
• The Royal Women's Hospital
• Timboon and District Healthcare Service

RESPONSE provided by the Acting Secretary, DHHS

RESPONSE provided by the Chief Executive Officer, Austin Health

RESPONSE provided by the Chief Executive Officer, Austin Health—continued

RESPONSE provided by the Chief Executive Officer, Beaufort and Skipton Health Service

RESPONSE provided by the Chief Executive, Eastern Health

RESPONSE provided by the Chief Executive, HPV

RESPONSE provided by the Chief Executive, Northern Health

RESPONSE provided by the Chief Executive Officer, The Royal Children's Hospital Foundation

RESPONSE provided by the Acting Chief Executive Officer, The Royal Women's Hospital

RESPONSE provided by the Chief Executive Officer, Timboon and District Healthcare Service

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Figures B1 to B4 list the entities included in this report. They detail the date we issued an audit opinion to each entity for its 2016–17 financial reports and the nature of the opinion.

Figure B1
Audit opinions issued for metropolitan hospitals and controlled entities

(a) Deregistered on 16 February 2017 with Australian Securities and Investment Commission (ASIC).

(b) Not yet signed at the date this report was issued.

Source: VAGO.

Figure B2
Audit opinions issued for regional hospitals and controlled entities

Source: VAGO.

Figure B3
Audit opinions issued for rural hospitals and controlled entities

Source: VAGO.

Figure B4
Audit opinions issued for small rural hospitals and controlled entities

(a) New controlled entity incorporated on 2 November 2016.

(b) New entity incorporated after merger with Dunmunkle Health Services from 1 July 2016.

Source: VAGO.

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Figure C1 shows the risk ratings applied to issues raised in management letters. It also details what they represent and the expected time line for the issue to be resolved.

Figure C1
Risk definitions applied to issues reported in audit management letters

Source: VAGO.

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Figure D1 shows the indicators used in assessing the financial sustainability risks of public hospitals. These indicators should be considered collectively and are more useful when assessed over time as part of a trend analysis.

Figure D1
Financial sustainability risk indicators

Source: VAGO.

Financial sustainability risk assessment criteria

The financial sustainability risk of each public hospital has been assessed using the criteria outlined in Figure D2.

Figure D2
Financial sustainability risk indicators—risk assessment criteria

Source: VAGO.

Figures D3 to D10 provide the indicator results for each of the 86 public hospitals, for the five financial years 2013–14 to 2016–17.

The results are listed by public hospital cohort. The four cohorts are:

• metropolitan—18 large public hospitals which offer multi- and specialised services within the greater metropolitan Melbourne area
• regional—15 large public hospitals in regional cities or centres of Victoria that offer multi-services
• rural—11 medium sized public hospitals in rural centres or areas of Victoria that offer less services than metropolitan and regional public hospitals
• small rural—42 small public hospitals located in rural areas of Victoria, offering limited services that focus on community care.

Metropolitan public hospitals

Figure D3
Net result indicator at 30 June 2013 to 2017

Source: VAGO.

Figure D4
Physical asset replacement indicator at 30 June 2013 to 2017

Source: VAGO.

Regional public hospitals

Figure D5
Net result indicator at 30 June 2013 to 2017

Source: VAGO.

Figure D6
Physical asset replacement indicator at 30 June 2013 to 2017

Source: VAGO.

Rural public hospitals

Figure D7
Net result indicator at 30 June 2013 to 2017

Source: VAGO.

Figure D8
Physical asset replacement indicator at 30 June 2013 to 2017

Source: VAGO.

Small rural public hospitals

Figure D9
Net result indicator at 30 June 2013 to 2017

Figure D9
Net result indicator at 30 June 2013 to 2017—continued

Source: VAGO.

Figure D10
Physical asset replacement indicator at 30 June 2013 to 2017

Figure D10
Physical asset replacement indicator at 30 June 2013 to 2017—continued

Source: VAGO.

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Activity-based funding

Method of allocating funding based on unit prices for each activity undertaken and the volume of that activity an entity is to perform.

Asset

An item or resource controlled by an entity that will be used to generate future economic benefits.

Asset valuation

The fair value of a non-current asset on a specified date.

Audit Act 1994

Victorian legislation establishing the Auditor-General's operating powers and responsibilities and detailing the nature and scope of audits that the Auditor‑General may carry out.

Audit committee

Helps a governing board to fulfil its governance and oversight responsibilities and strengthen accountability of senior management.

Audit opinion

A written expression, within a specified framework, indicating the auditor's overall conclusion about a financial (or performance) report based on audit evidence.

Block funding

A system of funding public hospital functions and services based on population and previous funding.

Cabinet minister

A member of the principal decision making body of the state government.

Capital expenditure

Money an entity spends on:

• new physical assets, including buildings, infrastructure, plant and equipment
• renewing existing physical assets to extend the service potential or life of the asset.

Capital grant/capital purpose income

Government funding for an agency to acquire or build capital assets such as buildings, land or equipment.

Clear audit opinion

A positive written expression provided when the financial report has been prepared and presents fairly the transactions and balances for the reporting period in keeping with the requirements of the relevant legislation and Australian Accounting Standards—also referred to as an unqualified audit opinion.

Collective purchasing arrangement

A contract for the purchase of goods or services for the benefit of two or more entities.

Contract management

The process of ensuring that contractual obligations of successful suppliers is met during the life of a contract.

Control environment

Processes within an entity's governance and management structure that provide reasonable assurance about the achievement of an entity's objectives in reliability of financial reporting, effectiveness and efficiency of operations, and compliance with applicable laws and regulations.

Current asset

An asset that will be sold or realised within 12 months of the end of the financial year being reported on, such as term deposits maturing in three months or stock items available for sale.

Current liability

A liability that will be settled within 12 months of the end of the financial year being reported on, such as payment of a creditor for services provided to the entity.

Deficit

When total expenditure is more than total revenue.

Depreciated replacement cost

Current replacement cost less accumulated depreciation to reflect the economic benefits of the assets that have been consumed.

Depreciation

Systematic allocation of the value of an asset over its expected useful life, recorded as an expense.

Entity

A corporate or unincorporated body that has a public function to exercise on behalf of the state or is wholly owned by the state, including departments, statutory authorities, statutory corporations and government business enterprises.

Expense

The outflow of assets or the depletion of assets an entity controls during the financial year, including expenditure and the depreciation of physical assets. An expense can also be the incurrence of liabilities during the financial year, such as increases to a provision.

Fair value

The price that would be received if an asset was sold or the price paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Financial Management Act 1994

Victorian legislation governing public sector entities, as determined by the Minister for Finance, including their financial reporting framework.

Financial report

A document reporting the financial outcome and position of an entity for a financial year, which contains an entity's financial statements, including a comprehensive income statement, a balance sheet, a cash flow statement, a comprehensive statement of equity and notes.

Financial Reporting Directions

Issued by the Minister for Finance for entities reporting under the Financial Management Act 1994, with the aim of:

• achieving consistency and improved disclosure in financial reporting for Victorian public entities by eliminating or reducing divergence in accounting practices
• prescribing the accounting treatment and disclosure of financial transactions in circumstances where there are choices in accounting treatment, or where existing accounting procurements have no guidance or requirements.

Financial sustainability

An entity's ability to manage financial resources so it can meet its current and future spending commitments, while maintaining assets in the condition required to provide services.

Financial year

A period of 12 months for which a financial report is prepared, which may be a different period to the calendar year.

Governance

The control arrangements used to govern and monitor an entity's activities to achieve its strategic and operational goals.

Internal audit

A function of an entity's governance framework that examines and reports to management on the effectiveness of the entity's risk management, internal controls and governance processes.

Internal control

A method of directing, monitoring and measuring an entity's resources and processes to prevent and detect error and fraud.

Issues

Weaknesses or other concerns in the governance structure of an entity identified during a financial audit, which are reported to the entity in a management letter.

Liability

A present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow of assets from the entity.

Management letter

A letter the auditor writes to the governing body, the audit committee and the management of an entity outlining issues identified during the financial audit.

Material error or adjustment

An error that may result in the omission or misstatement of information, which could influence the economic decision of users taken on the basis of the financial statements.

Material related party transaction

A transfer of resources, services or obligations between an entity and a relate party regardless of whether a price is charged.

Materiality

Information is material if its omission, misstatement or non-disclosure has the potential to affect the economic decisions of users of the financial report, or the discharge of accountability by management or those charged with governance. The size, value and nature of the information and the circumstances of its omission or misstatement help in deciding how material it is.

Mental health services (mental health)

All specialised mental health services providing a range of inpatient, community-based residential, rehabilitation and ambulatory services that treat and support people with a mental illness and their families and carers.

Net result

The value that an entity has earned or lost over the stated period—usually a financial year—calculated by subtracting an entity's total expenses from the total revenue for that period.

Non-admitted care

Medical procedures, such as day surgery, on a patient who is not admitted to hospital.

Non-current asset

An asset that will be sold or realised later than 12 months after the end of the financial year being reported on, such as investments with a maturity date of two years or physical assets the entity holds for long-term use.

Non-current liability

A liability that will be settled later than 12 months after the end of the financial year being reported on, such as repayments on a five-year loan that are not due in the next 12 months.

Physical asset

A non-financial asset that is a tangible item an entity controls, and that will be used by the entity for more than 12 months to generate profit or provide services, such as building, equipment or land.

Procurement

The end-to-end process of sourcing a supplier, contracting, purchasing the good or service, managing the contract (including supplier performance), and contract expiry or review. This can be by a department, individual role or process, and is wider than just purchasing the goods or services.

Procurement activity plan

A list of all procurement activities that the entity anticipates taking to market over a period of time (ideally 12 to 18 months).

Procurement strategy

A document that outlines the contribution that effective procurement will make to fulfil an entity's aims and objectives.

Revaluation

The restatement of a value of non-current assets at a particular point in time.

Revenue

Inflows of funds or other assets or savings in outflows of service potential, or future economic benefits in the form of increases in assets or reductions in liabilities of an entity, other than those relating to contributions by owners, that result in an increase in equity during the reporting period.

Risk

The chance of a negative or positive impact on the objectives, outputs or outcomes of an entity.

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Our Data Dashboards are interactive visualisation tools summarising the financial statement data for all Victorian public hospitals. They have been grouped into the following cohorts:

• metropolitan
• regional
• rural
• small rural.

Do you need help using the dashboard? Read our dashboard instructions.

Dashboard instructions

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Our Data Dashboards are interactive visualisation tools summarising the financial statement data for all Victorian public hospitals. They have been grouped into the following cohorts:

• metropolitan
• regional
• rural
• small rural.

Do you need help using the dashboard? Read our dashboard instructions.

Dashboard instructions

Back to top

Our Data Dashboards are interactive visualisation tools summarising the financial statement data for all Victorian public hospitals. They have been grouped into the following cohorts:

• metropolitan
• regional
• rural
• small rural.

Do you need help using the dashboard? Read our dashboard instructions.

Dashboard instructions

Back to top

Our Data Dashboards are interactive visualisation tools summarising the financial statement data for all Victorian public hospitals. They have been grouped into the following cohorts:

• metropolitan
• regional
• rural
• small rural.

Do you need help using the dashboard? Read our dashboard instructions.

Dashboard instructions

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