Auditor-General's Report

Tuesday 14th November 2017

Auditor General's Report

The Hon. K.J. MAHER (Minister for Employment, Minister for Aboriginal Affairs and Reconciliation, Minister for Manufacturing and Innovation, Minister for Automotive Transformation, Minister for Science and Information Economy) (15:33): I move:

That standing orders be so far suspended as to enable the report of the Auditor-General for the year ended 30 June 2017 to be referred to a committee of the whole and for ministers to be examined on matters contained in the report for a period of one hour.

Motion carried.

In committee.


The Hon. T.A. FRANKS: My questions relate to Part B: Agency audit reports, TAFE SA, and are for the minister representing the Minister for Higher Education and Skills. I refer to page 494, flowing on to 495. Under the heading, 'No system restriction in SIS to stop students who withdraw from studies receiving a payable grade', it notes that:

As we identified in previous years, SIS allows a lecturer to record a pass grade for a student who has withdrawn in a unit of competency. For semester 2, 2016 we identified 45 student records with a registration status of 'withdrawn' that were awarded a pass grade. These records related to 35 different students and 23 different certificates/awards.

It goes on to note that this was obviously in error, but:

At the time of our audit, TAFE SA did not have any formal processes to independently review grades assigned, or to review those that had been altered, meaning there were no detective processes to mitigate the risk associated with allowing the inappropriate entry of grades.

My question is: it is noted that TAFE SA has advised that it has implemented additional reporting to address this since the audit. What is that additional reporting?

The Hon. I.K. HUNTER: I thank the honourable member for her most important question to the minister in the other place. I undertake to take that question on notice and seek a response on her behalf. It is not unusual for the Auditor-General to highlight, as he has done for many agencies, issues with processes inside the agency, and it is not unusual for the agency to quickly move to put in place remedial positions to make sure that those issues raised by the Auditor-General are addressed. The honourable member asks exactly what are the additional reporting processes that have been put in place, so I will take that question to the minister in the other place and bring back a response.

The Hon. S.G. WADE: My first question refers to Part A: Executive summary, page 54, and an unfavourable net operating result of $40 million. The Budget and Finance Committee was advised that the $40 million adverse result related to a dispute with the commonwealth. Has that dispute been resolved and what has been the impact on the unfavourable net operating result?

The Hon. P. MALINAUSKAS: My advice is that the dispute with the commonwealth continues. It is important to contextualise that my advice is also that the dispute between the states and the commonwealth extends to other jurisdictions around the country, and that South Australia is very much not on its own in respect to this dispute around activity-related funding issues with the commonwealth. So, it is still continuing.

The Hon. S.G. WADE: On page 55 of the same part, the Executive Summary, there is a reference to the fact that the department's interim PPR in June 2017 showed that the LHNs and SAAS failed to achieve overall full year savings targets of $124 million and the mandated FTE recovery. The Auditor-General goes on to make clear that the only way, therefore, that the department achieved the unfavourable net operating result referred to previously was by receiving approved budget amendments and centrally retained DHA reserves. What amount was provided in terms of the approved budget amendments?

The Hon. P. MALINAUSKAS: My advice is that there was no additional supplementations made from Treasury in the year 2016-17 and instead those amounts that the honourable member refers to were accounted for in different ways. But there was no additional supplementation from Treasury in the relevant financial year.

The Hon. S.G. WADE: So, what were the approved budget amendments, and what impact did it have on the department's budget?

The Hon. P. MALINAUSKAS: My advice is that obviously, particularly in health, throughout the course of the year there are a range of adjustments that are made in respect of the budget. That is the nature of the budget process, particularly in the context of health, which is often demand driven. In respect to the area or the section that the honourable member is referring to, again, my advice clearly is that there were no additional supplementations made in 2016-17 in the context of budgeted savings.

The Hon. S.G. WADE: Can the minister advise: what was the quantum of the approved budget amendments that are referred to on page 55?

The Hon. P. MALINAUSKAS: To the saving?

The Hon. S.G. WADE: What is the quantum? You are telling me that it is not supplementation. That is great. Tell me what is the quantum of the approved budget amendments.

The Hon. P. MALINAUSKAS: I am happy to take that on notice, Mr Chairman.

The Hon. S.G. WADE: In the same paragraph it refers to funds that were received from centrally retained DHA reserves. How much was returned from centrally retained DHA reserves?

The Hon. P. MALINAUSKAS: My advice is that there is a pool of money that is centrally held by the department for the financial year that, for a lack of a better term, is largely set aside and not in the hands of the LHNs but within the department itself, and that provides a reserve which can then be called upon by the LHNs as the year progresses.

The Hon. S.G. WADE: Considering that on page 55 the Auditor-General notes that the department failed to achieve $124 million in full year savings from LHNs and SAAS and then in the next paragraph $216 million and 512 FTEs, where was that money recovered from, if the department did not receive additional supplementation from Treasury and the approved budget amendments did not balance out those items?

The Hon. P. MALINAUSKAS: Maybe if I can explain it this way. The LHNs individually in their own right have their own respective savings targets and their own budgets and the like. That operates in conjunction with but separate to the department, which in turn can hold reserves. I am advised that that is what accounts for the overall majority of the $216 million figure. So, the department held in reserve a large amount in anticipation of such an event: that the LHNs would not reach their savings targets.

The Hon. S.G. WADE: Taking the global savings that are listed on page 64 and considering that the department, according to these reports, in the last financial year was supposed to have a saving of $52 million and actually incurred additional costs of $17 million, how has the government managed to balance the budget, allegedly, if it has fallen short on its Transforming Health savings?

The Hon. P. MALINAUSKAS: When you say 'balance the budget', do you mean the state budget or the health budget?

The Hon. S.G. WADE: The unfavourable net operating result that I referred to earlier.

The Hon. P. MALINAUSKAS: It is important in the context of Mr Wade's question to refer back to the fact that we are talking about overall, across the department, an unfavourable result of approximately $40 million. So, when the honourable member asks his question, he needs to realise that the net result here for the department as a whole is an unfavourable result of approximately $40 million.

The Hon. S.G. WADE: I think I asked that in my first question; my point being, if the government has failed to reach its savings targets for Transforming Health, where have those savings come from?

The Hon. P. MALINAUSKAS: Which savings are we talking about?

The Hon. S.G. WADE: On page 64, the Auditor-General indicates that the government had both original and refreshed business cases for Transforming Health. Further down that page, he talks about the actual performance against the targets. If the government failed to achieve savings targets within Transforming Health, where did it find those additional savings?

The Hon. P. MALINAUSKAS: Part of the equation is the fact that there was a pool of funding allocated toward spending within Transforming Health that was enabling funding to realise Transforming Health policy that was not ultimately spent and that helps contribute to that savings figure.

The Hon. S.G. WADE: On page 69 of Part A: Executive summary, the Auditor-General reports that the financial benefit target for 2017-18 in the business case refresh was $269.6 million but as at 30 June 2017, total planned benefits for 2017-18 identified were only $140.1 million. What is the current total for the planned Transforming Health financial benefit initiatives identified for the 2017-18 financial year?

The Hon. P. MALINAUSKAS: We will have to take that question on notice. We do not have that particular detail at hand, which probably does not surprise the honourable member in light of the fact that we are talking about the past Auditor-General's Report.

The Hon. S.G. WADE: I just remind the minister that the examination is on this report and it was in that report. In relation to future savings, I refer to page 64, figure 4.3, row 2. Are the savings from Transforming Health projected in the business case refresh shown in this table still the current savings targets for the forward years?

The Hon. P. MALINAUSKAS: My advice is that at the time of publication, yes, these numbers are correct.

The Hon. T.A. FRANKS: My question relates to Part A: Executive summary, page 70. Under the heading ' Processes to address the Clinical Standards of Care are in progress', the report states:

The Transforming Health Ministerial Clinical Advisory Committees developed 284 Clinical Standards of Care which, at the time, were determined necessary to provide a sustainable and quality based health care system to meet the future needs of South Australia. The initial business case approved by Cabinet in March 2015 indicated that 52 of these 284 standards were not achievable with the existing health service configuration and this informed the need to transform the health care system.

It goes on to note:

A review of the number of standards being met was conducted in December 2016 and identified 42 standards not yet being met.

I note that, further on in the recommendation from the Auditor-General, it makes a reference to 45 clinical standards of care previously not achievable needing to be made up to date so that staff are aware of the standards required to be achieved and the approach to achieving them. My first question is quite simple: are there 42, 52 or 45 standards in question that are currently not being met? I suspect that there are 42.

The Hon. P. MALINAUSKAS: I appreciate that it is a relatively simple question, but in terms of trying to honour that with a relatively simple answer, again my advice is largely what is referred to here, and that is that, in December 2016, there were 42 standards that had not yet been met.

The Hon. T.A. FRANKS: My question then is: in between the cabinet business case approval in March 2015 and December 2016, what were the 10 standards met?

The Hon. P. MALINAUSKAS: I am more than happy to seek that information offline and provide it to the honourable member.

The Hon. S.G. WADE: Could the minister advise which of the 42 clinical standards that are still not currently being met will be met by the implementation of the service moves and models of care yet to be implemented?

The Hon. P. MALINAUSKAS: It is important to note that, in respect of that number of 42, I am advised that that is the number as at December 2016, as previously stated. Again, I am more than happy to get that information back to the honourable member as quickly as we can.

The Hon. S.G. WADE: In the recommendation of the Auditor-General, he recommended that DHA should update the clinical benefits framework to reflect the correct standards not being met and the approach to addressing them. Has that been done?

The Hon. P. MALINAUSKAS: My advice is that that work is currently underway.

The Hon. S.G. WADE: So, the advice is that it has not been completed. When will it be completed?

The Hon. P. MALINAUSKAS: My advice is that the work is underway. I am not in a position to be able to put a finite date on the completion.

The Hon. T.A. FRANKS: The Auditor-General has noted that the lack of an up-to-date clinical benefits framework has resulted, or potentially results, in staff not being aware of what standards are required to be achieved and the approach to achieving them. Are these not the very basis of Transforming Health? What will that date be if Transforming Health concludes tomorrow?

The Hon. P. MALINAUSKAS: As has been previously stated, the Transforming Health exercise is largely completed. There still remain issues that we are seeking to address as quickly as we can in a holistic policy response. Adjustments have been made to other Transforming Health plans, which the government has already alluded to. Certainly, I have been undertaking a substantial exercise in the cases of both The QEH and also Modbury Hospital—the two highlights—to make appropriate adjustments to government policy to ensure that we get a high-quality outcome that is still supported by clinicians but delivers a good result for the community at large, particularly in the north-eastern suburbs but also in the western suburbs where a number of efforts have been undertaken by myself, in the short time I have been minister, to try to address those issues.

It is important to also remember that—and this has been the repeatedly stated position of the government consistently through both my predecessor and myself—when it comes to improvements within the system, that has to be an ongoing, continuing effort. Just because the Transforming Health exercise, like I said, is largely complete, it does not mean that the government or the department is immune from continuing to make improvements to our system as we go along. It is a continued effort, and I suspect that in practice, regardless of who has the privilege of holding the office that I now currently do post the election, that will continue to be the case. It will probably be the case in perpetuity.

The Hon. S.G. WADE: Given that the Premier has been known to say that Transforming Health was completed with the opening of the RAH and the closing of the Repat, and the Repat closed last week, I would preface my question by saying: how can that be the case? In November 2014, the establishment of these clinical standards was seen as the central tent pole of Transforming Health and we have only achieved the implementation of 20 per cent of those that have not previously been met. My question is: in light of the minister's comments that Transforming Health is ongoing and continuing reform, can he assure—

The Hon. P. MALINAUSKAS: That is not what I said.

The Hon. S.G. WADE: Sorry, the minister might correct me, but I heard him say that health reform was ongoing, Transforming Health was ongoing.

The Hon. P. MALINAUSKAS: I said health reform would always be invited, but Transforming Health the project is largely complete.

The Hon. S.G. WADE: Okay, let me put the question this way: three years ago the government said it must do this dramatic restructuring because it did not meet 52 standards. Now, three years later, the government has managed to achieve 20 per cent of those. I ask the minister: is the government still committed to the implementation of the remaining 42 clinical standards?

The Hon. P. MALINAUSKAS: Again, I am advised that the Department for Health and Ageing has a process to embed the clinical standards within businesses as usual processes. It is currently underway and will ensure that they are used to inform the design of clinical services and infrastructure and are monitored through a range of business as usual processes.

Using a more granular description of the standards, this process places each statement in one of three different categories: principal, standard or clinical service capability statement. This will enable scheduled periodic review of achievement of the clinical standards of care depending on the granular description and relevant review time frames.

The Hon. S.G. WADE: I note that the minister chose to respond to that by advice from the department. I asked for a government commitment. In relation to Part A: Executive summary, page 27, paragraph 2, it refers to $50 million being spent for building modifications at the new RAH.

The Hon. P. MALINAUSKAS: What page are we on?

The Hon. S.G. WADE: Page 27, second paragraph. I would ask the minister: what were the $50 million worth of modifications that the government paid for in relation to the new RAH?

The Hon. P. MALINAUSKAS: I am advised that these are modifications that we, the government and the department, have asked for. Some examples are layout changes and changes that have been made around ICT infrastructure. I am advised that we can take that on notice and come back with a comprehensive list or breakdown for the honourable member's benefit.

The Hon. S.G. WADE: Could I ask that the minister provides the list in two parts: firstly, the modifications that were requested before commercial acceptance and, secondly, the modifications that were requested after commercial acceptance?

The Hon. P. MALINAUSKAS: Yes, we can certainly try to do that.

The Hon. S.G. WADE: The next question relates to Part B, page 175. The Auditor-General's Report refers to the budget for state-funded works as being $588 million, of which $388 million has been spent as at 30 June 2017. What proportion of the $200 million remaining in the state-funded works budget is still expected to be expended, and to what does that expenditure relate?

The Hon. P. MALINAUSKAS: I am advised that there are certain pieces of equipment that are in the physical possession of the department, and installed, but until the point that they are used in a commercial sense—that is, they are actually put into operation—they are not formally commissioned. The statistical representation of this is determined by equipment being used, as distinct from being owned and not being operated in practice.

The Hon. S.G. WADE: If I could clarify that the minister understands that all of that $200 million is committed, even if not accounted for, and that there is not expected to be an underspend on that item?

The Hon. P. MALINAUSKAS: My advice is that the overwhelming majority of that $200 million can be accounted for in the way I described.

The Hon. T.A. FRANKS: I refer the minister to Part B: Agency audit reports, page 142 and the generic heading, Transforming Health, which notes that SA Health has advised that the Transforming Health program will cease after the Repatriation General Hospital (RGH) is decommissioned and the new RAH opens and that clinical innovation service reforms to improve the consistency and quality of care and to support the financial sustainability of the health system will transition to business as usual. I ask the minister: what is the date of business as usual commencing?

The Hon. P. MALINAUSKAS: Business as usual for?

The Hon. T.A. FRANKS: The end of Transforming Health and the beginning of business as usual commencing.

The Hon. P. MALINAUSKAS: As I have said repeatedly, and stated previously even through this exercise, the Transforming Health process is largely complete. Adjustments are being made, but by and large the Transforming Health exercise is complete. The key major reforms have been realised, but adjustments have been made to what was the initial Transforming Health plan. I think they are probably best represented by the government's already stated commitment in terms of The QEH and the review exercise that has been undertaken at Modbury Hospital, but the process is largely complete, as previously stated.

The Hon. T.A. FRANKS: Does that mean that the infrastructure and the accoutrements around Transforming Health have now been wound up, including the ambassadors? Do the ambassadors for Transforming Health currently have the role of ambassador?

The Hon. P. MALINAUSKAS: I am not advised of any formal withdrawal of specific titles per se. I think it is also fair to say that would not necessarily be the case in any event. There is not an equivalent of a diplomatic visa that is bestowed upon a person who is a Transforming Health ambassador, so it is not as if there is necessarily a formal withdrawal of any such document.

The Hon. T.A. FRANKS: Are the working arrangements and the employment arrangements for the ambassadors for Transforming Health in place then? Do they continue into the future or have these now been withdrawn?

The Hon. P. MALINAUSKAS: My advice is that a number of those people are retained employees of SA Health who assisted us in the Transforming Health process. I am more than happy, for the sake of clarity, to take that question and see if we can get some more information for the honourable member.

The Hon. S.G. WADE: My questions relate to Country Health SA. Part A: Executive summary, page 55, states that Country Health SA highlighted that a strategic risk was the inability to operate within the financial allocations because they were being funded less than the efficient price. On what basis does the department consider that Country Health can operate below the national efficient price?

The Hon. P. MALINAUSKAS: The national efficient price is a nationally consistent average, and of course you will see variations around the place because the nature of the efficient price is that it is a national average. In respect of the country, one of the reasons there is a differential between the two, I am advised, is because of the absence of very substantial infrastructure costs that might otherwise be present in the metropolitan area. Probably the most obvious example of that is the new RAH.

The Hon. S.G. WADE: I refer to appendix Volume 2, page 312. Can the minister explain why the Country Health SA Local Health Network was the only local health network to receive less funding in the 2016-17 financial year than they did in the 2015-16 financial year?

The Hon. P. MALINAUSKAS: I am struggling to understand the context of the question from the honourable member in light of the fact that, according to my advice here and the numbers with which I have been presented, the recurrent funding between the two years is largely the same: $604,221,000 in 2017 and also $604,729,000 in 2016. They are both $604 million—there is a marginal difference, but they are both $604 million is my advice.

The Hon. S.G. WADE: Rather than explain to the minister about health inflation factors, I would rather just go to another matter. In Part A: Executive summary, page 52, it says:

In 2016-17 Health and Ageing operating expenses were estimated to be 31.2% of total operating expenses. The budget for 2017-18 is expected to remain at that level and projected to reduce by 2020-21.

My questions are: what are the forward projections of health and ageing operating expenses as a proportion of total operating expenses for each year up to 2021, and does the department have projections beyond that date?

The Hon. P. MALINAUSKAS: Are you asking what proportion health is of the state budget going forward? Is that what you are asking?

The Hon. S.G. WADE: Yes, basically, total operating expenses.

The Hon. P. MALINAUSKAS: That is a difficult question to answer, because there is a whole range of inputs that informs what happens to government expenditure going forward in other areas within the budget. It is multifactorial, to say the least, in terms of being able to forecast what those numbers will be into the future, particularly the out years.

The Hon. S.G. WADE: Simply the matter that—

The CHAIR: I am sorry, Hon. Mr Wade, but time for consideration of the Auditor-General's Report has expired.

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