ACT Local Hospital Network Directorate Financial and Performance Statements 2012‑13

Management discussion and analysis for the ACT Local Hospital Network Directorate for the financial year ended 30 June 2013

General overview

Purpose

The ACT Local Hospital Network is a new Directorate setup to receive and distribute funding for public hospital services under the National Health Reform Agreement. The ACT Local Hospital Network receives Activity Based Funding from both the Commonwealth and the ACT Governments and Block Funding including training and research. The ACT Local Hospital Network purchases public hospital services from four ACT public hospital providers:

  • Canberra Hospital and Health Services;
  • Calvary Public Hospital;
  • Clare Holland House; and
  • Queen Elizabeth II Hospital.

Changes in administrative structure

The ACT Local Hospital Network commenced operation on 1 July 2012 and is administered by the Director-General of the Health Directorate and supported by Health Directorate staff.

Risk management

The Directorate’s management has identified the following potential risks that may influence the future financial position of the Directorate:

  • Estimated public hospital activity is higher than the actual activity delivered by the entities in the ACT Local Hospital Network that results in a reduction to funding from the Commonwealth Government; and
  • The Commonwealth Government revises the National Healthcare Specific Purpose Payment for 2013‑14.

The Specific Purpose Payment funding can change due to population estimates and indexation factors.

The Government and the Directorate have responded to these risks by including in the implementation of the National Health Reform Agreement two years of transition with the Commonwealth Government funding contribution limited to the Specific Purpose Payment in 2012‑13 and 2013‑14. The Commonwealth Government will fund 45 per cent of the growth in public hospital activity from 2014‑15 and the ACT Government and the Directorate will agree on the process for managing fluctuation in activity and costs from 2014‑15 during development of the budget.

In the event that there is a material reduction to the Commonwealth Government Specific Purpose Payment during 2013‑14, the Directorate will consider alternative funding options including working with the Chief Minister and Treasury Directorate as necessary.

The above risks are monitored regularly throughout the year.

Financial performance

The following financial information is based on audited financial statements for 2012‑13, and the forward estimates contained in the 2013‑14 Budget Paper Number 4.

Total net cost of services

 

  Budget
2012‑13
$m
Actual 2012‑13
$m
Forward Estimate 2013‑14
$m
Forward Estimate 2014‑15
$m
Forward Estimate
2015‑16
$m
Total Expenses 718.7 713.8 906.3 964.6 1,036.2
Total Own Source Revenue 289.6 165.0 356.3 397.7 442.0
Net Cost of Services 429.1 548.8 550.0 566.9 594.2

 

Comparison to budget

The Directorate’s net cost of services for 2012‑13 of $548.8 million was $119.7 million or 27.9 per cent higher than the 2012‑13 budget (refer to Attachment A). The increase relates to delays in the enactment of legislation to enable the establishment of the Local Hospital Network’s National Health Funding Pool bank account. As a result of the delays in legislation, Commonwealth Government funding which was to be received as Own Source Revenue was instead paid to the Chief Minister and Treasury Directorate and on-passed to the ACT Local Hospital Network Directorate as Government Payment for Outputs.

Comparison to 2011‑12 actual expenses

The Directorate began operations in 2012‑13 so there are no comparisons for 2011‑12.

 

LHN Net cost services

Figure 1: Net Cost of Services

Future trends

As shown above in Figure 1, the net cost of services are expected to slightly rise each year through to 2015‑16.

Total expenditure

Components of expenditure

Figure 2 below shows that for the financial year ended 30 June 2013, the Directorate paid 99.3 per cent of expenditure as Grants and Purchased Services ($708.9 million), and 0.7 per cent for Transfer Expenses

($4.8 million), spending a total of $713.8 million.

 

LHN expenditure graph

Figure 2: Components of Expenditure

Comparison to budget

Total expenses of $713.8 million were ($4.9 million), or 0.7 per cent lower than the original 2012‑13 budget of $718.7 million.

This variation was predominantly due to:

a reduction in Commonwealth Government National Healthcare funding of $3.1 million associated with population and indexation factors, and

a change to the method for Cross Border Health payments between States and Territories. Under the new arrangements, the Commonwealth Government funded component of cross border activity is subtracted from the residents State/Territory’s National Healthcare Specific Purpose Payment and paid to the provider State/Territory.

Comparison to 2011‑12 actual expenses

The Directorate began operations in 2012‑13 so there are no comparisons for 2011‑12.

Future trends

Expenses are budgeted to steadily increase until 2015‑16.

Total revenue

Components of revenue

Figure 3 below indicates that for the financial year ended 30 June 2013, the Directorate received 77.2 per cent of its total revenue of $725.3 million from Government Payment for Outputs ($560.3 million), 11.5 per cent from Cross Border User Charges ($83.3 million), with the remaining 11.3 per cent made up of Grants from the Commonwealth ($81.7 million).

 

LHN own source revenue graph

Figure 3: Components of Own Source Revenue

Comparison to budget

Own source revenue for the year ending 30 June 2013 was $165.0 million, which was $124.6 million or 43.0 per cent lower than the 2012‑13 budget of $289.6 million. The reduction is due to delays in the enactment of legislation to enable the establishment of the Local Hospital Network’s National Health Funding Pool bank account. As a result of the delays in legislation, Commonwealth Government funding which was to be received as own source revenue was instead paid to the Chief Minister and Treasury Directorate and on-passed to the ACT Local Hospital Network Directorate as Government Payment for Outputs. In addition, there was a reduction in Commonwealth Government National Healthcare funding of $3.1 million associated with population and indexation factors.

Comparison to 2011‑12 actual income

The Directorate began operations in 2012‑13 so there are no comparisons for 2011‑12.

Future trends

Total own source revenue is expected to increase steadily until 2015‑16.

Financial position

The purpose of the Directorate is to receive Activity Based and Block Funding from the National Health Funding Pool created under the National Health Reform Agreement, and to purchase hospital services from ACT public hospitals. The ACT Local Hospital Network Directorate was never intended to have assets nor liabilities on its balance sheet, therefore no budget was set.

Total assets

Components of total assets

Figure 4 below indicates that, as at 30 June 2013, the Directorate held 97.3 per cent of its assets in receivables.

 

LHN total assets graph

Figure 4: Total Assets as at 30 June 2013

Comparison to budget

The total asset position as at 30 June 2013 is $86.8 million, which is $86.8 million higher than the 2012‑13 budget of $0 million.

The variance reflects the increase in:

  • Cash and Cash Equivalents ($2.3 million)­—due to the provision of a cash buffer from Chief Minister and Treasury Directorate to allow for the timing of Goods and Services Tax (GST) transactions; and
  • Receivables ($84.5 million)—which relates to the cross border receivables from New South Wales and an Australian Taxation Office refund for GST.

Comparison to 2011‑12 actual

The Directorate began operations in 2012‑13 so there are no comparisons for 2011‑12.

Total liabilities

Components of total liabilities

Figure 5 below indicates that 100 per cent of the Directorate’s liabilities relates to payables.

 

LHN Total liabilities

Figure 5: Total Liabilities as at 30 June 2013

Comparison to budget

The Directorate’s liabilities as at 30 June 2013, of $71.8 million, is $71.8 million higher than the 2012‑13 budget of $0 million.

This is due to higher payables ($71.8 million) which relates to cross border payments to the New South Wales Government and the ACT Health Directorate.

Comparison to 2011‑12 actual

The Directorate began operations in 2012‑13 so there are no comparisons for 2011‑12.

Net assets

The Directorate’s net assets as at 30 June 2013 was $15.0 million higher than the nil position budgeted.

This is mainly due to cross border revenue of $114.1 million being higher than the budget of $102.6 million, and capital injection of $3.5 million to cover timing of GST refunds from the Australian Taxation Office.

Attachment A—Comparison of net cost of services to budget 2012‑13

 

  Original Budget Plus AAO Transfers Total Funding Less Actual Variance to be Explained
Description $’000 $’000 $’000 $’000 $’000 %
Expenses            
Purchased Services 696,592 696,592 708,909 –12,317 –1.77%
Other Expenses 17,418 17,418 17,418 100.00%
Transfer Expenses 4,730 4,730 4,842 –112 –2.36%
Total Expenses 718,740 718,740 713,751 4,989 0.69%
             
Own Source Revenue
User Charges 120,000 120,000 83,300 36,700 30.58%
Grants from Commonwealth 169,605 169,605 81,695 87,910 51.83%
Other Revenue
Total Own Source Revenue 289,605 289,605 164,995 124,610 43.03%
             
Total Net Cost of Services 429,135 429,135 548,755 119,620 27.87%

 

ACT Local Health Network Directorate Independent Audit Report

Download:  Local Health Network Independent Audit Report

ACT Local Health Network Directorate Statement of Responsibility

Download:  Local Health Network Statement of Responsibility

ACT Local Hospital Network Directorate Statement by Chief Financial Officer

Download:  Local Health Network CFO

ACT Local Hospital Network Directorate Controlled Financial Statements For the Year Ended 30 June 2013

ACT Local Hospital Network Directorate Operating Statement
For the Year Ended 30 June 2013

  •   Note No. Actual
    2013
    $’000
    Original
    Budget
    2013
    $’000
    Income      
    Revenue      
    Government Payment for Outputs 3 560,272 429,135
    User Charges – Non-ACT Government 4 83,300 120,000
    Grants from the Commonwealth 5 81,695 169,605
    Total Revenue   725,267 718,740
    Total Income   725,267 718,740
           
    Expenses      
    Grants and Purchased Services 6 708,909 696,592
    Other Expensesa   17,418
    Transfer Expenses 7 4,842 4,730
    Total Expenses   713,751 718,740
           
    Operating Surplus   11,516
    Total Comprehensive Income   11,516
           
    The above Operating Statement should be read in conjunction with the accompanying notes. The Directorate only has one output class and as such the above Operating Statement is also the Directorate’s Operating Statement for the ACT Local Hospital Network Output Class. A separate disaggregated disclosure note has therefore not been included in these Financial Statements. There are no prior year comparative figures because the ACT Local Hospital Network Directorate commenced operations on
    1 July 2012.

ACT Local Hospital Network Directorate Balance Sheet
As at 30 June 2013

 

  Note No. Actual
2013
$’000
Original
Budget
2013
$’000
Current Assets      
Cash and Cash Equivalents 11 2,323
Receivables 12 84,477
Total Current Assets   86,800
       
Total Assets   86,800
       
Current Liabilities      
Payables 13 71,784
Total Current Liabilities   71,784
       
Total Liabilities   71,784
       
Net Assets   15,016
       
Equity      
Accumulated Funds   15,016
       
Total Equity   15,016
 
The above Balance Sheet should be read in conjunction with the accompanying notes. The Directorate only has one output class and as such the above Balance Sheet is also the Directorate’s Balance Sheet for the ACT Local Hospital Network Output Class. A separate disaggregated disclosure note has therefore not been included in these Financial Statements. There are no prior year comparative figures because the ACT Local Hospital Network Directorate commenced operations on 1 July 2012.

 

ACT Local Hospital Network Directorate Statement of Changes
in Equity For the Year Ended 30 June 2013

 

  Accumulated Funds Actual 2013
$’000
Total Equity Actual
2013
$’000
Original
Budget
2013
$’000
Balance at the Beginning of the Reporting Period
       
Comprehensive Income      
Operating Surplus 11,516 11,516
Total Comprehensive Income 11,516 11,516
       
Transactions Involving Owners Affecting Accumulated Funds  
Capital Injections 3,500 3,500
Total Transactions Involving Owners Affecting
Accumulated Funds
3,500 3,500
       
Balance at the End of the Reporting Period 15,016 15,016
       
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.

 

ACT Local Hospital Network Directorate Cash Flow Statement
For the Year Ended 30 June 2013

 

  Note No. Actual
2013
$’000
Original Budget 2013
$’000
Cash Flows from Operating Activities      
Receipts      
Government Payment for Outputs   560,272 429,135
User Charges   120,000
Grants received from Commonwealth   81,695 169,605
Goods and Services Tax Input Tax Credits from the Australian Taxation Office   14,372
Total Receipts from Operating Activities   656,339 718,740
       
Payments      
Grants and Purchased Services   637,125 696,592
Goods and Services Tax Paid to Suppliers   15,549
Other   17,418
Payments to Health Directorate   4,842 4,730
Total Payments from Operating Activities   657,516 718,740
       
Net Cash Outflows from Operating Activities 18 (1,177)
       
Cash Flows from Financing Activities      
Receipts      
Capital Injections   3,500
       
Total Receipts from Financing Activities   3,500
       
Net Cash Inflows from Financing Activities   3,500
       
Net Increase in Cash and Cash Equivalents   2,323

 

 

Cash and Cash Equivalents at the End of the Reporting Period   2,323
       
The above Cash Flow Statement should be read in conjunction with the accompanying notes. There are no prior year comparative figures because the ACT Local Hospital Network Directorate commenced operations on 1 July 2012.

 

ACT Local Hospital Network Directorate Controlled Statement of Appropriation
For the Year Ended 30 June 2013

 

  Original Budget
2013
$’000
Total Appropriated 2013
$’000
Appropriation Drawn
2013
$’000
Controlled      
Government Payment for Outputs 429,135 560,272 560,272
Capital Injections 3,500 3,500
Total Controlled Appropriation 429,135 563,772 563,772
       
The above Controlled Statement of Appropriation should be read in conjunction with the accompanying notes.

 

There are no prior year comparative figures because the ACT Local Hospital Network Directorate commenced operations on 1 July 2012.

Column Heading Explanations

The Original Budget column shows the amounts that appear in the Cash Flow Statement in the Budget Papers. This amount also appears in the Cash Flow Statement.

The Total Appropriated column is inclusive of all appropriation variations occurring after the Original Budget.

The Appropriation Drawn is the total amount of appropriation received by the Directorate during the year. This amount appears in the Cash Flow Statement.

Variances between ‘Original Budget’ and ‘Total Appropriated’

Government Payment for Outputs

The difference between the Original Budget and Total Appropriated to the Directorate is due to delays in enacting legislation, the Health (National Health Funding Pool and Administration) Act 2013, to establish the ACT State Pool account under the National Health Reform Agreement. The delays in establishing the ACT State Pool Account resulted in Grants from the Commonwealth under the National Health Reform Agreement (including a component of cross border revenue) not being able to be received by the Directorate. This amount was paid to the Chief Minister and Treasury Directorate until March 2013, amounting to $131.1 million, which was then paid to the Directorate as Government Payment for Outputs.

Capital Injection

The difference between the Original Budget and Total Appropriated to the Directorate is due to the need for provision of a cash buffer to deal with the delay between outflows of GST and the receiving of input tax credits from the Australian Taxation Office.

ACT Local Hospital Network Directorate Controlled Note Index

 

Note 1 Objectives of the ACT Local Hospital Network Directorate
Note 2 Summary of Significant Accounting Policies
Income Notes
Note 3 Government Payment for Outputs
Note 4 User Charges – Non-ACT Government
Note 5 Grants from the Commonwealth
Expense Notes
Note 6 Grants and Purchased Services
Note 7 Transfer Expenses
Note 8 Auditor’s Remuneration
Note 9 Waivers, Impairment Losses and Write-Offs
Note 10 Act of Grace Payments
Asset Notes
Note 11 Cash and Cash Equivalents
Note 12 Receivables
Liabilities Notes
Note 13 Payables
Other Notes
Note 14 Financial Instruments
Note 15 Commitments
Note 16 Contingent Liabilities and Contingent Assets
Note 17 Events Occurring After Balance Date
Note 18 Cash Flow Reconciliation
Note 19 Service Concession Assets

 

ACT Local Hospital Network Directorate Notes to and Forming Part
of the Financial Statements For the Year Ended 30 June 2013

Note 1.

Objectives of the ACT Local Hospital Network Directorate

Operations and Principal Activities

In 2011 the ACT Government become a signatory to the National Health Reform Agreement which introduced new financial and governance arrangements for Australian public hospital services and new arrangements for primary health care and aged care.

On 29 March 2011, the ACT Government took the first step toward implementing the ACT Local Hospital Network when the ACT Legislative Assembly passed amendments to the Health Act 1993. These amendments provided a legislative basis for the establishment of the ACT Local Hospital Network Directorate (the Directorate) and a skill-based ACT Local Hospital Council (Council).

The Directorate commenced operation on 1 July 2012 and is administrated by the Director-General of the Health Directorate and supported by Health Directorate staff.

The Council provides advice to the Director-General on the clinical and corporate governance framework needed to support improvement of standards of patient care and services under the local hospital network and ways in which to support, encourage and facilitate community and clinician involvement in the planning of services that form part of the Directorate.

The Council also reports to the Minister for Health on the state of the local hospital network and any recommendations relating to the improvement of health services provided by the Directorate that the Council considers necessary.

The Directorate receives Activity Based Funding from the Commonwealth and ACT Governments and block funding for teaching, training and research. It purchases public hospital services from four ACT public hospital providers:

  • Canberra Hospital and Health Services;
  • Calvary Public Hospital;
  • Clare Holland House; and
  • Queen Elizabeth II Family Centre.

Note 2. Summary of Significant Accounting Policies

(a) Basis of Accounting

The Financial Management Act 1996 (FMA) requires the preparation of annual financial statements for ACT Government Agencies.

The FMA and the Financial Management Guidelines issued under the Act, requires the Directorate’s financial statements to include:

  • an Operating Statement for the year;
  • a Balance Sheet at the end of the year;
  • a Statement of Changes in Equity for the year;
  • a Cash Flow Statement for the year;
  • a Statement of Appropriation for the year;
  • an Operating Statement for each class of output for the year;
  • a summary of the significant accounting policies adopted for the year; and
  • such other statements as are necessary to fairly reflect the financial operations of the Directorate during the year and its financial position at the end of the year.

These general-purpose financial statements have been prepared to comply with ‘Generally Accepted Accounting Principles’ (GAAP) as required by the FMA. The financial statements have been prepared in accordance with:

  • Australian Accounting Standards; and
  • ACT Accounting and Disclosure Policies.

The financial statements have been prepared using the accrual basis of accounting, which recognises the effects of transactions and events when they occur. The financial statements have also been prepared according to the historical cost convention.

These financial statements are presented in Australian dollars, which is the Directorate’s functional currency.

The Directorate is an individual reporting entity.

(b) Controlled and Territorial Items

The Directorate produces Controlled financial statements. The Controlled financial statements include income, expenses, assets and liabilities over which the Directorate has control.

The Directorate does not produce Territorial financial statements because it does not administer any resources on behalf of the Territory.

(c) The Reporting Period

These financial statements state the financial performance, changes in equity and cash flows of the Directorate for the year ending 30 June 2013 together with the financial position of the Directorate as at 30 June 2013.

(d) Comparative Figures

Budget Figures

To facilitate a comparison with Budget Papers, as required by the Financial Management Act 1996, budget information for 2012-2013 has been presented in the financial statements. Budget numbers in the financial statements are the original budget numbers that appear in the Budget Papers.

Prior Year Comparatives

Comparative information are not provided because the Directorate commenced operations on 1 July 2012.

(e) Rounding

All amounts in the financial statements have been rounded to the nearest thousand dollars ($’000). Use of the “–” symbol represents zero amounts or amounts rounded up or down to zero.

(f) Revenue Recognition

Revenue is recognised at the fair value of the consideration received or receivable in the Operating Statement. All revenue is recognised to the extent that it is probable that the economic benefits will flow to the Directorate and the revenue can be reliably measured. In addition, the following specific recognition criteria must also be met before revenue is recognised:

Cross Border (Interstate) Health Revenue

Revenue for cross border (interstate) health services is recognised when the number of patients and complexities of treatments provided can be measured reliably using the National Efficient price that is determined by the Independent Hospital Pricing Authority. Actual patient numbers and services are settled following an acquittal process undertaken in subsequent years and variations to the revenue recognised is accounted for in the year of settlement.

The National Health Reform Agreement specifies that each jurisdiction will make funding contributions through the National Health Funding Pool for services provided by other jurisdictions to its residents either on an ad hoc basis reflecting actual activity, or on a regular basis as scheduled through a Cross Border agreement.

Commonwealth Grants

Commonwealth Grants relate to Activity Based Funding and Block Funding under the National Health Reforms. They also include the Commonwealth funding component of cross border health costs for New South Wales residents treated in ACT public hospitals.

Activity Based Funding refers to a system for funding public hospital services provided to individual patients using national classifications, price weights and nationally efficient price as set by the Independent Hospital Pricing Authority.

Block funding is provided to support public hospital functions that are recognised by the Independent Hospital Pricing Authority as services acceptable to be funded on this basis and that conform to the Independent Hospital Pricing Authority’s national pricing model.

Commonwealth grants in 2012‑13 were based on the former National Healthcare Specific Purpose Payment method. Commonwealth funding to states and territories becomes uncapped and will be informed by the Independent Hospital Pricing Authority’s pricing model from 2014‑15.

(g) Waivers of Debt

Debts that are waived during the year under Section 131 of the Financial Management Act 1996 are expenses during the year in which the right to payment was waived. Further details of waivers are disclosed at Note 9: Waivers, Impairment Losses and Write-Offs.

(h) Current and Non-Current Items

Assets and liabilities are classified as current or non-current in the Balance Sheet and in the relevant notes. Assets are classified as current where they are expected to be realised within 12 months after the reporting date. Liabilities are classified as current when they are due to be settled within 12 months after the reporting date or when the Directorate does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

Assets or liabilities which do not fall within the current classification are classified as non-current.

(i) Cash and Cash Equivalents

For the purposes of the Cash Flow Statement and the Balance Sheet, cash includes cash at bank and cash on hand. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

(j) Receivables

Accounts receivable are initially recognised at fair value and are subsequently measured at amortised cost, with any adjustments to the carrying amount being recorded in the Operating Statement.

Accrued Cross Border revenue relates to the estimated number of New South Wales patients treated in an ACT public hospital for the 2012‑13 financial year. Under the National Health Reform Agreement, States and Territories are required to pay for Cross Border activity using the National Efficient Price that is determined by the Independent Hospital Pricing Authority. The actual level of revenue will be subject to an acquittal process to be completed in subsequent years.

The allowance for impairment losses represents the amount of receivables the Directorate estimates will not be repaid. The allowance for impairment losses is based on objective evidence and a review of overdue balances.

The Directorate considers the following is objective evidence of impairment:

  • becoming aware of financial difficulties of debtors;
  • default payments; or
  • debts more than 90 days overdue.

The amount of the allowance is the difference between the assets’ carrying amount and the present value of the estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial. The amount of the allowance is recognised in the Operating Statement. The allowance for impairment losses are written back against the receivables account when the Directorate ceases action to collect the debt as it considers that it will cost more to recover the debt than the debt is worth.

Receivables that have been renegotiated because they are past due or impaired are accounted for based on the renegotiated terms.

(k) Payables

Payables are a financial liability and are measured at the fair value of the consideration received when initially recognised and at amortised cost subsequent to initial recognition, with any adjustments to the carrying amount being recorded in the Operating Statement. All amounts are normally settled within 30 days after the invoice date.

(l) Employee Costs and Employee Benefits Liabilities

The Directorate was established as a consequence of the ACT implementing the National Health Reform Agreement. The objective of the Directorate is to receive Activity Based Funding and Block Funding from the Commonwealth and ACT Governments, and to purchase hospital services from ACT public hospitals. The Directorate does not employ any staff. All staff providing administrative support are employed by the Health Directorate. Therefore, the Directorate does not incur any employee costs and does not have any employee benefit liabilities.

(m) Equity Contributed by the ACT Government

Contributions made by the ACT Government, through its role as owner of the Directorate, are treated as contributions of equity.

Increases or decreases in net assets as a result of Administrative Restructures are also recognised in equity.

(n) ​Significant Accounting Judgements and Estimates

In the process of applying the accounting policies listed in this note, the Directorate has made the following judgements and estimates that have the most significant impact on the amounts recorded in the financial statements:

Cross Border (Interstate) Health Receivables: is an estimation based on the number of interstate patients converted into a National Weighted Activity Unit and paid at the National Efficient Price consistent with the National Health Reform Agreement. Interstate patient numbers for the current year is an estimation based on the actual patient numbers for the nine months to 31 March 2013. Actual patient numbers and services are settled following an acquittal process undertaken in subsequent years and variations to the revenue recognised are accounted for in the year of settlement.

(o) ​Impact of Accounting Standards Issued but Yet to be Applied

The following new and revised accounting standards and interpretations have been issued by the Australian Accounting Standards Board but do not apply to the current reporting period. These standards and interpretations are applicable to future reporting periods. The Directorate does not intend to adopt these standards and interpretations early. Where applicable, these Australian Accounting Standards will be adopted from their application date. It is estimated that the effect of adopting the below financial statement pronouncements, when applicable, will have no material financial impact on the Directorate’s financial statements in future reporting periods:

  • AASB 9 Financial Instruments (application date 1 January 2015);
  • AASB 13 Fair Value Measurement (application date 1 January 2013);
  • AASB 1055 Budgetary Reporting (application date 1 July 2014);
  • AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) [AASB 1, 3, 4, 5, 7, 101, 102, 112, 118, 120, 121, 127, 128, 131, 132, 136, 137, 139, 1023 & 1038 and Interpretations 2, 5, 10, 12, 19 & 127] (application date 1 January 2015);
  • AASB 2011-7 Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements Standards [AASB 1, 2, 3, 5, 7, 9, 2009–11, 101, 107, 112, 118, 121, 124, 132, 133, 136, 138, 139, 1023 & 1038 and Interpretations 5, 9, 16 & 17] (application date 1 January 2013 for for-profit entities and 1 January 2014 for not-for-profit entities);
  • AASB 2011-8 Amendments to Australian Accounting Standards arising from AASB 13 [AASB 1, 2, 3, 4, 5, 7, 9, 2009–11, 101, 107, 112, 118, 119, 120, 121, 128, 131, 132, 133, 134, 136, 138, 139, 140, 141, 1004, 1023 & 1038 and Interpretations 2, 4, 12, 13, 14, 17, 19, 131 & 132] (application date 1 January 2013);
  • AASB 2011–10 Amendments to Australian Accounting Standards arising from AASB 119 (September 2011) [AASB 1, AASB 8, AASB 101, AASB 124, AASB 134, AASB 1049 & AASB 2011-8 and Interpretation 14] (application date 1 January 2013);
  • AASB 2012-2 Amendments to Australian Accounting Standards – Disclosures – Offsetting Financial Assets and Financial Liabilities [AASB 7 & AASB 132] (application date 1 January 2013);
  • AASB 2012-3 Amendments to Australian Accounting Standards – Offsetting Financial Assets and Financial Liabilities [AASB 132] (application date 1 January 2014);
  • AASB 2012-5 Amendments to Australian Accounting Standards arising from Annual Improvements 2009–2011 Cycle [AASB 1, AASB 1010, AASB 116, AASB 132 & AASB 134 and Interpretation 2] (application date 1 January 2013);
  • AASB 2012-6 Amendments to Australian Accounting Standards – Mandatory Effective Date AASB 9 and Transition Disclosures [AASB 9, AASB 2009–11, AASB 2010-7 & AASB 2011-8] (application date 1 January 2013);
  • AASB 2012–10 Amendments to Australian Accounting Standards – Transition Guidance and Other Amendments [AASB 1, 5, 7, 8, 10, 11, 12, 13, 101, 102, 108, 112, 118, 119, 127, 128, 132, 133, 134, 137, 1023, 1038, 1039, 1049 & 2011-7 and Interpretation 12] (application date 1 January 2013); and
  • AASB 2013-3 Amendments to AASB 136 – Recoverable Amount Disclosures for Non–Financial Assets (application date 1 January 2014).

Note 3. Government Payment for Outputs

Government Payment for Outputs is revenue received from the ACT Government for the purchase of hospital services from ACT public hospitals. The ACT Government pays Government Payment for Outputs appropriation on a fortnightly basis.

 

  2013
$’000
Revenue from the ACT Government  
   
Government Payment for Outputsa 560,272
Total Government Payment for Outputs 560,272

 

Note 4. ​User Charges – Non-ACT Government

User charge revenue is derived by providing public hospital services to interstate residents. User charge revenue is not part of ACT Government appropriation and is paid by state or territory governments. This revenue is driven by demand for health services from interstate patients and is not for profit in nature.

 

  2013
$’000
User Charges – Non-ACT Government  
Cross Border (Interstate) Health Revenuea 83,300
Total User Charges – Non-ACT Government 83,300

 

a) Cross Border (Interstate) Health Revenue relates to revenue earned at the National Efficient Price for the treatment of residents from New South Wales in ACT public hospitals.

Note 5. ​Grants from the Commonwealth

Grants from the Commonwealth reflect contributions from the Commonwealth for Activity Based Funding and Block Funding, as well as a contribution for public health services.

 

  2013
$’000
Grants from the Commonwealth  
Grants 81,695
Total Grants from the Commonwealth 81,695

 

Note 6. Grants and Purchased Services

Grants and Purchased Services reflect public hospital payments to the Canberra Hospital, Calvary Public Hospital, Clare Holland House and Queen Elizabeth II Hospital.

 

  2013
$’000
Purchased Services  
Payments to Service Providers  
Canberra Hospital 537,917
Calvary Public Hospital 148,517
Clare Holland House 4,564
Queen Elizabeth II Hospital 2,410
Cross Border (Intertstate) Health Costs – New South Wales 15,501
Total Grants and Purchased Services 708,909

 

Note 7. ​Transfer Expenses

Transfer Expenses relate to the on-passing of Commonwealth public health funding to the Health Directorate.

 

  2013
$’000
Transfer Expenses 4,842
Total Transfer Expenses 4,842

 

Note 8. Auditor’s Remuneration

Auditor’s remuneration represents fees charged by the Auditor-General for financial audit services provided to

the Directorate.

 

  2013
$’000
Audit Services  
Audit fees paid to the ACT Auditor-General’s Office 50
Total Audit Fees 50
No other services were provided by the ACT Auditor-General’s Office.  

 

Note 9. ​Waivers, Impairment Losses and Write-Offs

Under Section 131 of the Financial Management Act 1996, the Treasurer may, in writing, waive the right to payment of an amount payable to the Territory.

A waiver is the relinquishment of a legal claim to a debt over which the Directorate has control. The write-off of a debt is the accounting action taken to remove a debt from the books but does not relinquish the legal right of the Directorate to recover the amount. The write-off of debts may occur for reasons other than waivers.

The Directorate had no waivers, impairment losses or write-offs.

Note 10. Act of Grace Payments

Under Section 130 of the Financial Management Act 1996 the Treasurer may, in writing, authorise Act of Grace Payments to be made by a Directorate. Act of Grace Payments are a method of providing equitable remedies to entities or individuals that may have been unfairly disadvantaged by the ACT Government but have no legal claim to the payment.

The Directorate made no Act of Grace Payments during the reporting period.

Note 11. Cash and Cash Equivalents

The Directorate holds a number of bank accounts on which it does not earn interest. In 2012‑13 as part of the whole-of-government banking arrangements, the Directorate transitioned banking services from the Commonwealth Bank to Westpac Banking Corporation. These funds are able to be withdrawn upon request.

 

  2013
$’000
Cash at Bank 2,323
Total Cash and Cash Equivalents 2,323

 

Note 12. Receivables

 

  2013
$’000
Current Receivables  
Accrued Revenuea 83,300
  83,300
Net GST Receivables 1,177
  1,177
   
Total Current Receivables 84,477
Total Receivables 84,477

 

 

Ageing of Receivables Not Overdue
$’000
Past Due
Less Than
30 days
$’000
Past Due 30 to 60 days
$’000
Past Due Greater Than 60 days
$’000
Total
$’000
2013          
Not Impaired Receivablesa 84,477 84,477
Impaired Receivables

 

a) This mainly relates to cross border receivables, which is funding due from the New South Wales Ministry of Health for admitted and non-admitted patient services provided to residents of New South Wales. This is categorised as ‘not overdue’ as the funding agreement does not mandate a timeframe for payment prior to final acquittal of activity numbers for each period and the final acquittals are yet to occur. $63.1 million of the net Receivable owing (ie $83.3 million as disclosed above minus $15.5 million owed to the New South Wales Government as disclosed in Note 13: Payables) to the Directorate was received on 27 August 2013 as an initial payment, until the full year reconciliation has been finalised.

 

Classification of ACT Government/Non-ACT Government Receivables 2013
$’000
Receivables with Non-ACT Government Entities  
Net Other Receivables 83,300
Net Good and Services Tax Receivables 1,177
Total Receivables with Non-ACT Government Entities 84,477
Total Receivables 84,477

 

Note 13. Payables

 

  2013
$’000
Current Payables  
Accrued Expensesa 71,784
Total Current Payables 71,784
Total Payables 71,784

 

a) Accrued expenses consists of cross border payables owed to the Health Directorate and the New South Wales Ministry of Health for admitted and non-admitted patient services provided to residents of New South Wales in the Canberra Hospital and Health Services and residents of the ACT in New South Wales hospitals respectively.

 

  2013
$’000
Payables are aged as follows:  
Not Overdue 71,784
Overdue for Less than 30 Days
Overdue for 30 to 60 Days
Overdue for More than 60 Days
Total Payables 71,784
   
Classification of ACT Government/Non-ACT Government Payables  
Payables with ACT Government Entities  
Accrued Expensesa 56,283
Total Payables with ACT Government Entities 56,283
   
Payables with Non-ACT Government Entities  
Accrued Expensesb 15,501
Total Payables with Non-ACT Government Entities 15,501
Total Payables 71,784

 

a. This is cross border payables owed to the Health Directorate for admitted and non-admitted patient services provided to residents of New South Wales in the Canberra Hospital and Health Services.

b. This is cross border payables owed to the New South Wales Ministry of Health for admitted and non-admitted patient services provided to residents of the ACT in New South Wales hospitals.

Note 14. Financial Instruments

Details of the significant policies and methods adopted, including the criteria for recognition, the basis of measurement, and the basis on which income and expenses are recognised, with respect to each class of financial asset and financial liability are disclosed in Note 2: Summary of Significant Accounting Policies.

Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Directorate is considered to have no exposure to interest rate risk, as it holds only cash and cash equivalents with Westpac Bank that generate no interest, and receivables are non-interest bearing.

A sensitivity analysis has not been undertaken for the interest rate risk of the Directorate as it is not exposed to movements in interest rates.

Credit Risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Directorate’s credit risk is limited to the amount of the financial assets held less any allowance for impairment.

The Directorate’s financial assets consist of Cash and Cash Equivalents and Receivables.

Cash and cash equivalents are held with the Westpac Banking Corporation, a high credit, quality financial institution, in accordance with whole of ACT Government banking arrangements and the Directorate holds no investments.

The Directorate’s receivables consist of amounts owed from the New South Wales Ministry of Health. As the New South Wales Government has a AAA credit rating it is considered that there is a very low risk of default for these receivables.

Liquidity Risk

Liquidity risk is the risk that the Directorate will encounter difficulties in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset.

The main source of cash to pay these obligations is appropriation from the ACT Government which is paid on a fortnightly basis during the year. The Directorate manages its liquidity risk through forecasting appropriation drawdown requirements to enable payment of anticipated obligations.

Price Risk

Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices, whether these changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market.

The Directorate holds no financial instruments that are subject to price risk and as a result, is not considered to have any price risk. Accordingly, a sensitivity analysis has not been undertaken.

Fair Value of Financial Assets and Liabilities

The carrying amounts and fair values of financial assets and liabilities at the end of the reporting period are:

 

  Carrying Amount
2013
$’000
Fair Value
2013
$’000
Financial Assets    
Cash and Cash Equivalents 2,323 2,323
Receivables 84,477 84,477
Total Financial Assets 86,800 86,800
     
Financial Liabilities    
Payables 71,784 71,784
Total Financial Liabilities 71,784 71,784

 

The following table sets out the Directorate’s maturity analysis for financial assets and liabilities as well as the exposure to interest rates, including average weighted interest rates by maturity period as at 30 June 2013. All financial assets and liabilities which have a floating interest rate or are non-interest bearing will mature in 1 year or less. All amounts appearing in the following maturity analysis are shown on an undiscounted cash flow basis.

 

        Fixed Interest Maturing in:    
  Note No. Weighted Average Interest Rate Floating Interest Rate
$’000
1 Year or Less
$’000
Over 1 to 5 Years
$’000
Over 5 Years
$’000
Non-Interest Bearing
$’000
Total
$’000
Financial Instruments                
Financial Assets                
Cash and Cash Equivalents 11   2,323 2,323
Receivables 12   84,477 84,477
Total Financial Assets     86,800 86,800
                 
Financial Liabilities                
Payables 13   71,784 71,784
Total Financial Liabilities     71,784 71,784
Net Financial Assets     15,016 15,016

 

 

  2013
$’000
Carrying Amount of Each Specified Category of Financial Asset and Financial Liability
Financial Assets  
Loans and Receivables Measured at Amortised Cost 84,477
Financial Liabilities  
Financial Liabilities Measured at Amortised Cost 71,784

 

Fair Value Hierarchy

The Directorate does not have any financial assets or financial liabilities at fair value. As such no fair value hierarchy disclosures have been made.

Note 15. Commitments

The Directorate has no commitments as at 30 June 2013.

Note 16. Contingent Liabilities and Contingent Assets

There were no contingent liabilities or contingent assets as at 30 June 2013.

There were no indemnities as at 30 June 2013.

Note 17. Events Occurring After Balance Date

There were no events occurring after the balance date, which would affect the financial statements as at

30 June 2013, or in the future reporting periods.

Note 18. Cash Flow Reconciliation

 

a.
Reconciliation of Cash and Cash Equivalents at the end of the reporting period in the Cash Flow Statement to the equivalent items in the Balance Sheet
  2013
$’000
Total Cash and Cash Equivalents Recorded in the Balance Sheet 2,323
Cash and Cash Equivalents at the end of the reporting period as recorded in the Cash Flow Statement 2,323

 

 

b. Reconciliation of Net Cash Outflows from Operating Activities to the Operating Surplus/(Deficit)
    2013
$’000
Operating Surplus 11,516
Cash Before Changes in Operating Assets and Liabilities 11,516
     
Changes in Operating Assets and Liabilities  
(Increase) in Receivables (84,477)
Increase in Payables 71,784
Net Changes in Operating Assets and Liabilities (12,693)
Net Cash Outflows from Operating Activities (1,177)

 

Note 19. Service Concession Assets

The Directorate has entered into an agreement with Calvary Health Care ACT Ltd for the provision of hospital and associated services. The original agreement was entered into by the Commonwealth on 22 October 1971 and does not stipulate any expiry date. This was subsequently amended in 1979 to include the Directorate (named at the time as Capital Territory Health Commission) with any duties or functions of the Commonwealth being transferred to the Directorate. The Agreement was for the facility to be used for a public hospital. This was varied, in 1988, by the Calvary Private Agreement to allow Calvary Health Care Ltd to use two floors of the facility for treating private patients. The Calvary Private Agreement sets the process and mechanism for Calvary Private to reimburse Calvary Public for any costs incurred in using public hospital facilities for treating private patients. These agreements were replaced on 7 December 2011 with the Calvary Network Agreement.

Under the agreement, Calvary Health Care ACT Ltd is required to provide hospital services and make these services available to all persons irrespective of their circumstances and is to charge patients fees only in accordance with the scale of fees applicable at Health Directorate hospitals for comparable services. In the event that the agreement ceases, all land is to be returned to the Territory. The level of services that is required to be provided in a financial year, for the amount of funding provided, is stipulated in a Performance Plan agreed between the Directorate and Calvary Health Care ACT Ltd for each year.

The amount of funding provided for in the 2012‑13 financial year was $167.8 million in recurrent funding, recognised in the Health Directorate’s ($14.7 million) and ACT Local Hospital Network Directorate’s ($153.1 million) grants and purchased services expenditure, and $0.7 million for capital upgrades of assets subject to these service concession arrangements. This is recognised as Territorial grants expenditure.

The land, hospital buildings and other assets comprising the Calvary Public Hospital are not recognised in the Directorate’s Balance Sheet.