Figure B1 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 B1

Financial sustainability risk indicators

We have consulted with all of the public hospitals and the Department of Health & Human Services (DHHS) throughout the course of our audits, 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.

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

Responses were received as follows:

In 2015–16 public hospitals controlled $13.5 billion in physical assets.

These assets, which include medical infrastructure, property, plant and equipment, need to be periodically renewed, upgraded or replaced to meet increasing safety and care standards.

In this Part, we examine the capital funding model for public hospitals and some of the challenges they face renewing and replacing property, plant and equipment. We also present case studies to illustrate the actions taken by public hospitals when capital funding is insufficient.

In this Part, we provide an insight into the financial sustainability risks to the 87 public hospitals, using a set of financial indicators.

To be financially sustainable, hospitals need to be able to fund their current and future costs. They also need to be able to absorb the financial effects of economic changes and financial risks, without significantly changing their revenue and expenditure policies.

In this Part, we comment on the results of our financial report audits of Victoria's 87 public hospitals and the financial outcomes for 2015–16.

We also comment on the internal control and financial reporting matters we found, and provide an update on matters raised in previous audits.

In this report, we comment on the matters arising from the 2015–16 financial report audits of the 87 public hospitals in the public hospital sector. We also assess the sector's financial performance during 2015–16 and its sustainability risks as at 30 June 2016.

We comment on key matters that arose during our audits and analyse the information in public hospitals' financial reports. This is one of a set of Parliamentary reports on the results of our 2015–16 financial audits.

Ordered to be published

VICTORIAN GOVERNMENT PRINTER November 2016

PP No 223, Session 2014–16 

Accountability

Responsibility of public entities to achieve their objectives in reliability of financial reporting, effectiveness and efficiency of operations, compliance with applicable laws, and reporting to interested parties.

Adverse opinion

An audit opinion expressed if the auditor has sufficient appropriate audit evidence and concludes that misstatements, individually and in aggregate, are both material and pervasive in the financial report.