Delivering HealthSmart Report - VAGO

Achievement against the approved program plan
As set out in Part 2 of this report, in arriving at the original cost budget of $323 million
in its 2003 funding submission, DHS estimated that participating VPHS agencies would
contribute $73 million, subsequently adjusted to $25.4 million.
OHIS advised that the downward adjustment to agency co-contributions was made
because of the inability of agencies to meet the original DHS expectations. Most
agency contributions were to be ‘in kind’ (such as releasing staff for training or for
project management activities), with a smaller proportion in direct cash outflows.
Agencies were expected to internally fund these costs, without recourse to additional
new funding.
The increase of $34.8 million in DHS’s contribution to the funding of the program
represents new, unbudgeted costs to the government. From this perspective it
represents a cost increase of 13.8 per cent.
There is no evidence that this increase in the program budget has been authorised by
government, however DHS consider that because the total program costs are within
the ‘approved funding envelope’ there is no requirement for reference to government
for approval.
This argument is flawed, as DHS do not monitor agency-level costs (which are part of
the approved funding envelope) so they are therefore not in a position to know the
quantum of funds that have been spent on HealthSMART. A more certain course of
action would be for DHS to seek amendment of the original program funding approval
via the defined central agency budget amendment processes.
3.3.2 Conclusion on how the program is performing
against the approved budget
OHIS had spent $184 million of the approved HealthSMART project (as at December
2007), representing about 57 per cent of the original $323 million budget allocation.
Although there has been significant activity and effort by OHIS resulting in the
implementation of a number of HealthSMART applications, some 57 per cent of the
original approved budget has been consumed, with 24 per cent of the expected
installations operational and the shared services environment and supporting ICT
technical infrastructure fully operational.
Due to delays in the implementation of most core systems, DHS has continually
underspent its planned annual budgets, with these amounts carried forward to
subsequent years. At the current rate of expenditure, DHS will not be able to spend all
its allocated capital by the current planned program completion date of June 2009.
Further, OHIS does not have a robust basis for estimating agency expenses nor does
it monitor agency expenses for the HealthSMART program. This brings into doubt the
reliability of its forecasts of cost to completion and reporting on actual system-wide
expenditure.
30 Delivering HealthSMART — Victoria's whole-of-health ICT strategy