Portland District Health Annual Report 2008 - South West Alliance of ...

financial performance
THE 2007/08 YEAR PRODUCED AN OPERATING RESULT SIGNIFICANTLY BETTER THAN BUDGETED, AND
PORTLAND DISTRICT HEALTH WILL BUDGET FOR A SMALL OPERATING SURPLUS FOR THE COMING FINANCIAL YEAR.
The service has been under DHS financial close watch for
the past four years, and this will continue into the coming
financial year. The key reasons for DHS’s decision to place
Portland Distrct Health on financial close watch include:
• Liquidity ratio < 0.7 – (0.33 – 0.71)
• Sustained operating deficits over recent years:
2004-05 - $0.63 million 2006-07 - $0.985 million
The journey to rebuild the accuracy and completeness
of Portland District Health’s financial ledgers has
been demanding. I am especially indebted to Western
District Health Service Director of Corporate Services
Pat Turnbull and his team for their tireless and unerring
work over the past financial year. We can now report
with certainty.
In addition, at the beginning of 2007/08 we estimated
that our deficit for the year may be between $1.7 and
$2 million.
In August, Portland District Health and Western District
Health Service agreed to develop a sub-regional support
structure that would allow Portland District Health to
purchase financial services from WDHS. This decision was
made in light of the following:
- Being unable to verify the accuracy or completeness
of the general ledger;
- Cash requirements could not be determined with
certainty;
- We were unable to identify department or program
costs or their linkage to reporting systems; and
- We were unable to determine actual performance
and verify it accurately.
Over the past twelve months, the following actions have
been initiated:
• Development of a financial strategy;
• Preparation of internal and financial controls;
• Restructuring Portland District Health’s charter
and the terms of reference of the Audit and
Risk Committee;
• A call for independent audit committee members;
• Appointment of internal auditors, in partnership with
Western District Health Service;
• Model by-laws refreshed and modernised to reflect
contemporary health service practice; and
• Developing audit priorities for 2008 around internal
controls incorporating contract management,
payroll, VMO payments and so on.
OPERATING RESULT
The first measurement, net result from operations
before capital, provides the most realistic measurement
of Portland District Health’s financial performance in
terms of day-to-day operations of the service. It reflects
the financial success or otherwise of providing a range of
services within the constraints of the operational streams
of income available to it. In particular, it recognises
that health services are not funded for the cost of
depreciation. On this measure of profitability, Portland
District Health has delivered an improved result.
Examples of work undertaken to achieve this improved
result and address Portland District Health’s financial
situation have been:
• Installation of a robust system of internal controls
and financial controls, including authorised
delegations;
• Instigation of a Goods and Services Tax and Fringe
Benefit Tax compliance;
• Compilation and implementation of a Financial
Improvements Register totalling $629,000, with
$1.2 million expected during next financial year;
• A review of all major contracts, for example
radiology, physiotherapy, maternal and child health
services;
• Internal reviews of the catering, environmental
services and senior executive structure; and
• Tendering of food provisions.
The poor state of Portland District Health’s financial
ledgers that were handed to the incoming administration
left us not knowing the full extent of Portland District
Health’s operating deficit. I am therefore delighted to
report a small operating loss of $43,000.
ANNUAL REPORT 07/08 13