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Note 32: Compliance with Statutory Conditions for Payments from the Consolidated Revenue Fund

Section 83 of the Constitution provides that no amount may be paid out of the Consolidated Revenue Fund except under an appropriation made by law. The Department of Finance and Deregulation (DoFD) provided information to all agencies in 2011 regarding the need for specific risk assessments in relation to section 83.

The possibility of this being an issue for DVA was reported in the notes to the 2010-11 financial statements. During 2011-12 DVA undertook a detailed investigation of the issue during the 2011-12 financial year in response to DoFD advice regarding an increased risk for all agencies of non-compliance with section 83 where payments are made from special appropriations that do not comply with statutory conditions in the relevant legislation.

It is important to note that it is impossible to fully remove the potential for section 83 breaches for payments. In the vast majority of cases DVA relies on information provided by its clients from which to calculate and pay appropriate entitlements. These estimates, provided by clients, are not always accurate resulting in potential breaches of section 83. In DVA, confirmed and potential section 83 breaches represent only a very small proportion of total payments, both in value and number.

Potential breaches may exist for a number of reasons, such as:

  • A payment or over-payment is potentially made in error, where these payments are created and based on potentially incorrect or inaccurate information provided by third parties and used in assessing payment eligibility that payment amounts are calculated upon. For example where the payment is based upon information that is provided by a client, DVA is aware that the information provided cannot be entirely free of potential errors and in some cases may suspect the payment is incorrect, and will investigate potential inaccuracies. However, this is not a result of non-compliance with any statutory condition otherwise; and
  • A payment is released early prior to certain pre-conditions being fulfilled on time for payment (pre-conditions as set in statutory provisions regulating an entitlement). For example, the legislation may only allow a payment to be released once all specific information is provided, but DVA releases the payment at the time of receiving information not entirely complete.

Annual appropriations

Consistent with the DoFD guidelines on annual Appropriation Acts, DVA’s annual appropriations are considered to represent a low risk of section 83 breach.

Self-Assessment Process

As noted above, during 2011-12 DVA developed and implemented a plan to review its exposure to the risks of not complying with statutory conditions on payments from appropriations. This work involved Identifying each special appropriation and special account and conducting detailed risk assessments and, where appropriate, conducting transaction testing for the 31 programs funded via these special appropriations and special accounts.

  • 7 special appropriations:

    • Papua New Guinea (Members of the Forces Benefits) Act 1957;

    • Veterans’ Entitlements Act 1986;

    • Defence Service Homes Act 1918;

    • Safety, Rehabilitation and Compensation Act 1988;

    • Military Rehabilitation and Compensation Act 2004;

    • Australian Participants in British Nuclear Tests (Treatment) Act 2006; and

    • Compensation (Japanese Internment) Act 2001.

  • 5 special accounts:

    • Military Death Claim Compensation Special Account;

    • Defence Service Homes Insurance Account;

    • Australian at War Special Account;

    • Other Trust Moneys Account (Superseded by Other Entities and Trust Moneys (SOETM) Special Account on the 26 June 2012); and

    • Other Entities and Trust Moneys (SOETM) Special Account

In 2012-13 DVA has conducted a section 83 compliance review to identify any new special accounts, changes to legislation, system changes or business activity changes which may impact on the previously identified section 83 control framework.

The following new business activities were identified:

  • Introduction of the residential aged care Workforce Supplement;
  • Introduction of the Social and Community Services (SACS) Supplement;
  • Introduction of the Veterans. Pharmaceutical Reimbursement Scheme;
  • Introduction of the In Home Telemonitoring for Veterans Trial;
  • Introduction of the Clean Energy Advance and Clean Energy Supplement;
  • Removal of prior approval for some items under the Rehabilitation Appliances Program (RAP); and
  • Anzac Centenary Public Fund Special Account.

An assessment of these new business activities has confirmed that these changes to DVA business have not changed the existing section 83 risk assessments.

During 2012-13 additional legal advice was received that indicated there could be breaches of section 83 under certain circumstances with payments for long service leave, goods and services tax and payments under determinations of the Remuneration Tribunal. DVA’s preliminary determination is that there is a low risk of the certain circumstances mentioned in the legal advice applying to the department and is not aware of any specific breaches of section 83 in respect of these items. DVA will review its processes and controls over payments for these items. DVA will include a more detailed review of its processes and controls of payments for these items in the section 83 compliance review for 2013-14.

While DVA has identified potential breaches with section 83 in the 2012-13 financial year, these have not yet been confirmed by external entities such as the Australian Government Solicitors (AGS) with the authority to make judgements on section 83 breaches. Where potential breaches were identified, an examination of how the potential breach occurred was undertaken to determine whether there was a discrepancy between the legislation (authorisation power), DVA’s procedures and policies and the administration of the payment.

A financial quantification of potential breaches of section 83 in 2012-13 was performed by DVA. This review identified that potential breaches were $59.7 million for 2012-13 financial year, comprising:

  • $44.7 million in residential aged care payments from the reconciliation of DoHA data;
  • $2.4 million in overpayments made on behalf of DVA by the Department of Human Services (DHS)
  • $0.012 million identified through management assurance testing; and
  • $12.6 million identified through the DVA debt register.

It should be noted that of the $44.7 million in incorrect residential aged care payments identified, $35.8 million has been adjusted by both DVA and DoHA and the client details for corrections were provided to DoHA on 24 June 2013 so that they could be manually corrected on their system. Once corrected, the system will provide a retrospective adjustment to the payment (ie it will adjust details for the correct date of effect).

Further details of the 2012-13 section 83 review are provided in Table A below.

While the overall review by DVA did detect some potential section 83 breaches, due to executing errors, it was determined that any risk of non-compliance of section 83 was not due to difficulties of administering the statutory conditions laid out in DVA’s legislation, or DVA’s existing payment systems and processes that satisfy those conditions. As such no additional process mapping was undertaken.

DVA will continue to monitor its level of compliance with section 83 of the Constitution across all legislation for which it is administratively responsible. Where possible, future changes to procedures and amendments to legislation will continue to be progressed to reduce the risk of non-compliance to an acceptably low level across all programs.

Details of the outcomes of the 2011-12 section 83 compliance review are provided in Table B below.

Notes to and forming part of the financial statements

Table A – 2012 - 13 Summary

2012 - Summary
Appropriations identified as subject to conditions Expenditure in 2012-13 $000 Review complete? (Yes/No) Breaches identified to 30 June 2013 Potential breaches to date yet to be resolved Remedial action taken or proposed1
      Number. Total $000 Incorrect $000 Recovered/offset As at 30 June 2013 $000 Yes/No Indicative extent  
SPECIAL APPROPRIATIONS                  
Papua New Guinea (Members of the Forces Benefits) Act 1957 56 Yes Nil N/A N/A N/A No N/A N/A
Veterans’ Entitlements Act 1986 11,456,114 Yes Nil N/A N/A N/A Yes Refer to footnote 2 N/A
Defence Service Homes Act 1918 2,148 Yes Nil N/A N/A N/A No N/A N/A
Safety, Rehabilitation and Compensation Act 1988 165,958 Yes Nil N/A N/A N/A No N/A N/A
Military Rehabilitation and Compensation Act 2004 176,361 Yes Nil N/A N/A N/A No N/A N/A
Australian Participants in British Nuclear Tests (Treatment) Act 2006 641 Yes Nil N/A N/A N/A No N/A N/A
Compensation (Japanese Internment) Act 2001 25 Yes Nil N/A N/A N/A No N/A N/A
SPECIAL ACCOUNTS                  
Military Death Claim Compensation Special Account 656 Yes Nil N/A N/A N/A Yes N/A N/A
Defence Service Homes Insurance Account 43,323 Yes Nil N/A N/A N/A No N/A N/A
Australians at War Special Account Nil Yes Nil N/A N/A N/A No N/A N/A
Other Trust Moneys Account (Superseded by Other Entities and Trust Moneys (SOETM) Special Account on the 26 June 2012) Nil Yes Nil N/A N/A N/A No N/A N/A
Other Entities and Trust Moneys (SOETM) 87 Yes Nil N/A N/A N/A No N/A N/A

1 L= legislative change; S= systems change; P=planned; M=made (e.g. SM, or LP)

2 The value of potential contraventions in respect to the Veterans. Entitlements Act 1986 (VEA) was $2.4 million (Department of Human Services (DHS) assessment), $57.3 million (DVA assessment). DHS. VAP item fee file. is a table of health benefits administered on behalf of the Department of Veterans. Affairs by DHS, and is used to determine the amount that can be paid for each type of service. Financial year 2012-13 VAP processed 2483 recoveries of overpayments for a total dollar value of $2.4 million. To date, 2324 of these overpayments have been recovered, for a total value of $2.2 million. The remaining $57.3 million was assessed by DVA as potential breaches within VEA special appropriation of $11.5 billion, this $57.3 million is neither implicitly over or under payments. As at 30 June 2013, the DVA is unaware of any VEA related section 83 breaches requiring further treatment. It is impossible to fully remove the potential for section 83 breaches for all payments. In some cases, DVA relies on information provided by third parties which may not always be accurate. Where possible, future changes to procedures and amendments to legislation will continue to be progressed to reduce the risk of non-compliance to an acceptably low level across all programs.

Notes to and forming part of the financial statements

Table B - Summary

Summary
Appropriations identified as subject to conditions Expenditure in 2011-12
$000
Review complete? (Yes/No) Breaches identified to 30 June 2012 Potential breaches to date yet to be resolved Remedial action taken or proposed1
      Number. Total $000 Incorrect $000 Recovered/offset As at 30 June 2012 $000 Yes/No Indicative extent  
SPECIAL APPROPRIATIONS                  
Papua New Guinea (Members of the Forces Benefits) Act 1957 71 Yes Nil N/A N/A N/A No N/A N/A
Veterans’ Entitlements Act 1986 11,400,911 Yes Nil N/A N/A N/A Yes Refer to footnote 2 N/A
Defence Service Homes Act 1918 2,683 Yes Nil N/A N/A N/A No N/A N/A
Safety, Rehabilitation and Compensation Act 1988 169,016 Yes Nil N/A N/A N/A No N/A N/A
Military Rehabilitation and Compensation Act 2004 116,667 Yes Nil N/A N/A N/A No N/A N/A
Australian Participants in British Nuclear Tests (Treatment) Act 2006 78 Yes Nil N/A N/A N/A No N/A N/A
Compensation (Japanese Internment) Act 2001 100 Yes Nil N/A N/A N/A No N/A N/A
SPECIAL ACCOUNTS                  
Military Death Claim Compensation Special Account 281 Yes Nil N/A N/A N/A Yes Refer to footnote 3 N/A
Defence Service Homes Insurance Account 50,944 Yes Nil N/A N/A N/A No N/A N/A
Australians at War Special Account Nil Yes Nil N/A N/A N/A No N/A N/A
Other Trust Moneys Account (Superseded by Other Entities and Trust Moneys (SOETM) Special Account on the 26 June 2012) 31 Yes Nil N/A N/A N/A No N/A N/A
Other Entities and Trust Moneys (SOETM) N/A Yes Nil N/A N/A N/A No N/A N/A

1 L= legislative change; S= systems change; P=planned; M=made (e.g. SM, or LP)

2 The value of potential contraventions in respect to the Veterans. Entitlements Act 1986 (VEA) was $1.8 million (Department of Human Services (DHS) assessment), $17.3 million (DVA assessment). DHS. VAP item fee file. is a table of health benefits administered on behalf of the Department of Veterans. Affairs by DHS, and is used to determine the amount that can be paid for each type of service. Financial year 2011-12 VAP processed 2224 recoveries of overpayments for a total dollar value of $1.8 million. To date, 2102 of these overpayments have been recovered, for a total value of $1.8 million. The remaining $17.3 million was assessed by DVA as potential breaches within VEA special appropriation of $11.4 billion, this $17.3 million is neither implicitly over or under payments. As at 30 June 2012, the DVA is unaware of any VEA related section 83 breaches requiring further treatment. It is impossible to fully remove the potential for section 83 breaches for all payments. In some cases, DVA relies on information provided by third parties which may not always be accurate. Where possible, future changes to procedures and amendments to legislation will continue to be progressed to reduce the risk of non-compliance to an acceptably low level across all programs.

3 The value of potential contraventions in respect to Military Death claim Compensation Special Account was $40 (1 transaction) for which the transaction relates to an over payment. This amount has been recovered in the same year.

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