Page 2739 - Week 09 - Thursday, 26 August 1993
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The most important aspect, though, from my own personal viewpoint, was to follow through the control mechanisms they have in place. Once they have their budget, I was interested to pursue the way they control it. They have the delegation of responsibility down to managers of cost centres, but they do have a very comprehensive system of reporting from their computer systems, on a monthly basis, the progress that has been made - accumulated costs, accumulated expenditure - against their budget. They have sessions with their top managers, with all their managers, regularly to identify where the budget is going out of kilter and, presumably, having done that, to identify ways in which the budget can be brought back under control.
So I have to conclude - other members of the committee, I am sure, will speak for themselves - that, on the face of it, the health organisation has the capacity to develop a proper budget, in the first place, in terms of its estimating. They then have to live with the Government's decision about how much money they get. They may not get what they ask for, and it has to withstand the scrutiny of the Estimates Committee and the Appropriation Bill debate, and at the end of it out comes a budget. But they do have the ability to put forward a properly constructed set of estimates for a budget and they do have the capability to control that once they have the budget.
Therefore, we explored the reasons why, unlike most other agency budgets, let us be clear, they have trouble keeping their expenditures within their budget appropriation. The management argued fairly, and we listened to what they had to say, that there are matters that are outside their management control - I think they are the words they used.
Mr Wood: Like the VMOs.
MR KAINE: That is one of them. There are a number of factors. The big one, they told us, was the private-public patient mix. We examined these factors in some detail. I accept that when a budget is being prepared it is difficult to project in which direction some of these activities are going to go. You could end up at the end of the year with a favourable mix, much more favourable than you projected, and you come in with a budget surplus, or you can come in with an unfavourable movement which puts you into a budget deficit.
We were persuaded by the management that, generally speaking, they had the ability to put some sort of quantum on these things. They were able to say that, in their view, in the course of a year there is likely to be X or Y dollars cost as a result of some of these activities. So I think they have the capability to put a dollar value on most of these things, with some degree of certainty. Bear in mind that they are only budget estimates anyway. Any figure that goes into these budgets is an estimate; they are all estimates. That being the case, I believe that they should be constructing the budget accordingly.
They made the point, validly, that the ultimate decision about the basis on which the budget is developed rests with the Government. I do not quibble with that, but I think that if the budget were considered a little more carefully, particularly in respect of these factors that are said to be beyond the control of management, we could get a budget that would more accurately reflect the expected outcome.
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