Auditor-General gives DHBs 'could do better' score on asset management

BUSINESSDESK: New Zealand’s district health boards need to apply more rigour to the management of their assets if they are to improve financial planning and lift the quality of their services, according to the Auditor-General.

DHBs should see asset management as a “core part of their own service and financial planning” to enable the smooth development of capital spending and investment in new infrastructure, the government watchdog said in a report on the 2010/11 audits of the health sector.

In 2009, DHBs were required by the Ministry of Health to formally document their approach to asset management, though most boards haven’t improved on that plan since then.

“The ministry needs to ensure that business cases for capital investment are fully integrated with service planning, for the individual DHB, between DHBs, throughout the region, and nationally,” the report said.

Without greater rigour, there’s the possibility the value of equipment is depreciated too quickly and replaced too early, or conversely it may show up as still having useful life when it should be past its use-by date.

“This makes it difficult to distinguish between equipment whose useful life has proved longer than originally estimated, and equipment whose appropriate renewal has been deferred, perhaps because of funding shortfalls,” the report said. “The lack of these aspects of information about some assets makes this difficult.”

Auditor-General Lyn Provost flagged asset management may be a special topic in its 2012/13 work, which will focus on whether DHBs are well prepared to meet future service obligations.

As a whole, the health sector showed improvement in managing within its means, and reduced its overall deficit, Provost said. Still, there was room to cut costs through more efficient procurement arrangements, and also savings available by clamping down on patients who may be ineligible for free services.

In the 2010/11 financial year, DHBs reported an overall deficit of $16.1 million, smaller than the expected $76.5 million shortfall, due mainly to a more robust performance by Capital & Coast DHB.

Provost flagged a lack of improvement in reporting health disparities for Maori as a specific concern, as it limits the government’s ability to use that information to improve outcomes for Maori health.

The government has earmarked spending of $13.819 billion on health in the 2011/12 financial year, or 15 percent of its total expenses, and the second-biggest expense on its books behind welfare and pensions.

The amount for new initiatives is less now than it was in 2009/10 and much of last year’s increase was to “keep with demographic and cost changes in the sector,” the report said.

“The sector is under pressure to provide better, more timely and more convenient health services,” the report said. “The government continues to review expenditure to identify funding that could be better used in other areas, particularly in frontline health services rather than ‘back office’ functions.”

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