Finance

Annual report 2022/23

Financial management

Ahpra and the National Boards work in partnership to ensure the National Scheme operates efficiently, effectively and economically. The financial statements section of the annual report describes the scheme’s position and performance in more detail, including the equity position for each National Board.

Financial overview

Income and expenses have steadily increased since 2018/19. Accounting for other economic flows, the comprehensive result for 2022/23 of –$6.6 million is a decrease from $14.9 million in 2021/22.

The changes to the comprehensive result each period largely reflect the growing number of registered practitioners, fee income, costs to regulate and the investment being made to support public safety objectives.

Financial performance

A deficit comprehensive result was planned as we invest in the Business Transformation Program. Income growth was offset by increased expenses, investment in technology, and responses to regulatory and health workforce priorities.

The income for the financial year was $274.7 million, an increase of $25 million from 2021/22 due to application and associated fee income jumping as international borders reopened. The economic recovery provided improved interest income and return on investments reflected in other economic flows.

The fees for each National Board for 2023/24 were set to recover the full costs of regulation for each profession. In some cases, these fees were indexed up to 3%, with one Board required to raise the fee by 18.4% to meet an increased share of regulation costs. For professions with very strong equity balances, fees were not increased.
Total expenses from transactions were $285.0 million, an increase of $53 million from 2021/22. Significant cost increases were due to wage inflation and workforce growth, additional costs of business operations, and it being a pivotal year in delivering the transformation program.

The investment in the transformation program, totalling $21.9 million, includes employee and contractor costs of design, delivery and associated overheads, and was made to accelerate some of the work to meet Australia’s health workforce objectives. The program costs are recognised in the audited financial statements: operating expenses of $10.4 million, intangible capital work in progress of $7.9 million and prepayment assets of $3.7 million.

Actions in response to the recommendations of the Independent review of the regulation of medical practitioners who perform cosmetic surgery had an estimated cost of $4.5 million. These costs were incurred in 2022/23 for enforcement action, standards setting and compliance monitoring.

Significant resources and expertise were also invested to meet emerging priorities including a national health workforce program and a comprehensive review of overseas health practitioner regulatory settings.

There was an increase in the expenditure on consultants and contractors for specialist skills, services and advice that cannot be provided through internal workforce capacity or capability. This includes specialist resources engaged for technology skills, and consultancy contracts in place for expert advice, services and independent reviews. Ahpra employs staff and engages consultants and contractors in accordance with policies and administrative authorisations.

Financial position

The financial statements disclose income and expenditure, and the equity balances held as compared to target equity for each National Board. Target equity is the amount of equity that should ideally be held and covers both Board and Ahpra risks, as well as the amount of funds that should be collected to date for funding future projects.

Equity

Equity has fallen to $95.1 million with the $6.6 million operating deficit for the year. Equity is held by each Board in accordance with an agreed framework. During the year, the equity framework was reviewed, through stakeholder consultation, actuarial engagement and international benchmarking. Recommendations of the review to improve the quantification of risk and management of the investment pool were adopted.

Equity serves several important purposes, including:

• mitigating against unexpected loss not covered by our comprehensive insurance
• funding capital and strategic projects that support the effective and efficient operation of Boards and the scheme – including the transformation program
• offsetting the impact to the financial position due to variance in the operating result.

The equity balance also includes funding for planned projects that we have committed to, to support effective and efficient operations.

Assets

The financial assets of $248.1 million includes $124.3 million registration fees paid in advance.

Non-financial assets include IT intangible assets that increased to $22.7 million from $17.0 million in 2021/22, and property lease assets that have been consumed, reducing to $36.8 million in 2022/23 as scheduled.

Intangible asset investment includes $7.9 million in completed technology projects and data platform assets. The $12.5 million in capital work in progress includes investment in integration and data platforms, along with other system-readiness work for the launch of the transformation program, in addition to other technology initiatives.

Ahpra recognised $3.7 million as prepayments of the costs of configuration and customisation related to the implementation of software-as-a-service (SaaS) arrangements within the transformation program. Once the system goes live, the configuration and customisation expenditure will start, and be consumed over a period of up to five years.

Liabilities

The increase in liabilities relates to higher registration fees held in advance for all professions, higher contract payables for supplies as timing of the transformation program speeds up, and higher employee benefits. It is offset by lower lease liability in line with lease terms.

The year ahead

The expected financial performance in 2023/24 is for another operating deficit to occur, as the investment in the transformation program remains funded from equity reserves. In the forward years, break-even results are forecast, consistent with our five-year financial plan that aims to adequately fund the required workforce and technology, support and systems from continued increases to regulatory income.