|
NRC: SET 30 October 1999
The Manager Department of Health & Aged Care
Office of Aboriginal & Torres Strait Islander Health 152-158 St George's
Terrace PERTH WA 6000
ATTENTION:
MR JOHN PYKE Funds Administrator Contract Liaison Officer Dear Sir CARNARVON MEDICAL SERVICE ABORIGINAL
CORPORATION
STRUCTURAL REVIEW
INTRODUCTION
Terms of Reference
1.1 In accordance with the contract and provision
of services to be provided by the Funds Administrator, we have undertaken a
review of existing organisational structures (Schedule I-A Clause 3) and have
considered opportunities for improvements within the organisation in terms
of:-
1.1.1
Efficiency - the efficient use of limited resources
particularly monetary resources; and
1.1.2 Accountability - adherence to agreed policies
and procedures outlined in grant conditions and as developed by the
organisation's Governing Committee.
1.2 We believe improvement in
efficiency and accountability will result in an improvement in the delivery of
health services which should be the focus of the organisation.
1.3 The issues of efficiency and accountability in
managing the organisation and its available fUnds are essential ingredients for
proper and appropriate service delivery of health services to Aboriginal &
Tones Strait Islander ("ATSI") peoples within the Gascoyne region.
1.4 The recommendations contained
herein are provided for the consideration of the Office of Aboriginal &
Torres Strait Islander Health ("OATSIH") and the Carnarvon Medical Service
Aboriginal Corporation ("CMSAC") Governing Committee.
Scope of Review
1.5
In addressing the terms of reference and performing
the review, the following work was undertaken:-
1.5.1 Attendance at the OATSIH Perth
office and discussions with Mr Michael O'Kane, State Director and Mr John Pyke,
Executive Officer Accountability for CMSAC;
1.5.2 Attendance at premises of CMSAC in Carnarvon
by Mr Neil Cribb during the week commencing 2 August 1999 and discussions with
Katrina Bellotti (Assistant to the Executive Director), Jenny Walsh
(Accountant/Administrative Offtcer) and Kay Mongoo (Assistant
Accountant);
1.5.3 Discussions with
Mr Steve Jansen of Jojara & Associates,
Consultants;
1.5.4 Numerous
discussions with Mr Bruce
McDowell, Funds Administrator, Carnarvon operative;
1.5.5 Review of documentation provided by the
OATSIH including Jojara & Associates report, audited financial statements
for prior years and review and consideration of internal
procedures.
1.5.6 Discussions with Mr Otti Beerli, Audit
Manager of Bird Cameron, in respect of accountability issues related to internal
controls.
1.6 This report has been prepared solely for the
purposes outlined in paragraph 1.1 above and we do not accept any responsibility
for its use outside of this purpose. Notwithstanding the terms of the contract,
we request that, except in accordance with the stated purpose, no quote or copy
of our report, in whole or in part should be produced without our written
consent as to the form and content in which it may appear.
Sources of Information
1.7 We have relied upon the information provided by
and comments made by those persons referred to above at paragraph 1.5. The work
carried out was of a review nature only and we have not performed an audit to
verify the veracity of any of the information we have been
provided.
Limitation of Review
1.8 During the course of undertaking this review,
we have not had an opportunity to meet with or discuss any matters regarding the
operations of CMSAC with Mrs Sue Oakley, the Executive Director. The Governing
Committee placed the Executive Director on two months leave with full pay on 2
August 1999.
1.9 Accordingly, some relevant matters may not have
been brought to our attention.
1.10 We acknowledge the Executive Director role is
a senior management position responsible for the day-to-day management of the
organisation and is therefore an integral component of matters relating to
efficiency, accountability and service delivery of the
organisation.
1.11 Furthermore, the Governing Committee and
Executive Director have failed to respond to formalised questions (refer
Appendix A) regarding issues and processes adopted by the organisation in the
incurring, approval and payment of expenditure and application of Commonwealth
funds. Accordingly, in some instances, we have been unable to reach definitive
conclusions.: This failure to assist and co-operate with the Funds
Administrator may be in breach of Commonwealth fUnding conditions.
1.12 Although we have not had an opportunity to
discuss relevant matters with the Executive Director,'we do not believe this has
impeded our ability to undertake the review, nor make determinations and
recommendations as to our findings.
Report Structure
1.13 The balance of our report is set
out under the following main headings:-
Section
Content
·
Page
2 Executive Summary 5 3 Background 6 4 Recommendations 9 Appendices
A Copy of Questions to the Governing Committee and
Executive Director
B Organisational Structure per Jojara
document
EXECUTIVE SUMMARY
2.1 Set down below are the key
points arising from our review.
Operational Management
2.2 The duly elected Governing
Committee is ultimately responsible for the organisation's efficiency and
accountability to the community and funding agencies. Within CMSAC it is
primarily responsible for the development of policy.
2.3 A five member management team
has previously been created comprising the Executive Director,
Senior Medical Officer, Clinic Manager, Administration
Officer and HACC manager. It would appear the roles and responsibility of the
team include operational, strategic and business planning, service development,
well-being and development, policies and procedures, financial management and
communications and information systems. Each member ofthe team has a vote with
the Executive Director having a casting vote.
2.4 Whilst the existence of the
management team is considered to be essential, we believe such a democratic
decision-making process may not be conducive to efficient and appropriate
decision-making and would undermine the position and responsibility of the
Executive Director.
2.5 We have noted that since the
departure of Jojara & Associates, the management team structure has not been
operative. This has been reinstituted upon Mr Bruce McDowell's involvement
under our contract.
2.6 The organisational structure
instituted by Jojara & Associates is attached as Appendix B.
2.7 The effectiveness of CMSAC's
operational management appears to be hindered by family relationships with the
Governing Committee and the Executive Director.
2.8 The delivery of the health
service must be the focus of the organisation and should not
be confused with the objectives of other
Aboriginal Corporations which include issues of self
determination and the development of business and employment
opportunities.
Executive Director
2.9 The role of the Executive Director is
integral to the overall management of the organisation and critical in terms of
efficiency, accountability and ultimately, service delivery.
2.10 We believe that in terms of
accountability, the Executive Director has failed to adequately perform the
duties required of the position by:-
2.10.1 Incurring travel
expenditure with apparent disregard for
accountability;
2.10.2 Not being readily available to address
issues arising on day-to-day management-issues, including:-
2.10.2.1 Human resources;
2.10.2.2 Financial management; and
2.10.2.3 The development of appropriate
health programmes.
2. 11 Notwithstanding the Executive
Director would appear to have substantial executive powers, the Governing
Committee is ultimately responsible for the organisation's
management, accountability and service delivery.
Furthermore, it is the responsibility of the Governing Committee to officially
reprimand the Executive Director in an appropriate manner to ensure a reasonable
level of performance is maintained. We believe the Governing Committee has
failed to formally reprimand the Executive Director on a timely basis and in an
appropriate and effective manner.
2.12 These circumstances have had a
detrimental impact upon:-
2.12.1 Staff morale, productivity and working
conditions;
2.12.2 Financial management and accountability;
and
2.12.3 The organisation's well-being, direction,
management and possibly, service delivery.
2.13 The Executive Director's
performance in managing the organisation should immediately be resolved in a
pragmatic manner to ensure the on-going delivery of a dedicated health service
to the ATSI people of the Gascoyne region. This should include the
adoption of an agreed work plan, duty statement, performance appraisal and
formalised disciplinary procedures.
Financial Management
2.14 CMSAC does not have a formalised financial and
accounting procedures manual to ensure ongoing accountability. Furthermore,
there has been a lack of internal controls in respect of expenditure and assets.
These matters are addressed in separate reports to the OATSIH.
2.15 The organisation lacks any defined
managerial structure and procedures in terms of its financial management.
Accordingly, the organisation has been found to lack in the area of
accountability of grant funds.
2.16 In the absence of
the Executive Director, personnel within the organisation's
accounting function are required to attend to matters falling within her
respsnsibility. It is for this reason the current staffing level within the
accounting function is considered to be appropriate.
2.17 However, we believe the volume of
financial transactions does not warrant an in-house accounting fUnction
supporting two fU11-time staff.
Defined Outputs
2.18 The grant monies provided by the
OATSIH are:-
"For the purpose of providing a health service,
including staff training support, to indigenous clients in Carnarvon and
surrounding areas including Mungullah Community. These services will be provided
to indigenous clients in accordance with the service delivery objectives of the
organisation".
2.19 The fUnding budget encompasses the
salaries and operational components for the delivery of a health
programme.
2.20 We have found there to be no
defined service outputs required or specified in the conditions of grant
funding.
2.21 We believe the lack of defined service
outputs provides the organisation with a discretion as to the funding
allocation, which is not an appropriate framework within which to ensure an
appropriate, efficient and accountable service delivery.
BACKGROUND
3.1 In Western Australia, the
State Government has the primary responsibility for the provision of health
services to the general community.
3.2 The Commonwealth Government ("the
Commonwealth") has for an extended period provided funds specifically for the
purposes of enhancing Aboriginal health.
3.3 The Commonwealth funds for
Aboriginal health were provided to ATSI people and organisations via the
Aboriginal & Torres Strait Islander Commission ("ATSIC") up until 30 June
1995.
3.4 However, given apparent
shortcomings in this avenue of funding, the Commonwealth restructured fUnding
for Aboriginal health by establishing the OATSIH within the Department of Health
& Aged Care with the intention of improving the delivery of health services
to ATSI people.
3.5 CMSAC, based in the township
of Carnarvon, provides an outpatient service only for ATSI peoples in the
Gascoyne region.
3.6 CMSAC is primarily funded
with the Commonwealth monies although minimal State funding is also
received.
3.7 The Carnarvon Hospital
provides health services to both non indigenous and indigenous people and
includes both outpatient and inpatient services.
RECOMMENDATIONS
4.1 Set down below are the key recommendations
arising from our review.
4.2 These are aimed at providing for improved
efficiency in terms of the organisation's limited resources and accountability
to ensure appropriate delivery of a health service to ATSI people.
Organisational Focus
4.3 Notwithstanding the prime objective of the
organisation is to provide a health service to the ATSI people of the Gascoyne
region, we believe the organisation has historically operated with broad
objectives normally associated with Aboriginal Corporations including self
determination and the development of employment opportunities.
Recommendation
4.4 The Governing Committee and Executive Director
implement and enforce policy and procedures on a commercial basis and void of
any issues or perceptions of nepotism and/or inappropriate expenditure so as to
enable the efficient and accountable delivery of the health
service.
Executive Director
4.5 The incumbent Executive Director, Sue Oakley,
is widely known to have been absent from the offices of CMSAC for a considerable
period of time such that she has not been able to adequately fulfill the
perceived job requirements associated with being readily available to attend to
day to day management responsibilities.
4.6 Furthermore, our enquiries would suggest that
there have been instances of expenditure initiateb by the Executive Director
which may not be considered appropriate expenditure for the purposes of the
delivery of a health service. Such matters have been addressed in a separate
report to the OATSIH.
4.7 During the course of undertaking the role of
Funds Administrator commencing on 30 june 1999, the Executive Director was only
in the office for two days, this being during the week commencing 26 July 1999.
We understand her absence was due to personal reasons. On 2 August 1999 the
Governing Committee placed the Executive Director on paid leave until 30
September 1999.
4.8 Accordingly, the organisation did not have a
fUll-time Executive Director during the period 30 June 1999 to 30 September 1999
when there is a need to meet all outstanding compliance obligations to the
OATSM, prepare budgets for the 1999/2000 financial year and commence new health
programmes.
4.9 We believe the above situation is untenable in
terms of the future efficiency, accountability and service delivery of the
organisation.
Recommendations
4.10 The role and future performance of the
Executive Director be resolved in a pragmatic manner by the Governing Committee
in conjunction with the OATSIH. This should entail the Governing Committee
taking a proactive
approach in managing the performance of the Executive Director, and together with the OATSIH and consultants as required, develop a work plan and duty statement encompassing key performance indicators as a measure of performance. Performance reviews should be undertaken on a monthly basis for no less than 12 months with those reviews being formally documented and communicated to the Executive Director. This process should provide the necessary mechanism to ensure the proper performance of the Executive Dire~ctor role and ongoing accountability or the taking of other remedial action. 4.11 The performance and disiplinary procedures
adopted by CMSAC should be in accordance with the WA Public Service
Awards.
4.12 The OATSIH should, if considered appropriate,
incorporate the above recommendation as a special condition of funding. We
understand the OATSIH also has the ability to engage an independent external
consultant to review compliance with grant conditions.
Development of Service Outputs
4.13 The grant fUnding provided by the OATSIH does
not require the delivery of stated outputs as a condition of its grant
funding.
4.14 As part of the funding process, the
organisation does not provide a detailed budget in support of its proposed
health services. Indeed, the OATSIH do not appear to require a detailed budget
for funding purposes.
Recommendations
4.15 The OATSIH develop appropriate performance
indicators and service outputs and incorporate these dcliverables as an integral
part of its Letters of Offer to funded organisations.
4.16 The OATSIH also require the funded
organisation to provide activity based reports on no less than a six monthly
basis to ensure levels of service delivery are in accordance with
required outputs and performance indicators.
4.17 The organisation develop detailed yearly
budgets on a consolidated basis and by specified service output. These budgets
should be submitted to.the respective fUnding agencies by no later than 31 March
1999 preceding the year of fUnding or as required by the funding
agencies.
Staff Levels
4.18 Our review has identified opportunities for
improved accountability without affecting efficiency and effective service
delivery by revisiting the roles within the accounting function and dental
clinic.
Accounting Function
4.19 Presently, the organisation employs a
full-time accountant (Jenny Walsh) and a full-time bookkeeper (Kay
Mongoo). The volume of financial transactions within the organisation does
not require two (2) Full Time Employees ("FTEs").
4.20 However, as previously discussed, in the
absence of the Executive Director, the Accountant has been required by necessity
to undertake some of the duties of the Executive Director, and also acts as a
necessary control in respect of expenditure, albeit at times
ineffectively.
Recommendation
4.21 Accordingly, we believe a rationalisation of
the accounting function may provide cost savings and improvements in
management reporting. However, a closer independent analysis of the functions
performed by the Executive Director (under the recommended performance
procedures and workplan), the Accountant and Assistant Accountant would be
necessary before implementing any such strategies.
4.22 We believe the financial management and
reporting of CMSAC may be enhanced and cost savings achieved by the outsourcing
of part of the accounting function. The organisation invite tenders from
appropriately qualified external accountants as identifted by the OATSIH to
provide accounting services to the organisation on a monthly basis.
This recommendation however, is conditional upon the Governing Committee
ensuring accountability of the Executive Director (refer paragraphs 4.10, 4.11
and 4.12 above) being implemented. As previously discussed, in the absence of
the Executive Director, the accountant has been required by necessity to
undertake some of the duties of the Executive Director, and also acts as a
necessary control in respect of expenditure
4.23 The external accountant would be
required to prepare monthly financial management reports to the Governing
Committee, quarterly submissions to the organisation's grantors and assist with
the preparation of final year end accounts and addressing any queries from the
auditors. The external accountant would also provide ongoing training and
assistance to the bookkeeper who would remain in-house. With the use of
modern technology, a significant part of these accounting functions could be
achieved from a distance.
4.24 Under this proposal the organisation
would invite tenders from appropriately qualified external accountants as
identified by the OATSIH to provide accounting services to the organisation on a
monthly basis.
Dental Clinic
4.25 A Dental Assistant is currently employed
full-time. This is considered to be excessive given a dentist only visits CMSAC
on a monthly basis.
Recommendation
4.26 A Dental Assistant only be employed on a
casual basis as required per month with an appropriate reduction in
funding.
Financial Management
4.27 The organisation does not currently have any
formalised accounting policies and procedures.
Furthermore, the Governing Committee, Executive Director and
management team are not provided with meaningful management reports on a monthly
basis to assist with the organisation's decision making processes.
Recommendations
4.28 Monthly financial reports be
generated on a service output and consolidated basis and be presented to the
Governing Committee, Executive Director and Unit Managers on no less than a
monthly basis.
4.29 To facilitate the embedding of
appropriate financial management practices within the organisation, an external
accountant be appointed by the organisation and the OATSIH to attend Governing
Committee meetings and management team meetings (as considered appropriate) on a
monthly basis for six months and then at the end of each quarter. Mr Bruce
McDowell in his capacity as the Fund Administrator's Carnarvon operative has
developed appropriate financial reports for this purpose.
4.30 Development of and adherence to
financial controls, particularly in relation to:-
4.30.1 Incurring ofexpenditure;
4.30.2 Receiving of Medicare funds; and
4.30.3 Assets.
4.31 A financial procedures manual be
prepared and implemented. The financial procedures and financial controls
instituted by the Funds Administrator have been documented as a reference tool.
This should be adequate for CMSAC's purposes in the short term, but like many
procedures and controls, accountability will rely upon the integrity of
individuals involved to ensure procedures are implemented and
enforced.
Duty Statements
4.32 We note duty statements do not exist for all
staff, including the Executive Director.
Recommendation
4.33 Duty statements be established for all staff.
A priority should be given to the development of a duty statement for the
Executive Director and the need to develop appropriate performance indicators
(refer paragraphs 4.10, 4.11 and 4.12).
Salary Sacrifice Arrangements
4.34 Employees avail themselves of the ability to
salary sacrifice personal expenditure without impacting upon their personal
financial position nor imposing the organisation with fringe benefits tax
consequences.
4.35 We reviewed the salary sacrifice arrangements
of CMSAC for the year ended 30 June 1999. A salary sacrifice account is
maintained for each employee.
4.36 Our review of the salary sacrifice
ledgers for the year ended 30 June 1999 indicates the salary sacrifice option is
being utilised for personal expenditure other than one-off monthly items of
expenditure such as loan repayments. We have noted items of expenditure to
include driving infringement notices, rates, outstanding accounts from retail
outlets (eg clothing) and expenses of third parties (possibly family members) on
an adhoc basis. We believe such arrangements are permitted.
4.37 Although the volume of relatively
minor payments does add to the administrative workload we do not believe it is
inefficient to the extent of requiring change.
4.38 We found it common practice for the
organisation to make payments on behalf of employees exceeding their
entitlements. This practice effectively creates employee loan accounts which is
contrary to grant terms and conditions which state:-
"Funds under this Agreement must not be used by the
Organisation to provide loans to staff, Board Members, other organisations or
any other person".
4.39 The following loan accounts arose during
the year:-
Employee
Name
Date Maximum Debit
Balance
***************Table Blanked
out*****************
4·40 All loan accounts were effectively repaid by
30 June 1999
Recommendation
4.41 The Governing Committee develop and
enforce a salary sacrifice policy which ensures salary sacrifice payments
are:-
4.41.1 Limited to the extent of employees
entitlements such that no employee loans are created at any time;
and
4.41.2 Not capable of being accumulated such that
payments are made on a regular (monthly) basis.
4.42 The Governing Committee be presented
with a report on a monthly basis detailing the individual employee salary
sacrifice account to ensure no overdrawn accounts and to ensure remedial action
is taken immediately.
4.43 As Funds Administrator we have
commenced the development of the above policy in conjunction with the Governing
Committee.
Travel Expenditure
4.44 Our review of travel expenditure and claims
has found a considerable lack of control over the incurring, approval and
payment of expenditure of a travel nature such that expenditure cannot be
properly acquitted in terms of proper authorisation or proper and appropriate
purpose.
4.45 Our detailed findings are documented in
a separate report to the OATSIH.
Recommendation
4.46 The Governing Committee ensure stringent
compliance with financial procedures and controls now implemented
including:-
4.46.1 CMSAC numerically numbered purchase orders
be used for all purchases, including travel, and suppliers be required to quote
purchase order number on all invoices;
4.46.2 Invoices only be paid where supported by an
appropriately authorised CMSAC purchase order. Currently, two signatures are
required to authorise the payment of an invoice these being the Accountant and a
Committee member. This control is not always implemented. This control must be
enforced by senior management to ensure accountability;
4.46.3 The organisation institute planning and
budgetary procedures whereby attendance at specified conferences and seminars
travel is approved by the Governing Committee prior to the commencement of the
applicable financial year. Planning and discussion of anticipated travel for the
coming year should be documented and ratified in the management
meetings.
4.47 A travel policy should be adopted which all
staff must adhere to.
4.48 The OATSIH require details of all proposed
travel to planned conferences and seminars as part of the organisation's budget
prior to the applicable year of funding.
Members Funds
4.49 The organisation maintains a general ledger
account termed "Members Funds". The balance of the account represents
funds available to the Governing Committee/Management and, given those monies
are not purportedly from grant funds, can be applied at their
discretion.
4.50 The funds form part of CMSAC's general
operating bank account which is also used to hold Commonwealth grant
monies.
4.51 We have identified instances of
the interest earned on Commonwealth grant monies and an administration fee from
State HACC funds being posted to the benefit of the Members Fund account. We
believe this practice is in breach of grant funding conditions which
states:
"Any income generated from Funds paid under this
Agreement, such as bank interest or proceeds from the sale of Assets, must only
be used by the Organisation for the purpose of the Project or otherwise with the
prior written approval ofthe Commomuealth and must be fully disclosed in the
Periodic financial Statement".
4.52 The Rules of CMSAC make no provision for
the maintenance of a Members Fund account. Indeed, Clause 7 of the Rules
states:-
"The objects of the Association do not include the
acquisition of pecuniary gain by the individual members of the Association and
profits of any dividend to the members from any profits or other income of the
service is prohibited ".
Recommendation
4.53 The organisation arrange for the
reimbursement of interest and administration fees from the Members
Fund account.
4.54 The organisation ensure future
compliance with grant funding conditions by immediately disbanding the
utilisation of a Members Fund account.
Should you have any queries in relation to the
matters raised above, please contact Mr Neil Cribb of our office.
Yours faithfUlly
BIRD CAMERON A J GILMOUR,
Director |
