Building for a brighter future - GHA Central

Financial: Financial Results
Notes to and forming part of the Financial Statements for the year ended 30 June 2006
Note 8: Other Assets
2006 2005
($’000)($’000)
NON CURRENT
Interest in Gippsland Health Alliance 740628
TOTAL 740 628
West Gippsland Healthcare Group (WGHG) is a member of the Gippsland Health Alliance (GHA) and administers the
Alliance as lead agent. The Alliance is not considered to be a Joint Venture for accounting purposes under AASB 1014
Accounting for Joint Ventures, as the Alliance is not subject to 'joint control'. Comparatives have been reinstated as a result
of this change in accounting treatment.
The GHA Joint Venture agreement was amended effective 1 July 2005 to accommodate an additional thirteen Community
Health Services that joined the Alliance as new members. The agreement also varied the allocation methodology for
recognising each member's interest in the joint venture's net assets. Previously, the inaugural ten hospital members held an
equal 10% interest in the Alliance. For reporting periods up to and including 30 June 2003, the Alliance's yearly net result
was accounted for in each member hospital's accounts based on their equal 10% interest. In the 2003/04 financial year
however, the Alliance adopted a Gross Operating Revenue (GOR) model to bill members for membership and services.
This was also the means by which to allocate the Alliance's revenue and expenses for the financial year to members.
In the early years of the Alliance, revenue exceeded expenditure and the resultant surpluses were equally distributed to the
members. However, with expenditure exceeding revenue in recent years, the larger agencies absorbed a greater proportion
of the Alliance's losses based on their GOR. This led to the anomaly whereby the larger agencies interest in the Alliance
eroded at a larger rate than the smaller agencies, thus distorting the true reality of each agencies interest in the Alliance.
The net profit or loss of the Alliance in subsequent financial years had been allocated based on each agency’s GOR relative
to the total GOR of all member agencies. However, no adjustment was made to each agencies pre 30 June 2003 interest
when the GOR model was introduced.
An accounting adjustment has been made in 2005/06 to the pre 30 June 2003 net assets of the Alliance in light of the
above so that member interests are reflective of proportionate GOR. This adjustment has resulted in WGHG's interest in the
joint venture increasing by $273,887.
The total Alliance funds available to members, are represented by:
2006 2005
($’000)($’000)
Current Liabilities 894 716
Non-Current Liabilities 38 27
Current Assets 3,469 3,951
Non-Current Assets 1,714 2,180
Available to Alliance members 4,251 5,388
Summarised Operating Statement
Income:
Government Grants 293 357
Contributions- Members 3,238 2,384
Other Revenue 448 401
Total Income 3,979 3,142
Expenditure:
Employee Benefits (395) (328)
Information Technology
and Administrative Expenses (4,721) (4,513)
Total Expenditure (5,116) (4,841)
Net Deficit for the Year (1,137) (1,220)
Revenue and expenditure of the Alliance forms part of the overall net surplus/deficit attributable to members. This net surplus/
deficit is allocated to each of the member agencies based on each members proportionate Gross Operating Revenue (GOR).
The share of the net result of the Alliance attributable to WGHG for 2005/06 of -$162,209 (-$208,259 in 2004/05)
is reported as an 'IT expense' item under note 2b. Contributions made to the Alliance of $476,973 ($394,595 in 2004/05)
is also expensed and disclosed in note 2b under 'IT expense'.
The Group's share of the Alliance net assets at balance date was $739,678 ($628,001 in 2004/05).
WGHG hold the Alliance's cash assets in trust. The dollar value of the Alliance's bank balance as at reporting date is disclosed
in notes 6 and 12.
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