Questions and Answers: New Governance and Accountability Arrangements for Community Health Centres

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These Questions and Answers were revised and updated on 26 February 2009, replacing the previous version which was posted in early December 2008.

Please note that Questions 12, 18, 31, 33, 34 and 35 are new.  Some other questions have been updated.

1. Why is the Government introducing new governance and accountability arrangements for community health centres?
2. What are the main elements of the proposed framework?
3. Who will be able to register, and who will need to register to receive funding?
4. Will organisations other than community health centres that currently receive community health and dental funding need to register as community health centres?
5. What would be the status of CHCs that choose not to register?
6. What criteria will be used to assess applications for registration?
7. Why does the Act include a requirement for agencies applying to register to be companies limited by guarantee?
8. Will the change to a company limited by guarantee require the department’s consent to change CHCs’ rules or structure?
9. Will registered CHCs as companies limited by guarantee have model rules of association?
10. How long will registration be valid?
11. What are the timelines and transitional provisions in relation to transferring to a company limited by guarantee and registering as a CHC?
12. Will the department accept applications for registration before 31 March 2009?
13. What will the performance standards cover?
14. What powers will the Secretary of DHS have?
15. Under what circumstances would the Minister be able to appoint an administrator?
16. When CHCs change their governance structure will they be required to reapply for their charitable status with the ATO?
17. Would the transmission of business have implications for staffing interests?
18. Will there be any change in relation to supplementation of enterprise bargaining outcomes for stand alone community health centres?
19. Will the new arrangements place an increasing reporting burden on community health centres?
20. What will the new reporting arrangements look like?
21. CHC boards currently continue to assume the risk of salary packaging.  What assurance can the department provide to CHC boards to enable them to continue to underwrite this risk?
22. Will registered CHCs be eligible for Treasury Corporation Victoria loans in future?
23. Will community health centres still be eligible for funding for capital works and minor capital works?
24. Will the changes have implications for leases?
25. How will the Government secure its interest in community health centre assets?
26. Will the department apply charges over community health assets?
27. Has there been discussion with the Auditor General’s Office in relation to the changes?
28. Has the department engaged with Commonwealth Departments on this issue?
29. Will existing catchment arrangements continue?
30. Will there be any impact on the issue of connectivity and mandating of products such as HealthSMART?
31. Will there be changes in relation to Rural ICT Alliances?
32. Will CHCs be able to amalgamate with another CHC or another appropriate agency?
33. Will community health centres continue to be subject to the Freedom of Information Act and other related Acts?
34. Will the application of any other Victorian Acts of Parliament change?
35. Will CHCs continue to be able to participate in the board of management training conducted by the Nous Group?
36. What support is the Government offering community health centres to implement the proposed new arrangements?
37. How will the Government communicate with the sector about the changes?

1. Why is the Government introducing new governance and accountability arrangements for community health centres?

2. What are the main elements of the proposed framework?

The Health Services Legislation Amendment Act 2008 introduces a new framework for community health centre (CHC) governance and accountability by removing existing legislative controls over CHCs contained in the Health Services Act 1988.  The framework for CHCs will comprise: 

• A voluntary registration scheme for organisations that provide government funded community health services; and
• Performance standards to ensure that quality services are provided to the Victorian people.

CHCs that register would be eligible to receive community health and dental funding and will be subject to the proposed new governance and accountability framework.  Existing CHCs may choose not to register.  In this case they would no longer be eligible for funding from the department’s community health and dental funding streams.

3. Who will be able to register, and who will need to register to receive funding?

The Act provides that registration will be an open process.  However, organisations that apply for registration will need to meet the registration criteria set out in the Act. These are summarised below. 

The new legislation provides that for organisations that have previously been declared community health centres under the Health Services Act 1988, registration is a condition of accessing community health and dental funding, but it would not be a guarantee.  Funding decisions are a separate process.

4. Will organisations other than community health centres that currently receive community health and dental funding need to register as community health centres?

No.  The Act amends previous provisions relating to community health services declared under the Health Services Act 1988. It therefore does not apply to, for example, women’s health services, or metropolitan or rural health services.

5. What would be the status of CHCs that choose not to register?

During consultations on the proposed model there was broad support from the sector and other stakeholders for the registered community health centre model.  It is anticipated that the vast majority of community health centres will elect to become registered.

A community health centre that chooses not to register would not be eligible for community health and dental funding.  Their organisational and governance arrangements would be a matter for them.

6. What criteria will be used to assess applications for registration?

The Act provides that to register, community health centres need to be companies limited by guarantee.  The Act also sets out four registration criteria which agencies will need to demonstrate they meet in their application.  These are that the community health centre:

• is able to provide at least one community health service, by suitably qualified health professionals or social workers; and
• has links with the local community to which it provides, or will provide, at least one community health service demonstrated, for example, by—

• a member of the local community being a member of the applicant's board of directors; or
• a partnership between the applicant and another local agency; or
• having the capacity to meet the specific health needs of certain classes of persons living in the local community; and

• has appropriate governance and policies; and
• will be able to meet the performance standards specified by the Minister for Health.

The department has provided guidelines to assist agencies to prepare their applications for registration and a draft version of the application form. These are available on the department’s website.

7. Why does the Act include a requirement for agencies applying to register to be companies limited by guarantee?

A key aspect of the proposed governance framework is a requirement that agencies registering must be companies limited by guarantee.

Companies limited by guarantee are subject to more rigorous reporting arrangements than incorporated associations.  The vast majority of community health centres are currently incorporated associations.

This higher level of accountability is necessary because:

• Existing accountability and control mechanisms in the Health Services Act 1988 that apply to community health centres will be removed;
• The State Government invests significantly in community health centres: in addition to more than $250m in recurrent funding, community health centres are also eligible for capital funding.  And about 60 per cent of the sector operate from Crown land or department owned land.
• The community has certain expectations about the accountability of Government funded agencies.  Ensuring Victorians continue to have confidence in the way the sector is governed and managed is crucial.

8. Will the change to a company limited by guarantee require the department’s consent to change CHCs’ rules or structure?

Once the legislative changes take effect CHCs which become companies limited by guarantee will not be required to seek the department’s permission to change their rules or structure.  The Act repeals the existing provisions in the Health Services Act that require this permission. 

9. Will registered CHCs as companies limited by guarantee have model rules of association?

The department considers this a good idea and has assisted the Victorian Healthcare Association in the development of a transition toolkit which includes model rules.

10. How long will registration be valid?

It is proposed that registration will be a one-off process.  However, the Act sets out circumstances under which registration may be revoked.

11. What are the timelines and transitional provisions in relation to transferring to a company limited by guarantee and registering as a CHC?

The Act will commence on 31 March 2009.  The Act provides that all existing CHCs will be deemed to be registered for a transition period of 90 days from commencement.  During this transition period the department will consider applications for registration.

The department has provided a pro forma setting out the information to be submitted with applications for registration.  Following submission there may be some instances where the department requires further information from agencies to demonstrate they meet particular registration criteria.  In this case the department will write to agencies advising them of any additional information required, and when this information will need to be provided by.

Existing CHCs will need to submit applications by Friday 15 May 2009 to ensure continued eligibility for community health and dental funding. This will allow time for applications to be assessed, and additional information to be prepared and submitted if necessary during the 90 day transition period.  DHS cannot guarantee registration within the transition period of any company whose application arrives after 15 May 2009.

CHCs are able to prepare for the proposed registration process before the legislation is passed taking the necessary steps to becoming a company limited by guarantee and by preparing and gathering material that will demonstrate that they meet the registration criteria.  The department and the Victorian Healthcare Association are providing assistance in these steps.

12. Will the department accept applications for registration before 31 March 2009?

The department will not accept applications for registration before 31 March 2009.

To apply for registration an organisation needs to be a company limited by guarantee. Organisations that are community health centres under the current provisions of the Heath Services Act need to obtain the Secretary’s approval to alter their constitution. It is not considered consistent with the intention of the new framework for the Secretary to approve changes to community health centres’ governance arrangements. Therefore any required constitutional changes should not take effect before 31 March 2009.

In addition, during February the department is conducting a ‘pilot’ of the registration with three volunteer organisations nominated by the VHA.  This process is designed to ensure that the application form and supporting documentation are as clear and helpful as possible.  Therefore the versions of the guidelines and application form are draft versions to assist preparation and may change.

13. What will the performance standards cover?

The Act provides that the Minister for Health may determine performance standards to be published in the Government Gazette.  This will come into effect following the passing of the Act.  The Act states that performance standards may cover: effective governance; management; risk management; financial management and quality. 

The department has made available Interim guidelines for applying to be a registered community health centre (January 2009) which include draft performance standards.

14. What powers will the Secretary of DHS have?

The Act outlines circumstances under which the Secretary may direct a registered community health centre to remedy a breach of terms or conditions of a funding agreement, to meet a performance standard, to comply with a condition of registration a or to meet the registration criteria. Were a registered community health centre to fail to comply with a direction, the Secretary would be able to stop payments or revoke registration.

Such decision would be subject to review by the Victorian Civil and Administrative Tribunal.

15. Under what circumstances would the Minister be able to appoint an administrator?

The Act provides that the Minister for Health may decide to appoint an administrator to manage part or all of a registered community health centre’s activities where the centre:

• is inefficiently or incompetently managed;
• has breached a term or condition of any funding agreement;
• has failed to meet a performance standard;
• has not complied with a  condition of registration;
• has failed to continue to meet the registration criteria; or
• has not complied with a Secretary’s direction.

Such a decision would be subject to review by the Victorian Civil and Administrative Tribunal.

This power is designed to ensure ongoing service delivery in circumstances where there are significant breaches of regulatory requirements. It would only be used as a last resort and in very limited circumstances, as it is expected that the vast majority of the sector to continue to deliver high quality, well managed services, therefore maintaining compliance with the standards.

16. When CHCs change their governance structure will they be required to reapply for their charitable status with the ATO?

CHCs will need to reapply. The department understands that some CHCs have received confirmation in writing that they will be entitled to be endorsed as a charity within the new framework.

17. Would the transmission of business have implications for staffing interests?

The move from an incorporated association to a company limited by guarantee is a direct transmission of business, so all staff would be expected to be transferred at their existing terms and conditions of employment. It will be important for all CHCs to consult with their staff and unions to ensure they understand the processes. 

18. Will there be any change in relation to supplementation of enterprise bargaining outcomes for stand alone community health centres?

No, the process will not change as a result of the governance changes. Supplementary funding is not automatic but is determined following a pricing review that includes movements in wage outcomes for all community health centres, including stand alone community health centres. This ensures that consistent treatment is afforded all community health centres regardless of management structure.

19. Will the new arrangements place an increasing reporting burden on community health centres?

The Government does not expect community health centres’ reporting obligations to increase once the proposed new laws are effective.  Some performance reporting requirements and information required to support the registration process can be met through existing reporting obligations to the department.  This includes obligations in relation to the service agreement process, annual reporting and the annual quality of care report. 

It is likely the department will require agencies to submit additional information in relation to assessing applications for registration and performance monitoring.   However this information would generally already be documented by community health centres for their own purposes. Consequently it is anticipated that the reporting for community health centres will be largely unchanged as a result of these arrangements. 

20. What will the new reporting arrangements look like?

There will be no specific changes to reporting to DHS as a result of this legislation. Over time the department would like to have a simpler and more streamlined approach.  

Community Health Centres will be required to notify Consumer Affairs Victoria (CAV) within 14 days after the agency has been incorporated under the Corporations Act.  As part of the notification process, Community Health Centres will be required to lodge with CAV any outstanding annual statements for the financial years leading up to and ending on 30 June 2008.  Community Health Centres are not required to lodge with CAV a partial financial statement for the months from 1 July 2008 leading up to their incorporation under the Corporations Act. CAV can be contacted at: consumer@justice.vic.gov.au

Following incorporation under the Corporations Act, community health centres will be required to lodge their financial reports to the Australian Securities and Investments Commission within four months of the end of the financial year.  The first financial year for a company starts on the day on which it is registered or incorporated.  It lasts for 12 months or the period (not longer than 18 months) determined by the directors.  Subsequent financial years must start at the end of the previous financial year and be 12 months long.  Further details can be found at: www.asic.gov.au

21. CHC boards currently continue to assume the risk of salary packaging.  What assurance can the department provide to CHC boards to enable them to continue to underwrite this risk?

Although the Australian Taxation Office has provided assurances that the proposed changes to governance and accountability will meet their requirements in relation to government control, the department cannot give advice on their behalf.  Similarly the department is not in a position to write to CHC boards offering to underwrite any financial risk in relation to salary packaging for staff. 

It should be noted that the revocation of the current charitable status of CHCs has not occurred and a consideration of the review and the legislative changes is to ensure it does not.

22. Will registered CHCs be eligible for Treasury Corporation Victoria loans in future?

Existing provisions in the Health Services Act 1988 require community health centres to seek the approval of the Minister for Health and Treasurer for any loans and these are Government guaranteed.  This Act repeals these provisions, meaning registered community health centres will no longer need Government approval to obtain loans.  Similarly new loans will not be guaranteed by Government.

The transitional provisions in the Act provide that current loans guaranteed by the Victorian Government will continue for the duration of these loans.

23. Will community health centres still be eligible for funding for capital works and minor capital works?

Funding for capital works will continue to depend on departmental service planning priorities and available funding.

24. Will the changes have implications for leases?

It is desirable for the department to have leases with CHCs for all Crown and departmentally owned assets.

No changes are anticipated to leasing arrangements as a result of this legislation.

25. How will the Government secure its interest in community health centre assets?

The manner in which Government manages its interest in land and buildings occupied by community health centres will depend on ownership arrangements in place.  These matters are relevant in terms of Government managing and protecting its ongoing asset investment.  Current arrangements to protect the Government’s asset base would continue. 

Such arrangements would include:

• lease agreements in relation to services provided from departmental or Crown land; or
• registering the department’s interest on the certificate of title where Government assets are located on land owned by the community health centre.

26. Will the department apply charges over community health assets?

Assets that CHCs operate may be owned by the Crown, by the department, or by the CHC.  Upon wind-up, charitable organizations are required to transfer their assets to like charities with similar purposes and objects. 

The Discussion Paper proposed a charge over CHC assets, as a protection for state investment. This was intended to ensure that in the unlikely event of windup, the department could recover its funding to enable it to be re-allocated to a new service provider, thereby ensuring continuity of service for the community.

Following review the department has decided that the proposed charge over assets is not practical.  The department therefore intends to ensure continuity in the provision of services through a clause within service agreements rather than through a charge.  This clause will ensure that if the organisation ceases to provide services it will consult with the department for direction as to the distribution of DHS funded assets.

27. Has there been discussion with the Auditor General’s Office in relation to the changes?

The Victorian Auditor General’s Office (VAGO) was provided with a copy of the discussion paper and there have been discussions between the department and VAGO.

28. Has the department engaged with Commonwealth Departments on this issue?

The department has not engaged with the Commonwealth on these matters beyond those issues directly relating to the Australian Taxation Office.

It will be up to CHCs to seek their own advice regarding agreements and licenses, such as any need to re-register in a new corporate form.

29. Will existing catchment arrangements continue?

The existing provisions in the Health Services Act 1988 regarding catchments relate to membership and governance and not to funding or service provision.  The Act removes these provisions.  The department allocates funding for the provision of services to local communities across the state, and this will not change as a result of the proposed amendments.

The new legislation includes a number of criteria for registration, one of which is that the community health centre has links with the local community and partnership arrangements with other agencies serving that community. In particular it is important that CHCs engage actively at the local level with all agencies participating in chronic disease prevention and management.

30. Will there be any impact on the issue of connectivity and mandating of products such as HealthSMART?

No changes to the policy or its implementation are anticipated in relation to HealthSMART.

However, as development of IT systems continue it will be essential that all registered CHCs systems have the capability to interface with and participate in DHS requirements.

31. Will there be changes in relation to Rural ICT Alliances?

The Department is working through the legal and policy implications of the legislative changes in relation to their impact on the relationship between community health centres and rural ICT alliances.

32. Will CHCs be able to amalgamate with another CHC or another appropriate agency?

The Act includes provisions to enable voluntary amalgamation with registered funded agencies to continue.   Registered funded agencies are defined by the Health Services Act 1988 to include public hospitals, denominational hospitals, public health services and State funded residential care services.

Two registered CHCs, being companies limited by guarantee, would be able to amalgamate as they wished. The new entity would have to apply for a new registration to be eligible for community health and dental health funding.  

33. Will community health centres continue to be subject to the Freedom of Information Act and other related Acts?

The Freedom of Information Regulations 1998 currently prescribe “community health centres within the meaning of the Health Services Act 1988” as being subject to FOI. The Department of Justice is currently reviewing these regulations.

It is proposed to remove community health centres from the regulations because they will no longer be subject to significant government control. They will instead be subject to the new voluntary registration framework.  As application can be made under the FOI Act for documents held by a government department, those documents submitted by CHCs as part of the process for registration or to demonstrate the meeting of performance standards will remain subject to FOI provisions.

A registered community health centre will not fall within the definition of "public office" for the purposes of the Public Records Act 1973 or "public body" for the purposes of the Whistleblowers Protection Act 2001, so these Acts will not apply.

The Health Records Act enables members of the public to access health information kept about themselves.

34. Will the application of any other Victorian Acts of Parliament change?

Part 4 of the Health Services Legislation Amendment Act 2008 outlines a number of consequential amendments which are designed to ensure that the relationship between community health centres and other Acts does not change.

The Fundraising Appeals Act 1998 is not included in Part 4. As a consequence, registered community health centres, which will no longer be registered funded agencies, will no longer be excluded from the definition of a “public place” under that Act.  Therefore, sections 9 and 10 of the Fundraising Appeals Act 1998 will apply.  That is, collectors on the premises will need to wear an identifying badge that complies with the Act, and collection receptacles must comply with the Act.

35. Will CHCs continue to be able to participate in the board of management training conducted by the Nous Group?

The Department of Human Services contracted the Nous Group to run the Victorian Health Boards Governance Program (VHBG Program).   The program is aimed at all public sector health service board directors and members across Victoria.

Under the new framework, registered CHCs will no longer be classified as public sector health services, and will, therefore, no longer be eligible to participate in the VHBG Program.  As companies limited by guarantee, CHCs will be required to determine for themselves the appropriate training needs of their Boards.

The department will investigate how best to support the new Boards into the future.

CHCs may seek further training opportunities for their Boards either via the Our Community website for non-government organisations, or the ASIC Training Register for companies limited by guarantee.

36. What support is the Government offering community health centres to implement the proposed new arrangements?

The Victorian Government is providing one off funding to the Victorian Healthcare Association to support the implementation of the proposed new arrangements. The Association is conducting forums for board members and has developed a resource kit.  

The department has developed a website which is regularly updated with information, resources and guidance regarding transitional issues and the registration process.

37. How will the Government communicate with the sector about the changes?

The Victorian Government is committed to ensuring community health centres receive timely information about the new arrangements to assist with the smooth implementation of the new laws. 

When the legislation was introduced into Parliament, the Minister and the department wrote to each community health centre and the Victorian Healthcare Association to inform them of the introduction of the legislation and its provisions. 

The department has written to the sector at key points in the transition process, and will continue to do so providing further detailed information about the proposed registration process, performance standards and providing guidance regarding information agencies could use to demonstrate they would meet the criteria and standards.

Contact

If you have further questions, please contact:
Bruce Watson
Primary Health Branch
Department of Human Services
Enquiries
Tel:  (61 3) 9096 6131
Fax: (61 3) 9096 9161

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