Page 45 - Statement of Intent 2015/16

Depreciation is charged to the statement of comprehensive income using the straight-line method. Land is not depreciated. Depreciation is set at rates that will write-off the cost or fair value of the assets, less their estimated residual values, over their useful lives.
Risk
Mitigation Strategy
Savings are required in 2015/16 and the outer years. Our saving target includes $43.4 million that we are still working to determine how we deliver these savings.
 Develop realistic savings plans.
 Focus on process change to deliver enduring
savings.
 Use proven methodologies.
 Monitor closely and take corrective action quickly.
 Be brave and tackle the hard issues.
To achieve the result, the savings plan needs to be achieved. We do not have a good record of achieving savings plans so there will be some challenges.
 Freeze capital.
 Cap full time equivalents.
 Service reductions where there is low impact on
our outcome of improving the health of our population.
The employee relations environment presents uncertainty in terms of potential increases in employee remuneration packages. Although a wage increase percentage has been included in the assumptions, some employee representatives may have an expectation of wage increases that differ from the budgeted levels. A one percent increase or decrease in wage rates equates to approximately $4.9 million in additional payroll costs
Potential strategies include:
 Negotiate lower than inflation or close to zero per cent increases.
 Use sinking lid and other containment mechanisms to constrain full time equivalents.
There is risk that cost increases for the provider arm purchasing of goods and services will exceed the assumed percentage increases based on the inherent uncertainty of future inflationary pressures. A one per cent increase or decrease in the cost of provider arm goods and services equates to approximately $2.3 million in additional expenditure.
 Review contracting arrangements and negotiate more favourable terms.
 Participate in national procurement initiatives to take advantage of bulk purchasing.
There is financial risk in terms of the inherent uncertainty as to the total amount of funding that will be appropriated to health beyond the current year and how this funding will be allocated by the Population Based Funding (PBF) formula. In addition, PBF is a fixed annual funding allocation in an environment where the District Health Board funds demand driven contracts that have the risk of the demand exceeding the forecast levels.
3.6 Any Additional Information and Explanations to Fairly Reflect
the Operations and Position of the DHB
The accounting policies used in the preparation of the financial statements can be found in appendix 8.6. There have been no significant changes in the accounting policies.
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