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Chapter 4: Governance and management

 

PHIAC had a robust and comprehensive governance structure in place throughout 201415 that ensured authority was appropriately exercised and controlled.
 
The focus for this chapter includes the governance structure and Council framework, the Audit, Risk and Compliance Committee, human resources and the management of legislative changes in 2014-15.
 
Governance structure
 
The operations of PHIAC during 2014-15 were governed by the Council which was responsible to the Parliament through the Minister for Health for the overall strategy, governance and performance of the organisation.
 
The Council consisted of a Commissioner and two to four other members, all appointed on a part-time basis for a fixed term by the Minister. The Council appointed the Chief Executive Officer (CEO) in consultation with the Minister and employed the number of staff it considered necessary to undertake the performance of the Council's functions as described in section 264-10 of the PHI Act.
 
PHIAC's executive management comprised of the CEO and two general managers, the General Manager - Prudential Supervision (and Deputy CEO) and the General Manager - Industry Operations and General Counsel. This group formed the Executive Management Committee (EMC) and was responsible for the day-to-day management of PHIAC, delivery of the corporate objectives and regulatory oversight activities. The EMC met fortnightly, or more frequently as required.
 
Supporting the EMC were executive level managers who led teams of staff performing a range of functions required by PHIAC in order to deliver its corporate goals and key priorities.
 
Table 3: Council members renewal dates and meetings attended in 2014-15
 
Council Member Date First Appointed End Date Meetings Attended in 2014-15 Meetings Eligible to Attend in 2014-15
Ms Lynn Ralph, Commissioner 29 Nov 10 30 June 15 9 9
Mr John McGee, Deputy Commissioner and Chair of the Audit, Risk and Compliance Committee 17 Mar 05 30 June 15 9 9
Mr John Barrington, Member 29 Nov 10 10 Nov 14 3 3
Mr Terry Downing, Member 29 Nov 10 30 June 15 9 9
Dr Barry Catchlove, Member 27 Feb 12 26 Feb 15 5 5
 
PHIAC Chief Executive Officer (CEO) with Members of the ARCC. From left to right: Barry Catchlove, Terry Downing, John Barrington, John McGee and Shaun Gath.
 
The Council
 
The Council members had the collective power to manage and direct the operations of PHIAC.
 
The Council met regularly to discharge this responsibility and received briefings and updates from management on a range of governance and operational matters requiring their attention.
 
As a consequence of the scheduled closure of the agency on 1 July 2015, as Council members resigned or their term expired new members were not appointed unless, the Council was inquorate as a result.
 
Image of the PHIAC CEO with Members of the ARCC: Barry Catchlove, Terry Downing, John Barrington, John McGee and Shaun Gath.
 
Click on the above image to view the photo in a larger size.
 
Council Membership
 
During 2014-15, there were several changes to the composition of the Council and PHIAC would like to recognise and thank all council members for their contributions over the past 25 years.
 
Mr John Barrington resigned as a member of the Council on 10 November 2014 and Dr Barry Catchlove's term as a Council member expired on 26 February 2015.
 
Mr John McGee's term as a Council member expired on 26 February 2015. Mr McGee was reappointed as a Council member.
 
The Council 2014-15
 
Ms Lynn Ralph — Commissioner of Private Health Insurance Administration
 
Photo of Ms Lynn Ralph
 
Ms Ralph has worked in the financial services sector for over 20 years, specialising in funds management and insurance.
 
Ms Ralph is co-founder of Cameron Ralph Pty Ltd, a firm which assists boards to improve their effectiveness. She has over 40 years cumulative boardroom experience and lectures and writes on corporate governance.
 
Ms Ralph is Chairman of BT Funds Management and a director of Sydney Swans Ltd, The Sydney Institute and Bangarra Dance Theatre.
 
Ms Ralph is a Fellow of the Australian Institute of Company Directors and a Senior Fellow of the Financial Services Institute of Australasia.
 
Previously she held the position of Deputy Chair of ASIC.
 
Mr John McGee — Deputy Commissioner and Chair of the Audit, Risk and Compliance Committee
 
Photo of Mr John McGee
 
Mr McGee has practised as a solicitor in Sydney and London and has spent approximately twenty years in the financial services industry working primarily in mortgage securitisation and life insurance. He was a managing director of The Bank of New York Mellon's corporate trust business in Australia and was previously a non-executive director of Westpac Funds Management Ltd, the responsible entity for many Westpac related listed and unlisted trusts.
 
Mr McGee has served on other corporate boards in the oil, gas and biotechnology industries.
 
Mr John Barrington—Council Member
 
Photo of Mr John Barrington
 
Mr Barrington is the Principal of Barrington Legal, a law firm located in Sydney specialising in business acquisitions, insurance software licensing and hospitality. Mr Barrington is also Chair of Meridian Lawyers, a national law firm specialising in insurance and liability claims.
 
Previously, Mr Barrington was General Counsel for the National Mutual Life Association, CEO of Mutual Community Ltd and Senior Vice President of CUNA Mutual Ltd.
 
Mr Terry Downing — Council Member
 
Photo of Mr Terry Downing
 
Mr Downing has over thirty years' experience in the financial services industry in Australia and Asia. A Certified Practising Accountant, Mr Downing's areas of expertise include general insurance, funds management, and superannuation and risk management.
 
Mr Downing currently holds a number of non-executive director positions in the public and private sectors. He is also a Fellow of the Australian Institute of Company Directors and the Australian and New Zealand Institute of Insurance and Finance.
 
Dr Barry Catchlove—Council Member
 
Photo of Dr Barry Catchlove
 
Dr Catchlove is a qualified physician with more than forty years' experience in healthcare. Dr Catchlove is Deputy Chair of the Sydney Local Health District and he also served on the Sydney University Senate from 2008 to 2013 as Chairman of the Safety and Risk Management Committee.
 
Previously, Dr Catchlove served as Pro-Chancellor of Sydney University in 2012 and a senior manager of Mayne Nickless. Between 1997 and 1999, he was Chair of the Health Insurance Commission (now Medicare Australia).
 
The Audit, Risk and Compliance Committee
 
The Council established an Audit, Risk and Compliance Committee (ARCC) in accordance with section 45 of the Public Governance, Performance and Accountability Act 2013 (PGPA Act) and subsection 17 of the Public Governance, Performance and Accountability Rule 2014 (PGPA Rule).
 
The ARCC was a sub-committee of the Council whose objective was to assist the Council to discharge its responsibilities to the Minister for Health by ensuring due care and diligence was applied to:
  • the objectivity and reliability of PHIAC's published financial information;
  • the internal control systems of PHIAC;
  • the financial management processes adopted by PHIAC;
  • the processes for identifying, monitoring and controlling business risk; and
  • the monitoring and undertaking of reviews of any matters which the Council referred to this sub-committee.
Mr John McGee was the Chair of the ARCC, with other members being Mr John Barrington, Mr Terry Downing and Dr Barry Catchlove.
 
With the resignation of Mr John Barrington in November 2014 and the expiration of Dr Barry Catchlove's term in February 2015, the ARCC had insufficient members to remain in compliance with subsection 17 of the PGPA Rule 2014.Subsequently the Council appointed Mr Paul Groenewegen (PHIAC Deputy CEO) as a member of the ARCC. During 2014-15, the ARCC met five times.
 
In addition to the ARCC members, regular attendees at ARCC meetings were the Commissioner (observer status), PHIAC's CEO, the General Manager - Industry Operations and General Counsel, and the Chief Financial Officer. A representative from the Australian National Audit Office was also invited to attend all meetings.
 
Table 4: Attendance at ARCC meetings during 2014-15
 
ARCC Member Meetings Attended in 2014-15 Meetings Eligible to Attend in 2014-15
Mr John McGee, Chair 5 5
Mr John Barrington, Member 3 3
Dr Barry Catchlove, Member 3 3
Mr Terry Downing, Member 5 5
Mr Paul Groenewegen, Member 2 2
 
Staffing and resources
 
The PHIAC secretariat comprised 26.6 full-time equivalent (FTE) staff as at 30 June 2015 (with an additional 1.5 FTE staff represented by the Council).
 
Personnel working in the secretariat reported to the Chief Executive Officer through the two general managers.
 
The secretariat comprised a diverse range of qualifications and skills including corporate governance, commerce, banking and finance, actuarial, accounting, economics, statistics, education, law, risk management and information technology.
 
PHIAC adhered to the Australian Public Service Code of Conduct and Values and maintaining the appropriate work-life balance of staff was actively encouraged by PHIAC management.
 
Throughout 2014-15 PHIAC maintained its commitment to ongoing staff training for further knowledge, skills and professional development. Staff attended a range of courses, conferences and seminars in line with their learning development plans.
 
Each staff member contributed to the ongoing success of PHIAC during its operation and most staff transitioned to APRA at the transfer date of 1 July 2015 to continue this work.
 
PHIAC executive management
 
Mr Shaun Gath — Chief Executive Officer
 
Photo of Mr Shaun Gath
 
Appointed for a five year term to the position of CEO of PHIAC in June 2008, Mr Gath was reappointed for a further five year term in June 2013.
 
Prior to his appointment, Mr Gath was a partner in a national law firm where he worked with Government and health sector clients, focusing on governance and regulatory issues.
 
Earlier in his career Mr Gath worked as a ministerial adviser and spent four years as General Counsel of the Health Insurance Commission (now Medicare Australia). Mr Gath has held a number of professional positions, including ACT President and National Vice-President of the Australian Corporate Lawyers Association and Deputy Chair of the Public Law Committee of the International Bar Association.
 
Mr Paul Groenewegen — General Manager, Prudential Supervision and Deputy CEO
 
Photo of Mr Paul Groenewegen
 
Mr Groenewegen joined PHIAC in 2001 and was appointed to his current role in September 2005. He has played a leading role in developing PHIAC's supervisory activities.
 
Prior to joining PHIAC, Mr Groenewegen held a series of financial and accounting based positions with a large health service provider and the Commonwealth Government. Mr Groenewegen is a Certified Practising Accountant, is a Graduate Member of the Australian Institute of Company Directors and holds a Graduate Diploma in Applied Corporate Governance.
 
From February 2015, Mr Groenewegen was a member of the PHIAC ARCC.
 
Mr Neil Smith — General Manager, Industry Operations and General Counsel
 
Photo of Mr Neil Smith
 
Mr Smith joined PHIAC in December 2008 after working for more than a decade in the Commonwealth DoH including as Special Legal Advisor on Private Health Insurance
 
As General Counsel, Mr Smith was responsible for a small team of lawyers which provided a range of legal advice including specialist advice on the prudential regulation of private health insurance.
 
As General Manager, Mr Smith was also responsible for enforcement and compliance, industry transactions, crisis management, and the day-to-day running of the PHIAC office, including PHIAC's corporate services, IT and administration. Mr Smith is a Barrister and Solicitor and is a Graduate Member of the Australian Institute of Company Directors.
 
Mr Mark Lott—Council Secretary
 
Photo of Mr Mark Lott
 
Mr Lott provided guidance to both the Council and PHIAC on a part-time basis, advising on administrative processes.
 
Mr Lott has over 16 years Government experience in reporting and human resource management, including policy and advisory experience.
 
Mr Lott also has private sector management experience and holds a degree in philosophy with a focus on ethics and logic.
 
Performance pay
 
PHIAC has a performance bonus system in place designed in consultation with staff and managers and covering all employees. For 2014-15, the aggregate bonus pool was $544,981. This figure included the payment of the 2013-14 cycle in November 2014 and payment of the 2014-15 cycle, which was paid in June, just prior to the transition to APRA.
 
PHIAC website
 
During 2014-15, PHIAC's website continued to meet its obligations to stakeholders and government in the areas of information access, usability, easy to follow navigation and accessibility.
 
The PHIAC website provided information in three broad categories:
  • Industry—provided access to information about the regulatory framework, reporting activities, regular PHI industry statistics, consultation opportunities, notification and application forms and education programs.
  • Consumers—enabled access to a range of information about private health insurance including areas of healthcare, consumer statistics and the PHI industry. There were also links to other related websites including the DoH, PHIO, the ACCC and consumer forums.
  • Corporate—provided details of PHIAC's governance arrangements, organisational structure, publications, media releases, employment opportunities and contact information.
As at 1 July 2015 the PHIAC website ceased operation however information on the PHI industry is now available on the APRA website: www.apra.gov.au/phi/Pages/default.aspx.
 
Management of legislative obligations
 
Cost recovery impact statement
 
PHIAC did not publish a Cost Recovery Impact Statement on the Council Administration Levy in 2014-15 due to the transition process. Instead, the agency's costs were closely scrutinised by DoH, the ANAO and the Department of Finance throughout the year. Both the Departments supported an application to the Ministers for Health and Finance for PHIAC to operate at a loss in 2014-15. This approval enabled PHIAC to utilise its reserve in 2014-15 to cover the costs of transition, rather than impose a supplementary levy on the industry. This was the only year in over 25 years of operation that PHIAC recorded a loss.
 
In addition, the Minister for Health approved the non-collection of the Council Administration Levy for the fourth quarter of 2014-15, a saving to the PHI industry of $1.554 million.
 
Public Governance, Performance and Accountability Act 2013
 
On 1 July 2014, a new resource management framework for all Commonwealth entities commenced when the Public Governance, Performance and Accountability Act 2013 (PGPA Act) replaced the Financial Management and Accountability Act 1997 (FMA Act) and the Commonwealth Authorities and Companies Act 1997 (CAC Act).
 
Throughout the year PHIAC strengthened its compliance with the PGPA Act and the PGPA Rule, underpinning the implementation of the Act. In particular, PHIAC's response to the PGPA Act included:
  • adopting the relevant recommendations contained in the Resource Management Guidance papers on the Department of Finance website;
  • attending targeted training;
  • amending the procurement process to incorporate the duties of officials to disclose any perceived conflicts of interest;
  • providing Council briefings on new developments such as the new rule governing the composition of PHIAC's Audit Committee; and
  • reminding staff of their duties as officials at staff meetings and via email updates.
Risk management framework
 
PHIAC embedded risk management practices and processes to support governance and business management across the organisation. Underpinning this application was a risk management framework that identified and brought together the organisational components that contribute to achieving PHIAC's vision and corporate goals.
 
PHIAC's risk management framework was based on the COSO1 Enterprise Risk Management Integrated Framework (better practice) and tailored for PHIAC's corporate structure and business environment.
 
1. Committee of Sponsoring Organizations of the Treadway Commission.
 
PHIAC organisational chart 2014-15
 
PHIAC organisational flow chart for 2014-15.