The ACT government will demand Calvary Public Hospital better account for how it spends taxpayers' money in the wake of a damning report slamming executives for covering up huge financial problems.
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The agreement with the hospital's owners is now under review until December, and the government is demanding better governance and financial accountability safeguards.
The ACT government said it is also working with Calvary Hospital to ensure their agreement has the "capacity" to deliver value in terms of "patient care and service efficiency within an integrated public hospital and health service".
"This work will assist to inform whether the current Agreement is the most appropriate mechanism to delivery [sic] public hospital services, with this process completed by December 2016," the government said in its response to a damning Auditor-General's report into the hospital's irregular financial reports.
Auditor-General Maxine Cooper handed down a report into Calvary Hospital in April, which detailed falsification of financial statements back to October 2012, with irregularities reaching as high as $9 million between 2012 and 2014.
Hospital staff acted in a deliberately misleading way about its financial state. The hospital's chief executive and chief financial officer were both asked to resign.
The hospital falsely reported having received $8.89 million from the government in 2013-14, allowing it to report a surplus of $1.9 million. The real position was a $9.5 million loss.
Reports and financial systems were manipulated, minutes and meetings were faked, and inaccurate monthly reports were entered into its financial system as part of the deception.
Only a small number of executives and staff were involved, but others knew and failed to report their actions.
Immediately after Dr Cooper's report, the government said although the issues were serious, they had not impacted the ACT budget and no taxpayer funds were "jeopardised" by the "inappropriate accounting treatments" by Calvary during 2013-14.
The government's long-awaited official response to Dr Cooper's report was tabled in the Legislative Assembly on Thursday.
The government supported findings in the report which outlined areas where governance and oversight of Calvary by ACT Health could be improved.
"ACT Health will work with Calvary over coming months to determine the capacity of the current arrangements to deliver effective, efficient and integrated public hospital and health systems for our community," the government said in its response.
The government said a number of the Auditor-General's recommendations had already been completed, with the rest to be addressed by the end of the year.
The government agreed or agreed-in-part with several recommendations, including to "review, negotiate and amend" Calvary Hospital's contract to addresses weaknesses picked up by the audit.
ACT Health has also done a "risk management" plan for buying services from Calvary Public Hospital, which will be reviewed every year. The government will also work with Calvary to introduce a new funding model, which will be trialled this financial year.
Health Minister Simon Corbell said the strengthened funding and governance arrangements, which effectively allow the government to better track how money is being spent, would ensure such irregularities do not occur again at Calvary Public Hospital.
He said the agreement with Calvary was a legal contract that could not be "unilaterally revoked".
"The government, however, is currently reviewing the agreement... to determine whether the current arrangements can continue to deliver an effective, efficient and integrated public hospital and health system for our community," he said.
The government will demand to see evidence that systems and processes in place at the hospital are consistent with ACT public service law and relevant enterprise agreements.
The evidence will be required by October 2016.
