Building for our future

Annual Report 2014 Building for our future

Our hospital Our front cover Electrical contractor Kirsten Curry from ELEKNET shows four year-old Austin Gore some of the work being undertaken by TS Constructions on the new Mother and Baby Unit at Latrobe Regional Hospital. We re building a more responsive health service for our community and planning for the next generation of Gippslanders. Photograph by Jodie Lee Photography. The principal objective of Latrobe Regional Hospital, an incorporated body, is to provide public hospital services in accordance with the principles of the Australian Health Care Agreement (Medicare) and the Health Services Act 1988 (Vic). In addition to this, LRH sets other objectives that encompass the shared vision, core values and strategic direction of the hospital. Responsible Bodies Declaration In accordance with the Financial Management Act 1994, I am pleased to present the Report of Operations for Latrobe Regional Hospital for the year ending 30 June 2014. Kellie O Callaghan Chair, Board of Directors Traralgon West 22/07/2014

Contents 2: Highlights of our year 3: Our services 4: Our shared vision 5: Building on our strengths: Message from the Chair and Chief Executive 7: Our history. Our strategic direction and core values 8: Organisational chart 9: Our leadership group 10: Our Board of Directors 13: Our staff 14: Reports: Director Nursing, Midwifery and Clinical Services. Director Mental Health. Chief Medical Officer, Senior Paediatrician. Director Corporate Services. 18: Our community 20: Statement of Priorities 26: Our achievements Summary of Financial Results 29: Reporting requirements 31: Attestations 32: Additional information 33: Disclosure Index 1

Highlights of our year Demand for services has grown with 121,967 patients admitted, 9157 more than the previous 12 months. The Victorian Government announced $73 million for a major redevelopment of services including the construction of a new Emergency Department and cardiac catheterisation laboratory. Construction continued on several major projects including the $22 million expansion of the Gippsland Cancer Care Centre, a new allied health building and a mental health unit to provide support to women experiencing emotional problems or having difficulty coping after the birth of their child. Our specialist clinics began operating from a new building on the former Traralgon Hospital site. From a total operating revenue of $192.652 million we posted an operating surplus of $6.168 million Our community donated $652,040 towards new equipment and services. We launched a new appeal to raise money for our Mental Health Service and awareness about mental health issues. Our dedicated workforce is the largest in Gippsland with 1841 staff and 52 volunteers.

Our services Latrobe Regional Hospital is Gippsland s specialist referral and trauma centre for a population of more than 240,000. Located 150km east of Melbourne at Traralgon West in the Latrobe Valley, it is a purpose-built, 261-bed teaching hospital and is being developed as the site for sub-specialty services. The hospital is fully integrated and offers complete medical services in-house including aged care, elective surgery, emergency care, maternity, mental health, pharmacy, rehabilitation and medical and radiation oncology. The hospital has four operating theatres and specialises in general surgery, orthopaedic, opthalmology, gynaecology and obstetrics as well as ear, nose and throat surgery and urology. We treated 121,967 patients in 2013-14. Of those 30,541 were inpatients, 31,646 were seen at emergency and 59,780 were outpatients. Of the patients treated 9161 underwent surgical procedures. We delivered 859 babies including five sets of twins. LRH has community mental health teams in the Latrobe Valley, Sale, Bairnsdale, Yarram, Orbost, Korumburra, Warragul and Wonthaggi. The Community Residential Care Unit provides supported care to people over a longer term while the Prevention and Recovery Care Unit provides sub-acute residential care for people with mental health issues. LRH is closely affiliated with Monash University s School of Rural Health and Federation University and provides placements and clinical experience for students. LRH actively participates in undergraduate teaching and has accredited postgraduate positions across a range of disciplines, including medicine, nursing and midwifery. LRH employs 1841 staff and has 52 volunteers working in a variety of roles. 3

Our shared vision We will be a leading regional health care provider delivering timely, accessible, integrated and responsive services to the Gippsland community.

Building on our strengths Message from the Chair and the Chief Executive Over the past year our hospital precinct has been undergoing transformation. From east to west, wherever you look across our site, there is evidence of construction to provide our community with the standard of health care it deserves. It s part of our vision - to be a leading regional health care provider. To do that, we need to grow and develop a facility that best meets the needs of Gippsland. Our vision was recognised by the Victorian Government in April when it announced $73 million for a major project at LRH known as Stage 2a of our Master Plan. We ll be able to double the size of our Emergency Department and in a Gippsland first we ll offer a cardiac catheterisation lab - a life-saving service that will improve outcomes for patients experiencing heart health issues. Stage 2a will also include a new 30-bed acute ward, a 12-bed short-stay unit, two day rooms for endoscopy procedures and a new entrance and admissions area. We re future-proofing our hospital to meet demand that grows substantially each year. This year we treated more than 121,000 patients with 31,646 seen by our Emergency Department staff. Our transfer of patients who arrive at the hospital in an ambulance is better than the state-wide benchmark. Our elective surgery waiting lists continue to fall with more than 4900 patients admitted for procedures. We have a dedicated workforce and leadership team who strive to improve the quality of care for people across our region. Our community too are generous contributors to LRH in so many ways. We have a team of 52 volunteers who work at the hospital on a regular basis, providing important services such as supporting patients and driving them to and from medical appointments. The generosity of our community gives momentum to our fundraising efforts. Our two year Allied Health Appeal which ended in May raised $479,647. We purchased equipment to improve the quality of life for people recovering from surgery, injuries and serious illnesses such as stroke. The equipment is being used in our allied health building, an $8 million construction project which was completed this year. Peter Craighead Chief Executive Kellie O Callaghan Chair Our attention now turns to our Mental Health Service where we hope to raise money to support projects to aid the recovery of people living with mental health issues. The new appeal is not just about fundraising. We re hoping the community embraces the appeal theme Talk About It. Make A Difference, encouraging all of us to increase our understanding of the challenges people experiencing mental illnesses face. Construction is almost complete on a new mental health unit for mothers and babies. It will provide support to women experiencing emotional problems or having difficulty coping after the birth of their child. We opened a new $1.1 million building for sub-acute specialist services at the former Traralgon Hospital site. It provides continence and pain specialist clinics and a Cognitive Dementia and Memory Service for people right across Gippsland. Many people driving past our hospital have watched the expansion of the Gippsland Cancer Care Centre take shape. The $22 million project which includes expanded chemotherapy, radiotherapy and dialysis services is also close to completion. We look forward to the year ahead when we ll witness more changes to our hospital site and welcome new infrastructure and services. We re building for the future but we re also building on strengths - our staff and our community. 5

Millions of dollars of capital works to expand services at Latrobe Regional Hospital are being overseen by General Manager Business Services Stewart Harper.

Our history Latrobe Regional Hospital as an entity is a little more than two decades old. In its short history it has been subject to transformation and expansion, evolving and growing alongside the community it serves. In its third decade there is again a vision for extensive growth, which will see it continue to provide for the health care needs of the region now and into the future. Latrobe Regional Hospital came into existence in July 1991, bringing together the Latrobe Valley Hospital at Moe built in 1972, the Central Gippsland Hospital at Traralgon built in 1956 and St Hilary s Nursing Home at Morwell. The organisation was expanded in July 1995 when LRH took over responsibility for the provision of regional mental health services from Hobson Park Hospital at Traralgon. The move was part of a statewide reform of mental health services and resulted in LRH providing inpatient, residential and community-based care. As LRH continued to grow, it was widely recognised both the Traralgon and Moe campuses required significant upgrades to meet the future demands of the region. In 1996 Australian Hospital Care Limited (AHC) won the contract to build and operate a new 257-bed, state-of-the-art public hospital and in July 1998 LRH started operation as Victoria s first privately owned public hospital. Two years later the State Government assumed responsibility for its operation. In 2006 the Gippsland Cancer Care Centre was opened, further broadening the hospital s role and reflecting the increasing importance of LRH as a regional health care provider. Our strategic direction and core values Strategic direction Enhance services available to the community Improving service models Improving quality Enabling people Supporting education, training and research Building leadership Developing infrastructure Developing partnerships Core values Person-Centred Care Working together Excellence Integrity 7

Organisational Chart as at June 2014 Gippsland Health Alliance Corporate Counsel Director Mental Health Chief Executive Executive Office Director Corporate Services Director Clinical Services Chief Medical Officer Pharmacy Koori Liaison Fundraising Public Relations GRICS BreastScreen Business Services Financial Services Support Services Sub-Acute Acute Clinical Governance Medical Services MH Professional Development Unit Medical Staff - External Business - Business Analyst - Projects & Developments - Biomedical Engineering - Facilities - Patient Liaison - Diversity/ Interpreter - Library Acute Bed-based Mental Health Community Mental Health - Flynn Ward - Macalister Ward - Prevention & Recovery Care Service - CRCU - Triage - Consultation Liaison & ED Mental Health Services - Finance - Payroll - Contracts - Purchasing & Supply - Fleet - Human Resources - OH&S/ WorkCover - Food Services - Environmental Services - Security - Clerical Services - Volunteers Emergency Department: - Tambo Acute Wards: - Tyers - Tanjil - Thomson - Tarra - Hospital Co-ordinators - Operating Theatres - Cardiology - Patient Services - Critical Care Unit - Pre-Admission - Staff Development - Clinical Governance - Community Consultation - HMO Management - Senior Medical Staff - Medical Education & Training - Private Consulting Suites - Business Support - Health Information - Consultant Psychiatrists - Registrars - Medical Officers - Adult Mental Health Teams - Aged Mental Health Team - Child & Youth Mental Health Team - Primary Mental Health & Community Development Team - Allied Health - HITH - Nurse Consultant - Infection Control - Wound Management - Diabetes Educators - Chemotherapy - Dialysis - Radiotherapy Nicholson: - Rehabilitation - GEM - Health Independence Program - HARP - PAC - SAC

Our leadership group Ministers The Hon David Davis, Victorian Minister for Health The Hon Mary Wooldridge, Victorian Minister for Mental Health Governance Under the Health Services Act 1998, board directors are responsible for the corporate and clinical governance of Latrobe Regional Hospital on behalf of the State Government of Victoria. In discharging their responsibilities, the directors are active members of various board committees set up to assist the board in monitoring the operations of the hospital. Finance Committee Audit and Risk Committee Remuneration Committee Appointments and Scope of Practice Committee Human Research Ethics Committee Quality Committee Community Advisory Committee LRH Foundation Population Health Committee In accordance with the by-laws of Latrobe Regional Hospital, the board places great importance on making clear any existing or potential conflicts of interest. Any such conflicts of interest of board directors are officially documented at every meeting of the board and recorded in a Disclosure of Interest Register. Latrobe Regional Hospital's executive team from left: Director Corporate Services Catherine Greaves, Chief Medical Officer Dr Simon Fraser, Chief Executive Peter Craighead, Director Nursing, Midwifery and Clinical Services Amanda Cameron, Director Mental Health Cayte Hoppner. 9

Our Board of Directors Kellie O Callaghan - Chair Appointed: 2005 Kellie O Callaghan draws on extensive knowledge and experience in health and human services in the development and management of community-based organisations. She is focused on applying the principles of community engagement and good governance to benefit communities. Ms O Callaghan was elected to Latrobe City Council in 2008 and has served as mayor and deputy mayor. She is also the chair of the Clean Coal Victoria Advisory Committee and a non-executive director of Gippsland Medicare Local. Ms O Callaghan is committed to ensuring the broader Gippsland community has access to quality health services that are well resourced and sustainable. Qualifications: Bachelor of Arts (Social Science), Graduate Diploma Mental Health Science, Graduate Australian Institute of Company Directors. LRH committees: Board and Finance Committee and Executive Performance Committee (chair), LRH Foundation (chair), Community Advisory Committee (chair), Human Research Ethics Committee (chair), ex-officio member of Audit and Risk Committee, Appointments and Scope of Practice Committee, Population Health Committee and Quality Committee. 11 board meetings: 11 attended Leah Young Appointed: 2010 Leah Young has experience in business management and governance. She has served on the boards of Gippsland Water and Westernport Water and is currently a board director with Gippsland Medicare Local and the business manager at St Paul s Anglican Grammar School. Ms Young has experience in local government, finance, corporate services and capital works development. Qualifications: Bachelor of Business, Graduate Diploma of Business, Company Directors Course Diploma (FAICD), Governance Institute of Australia Certificate in Governance and Administration GIA (Cert). LRH committees: Board and Finance Committee (member), Audit and Risk Committee (chair), Executive Performance Committee (member). 11 board meetings: 10 attended Ian Gibson - Deputy Chair Appointed: 2009 Ian Gibson holds qualifications in economics, arts, public policy and management. He has extensive experience in strategic planning, local government and governance. Mr Gibson is a board member of the West Gippsland Catchment Management Authority and a sessional member of Planning Panels Victoria. Qualifications: Bachelor of Economics, Bachelor of Arts, Masters of Public Policy and Management. LRH committees: Board and Finance Committee (deputy chair), Appointments and Scope of Practice Committee (chair), Audit and Risk Committee (deputy chair), Population Health Committee (chair), Credentials Committee, Executive Performance Committee (member). 11 board meetings: 10 attended Mary Draper Appointed: 2011 Mary Draper is chief executive officer of the Health Issues Centre, Victoria s health consumer organisation. She was a member of the Ministerial Advisory Committee on the Victorian Health Priorities Framework and the review panel on the Health Services Conciliation and Review Act. Ms Draper chairs the Department of Health s Participation Advisory Committee and has been on a range of national and state health and social policy committees. She has worked for government, universities, health services and consumer organisations on quality of patient care, safety, consumer participation in health and women s policy. She has skills in strategy development, policy and organisational development, stakeholder engagement, consultation and facilitation. Qualifications: Bachelor of Arts, Bachelor of Social Studies. LRH committees: Board and Finance Committee (member), Quality Committee (chair), Community Advisory Committee (deputy chair). 11 board meetings: 9 attended

Elizabeth Board Appointed: 2011 (leave of absence December 2013 to 30 June 2014) Elizabeth Board has qualifications and experience in education, fundraising, arts and business management. She is development director at Camberwell Grammar and runs two small businesses, one in Gippsland and one in Richmond. She has extensive experience in corporate governance and strategic planning. Ms Board is a member of the Australian Institute of Company Directors, a fellow of Educate Plus, a board member of Plus Recruitment and she sits on the boards of a number of not-for-profit organisations in Victoria and Tasmania. She chairs MAS National Ltd, an Australian Apprenticeship Centre. Qualifications: Master of Education, Bachelor of Arts, Graduate Diploma of Business Management. LRH committees: Board and Finance Committee (member), Community Advisory Committee (chair July to December 2013), LRH Foundation (member July to December 2013). 11 board meetings: 4 attended Dr Annie Moulden, OAM Appointed: 2012 Annie Moulden is a consultant paediatrician and the clinical director of innovation and quality at Monash Health. She was previously the director of quality and the clinical lead for patient safety at the Royal Children s Hospital. Dr Moulden was an executive member of the Victoria Quality Council until 2012 and is a director of Very Special Kids, an organisation which supports the families of children with life-threatening illnesses. Dr Moulden is driven by a need to transform the delivery of healthcare to improve the patient experience and increase the safety and quality of care. Qualifications: Bachelor of Medicine, Bachelor of Surgery, Fellow of the Royal Australasian College of Physicians, Graduate of the Australian Institute of Company Directors. LRH Committees: Board and Finance Committee (member), Quality Committee deputy chair), Appointments and Scope of Practice Committee (deputy chair). 11 board meetings: 10 attended Sean Dignum Appointed: 2012 Sean Dignum is a strategic communication advisor and issues manager with extensive experience in corporate affairs projects and public education campaigns. Mr Dignum s strategic perspective is informed by extensive experience at the senior level in mainstream media. He is principal of the Melbourne-based advisory firm SDA Strategic and has been a member of boards and committees for diverse business, arts and community organisations. Qualifications: Bachelor of Arts, Member of the Risk Management Institution of Australia. LRH committees: Board and Finance Committee (member), Population Health Committee (deputy chair), Audit and Risk Committee (member). 11 board meetings: 10 attended 11

Our Biomedical Engineering team maintains and repairs medical equipment. LRH offers a diverse range of career opportunities and with more than 1800 staff is the largest employer in Gippsland.

Our staff JUNE Current JUNE YTD FTE Labour Category Month FTE (annual average) 2014 2013 2014 2013 Nursing 608.18 590.43 593.02 582.55 Admin and Clerical 190.89 181.54 188.77 187.49 Medical Support 66.26 57.66 64.81 60.53 Hotel and Allied Services 94.25 112.01 90.61 105.19 Medical Officers 23.02 32.28 29.24 29.81 Hospital Medical Officers 100.68 92.21 94.71 93.82 Sessional Clinicians 17.39 9.91 12.56 9.96 Ancillary Staff (Allied Health) 114.33 109.15 113.05 107.87 Total Staff Employed - FTE* 1215.00 1185.19 1186.77 1177.22 *FTE stands for full-time equivalent positions. Health and Safety Continued focus on improving health and safety in the work environment during 2013-14 has remained clearly on the agenda for staff at LRH. Our employees have worked together and actively reported all known or observed hazards to their immediate supervisor or manager in an effort to achieve excellence in health and safety. During the year the Victorian Auditor General s Office (VAGO) conducted an audit on health and safety in Victorian public hospitals. LRH was identified as an appropriate representative for large regional hospitals and participated in the audit. The results confirmed all public hospitals experience similar challenges in the provision of a safe environment for staff, clients and visitors. As a result of the VAGO audit LRH is now a representative on the Metro and Regional Health OHS Executive which liaises with the Department of Health to facilitate system-wide improvements to occupational health and safety in Victorian public hospitals. This engagement has enabled LRH to participate in stakeholder forums relating to occupational violence (Code Grey) and incident reporting (RiskMan) systems review. During the past 12 months LRH has experienced a total of 286 health and safety incidents which have decreased from 298 in the previous 12 months. Injury was sustained in 44.06 per cent of the incidents reported, up marginally from 41.3 per cent when compared to the previous 12 month period. This resulted in 43 accepted WorkCover claims of which 26 were standard claims and 17 minor claims. The WorkCover performance of LRH remains sound as demonstrated by the indicators detailed below. The hospital s overall performance over the past five years has shown a steady improvement largely due to the adoption of strategic claims management practices. Workcover Indicators 2009-10 2010-11 2011-12 2012-13 2013-14 Premium Rate 2.015% 1.813% 1.276% 1.395% 1.307% Industry Rate 1.342% 1.391% 1.379% 1.296% 1.232% Performance Rating 1.501 1.304 0.925 1.076 1.060 Data analysis highlights a significant proportion of health and safety incidents relate to aggression, falls, sprains and sharps Health and Safety (continued) injuries. We are continuing to work on ways to minimise risks to staff and patients through integrated risk management safety systems and incident reporting. In response to the risk of aggression, the hospital has instigated an organisation-wide Occupational Violence and Aggression Work Group which reports to our Occupational Health and Safety Committee. To date this group has assessed the risk of violence and aggression across all work areas and locations, commenced the review of the communication and non-violent response education (CARE) program and reviewed the protocols in relation to the use of seclusion and restraint at LRH. We have also made numerous improvements to the physical environment to reduce the likelihood of incidents. LRH has improved the tracking and monitoring capability of staff compliance of mandatory training in an effort to reinforce safety improvements. During the next 12 months LRH will continue to evolve the capability of the OHS system to sustain and improve the overall safety performance within the hospital. Resources In 2013-14 Latrobe Regional Hospital employed 1841 staff across 10 locations throughout Gippsland. The biggest category of employees is nursing staff, which comprises more than half of the hospital workforce. As at 30 June 2014 staffing levels by labour category were as per the table at the top of this page. Alignment with public administration values LRH works with staff to identify desired behaviours and ensures that policy and practice adhere to public sector values and the hospital s own core values which are approved by the board of directors. Staff are expected to adhere to the Public Sector Code of Conduct for Victorian Public Sector Employees issued by the Public Sector Standards Commissioner. Our Workplace Conduct Policy is consistent with the Charter of Human Rights and Responsibilities Act 2006 (Vic) and promotes the principles of equal opportunity and fair and reasonable treatment of others. 13

Report by Amanda Cameron, Director Nursing, Midwifery and Clinical Services The Director Nursing, Midwifery and Clinical Services is a registered nurse with experience at a senior level managing a diverse health care environment. The director is responsible for all the wards of the hospital and same-day services such as chemotherapy, dialysis and allied health services. The position is integral to ensuring LRH continues to improve the healthcare delivered to the community. Achievements this year include: The performance of our Emergency Department where no patient has stayed for 24 hours. The ED continues to exceed the state target for ambulance transfers and has improved its waiting times despite increased demand. Sustained high achievements in elective surgery with the number of patients admitted for surgery exceeding targets. Successful mid-cycle accreditation under the new National Standards with 14 developmental actions upgraded to having been satisfactorily met. Introduction of a student-led clinic under the supervision of a nurse practitioner in collaboration with Federation University. Relocation of the Chemotherapy Unit into the Gippsland Cancer Care Centre. Commencement of the Residential In Reach program. The development and implementation of the organisation s Quality Plan. Implementation of further redesign principles with the introduction of the Productive Operating Theatre. Commencement of capital works for a four-bed High Dependency Unit. A number of significant senior nursing management appointments. Introduction of Advanced Care Planning with the appointment of a dedicated project worker. Continued involvement with the clinical networks including stroke, emergency, cardiac and maternity and newborn. New Sub Acute Ambulatory Care building completed. Comprehensive revision of all policies and protocols across the organisation, resulting in a met with merit action Standard 1 Governance. Commencement of LRH providing post-acute nursing services. Improvement in the management of stroke through targeted door-to-needle time for thrombolysis. Completion of the Allied Health redevelopment.

Report by Cayte Hoppner, Director Mental Health The Director Mental Health (DMH) is a senior mental health nurse with experience in mental health service management. The DMH leads the mental health team in implementing mental health reform and provides high-level advice as a member of the LRH executive. There have been a number of improvements in the delivery of specialist mental health services across the Gippsland region. Some of the key highlights for the year have been: Construction of the new five-bed Mother Baby Unit (MBU) and the development of the therapeutic model of care for the facility. The MBU is due to open in September 2014. Construction of the new six-bed High Dependency and Assessment Unit within Flynn which is due to open in August 2014. Implementation of the new Mental Health Act 2014. The reform of the Mental Health Act has been the most significant legislation change for many years and introduces a range of safeguards and oversights for mental health services. Completion of a literature review for the model of care for the aged mental health program. Commencement of our Nurse Practitioner Candidate in Alcohol and Other Drugs in the Emergency Department and two further nurse practitioner candidates in adult and aged community mental health. Improvements in key areas of our performance including re-admission rates, pre-admission and post discharge follow up. A key focus on reporting rates of restraint and seclusion and targeted work in this area that is leading to a reduction in the use of these restrictive interventions. The appointment of two permanent consumer consultants who bring a wealth of lived experience and knowledge to support our journey to becoming a recovery-oriented service. Service-wide implementation of the Choice and Partnerships approach in our Child and Youth Mental Health Service which has led to increased referrals and a reduction in waiting lists. Pilot implementation of the Optimal Health Program - a recovery-based model of care within the adult mental health program. This has been supported by a partnership with St Vincent s Hospital providing education and supervision. Implementation of Dialectical Behaviour Therapy - a specialist program for the treatment of Borderline Personality Disorder. 15

Report by Dr Simon Fraser, Chief Medical Officer, Senior Paediatrician The Chief Medical Officer (CMO) is a medical practitioner with experience in hospital administration. As a member of the hospital executive the CMO provides high-level advice and support on a range of issues. The CMO also supports the senior and junior medical staff, general managers working within the hospital and indirectly the Health Information Unit. Achievements in medical services this year include: The appointment of a substantial number of new senior medical staff including: General Surgeon Mr Ravindran Sivasubramaniam General Surgeon Mr KJ Tan Thoracic Surgeon Mr Cliff Choong Obstetrician and Gynaecologist Dr Tzippora Ben-Harim Infectious Disease Consultant Dr Roy Chean Geriatrician Dr Alice Lac Intensivist Dr Judit Orosz Anaesthetist Dr Hedda Robinson Examinations have been held for the Royal Australasian College of Physicians (both adult and paediatric examinations). Our relationship with Monash University (medical students) has been strengthened with the appointment of two clinical deans (Assoc Prof Alistair Wright and Dr Cathy Coates) and the sub-regional leadership role of Associate Professor of Rural Medicine Joseph Tam. We have continued with 10 Gippsland Rural Intern Training (GRIT) interns. Dr Dennis Danso, Clinical Lead and Obstetrician and Gynaecologist resigned in December 2013. He had been with LRH for a number of years and has relocated overseas. The appointment to leadership roles of: Pharmacy Manager Kenneth Ch ng A second Emergency Department Co-Director Dr Yaman Al-Azzawi Recruitment of a medical management registrar for the second year. Implementation of electronic death certificate completion across the organisation.

Report by Catherine Greaves, Director Corporate Services The Director Corporate Services provides business and support services to LRH s clinical and medical departments to ensure the hospital s smooth and efficient operation. Key achievements of corporate services throughout the year include: Continued redevelopment works on the Gippsland Cancer Care Centre with completion of the first two stages of the project which includes a new hospital entrance, expanded dialysis and chemotherapy units, new office and administration areas and construction of a third radiotherapy bunker. Completion of the Allied Health redevelopment project which includes expansion of occupational therapy and physiotherapy spaces, a new gym and additional consulting rooms and staff areas. Commencement of building works to extend the High Dependency Unit by an additional four beds. Finalised the implementation of LRH s Cultural Responsiveness Plan and the new Carers Recognition Act action plan. Completion of the final stage of an ICOP (Improving Care for Older People) project, which involved the installation and refurbishment of more than 20 bathrooms. Development of a comprehensive business plan for the pharmacy department and implementation of a number of activities including a risk-based approach to clinical pharmacy and adopting lean practices to streamline services. Ongoing active participation in the Gippsland Aboriginal Health Advisory Committee to develop Gippsland s Koolin Balit Implementation Plan 2013-15 which incorporates a variety of region-wide projects aimed at closing the health gap. Coordination and completion of a joint tender for provision of banking services Further development of a comprehensive Asset Management Plan which incorporates both medical and non-medical equipment. Introduction of a variety of measures to improve the quality of our food services including changeover of receptacles to improve food temperatures. A dietician and speech pathologist have had input into menus and meal evaluations to improve nutrition and texture. Patient surveys have been used to measure variety, quantity and taste of meals. Our Environmental Services Department achieved an overall hospital score of 95 per cent in its annual Department of Health cleaning audit. Enhancement of the PIP2 software system incorporating an electronic performance appraisal database and centralised mandatory training portal to enable improved monitoring and reporting. Implementation of our Aboriginal Employment Plan which has included recruitment of four trainees in theatre, allied health and pharmacy in addition to employment of two nursing/midwifery cadets. 17

Our community Volunteers give freely of their time Why does a 17 year-old school student choose to help patients at LRH rather than spend time with her friends? Why do former chemotherapy patients return to the Gippsland Cancer Care Centre to support people undergoing treatment? There is something special about people who freely give up their time to help others. We have a band of 52 volunteers who support patients, their families and hospital staff. There are 19 volunteer drivers who transport patients unable to drive themselves to an appointment at the hospital or access public transport. On average the drivers transport more than 30 patients a week. Our volunteers contribute many skills and so much expertise to our service. We re striving to provide a quality health service to the region and we re proud our community is part of that journey. Pictured above, Mike Forehan has dedicated many years of service to LRH as a volunteer driver. Pictured below, volunteer Carmen Cook provides support to the Gippsland Cancer Care Centre and maintains its wig library. General volunteers provide valuable support throughout the hospital. They re friendly faces offering books and magazines to patients, handing out meals and hot drinks to people undergoing chemotherapy or dialysis and supporting family members sitting with a patient in the Emergency Department. There are even volunteers who run a maintenance program to keep tyres and wheels on wheelchairs in tip-top shape. Some of our volunteers are retirees. Others have a close connection to the hospital or just an inherent desire to reach out to people in need.

Our community Continued support for fundraising and events Our generous community contributed $652,040 over the past year to enable the purchase of equipment to improve the quality of care for patients at Latrobe Regional Hospital and the Gippsland Cancer Care Centre. The figure includes $163,210 raised by our Allied Health Appeal in 2013-14. The appeal was launched in 2012 and closed at the end of May. It raised a total of $479,647 towards equipment such as adjustable electronic walking rails and electric wheelchairs to support people recovering from surgery, injuries and serious illnesses. Our attention has now turned to our Mental Health Service. Contributions to the LRH Mental Health Appeal will fund a number of important projects including the redevelopment of the outdoor courtyards in the hospital s Flynn Unit and the creation of sensory rooms to promote positive changes in the life of a person with mental health issues. The Mental Health Appeal has embraced the theme Talk About It. Make A Difference to raise awareness about mental health issues and the services available to people across Gippsland. Our community also dug deep to support the 2013 Christmas Appeal donating $72,404 which has funded the purchase of an adjustable operating table. Gippsland broadcasters TRFM and Gold 1242 rallied to our aid to run the annual LRH Gala Ball in October last year. The glittering event had been put on hold due to funding constraints however TRFM and Gold 1242 stepped in to stage it on our behalf, raising $98,613. We can t overlook the many people and businesses in our community who have made in-kind contributions of goods, services and their time. Star FM s Give Me 5 for Kids campaign is another example of community goodwill which has provided financial support to children seeking treatment and rehabilitation for illnesses and injuries. Pictured above, proceeds from the WIN Network Traralgon Marathon supported the LRH Mental Health Appeal. The marathon is Australia s oldest. A major event supporting the Mental Health Appeal was the 2014 WIN Network Traralgon Marathon in June. We were delighted the marathon organisers, Traralgon Harriers donated $17,500 to the new appeal, having also contributed to the Allied Health Appeal in 2013. 19

Statement of Priorities Part A: Strategic Priorities The Victorian Government s priorities and policy directions are outlined in the Victorian Health Priorities Framework 2012-2022. In 2013-14 Latrobe Regional Hospital contributed to the achievement of these priorities by: Priority Action Deliverable Strategies/Actions Developing a system that is responsive to people s needs. Implement formal advance care planning structures and processes that provide patients with opportunities to develop, review and have their expressed preference for future treatment and care enacted. Investigate the suitability of incorporating Advanced Care Planning with the Pathway for Improving the Care of the Dying. In progress. Advance care planning project worker recruited. In partnership with other local providers apply existing service capability frameworks to maximise the use of available resources across the catchment. Establishment of Mother-baby service at LRH. In progress. Building works due for completion September 2014. Model of care developed. Development of operational guidelines underway. Recruitment process underway. Establishment of an in-reach residential program. Completed. Service commenced. Improving every Victorian s health status and experiences. Improve 30 day unplanned readmission rates. Consider expansion of electronic discharge summaries to all local GP practices. In progress. BOSSNet system set up to email or auto fax discharge summaries to medical clinics. Education and rollout of new system scheduled for August/September 2014. Consider new models of care and more coordinated services to respond to the specific needs of people with priority clinical conditions. Complete Allied Health redesign which will identify opportunities for future models of care. In progress. Patient flow monitored during Allied Health redevelopment and SACS development. Plan to connect more medical clinics to discharge summaries system. Generate internal referral to SACS services.

Priority Action Deliverable Strategies/Actions Improving every Victorian s health status and experiences (continued). Complete stage 2 of Gippsland Cancer Care Centre and plan for the increased service provision. Implementation of a clinical pathway with Central Gippsland Health Service for orthopaedic patients from pre-admission to rehabilitation. In progress. Oncology consulting now operating from level one of the Gippsland Cancer Care Centre. Building works scheduled for completion August 2014. Completed. Pathway now in use. Optimise alternatives to hospital admission. In-reach residential care program implemented. Completed. RIR care program is treating patients in their designated care facility. Complete review and commence the delivery of a home-based nursing service. Completed. Post-Acute Care Nursing Service commenced. Expanding service, workforce and system capacity. Support excellence in clinical training through productive engagement in clinical training networks and developing health education partnerships across the continuum of learning. In partnership with the Gippsland Clinical Training Network and Monash University School of Nursing establish studentled primary clinic and enhance use of simulation teaching environments. In progress. Primary Care Clinic open three days a week. Nursing students have commenced rotations through the clinic. Work collaboratively with the department on service and capital planning to develop service and system capacity. Review of Masterplan. Completed. Stage 2a of Masterplan revised. Commence tender and construction of a four-bed High Dependency Unit. In progress. Tender awarded. Construction continues. Fit-out progressing. Complete construction of four additional Mental Health High Dependency beds. In progress. Building works due for completion August 2014. Development of therapeutic model underway. 21

Priority Action Deliverable Strategies/Actions Increasing the system s financial sustainability and productivity. Reduce variation in health service administrative costs. Lead and contribute to the implementation of system improvements, partnerships and collaboration within the Gippsland region. In progress. Funding received for implementation of Regional Sustainable Hospitals Plans. Aged Care project commenced. Clinical Pathways Project and Medical Recruitment Project underway. EOI progressing for Gippsland Regional maternity and Newborn Planning project. Identify opportunities for efficiency and better value service delivery. Cooperative regional or sub-regional approach to pharmacy. In progress. New Pharmacy Director commenced at LRH. Pharmacy Business Plan approved. Pharmacy Managers Network commenced. Implementing continuous improvements and innovation. Develop and implement improvement strategies that better support patient flow and the quality and safety of hospital services. Introduce the Productive Operating Theatre and continue the rollout of the Productive Ward. In progress. Team established and training complete. Project ongoing. Increasing accountability and transparency. Prepare for commencement of proposed new mental health legislation in 2014. Development of a strategic action plan by the Mental Health Services, incorporating an education and communication strategy, to enable the new legislation to be implemented in 2014. In progress. Implementation plan completed. Policy and procedure review completed. Staff training underway. Patients under involuntary status advised of changes to legislation. HIU position recruitment underway. Implement systems that support streamlined approaches to clinical governance at all levels of the organisation. Integrate risk management systems with the National Safety and Quality Health Service Standards. In progress. Improved reporting of quality and safety indicators implemented at all levels. Clinical audit schedule developed. LRH Risk Management framework under review by VMIA. Improving utilisation of e-health and communications technology. Trial, implement and evaluate strategies that use ICT as an enabler of better patient care. Stage 2 of CHARM Chemotherapy Clinical Decision Support and Management software across five regional chemotherapy sites. In progress. Extensive development, configuration and testing completed. Software live at BRHS and on track at LRH, WGHG, GSHS and CGHS.

Statement of Priorities Part B: Performance Priorities Financial Performance Operating Result Target 2013-14 actuals Annual operating result ($'m) $1.0m $6.168m WIES Activity Performance Target 2013-14 actuals Percentage of WIES (public and private) performance to target 100 97% Cash Management Target 2013-14 actuals Creditors <60 days 40 Debtors <60 days 45 Access Performance Key performance indicator Target 2013-14 actuals Emergency Care Percentage of Ambulance transfers within 40 minutes 90 92 NEAT - Percentage of emergency presentations to physically leave the emergency department for admissions to hospital, be referred to another hospital for treatment, or be discharged within four hours (July - December 2013) 75 67 NEAT - Percentage of emergency presentations to physically leave the emergency department for admissions to hospital, be referred to another hospital for treatment, or be discharged within four hours (January - June 2014) 81 66 Number of patients with length of stay in the emergency department greater than 24 hours 0 0 Percentage of Triage Category 1 emergency patients seen immediately 100% 100% Percentage of Triage Category 1-5 emergency patients seen within clinically recommended times 80% 76% Elective Surgery Percentage of Urgency Category 1 elective patients treated within 30 days 100% 100% NEST - Percentage of Urgency Category 2 elective surgery patients treated within 90 days (July - December 2013) 80% 99% NEST - Percentage of Urgency Category 2 elective surgery patients treated within 90 days (January - June 2014) 88% 98% NEST - Percentage of Urgency Category 3 elective surgery patients treated within 365 days (July - December 2013) 94.5 99% NEST - Percentage of Urgency Category 3 elective surgery patients treated within 365 days (January - June 2014) 97 99% Number of patients on the elective surgery waiting list 935 896 Number of Hospital Initiated Postponements (HiPs) per 100 scheduled admissions 8 5 23

Statement of Priorities Part B: Performance Priorities (continued) Service Performance Key performance indicator Target 2013-14 actuals Elective Surgery Number of patients admitted from the Elective Surgery waiting list - quarter 1 1,311 1,255 Number of patients admitted from the Elective Surgery waiting list - quarter 2 1,194 1,276 Number of patients admitted from the Elective Surgery waiting list - quarter 3 993 1,065 Number of patients admitted from the Elective Surgery waiting list - quarter 4 1,213 1,317 Critical Care ICU Number of days below agreed minimum operating capacity 0 0 Quality and Safety Health Service Accreditation Full compliance Achieved Residential aged care accreditation Full compliance Achieved Cleaning standards Full compliance Achieved Cleaning standards (AQL-A) 90 98 Cleaning standards (AQL-B) 85 95 Cleaning standards (AQL-C) 85 93 Health care worker immunisation - influenza 75 75 Hospital acquired infection surveillance No outliers Outliers Hand Hygiene (rate) 70 85 SAB rate per occupied bed days < 2/10,000 0.2 Victorian Patient Satisfaction Monitor: (OCI) (July to December 2013) 73 Achieved Consumer Participation Indicator (July to December 2013) 75 Achieved Victorian Hospital Experience Measurement Instrument (January to June 2014) Full compliance Achieved People Matter Survey Full compliance Achieved Maternity Percentage of women with prearranged postnatal care 100 100 Mental Health 28 day readmission rate (%) 14 16 Adult mental health post-discharge follow-up rate (%) 75 82 Adult mental health seclusion rate per occupied bed days < 15/1,000 8 Aged mental health post-discharge follow-up rate (%) 75 82 Aged mental health seclusion rate per occupied bed days < 15/1,000 0 CAMHS post-discharge follow-up rate (%) 75 87 CAMHS seclusion rate per occupied bed days < 15/1,000 N/A

Statement of Priorities Part C: Activity and Funding Funding type Activity achieved Acute Admitted WIES Public 16,906 WIES Private 1,313 Total WIES (Public and Private) 18,219 WIES Department of Veteran Affairs (DVA) 112 WIES Transport Accident Commission (TAC) 349 TOTAL WIES 18,680 Acute non-admitted Emergency Services - Non Admitted 31,646 Specialist Clinics 34,932 Sub Acute Admitted Rehab Public 11,334 Rehab Private 2,151 Rehab DVA 379 GEM Public 5,784 GEM Private 1,214 GEM DVA 798 Palliative Care Public 1,210 Palliative Care Private 337 Palliative Care DVA 54 Transition Care - Residential 5,688 Transition Care - Home Based 5,366 Subacute Non-admitted Victorian Artificial Limb Program 601 Health Independence Program 24,035 Health Independence Program - DVA 212 Mental Health Services & Drug Services Mental Health Inpatient 14,514 Mental Health Ambulatory 64,487 Mental Health - Residential (CRCU) 3,563 Mental Health Service System Capacity N/A Mental Health Sub Acute (PARCS) 1,934 Drug Services N/A 25

Our achievements Summary of Financial Results Summary of significant changes in financial position in 2013-14 During the 2013-14 financial year, the Victorian State Government through the Department of Health provided $37.7 million in operating grants, $121.8 million in activitybased funding payments via the National Health Funding Administrator and other Commonwealth grants totalled $12.1 million. The Victorian State Government also provided $13 million towards targeted capital works and equipment. Revenue from operating activities before capital and specific items showed an increase of 3.8 per cent from the previous financial year. Revenue received included carry-over funding totalling $2 million, which is scheduled for disbursement in 2014-15. Total expenses from services supported by the Health Service Agreement increased by 4.6 per cent from 2012-13. Supplies and consumables increased by 9.2 per cent, employee costs increased by 5.1 per cent and all other non-salary labour costs increased by 1 per cent. Operating activities provided a net cash inflow of $22.6 million with a net cash outflow of $15.3 million from investing and financing activities, resulting in a net increase of $7.3 million in cash held. Cash and cash equivalents at end of financial year totalled $45.5 million. Two capital works projects commenced during 2013, a four-bed extension to the Mental Health high dependency unit and a five-bed Mental Health Mother and Baby Unit. These projects have a combined cost of $5.3 million and are funded by the Victorian Government. Other major capital works projects continued during the year including the Gippsland Cancer Care Centre (GCCC) and Allied Health upgrade. The Allied Health upgrade was completed in February 2014 while the GCCC is on track to be completed in August 2014. LRH has completed a number of other building projects funded within the hospital at an estimated cost of $6.5 million. Funding for all current projects includes $32.4 million from the Commonwealth and Department of Health and the balance of $9.8 million from hospital reserves. An independent valuation of the hospital's land and buildings was performed by the Valuer-General Victoria to determine the fair value of the land and buildings. The valuation, which conforms to Australian Valuation Standards, was determined by reference to the amounts for which assets could be exchanged between knowledgeable willing parties in an arm's length transaction. The valuation was based on independent assessments. The final WIES results show that our public/private WIES throughput finished below target by 548 WIES (-2.92 per cent). Compensable and other WIES finished 59 WIES up from target bringing the overall WIES throughput to 489 WIES (-2.55 per cent) under in our combined WIES targets. There were no events subsequent to balance date which may have had a significant effect on the operations of LRH in subsequent years.

Our achievements Summary of Financial Results (continued) Summary of Financial Results for the preceding four Financial Years 2013/14 2012/13 2011/12 2010/11 2009/10 Total Operating Expenses 186,482 178,297 168,851 157,743 148,511 Total Operating Revenue 192,650 185,321 174,706 165,133 153,881 Net Operating Result Before Capital and Specific Items Surplus/(Deficit) 6,168 7,024 5,855 7,390 5,370 Net Capital and Specific Items 4,770 5,134 (1,804) (950) (6,275) Net Result for the Year Surplus/(Deficit) 10,938 12,158 4,051 6,440 (905) Retained Surplus/(Accumulated Deficit) 59,425 50,058 37,617 33,563 27,593 Total Assets 193,758 160,245 147,803 138,240 129,871 Total Liabilities 45,243 40,801 40,517 35,005 33,299 Net Assets 148,515 119,444 107,286 103,235 96,572 Total Equity 148,515 119,444 107,286 103,235 96,572 Consultancies engaged during 2013-2014 A number of consultants were contracted to work for Latrobe Regional Hospital in 2013/14. As required by the Victorian Industry Participation Policy Act 2003, a summary of the extent of contractual costs or consultants is provided below. 2013/14 2012/13 Number of consultants used to a value greater than $10,000 0 2 Number of consultants used to a value less than $10,000 3 1 Total cost of consultants used to a value less than $10,000 $17,706 $4,200 Details of individual consultancies Total approved Expenditure Future Purpose of project fee 2013-14 expenditure Consultant consultancy Start date End Date (excluding GST) (excluding GST) (excluding GST) Wellbeing Nutrition Speech & Dietetics & Dietetics Workshop & DVD Production May-14 Oct-14 $9,206 $8,206 $1,000 Concept4 Solutions GRICS Strategic Plan Stage 3 & 4 Jun-13 Sep-13 $5,500 $5,500 $0 Wordwise Communications Communications Advice & Support Nov-13 Dec-13 $4,000 $4,000 $0 27

Our achievements Summary of Financial Results (continued) Patient debtors outstanding as at 30 June 2014 Under 30 Days 31-60 Days 61-90 Days Over 90 Days Total 30/06/14 Total 30/06/13 Private 235,065 257,151 3,201 51,174 546,591 195,165 Transport Accident Commission 0 0 0 32,188 32,188 10,750 Victoria WorkCover Authority 21,240 19,055 0 15,386 55,681 93,620 Other Compensable 6,470 8,724 0 12,994 28,188 14,809 Residential Aged Care 8,930 4,955 31,245 0 45,131 9,700 Total 271,705 289,885 34,446 111,742 707,779 324,045 Revenue Indicators Average Collection Days 2014 2013 Private 60.55 36.00 Transport Accident Commission 134.21 116.00 Victoria WorkCover Authority 226.94 102.00 Residential Aged Care 51.97 49.00

Reporting requirements Financial Management The information requirements listed in the Financial Management Act 1994 (the Act), the Standing Directions of the Minister for Finance under the Act (Section 4 Financial Management Reporting) and Financial Reporting Directions have been prepared and are available to the relevant Minister, Members of Parliament and the public upon request. Government Advertising LRH did not engage in any government advertising campaigns reportable per FRD 22E for 2013-14. Building Act 1993 Compliance LRH complies with the building and maintenance provisions of the Building Act 1993/Standards for Publicly Owned Buildings; building and maintenance provisions of the Building Act. We obtain building permits for all new projects where required and certificates of occupancy or certificates of final inspection for all completed projects. LRH controls properties located at the corner of Princes Highway and Village Avenue, Traralgon West and within the Princes Street, Washington Street and Garden Grove precinct in Traralgon. A number of administrative and residential services are provided from these properties. LRH owns and occupies an additional five buildings located at the Traralgon West campus which operate as specialist consulting clinics and administration offices. LRH also provides non-residential health services from 10 properties not under its direct control. These are located throughout Gippsland. A further 34 properties are used as residential accommodation for staff, 15 of which are under the control of LRH and 19 that are leased from private vendors and not under the control of LRH. LRH ensures all buildings owned or occupied by staff or patients meet the standards for essential safety measures. Likewise, all LRH buildings are audited annually for compliance against the occupancy certificate and building regulations. Victorian Industry Participation Policy LRH complies with the intent of the Victorian Industry Participation Policy Act 2003. The Act requires local industry participation in supplies wherever possible, taking into consideration the principle of value for money and transparent tendering processes. For the financial year ending 30 June 2014 LRH: did not commence any new contracts that require disclosure completed one regional building contract for the hospital s $5 million Allied Health upgrade, meeting all VIPP commitments continued to deliver on the $22 million Gippsland Cancer Care redevelopment which is due for completion in the second half of 2014. National Competition Policy Latrobe Regional Hospital has observed and complied with all requirements of the Victorian Government competitive neutrality (CN) policies (as amended) for all significant business activities. Freedom of Information Latrobe Regional Hospital provides access to documents held by the hospital in accordance with the Victorian Freedom of Information Act 1982. Freedom of Information requests 1 July 2013-30 June 2014 Requests received 320 Access granted in full 277 Access granted in part 1 Access denied in full 0 Not yet finalised* 14 Not finalised in 2012-13^ 7 Other # 28 * A decision with regard to release had not been made at 30/6/2014 ^ indicates valid requests not finalised in 2012-13 that were finalised during 2013-14 # indicates requests that were withdrawn, did not proceed or nil documents available 29

Reporting requirements (continued) Protected Disclosure Act 2012 LRH s General Manager Support Services is the Protected Disclosure Officer for the purpose of the Protected Disclosure Act. During 2013-14 there were no disclosures of corrupt or improper conduct as defined by the Act. Carers Recognition Act 2012 LRH recognises the principles of the Carers Recognition Act 2012 and has incorporated these into the hospital s Consumer, Carer and Community Partnership Policy. The hospital established an implementation plan to educate, promote, integrate and evaluate our progress against the principles of the Act and this has been fully implemented. LRH received no disclosures under this legislation during 2013-14. Environmental Performance LRH is committed to the principles of sound environmental practice to protect and enhance the environment for future generations. The implementation of sustainable practices in the activities that LRH undertakes will be managed through the environmental management system and the environmental management plan. The following key activities are helping us to achieve environmental sustainability at LRH: The introduction of a committee specific to the task of sustainable and environmental management. Reduction of waste through sound purchasing initiatives, responsible recycling, minimisation of water use and the reduction of energy use. Requiring staff and others who work on behalf of LRH to adopt environmental best practice and adhere to legal requirements regarding environmental protection. Training staff to be vigilant in identifying risks to the environment and creating an avenue to report environmental risks as well as environmental best practice initiatives. Implementing initiatives that have a sustainable conscience and lead to a reduction in our environmental footprint. Developing a program that monitors LRH s core business and its performance against defined environmental targets and objectives.

Attestations Attestation for compliance with the Australian/New Zealand Risk Management Standard I, Peter Craighead, certify that the Latrobe Regional Hospital has risk management processes in place consistent with the AS/NZS ISO 31000:2009 (or an equivalent designated standard) and an internal control system is in place that enables the executive to understand, manage and satisfactorily control risk exposures. The Board of Directors verifies this assurance and that the risk profile of the Latrobe Regional Hospital has been critically reviewed within the last 12 months. Peter Craighead Chief Executive Traralgon West 22/07/2014 Attestation for compliance with the Ministerial Standing Direction 4.5.5.1 - Insurance I, Peter Craighead, certify that the Latrobe Regional Hospital has complied with Ministerial Direction 4.5.5.1 - Insurance. Peter Craighead Chief Executive Traralgon West 22/07/2014 Attestation on Data Integrity I, Peter Craighead, certify that the Latrobe Regional Hospital has put in place appropriate internal controls and processes to ensure that reported data reasonably reflects actual performance. The Latrobe Regional Hospital has critically reviewed these controls and processes during the year. Peter Craighead Chief Executive Traralgon West 22/07/2014 31

Additional information (FRD 22E) In compliance with the requirements of FRD 22E Standard Disclosures in the Report of Operations, details in respect of the items listed below have been retained by Latrobe Regional Hospital and are available to the relevant Ministers, Members of Parliament and the public on request (subject to the Freedom of Information requirements, if applicable): (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) A statement of pecuniary interest has been completed; Details of shares held by senior officers as nominee or held beneficially; Details of publications produced by the Department about the activities of the health service and where they can be obtained; Details of changes in prices, fees, charges, rates and levies charged by the health service; Details of any major external reviews carried out on the health service; Details of major research and development activities undertaken by the health service that are not otherwise covered either in the Report of Operations or in a document that contains the financial statements and Report of Operations; Details of overseas visits undertaken including a summary of the objectives and outcomes of each visit; Details of major promotional, public relations and marketing activities undertaken by the health service to develop community awareness of the health service and its services; Details of assessments and measures undertaken to improve the occupational health and safety of employees; General statement on industrial relations within the health service and details of time lost through industrial accidents and disputes, which is not otherwise detailed in the Report of Operations; A list of major committees sponsored by the health service, the purposes of each committee and the extent to which those purposes have been achieved; Details of all consultancies and contractors including consultants/contractors engaged, services provided, and expenditure committed for each engagement.

Disclosure Index The annual report of Latrobe Regional Hospital is prepared in accordance with all relevant Victorian legislation. This index has been prepared to facilitate identification of the Department s compliance with statutory disclosure requirements. Legislation requirements Page reference Minesterial Directions Report of Operations Charter and purpose FRD 22D Manner of establishment and the relevant Ministers 7, F7 FRD 22D Objectives, functions, powers and duties 3 FRD 22D Nature and range of services provided 3 Management and structure FRD 22D Organisational structure 8 Financial and other information FRD 10 Disclosure index 33 FRD 12A Disclosure of major contracts 29 FRD 21B Responsible person and executive officer disclosures F7 FRD 22D Application and operation of Protected Disclosure 2012 30 FRD 22D Application and operation of Carers Recognition Act 2012 30 FRD 22D Application and operation of Freedom of Information Act 1982 29 FRD 22D Compliance with building and maintenance provisions of Building Act 1993 29 FRD 22D Details of consultancies over $10,000 27 FRD 22D Details of consultancies under $10,000 27 FRD 22D Employment and conduct principles 13 FRD 22D Major changes or factors affecting performance 26 FRD 22D Occupational health and safety 13 FRD 22D Operational and budgetary objectives and performance against objectives 23, 24 33

Report of Operations (continued) FRD 24C Reporting of office-based environmental impacts 30 FRD 22D Significant changes in financial position during the year 26 FRD 22D Statement of availability of other information 32 FRD 22D Statement on National Competition Policy 29 FRD 22D Subsequent events F7 FRD 22D Summary of the financial results for the year 26 FRD 22D Workforce Data Disclosures including a statement on the application of employment and conduct principles 13 FRD 25B Victorian Industry Participation Policy disclosures 29 FRD 29 Workforce Data disclosures 13 SD 4.2(g) Specific information requirements Inside front, 3 SD 4.2(j) Sign-off requirements Inside front SD 3.4.13 Attestation on data integrity 31 SD 4.5.5.1 Ministerial Standing Direction 4.5.5.1 compliance attestation 31 SD 4.5.5 Risk management compliance attestation 31 Financial Statements Financial statements required under Part 7 of the FMA SD 4.2(a) Statement of changes in equity F5 SD 4.2(b) Comprehensive operating statement F3 SD 4.2(b) Balance sheet F4 SD 4.2(b) Cash flow statement F6

Financial Statements (continued) Other requirements under Standing Directions 4.2 SD 4.2(a) Compliance with Australian accounting standards and other authoritative pronouncements F1 SD 4.2(c) Accountable officer s declaration F1 SD 4.2(c) Compliance with Ministerial Directions 29, F1 SD 4.2(d) Rounding of amounts F7 Legislation Freedom of Information Act 1982 29 Protected Disclosure Act 2001 30 Carers Recognition Act 2012 30 Victorian Industry Participation Policy Act 2003 29 Building Act 1993 29 Financial Management Act 1994 29 35

Financial Contents 37: Declaration Letter 38: Auditor General s Report 40: Comprehensive Operating Statement 41: Balance Sheet 42: Statement of Changes in Equity 43: Cash Flow Statement 44: Notes to the Financial Statements

Declaration Board member s, accountable officer s and chief finance and accounting officer s declaration The attached financial statements for Latrobe Regional Hospital have been prepared in accordance with Standing Directions 4.2 of the Financial Management Act 1994, applicable Financial Reporting Directions, Australian Accounting Standards including Interpretations, and other mandatory professional reporting requirements. We further state that, in our opinion, the information set out in the comprehensive operating statement, balance sheet, statement of changes in equity, cash flow statement and accompanying notes, presents fairly the financial transactions during the year ended 30 June 2014 and the financial position of Latrobe Regional Hospital at 30 June 2014. At the time of signing, we are not aware of any circumstance which would render any particulars included in the financial statements to be misleading or inaccurate. We authorise the attached financial statements for issue on this day. Kellie O Callaghan Chair, Board of Directors Peter Craighead Chief Executive Nick Moisis Chief Finance & Accounting Officer Latrobe Regional Hospital Traralgon West 22 August 2014 37

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Comprehensive Operating Statement for the Year Ended 30 June 2014 TOTAL TOTAL 2014 2013 Note Revenue from operating activities 2 185,489 178,700 Revenue from non-operating activities 2 7,161 6,621 Employee expenses 3 (119,156) (113,356) Non salary labour costs 3 (10,874) (10,764) Supplies and consumables 3 (35,743) (32,750) Other expenses 3 (20,709) (21,427) Net result before capital and specific items 6,168 7,024 Capital purpose income 2 13,176 12,807 Reversal of impairment of financial assets 2-2 Depreciation and amortisation 4 (8,406) (8,176) Assets provided free of charge 2c - 501 NET RESULT FOR THE YEAR 10,938 12,158 Other comprehensive income Items that will not be reclassified to net result Changes in physical asset revaluation surplus 18,133 - Total other comprehensive income 18,133 - Comprehensive result 29,071 12,158 This Statement should be read in conjunction with the accompanying notes.

Balance Sheet as at 30 June 2014 TOTAL TOTAL 2014 2013 Note ASSETS Current Assets Cash and Cash Equivalents 5 45,511 38,243 Receivables 6 4,152 4,389 Inventories 7 1,190 1,023 Prepayments 353 575 Total Current Assets 51,206 44,230 Non-Current Assets Receivables 6 2,760 2,467 Property, Plant & Equipment 8 139,792 113,632 Total Non-Current Assets 142,552 116,099 TOTAL ASSETS 193,758 160,329 LIABILITIES Current Liabilities Payables 9 10,672 8,719 Provisions 10 28,312 26,114 Other Current Liabilities 12 776 726 Non Interest Bearing Liabilities 13 50 50 Total Current Liabilities 39,810 35,609 Non-Current Liabilities Provisions 10 5,023 4,838 Non Interest Bearing Liabilities 13 410 438 Total Non-Current Liabilities 5,433 5,276 TOTAL LIABILITIES 45,243 40,885 NET ASSETS 148,515 119,444 EQUITY Property, Plant & Equipment Revaluation Surplus 14a 50,395 32,262 Restricted Specific Purpose Surplus 14a 15,111 13,540 Contributed Capital 14b 23,584 23,584 Accumulated Surpluses 14c 59,425 50,058 TOTAL EQUITY 14d 148,515 119,444 Commitments 17 Contingent Assets and Contingent Liabilities 18 This Statement should be read in conjunction with the accompanying notes. 41

Statement of Changes in Equity for the Year Ended 30 June 2014 Property Plant & Restricted Equipment Specific Accumulated Revaluation Purpose Contributions Surpluses/ Surplus Surplus by Owners (Deficits) Total Note $ 000 $ 000 $ 000 $ 000 $ 000 Balance at 1 July 2012 32,262 13,823 23,584 37,617 107,286 Net result for the year - - - 12,158 12,158 Other comprehensive income for the year - - - - - Transfer to accumulated surplus 14a,c - (283) - 283 - Balance at 30 June 2013 32,262 13,540 23,584 50,058 119,444 Net result for the year - - - 10,938 10,938 Other comprehensive income for the year 18,133 - - - 18,133 Transfer to accumulated surplus 14a,c - 1,571 - (1,571) - Balance at 30 June 2014 50,395 15,111 23,584 59,425 148,515 This Statement should be read in conjunction with the accompanying notes.

Cash Flow Statement for the Year Ended 30 June 2014 TOTAL TOTAL 2014 2013 Note CASH FLOWS FROM OPERATING ACTIVITIES Operating grants from government 174,650 165,451 Patient and resident fees received 2,552 2,465 Donations and bequests received 498 437 GST received from/(paid to) ATO 6,891 5,882 Interest received 1,802 1,827 Other receipts 16,715 16,962 Total receipts 203,108 193,024 Employee expenses paid (116,126) (111,208) Payments for supplies & consumables (77,402) (75,880) Total payments (193,528) (187,088) Cash generated from operations 9,580 5,936 Capital grants from government 12,529 12,530 Capital grants from non-government 396 1,595 Capital donations and bequests received 108 - NET CASH FLOW FROM/(USED IN) OPERATING ACTIVITIES 15 22,613 20,061 CASH FLOWS FROM INVESTING ACTIVITIES Payments for non-financial assets (15,298) (18,863) NET CASH FLOW FROM/(USED IN) INVESTING ACTIVITIES (15,298) (18,863) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings - 3,202 Repayment of borrowings (50) (3,252) NET CASH FLOW FROM/(USED IN) FINANCING ACTIVITIES (50) (50) NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS HELD 7,265 1,148 Cash and cash equivalents at beginning of financial year 38,231 37,083 CASH AND CASH EQUIVALENTS AT END OF FINANCIAL YEAR 5 45,496 38,231 This Statement should be read in conjunction with the accompanying notes. 43

Notes to Financial Statements for the Year Ended 30 June 2014 Table of contents Note 1: Summary of significant accounting policies 45 Note 2: Revenue 59 Note 2a: Analysis of Revenue by Source 60 Note 2b: Private and Residential Fees 62 Note 2c: Assets Received Free of Charge or For Nominal Consideration 62 Note 3: Expenses 63 Note 3a: Analysis of Expenses by Source 64 Note 3b: Analysis of Expenses by Internally Managed and Restricted Specific Purpose Funds for Services Supported by Hospital and Community Initiatives 66 Note 4: Depreciation and Amortisation 66 Note 5: Cash and Cash Equivalents 67 Note 6: Receivables 67 Note 7: Inventories 68 Note 8: Property, Plant & Equipment 69 Note 9: Payables 75 Note 10: Provisions 76 Note 11: Superannuation 77 Note 12: Other Liabilities 77 Note 13: Non Interest Bearing Liabilities 77 Note 14: Equity 78 Note 15: Reconciliations of Net Result for the Year to Net Cash Inflow/(Outflow) from Operating Activities 79 Note 16: Financial Instruments 80 Note 17: Commitments 86 Note 18: Contingent Assets and Contingent Liabilities 87 Note 19: Operating Segments 87 Note 20: Jointly Controlled Operations and Assets 88 Note 21a: Responsible Persons Disclosures 89 Note 21b: Executive Officer Disclosures 90 Note 22: Remuneration of auditors 91 Note 23: Events Occurring after the Balance Sheet Date 91

Notes to Financial Statements for the Year Ended 30 June 2014 Note 1: Summary of significant accounting policies These annual financial statements represent the audited general purpose financial statements for Latrobe Regional Hospital for the period ending 30 June 2014. The purpose of the report is to provide users with information about the Hospital s stewardship of resources entrusted to it. (a) Statement of compliance These financial statements are general purpose financial statements which have been prepared in accordance with the Financial Management Act 1994 and applicable AASs, which include interpretations issued by the Australian Accounting Standards Board (AASB). They are presented in a manner consistent with the requirements of AASB 101 Presentation of Financial Statements. The financial statements also comply with relevant Financial Reporting Directions (FRDs) issued by the Department of Treasury and Finance, and relevant Standing Directions (SDs) authorised by the Minister for Finance. The Hospital is a not-for profit entity and therefore applies the additional AUS paragraphs applicable to not-for-profit Hospitals under the AASs. The annual financial statements were authorised for issue by the Board of Latrobe Regional Hospital on 22 August 2014. (b) Basis of accounting preparation and measurement Accounting policies are selected and applied in a manner which ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported. The accounting policies set out below have been applied in preparing the financial statements for the year ended 30 June 2014, and the comparative information presented in these financial statements for the year ended 30 June 2013. The going concern basis was used to prepare the financial statements. These financial statements are presented in Australian dollars, the functional and presentation currency of the Hospital. The financial statements, except for cash flow information, have been prepared using the accrual basis of accounting. Under the accrual basis, items are recognised as assets, liabilities, equity, income or expenses when they satisfy the definitions and recognition criteria for those items, that is they are recognised in the reporting period to which they relate, regardless of when cash is received or paid. The financial statements are prepared in accordance with the historical cost convention, except for: non-current physical assets, which subsequent to acquisition, are measured at a re-valued amount being their fair value at the date of the revaluation less any subsequent accumulated depreciation and subsequent impairment losses. Revaluations are made and are re-assessed with sufficient regularity to ensure that the carrying amounts do not materially differ from their fair values; the fair value of assets other than land is generally based on their depreciated replacement value. Historical cost is based on the fair values of the consideration given in exchange for assets. In the application of AASs, management is required to make judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on professional judgements derived from historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision, and future periods if the revision affects both current and future periods. Judgements and assumptions made by management in the application of AASs that have significant effects on the financial statements and estimates, with a risk of material adjustments in the subsequent reporting period, relate to: the fair value of land, buildings, infrastructure, plant and equipment (refer to Note 1(k); superannuation expense (refer to note 1(h)); and actuarial assumptions for employee benefit provisions based on likely tenure of existing staff, patterns of leave claims, future salary movements and future discount rates (refer to Note 1(l)). Consistent with AASB 13 Fair Value Measurement, the Hospital determines the policies and procedures for both recurring fair value measurements such as property, plant and equipment, investment properties and financial instruments, and for nonrecurring fair value measurements such as non-financial physical assets held for sale, in accordance with the requirements of AASB 13 and the relevant FRDs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within 45

Notes to Financial Statements for the Year Ended 30 June 2014 Note 1: Summary of significant accounting policies the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: Level 1- Quoted (unadjusted) market prices in active markets for identical assets or liabilities Level 2- Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable Level 3- Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable. For the purpose of the fair value disclosures, Latrobe Regional Hospital has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above. In addition, the Hospital determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. The Valuer-General Victoria (VGV) is Latrobe Regional Hospital s independent valuation agency. The Hospital, in conjunction with VGV monitors the changes in the fair value of each asset and liability through relevant data sources to determine whether revaluation is required. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision, and future periods if the revision affects both current and future periods. Judgements and assumptions made by management in the application of AASs that have significant effects on the financial statements and estimates, with a risk of material adjustments in the subsequent reporting period, relate to: the fair value of land, buildings, infrastructure, plant and equipment (refer to Note 1(k); superannuation expense (refer to note 1(h)); and actuarial assumptions for employee benefit provisions based on likely tenure of existing staff, patterns of leave claims, future salary movements and future discount rates (refer to Note 1(l)). (c) Reporting entity The financial statements include all the controlled activities of the Hospital. Its principal address is: Cnr. Princes Highway and Village Avenue Traralgon West, Victoria 3844. A description of the nature of Hospital s operations and its principal activities is included in the report of operations, which does not form part of these financial statements. Objectives and funding Latrobe Regional Hospital s overall objective is to provide public hospital services in accordance with the principles of the Australian Health Care Management (Medicare) and the Health Services Act 1988 (Vic), as well as improve the quality of life to Victorians. Latrobe Regional Hospital is predominantly funded by accrual based grant funding for the provision of outputs. (d) Principles of consolidation Jointly controlled assets or operations Interests in jointly controlled assets or operations are not consolidated, but are accounted for by recognising in Latrobe Regional Hospital s financial statements its proportionate share of the assets, liabilities and any income and expenses of such assets. (e) Scope and presentation of financial statements Fund Accounting The Hospital operates on a fund accounting basis and maintains three funds: Operating, Specific Purpose and Capital Funds. The Hospital s Capital and Specific Purpose Funds include unspent capital donations and receipts from fundraising activities conducted solely in respect of these funds. Services Supported By Hospitals Agreement and Services Supported By Hospital and Community Initiatives Activities classified as Services Supported by Hospitals Agreement (HSA) are substantially funded by the Department of Health and includes Residential Aged Care Services (RACS) and are also funded from other sources such as the Commonwealth, patients and residents, while Services Supported by Hospital and Community Initiatives (H&CI) are funded by the Hospital's own activities or local initiatives and/or the Commonwealth. Residential Aged Care Service The Residential Aged Care Service operation is an integral part of the Latrobe Regional Hospital and shares its resources. The results of the two operations have been segregated based on actual revenue earned and expenditure incurred by each operation in Note 19 to the financial statements. The Residential Aged Care is substantially funded from Commonwealth bed-day subsidies.

Notes to Financial Statements for the Year Ended 30 June 2014 Note 1: Summary of significant accounting policies Comprehensive operating statement The comprehensive operating statement includes the subtotal entitled net result before capital & specific items to enhance the understanding of the financial performance of the Hospital. This subtotal reports the result excluding items such as capital grants, assets received or provided free of charge, depreciation, expenditure using capital purpose income and items of an unusual nature and amount such as specific income and expenses. The exclusion of these items is made to enhance matching of income and expenses so as to facilitate the comparability and consistency of results between years and Victorian Public Hospitals. The net result before capital & specific items is used by the management of the Hospital, the Department of Health and the Victorian Government to measure the ongoing operating performance of Hospitals. Capital and specific items, which are excluded from this sub-total, comprise: capital purpose income, which comprises all tied grants, donations and bequests received for the purpose of acquiring non-current assets, such as capital works, plant and equipment or intangible assets. It also includes donations of plant and equipment (refer Note 1 (g)). Consequently the recognition of revenue as capital purpose income is based on the intention of the provider of the revenue at the time the revenue is provided. specific income/expense, comprises the following items, where material: Voluntary departure packages Write-down of inventories Non-current asset revaluation increments/decrements Diminution/impairment of investments Voluntary changes in accounting policies (which are not required by an accounting standard or other authoritative pronouncement of the Australian Accounting Standards Board) impairment of financial and non-financial assets, includes all impairment losses (and reversal of previous impairment losses), which have been recognised in accordance with Notes 1 (k) depreciation as described in Note 1 (h); assets provided or received free of charge (refer to Notes 1 (g) and (h)); and expenditure using capital purpose income, comprises expenditure which either falls below the asset capitalisation threshold or doesn t meet asset recognition criteria and therefore does not result in the recognition of an asset in the balance sheet, where funding for that expenditure is from capital purpose income. Balance sheet Assets and liabilities are categorised either as current or non-current (non-current being those assets or liabilities expected to be recovered/settled more than 12 months after reporting period), are disclosed in the notes where relevant. Statement of changes in equity The statement of changes in equity presents reconciliations of each non-owner and owner changes in equity from opening balance at the beginning of the reporting period to the closing balance at the end of the reporting period. It also shows separately changes due to amounts recognised in the comprehensive result and amounts recognised in other comprehensive income. Cash flow statement Cash flows are classified according to whether or not they arise from operating activities, investing activities, or financing activities. This classification is consistent with requirements under AASB 107 Statement of Cash Flows. Rounding All amounts shown in the financial statements are expressed to the nearest $1,000 unless otherwise stated. Minor discrepancies in tables between totals and sum of components are due to rounding. Comparative Information Where necessary the previous year s figures have been reclassified to facilitate comparisons. (f) Change in accounting policies AASB 13 Fair Value Measurements AASB 13 establishes a single source of guidance for all fair value measurements. AASB 13 does not change when a hospital is required to use fair value, but rather provides guidance on how to measure fair value under Australian Accounting Standards when fair value is required or permitted. The hospital has considered the specific requirements relating to highest and best use, valuation premise, and principal (or most advantageous) market. The methods, assumptions, processes and procedures for determining fair value were revised and adjusted where applicable. In light of AASB 13, the hospital has reviewed the fair value principles as well as its current valuation methodologies in assessing the fair value, and the assessment has not materially changed the fair values recognised. AASB 13 has predominantly impacted the disclosures of the hospital. It requires specific disclosures about fair value measurements and disclosures of fair values, some of which replace existing disclosure requirements in other standards, including AASB 7 Financial Instruments: Disclosures. 47

Notes to Financial Statements for the Year Ended 30 June 2014 Note 1: Summary of significant accounting policies The disclosure requirements of AASB 13 apply prospectively and need not to be provided for comparative periods, before initial application. Consequently, comparatives of these disclosures have not been provided for 2012-13, except for financial instruments, of which the fair value disclosures are required under AASB 7 Financial Instruments Disclosures. AASB 119 Employee Benefits In 2013-14, the hospital has applied AASB 119 Employee Benefits (Sep 2011, as amended), and related consequential amendments for the first time. The revised AASB 119 changes the accounting for defined benefit plans and termination benefits. The most significant change relates to the accounting for changes in defined benefit obligation and plan assets. As the current accounting policy is for the Department of Treasury and Finance to recognise and disclose the State s defined benefit liabilities in its financial statements, changes in defined benefit obligations and plan assets will have limited impact on the health service. The revised standard also changes the definition of short-term employee benefits. These were previously benefits that were expected to be settled within 12 months after the end of the reporting period in which the employees render the related service, however, short-term employee benefits are now defined as benefits expected to be settled wholly within 12 months after the end of the reporting period in which the employees render the related service. As a result, accrued annual leave balances which were previously classified as short-term employee benefits no longer meet this definition and are now classified as long-term employee benefits. This has resulted in a change of measurement for the annual leave provision from an undiscounted to discounted basis. These changes have not altered the measurement of the annual leave provision for the hospital. (g) Income from transactions Income is recognised in accordance with AASB 118 Revenue and is recognised as to the extent that it is probable that the economic benefits will flow to Latrobe Regional Hospital and the income can be reliably measured at fair value. Unearned income at reporting date is reported as income received in advance. Amounts disclosed as revenue are, where applicable, net of returns, allowances and duties and taxes. Government Grants and other transfers of income (other than contributions by owners) In accordance with AASB 1004 Contributions, government grants and other transfers of income (other than contributions by owners) are recognised as income when the Hospital gains control of the underlying assets irrespective of whether conditions are imposed on the Hospital s use of the contributions. Contributions are deferred as income in advance when the Hospital has a present obligation to repay them and the present obligation can be reliably measured. Indirect Contributions from the Department of Health - Insurance is recognised as revenue following advice from the Department of Health. - Long Service Leave (LSL) Revenue is recognised upon finalisation of movements in LSL liability in line with the arrangements set out in the Metropolitan Health and Aged Care Services Division Hospital Circular 05/2013. Patient and Resident Fees Patient fees are recognised as revenue at the time invoices are raised. Private Practice Fees Private practice fees are recognised as revenue at the time invoices are raised. Revenue from commercial activities Revenue from commercial activities such as commercial laboratory medicine is recognised at the time invoices are raised. Donations and Other Bequests Donations and bequests are recognised as revenue when received. If donations are for a special purpose, they may be appropriated to a surplus, such as the specific restricted purpose surplus. Interest Revenue Interest revenue is recognised on a time proportionate basis that takes in account the effective yield of the financial asset, which allocates interest over the relevant period. Sale of investments The gain/loss on the sale of investments is recognised when the investment is realised.

Notes to Financial Statements for the Year Ended 30 June 2014 Note 1: Summary of significant accounting policies Fair value of assets and services received free of charge or for nominal consideration Resources received free of charge or for nominal consideration are recognised at their fair value when the transferee obtains control over them, irrespective of whether restrictions or conditions are imposed over the use of the contributions, unless received from another Hospital or agency as a consequence of a restructuring of administrative arrangements. In the latter case, such transfer will be recognised at carrying value. Contributions in the form of services are only recognised when a fair value can be reliably determined and the service would have been purchased if not received as a donation. Other income Other income includes non-property rental, dividends, forgiveness of liabilities, and bad debt reversals. (h) Expense recognition Expenses are recognised as they are incurred and reported in the financial year to which they relate. Cost of goods sold Costs of goods sold are recognised when the sale of an item occurs by transferring the cost or value of the item/s from inventories. Employee expenses Employee expenses include: wages and salaries; annual leave; sick leave; long service leave; and superannuation expenses which are reported differently depending upon whether employees are members of defined benefit or defined contribution plans. Defined contribution superannuation plans In relation to defined contribution (i.e. accumulation) superannuation plans, the associated expense is simply the employer contributions that are paid or payable in respect of employees who are members of these plans during the reporting period. Contributions to defined contribution superannuation plans are expensed when incurred. Defined benefit superannuation plans The amount charged to the comprehensive operating statement in respect of defined benefit superannuation plans represents the contributions made by the Hospital to the superannuation plans in respect of the services of current Hospital staff during the reporting period. Superannuation contributions are made to the plans based on the relevant rules of each plan, and are based upon actuarial advice. Employees of the Hospital are entitled to receive superannuation benefits and the Hospital contributes to both the defined benefit and defined contribution plans. The defined benefit plan(s) provide benefits based on years of service and final average salary. The name and details of the major employee superannuation funds and contributions made by Latrobe Regional Hospital are disclosed in Note 11: Superannuation. Depreciation All infrastructure assets, buildings, plant and equipment and other non-financial physical assets that have finite useful lives are depreciated (i.e. excludes land assets held for sale, and investment properties). Depreciation begins when the asset is available for use, which is when it is in the location and condition necessary for it to be capable of operating in a manner intended by management. Depreciation is generally calculated on a straight line basis, at a rate that allocates the asset value, less any estimated residual value over its estimated useful life. Estimates of the remaining useful lives and depreciation method for all assets are reviewed at least annually, and adjustments made where appropriate. This depreciation charge is not funded by the Department of Health. Assets with a cost in excess of $1000 are capitalised and depreciation has been provided on depreciable assets so as to allocate their cost or valuation over their estimated useful lives. The following table indicates the expected useful lives of noncurrent assets on which the depreciation charges are based. 2014 2013 Buildings - Structure Shell Building Fabric 40 to 45 years 40 to 45 years - Site Engineering Services and Central Plant 30 to 40 years 30 to 40 years Central Plant - Fit Out 20 to 25 years 20 to 25 years - Trunk Reticulated Building Systems 20 to 25 years 20 to 25 years Plant & Equipment 10 years 10 years Computer Equipment 1 to 5 years 1 to 5 years Furniture and Fittings 10 years 10 years Motor Vehicles 5 years 5 years Leasehold Improvements 5 to 40 years 5 to 40 years Site Improvements 40 to 45 years 40 to 45 years Please note: the estimated useful lives, residual values and depreciation method are reviewed at the end of each annual reporting period, and adjustments made where appropriate. As part of the buildings valuation, building values were separated into components and each component assessed for its useful life which is represented above. 49

Notes to Financial Statements for the Year Ended 30 June 2014 Note 1: Summary of significant accounting policies Finance costs Finance costs are recognised as expenses in the period in which they are incurred. Other operating expenses Other operating expenses generally represent the day-to-day running costs incurred in normal operations and include: Supplies and consumables Supplies and services costs which are recognised as an expense in the reporting period in which they are incurred. The carrying amounts of any inventories held for distribution are expensed when distributed. Bad and doubtful debts Refer to Note 1 (k) Impairment of financial assets. Fair value of assets, services and resources provided free of charge or for nominal consideration Contributions of resources provided free of charge or for nominal consideration are recognised at their fair value when the transferee obtains control over them, irrespective of whether restrictions or conditions are imposed over the use of the contributions, unless received from another agency as a consequence of a restructuring of administrative arrangements. In the latter case, such a transfer will be recognised at its carrying value. Contributions in the form of services are only recognised when a fair value can be reliably determined and the services would have been purchased if not donated. (i) Other comprehensive income Other comprehensive income measures the change in volume or value of assets or liabilities that do not result from transactions. Net gain/(loss) on non-financial assets Net gain/(loss) on non-financial assets and liabilities includes realised and unrealised gains and losses as follows: Revaluation gains/(losses) of non-financial physical assets Refer to Note 1(k) Revaluations of non-financial physical assets. Net gain/(loss) on disposal of non-financial assets Any gain or loss on the disposal of non-financial assets is recognised at the date of disposal and is the difference between the proceeds the carrying value of the asset at that time. Net gain/(loss) on financial instruments Net gain/(loss) on financial instruments includes: realised and unrealised gains and losses from revaluations of financial instruments at fair value; impairment and reversal of impairment for financial instruments at amortised cost (refer to Note 1 (l)); and disposals of financial assets and de-recognition of financial liabilities. Revaluations of financial instrument at fair value Refer to Note 1 (j) Financial instruments. Share of net profits/(losses) of associates and joint entities, excluding dividends. Refer to Note 1 (d) Basis of consolidation. Other gains/(losses) from other comprehensive income Other gains/(losses) include: the revaluation of the present value of the long service leave liability due to changes in the bond interest rates; and transfer of amounts from the reserves to accumulated surplus or net result due to disposal or de-recognition or reclassification. (j) Financial instruments Financial instruments arise out of contractual agreements that give rise to a financial asset of one Hospital and a financial liability or equity instrument of another Hospital. Due to the nature of the Hospital s activities, certain financial assets and financial liabilities arise under statute rather than a contract. Such financial assets and financial liabilities do not meet the definition of financial instruments in AASB 132 Financial Instruments: Presentation. For example, statutory receivables arising from taxes, fines and penalties do not meet the definition of financial instruments as they do not arise under contract. Where relevant, for note disclosure purposes, a distinction is made between those financial assets and financial liabilities that meet the definition of financial instruments in accordance with AASB 132 and those that do not. The following refers to financial instruments unless otherwise stated: Categories of non-derivative financial instruments Loans and receivables Loans and receivables are financial instrument assets with fixed and determinable payments that are not quoted on an active market. These assets are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial measurement, loans and receivables are measured at amortised cost using the effective interest method, less any impairment.

Notes to Financial Statements for the Year Ended 30 June 2014 Note 1: Summary of significant accounting policies Loans and receivables category includes cash and deposits (refer to Note 1(k)), term deposits with maturity greater than three months, trade receivables, loans and other receivables, but not statutory receivables. Financial liabilities at amortised cost Financial instrument liabilities are initially recognised on the date they are originated. They are initially measured at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial instruments are measured at amortised cost with any difference between the initial recognised amount and the redemption value being recognised in profit and loss over the period of the interestbearing liability, using the effective interest rate method. Financial instrument liabilities measured at amortised cost include all of the Hospital s contractual payables, deposits held and advances received, and interest-bearing arrangements other than those designated at fair value through profit or loss. (k) Assets Cash and Cash Equivalents Cash and cash equivalents recognised on the balance sheet comprise cash on hand and cash at bank, deposits at call and highly liquid investments with an original maturity of three months or less, which are held for the purpose of meeting short term cash commitments rather than for investment purposes, which are readily convertible to known amounts of cash and are subject to insignificant risk of changes in value. Receivables Receivables consist of: - contractual receivables, which includes mainly debtors in relation to goods and services, loans to third parties, accrued investment income, and finance lease receivables; and - statutory receivables, which includes predominantly amounts owing from the Victorian Government and Goods and Services Tax ( GST ) input tax credits recoverable. Receivables that are contractual are classified as financial instruments and categorised as loans and receivables. Statutory receivables are recognised and measured similarly to contractual receivables (except for impairment), but are not classified as financial instruments because they do not arise from a contract. Receivables are recognised initially at fair value and subsequently measured at amortised cost, using the effective interest method, less any accumulated impairment. Trade debtors are carried at nominal amounts due and are due for settlement within 30 days from the date of recognition. Collectability of debts is reviewed on an ongoing basis, and debts which are known to be uncollectible are written off. A provision for doubtful debts is recognised when there is objective evidence that the debts may not be collected and bad debts are written off when identified. Inventories Inventories include goods and other property held either for sale, consumption or for distribution at no or nominal cost in the ordinary course of business operations. It includes land held for sale and excludes depreciable assets. Inventories held for distribution are measured at cost, adjusted for any loss of service potential. All other inventories, including land held for sale, are measured at the lower of cost and net realisable value. Inventories acquired for no cost or nominal considerations are measured at current replacement cost at the date of acquisition. The bases used in assessing loss of service potential for inventories held for distribution include current replacement cost and technical or functional obsolescence. Technical obsolescence occurs when an item still functions for some or all of the tasks it was originally acquired to do, but no longer matches existing technologies. Functional obsolescence occurs when an item no longer functions the way it did when it was first acquired. Cost for inventory is measured on the basis of weighted average cost. Property, plant and equipment All non-current physical assets are measured initially at cost and subsequently re-valued at fair value less accumulated depreciation and impairment. Where an asset is acquired for no or nominal cost, the cost is its fair value at the date of acquisition. More details about the valuation techniques and inputs used in determining the fair value of non-financial physical assets are discussed in Note 8 Property, Plant and Equipment. Land and buildings are recognised initially at cost and subsequently measured at fair value less accumulated depreciation and impairment. Plant, equipment and vehicles are recognised initially at cost and subsequently measured at fair value less accumulated depreciation and impairment. Depreciated historical cost is generally a reasonable proxy for fair value because of the short lives of the assets concerned. 51

Notes to Financial Statements for the Year Ended 30 June 2014 Note 1: Summary of significant accounting policies Leasehold improvements The cost of a leasehold improvement is capitalised as an asset and depreciated over the shorter of the remaining term of the lease or the estimated useful life of the improvements. Revaluations of non-current physical assets Non-current physical assets are measured at fair value and are re-valued in accordance with FRD 103E Non-current physical assets. This revaluation process normally occurs at least every five years, based upon the asset s Government Purpose Classification, but may occur more frequently if fair value assessments indicate material changes in values. Independent valuers are used to conduct these scheduled revaluations and any interim revaluations are determined in accordance with the requirements of the FRDs. Revaluation increments or decrements arise from differences between an asset s carrying value and fair value. Revaluation increments are recognised in other comprehensive income and are credited directly to the asset revaluation surplus, except that, to the extent that an increment reverses a revaluation decrement in respect of that same class of asset previously recognised as an expense in net result, the increment is recognised as income in the net result. Revaluation decrements are recognised in other comprehensive income to the extent that a credit balance exists in the asset revaluation surplus in respect of the same class of property, plant and equipment. Revaluation increases and revaluation decreases relating to individual assets within an asset class are offset against one another within that class but are not offset in respect of assets in different classes. Revaluation surplus is not transferred to accumulated funds on de-recognition of the relevant asset. In accordance with FRD 103E, Latrobe Regional Hospital s non-current physical assets were assessed to determine whether revaluation of the non-current physical assets was required. Prepayments Other non-financial assets include prepayments which represent payments in advance of receipt of goods or services or that part of expenditure made in one accounting period covering a term extending beyond that period. Disposal of non-financial assets Any gain or loss on the sale of non-financial assets is recognised in the comprehensive operating statement. Refer to note 1(i) - comprehensive income. Impairment of non-financial assets Apart from intangible assets with indefinite useful lives, all other non-financial assets are assessed annually for indications of impairment, except for: inventories. If there is an indication of impairment, the assets concerned are tested as to whether their carrying value exceeds their possible recoverable amount. Where an asset s carrying value exceeds its recoverable amount, the difference is written-off as an expense except to the extent that the write-down can be debited to an asset revaluation surplus amount applicable to that same class of asset. If there is an indication that there has been a change in the estimate of an asset s recoverable amount since the last impairment loss was recognised, the carrying amount shall be increased to its recoverable amount. This reversal of the impairment loss occurs only to the extent that the asset s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised in prior years. It is deemed that, in the event of the loss or destruction of an asset, the future economic benefits arising from the use of the asset will be replaced unless a specific decision to the contrary has been made. The recoverable amount for most assets is measured at the higher of depreciated replacement cost and fair value less costs to sell. Recoverable amount for assets held primarily to generate net cash inflows is measured at the higher of the present value of future cash flows expected to be obtained from the asset and fair value less costs to sell. Investments in jointly controlled assets and operations In respect of any interest in jointly controlled assets, Latrobe Regional Hospital recognises in the financial statements: its share of jointly controlled assets; any liabilities that it had incurred; its share of liabilities incurred jointly by the joint venture; any income earned from the selling or using of its share of the output from the joint venture; and any expenses incurred in relation to being an investor in the joint venture. For jointly controlled operations Latrobe Regional Hospital recognises: the assets that it controls; the liabilities that it incurs; expenses that it incurs; and the share of income that it earns from selling outputs of the joint venture

Notes to Financial Statements for the Year Ended 30 June 2014 Note 1: Summary of significant accounting policies De-recognition of financial assets A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when: the rights to receive cash flows from the asset have expired; or the Hospital retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a pass through arrangement; or the Hospital has transferred its rights to receive cash flows from the asset and either: (a) has transferred substantially all the risks and rewards of the asset; or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. Where the Hospital has neither transferred nor retained substantially all the risks and rewards or transferred control, the asset is recognised to the extent of the Hospital s continuing involvement in the asset. Impairment of financial assets At the end of each reporting period Latrobe Regional Hospital assesses whether there is objective evidence that a financial asset or group of financial asset is impaired. All financial instrument assets, except those measured at fair value through profit or loss, are subject to annual review for impairment. Receivables are assessed for bad and doubtful debts on a regular basis. Bad debts considered as written off and allowances for doubtful receivables are expensed. Bad debt written off by mutual consent and the allowance for doubtful debts are classified as other comprehensive income in the net result. The amount of the allowance is the difference between the financial asset s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. Where the fair value of an investment in an equity instrument at balance date has reduced by 20 percent or more than its cost price or where its fair value has been less than its cost price for a period of 12 or more months, the financial asset is treated as impaired. In order to determine an appropriate fair value as at 30 June 2014 for its portfolio of financial assets, the Hospital obtained a valuation based on the best available advice using an estimated valuation method through a reputable financial institution. This value was compared against valuation methodologies provided by the issuer as at 30 June 2014. These methodologies were critiqued and considered to be consistent with standard market valuation techniques. In assessing impairment of statutory (non-contractual) financial assets, which are not financial instruments, professional judgement is applied in assessing materiality using estimates, averages and other computational methods in accordance with AASB 136 Impairment of Assets. Net gain/(loss) on financial instruments Net gain/(loss) on financial instruments includes: realised and unrealised gains and losses from revaluations of financial instruments that are designated at fair value through profit or loss or held-for-trading; impairment and reversal of impairment for financial instruments at amortised cost; and disposals of financial assets and de-recognition of financial liabilities Revaluations of financial instruments at fair value The revaluation gain/(loss) on financial instruments at fair value excludes dividends or interest earned on financial assets. (l) Liabilities Payables Payables consist of: contractual payables which consist predominantly of accounts payable representing liabilities for goods and services provided to the Hospital prior to the end of the financial year that are unpaid, and arise when the Hospital becomes obliged to make future payments in respect of the purchase of those goods and services. The normal credit terms for accounts payable are usually Net 30 days. statutory payables, such as goods and services tax and fringe benefits tax payables. Contractual payables are classified as financial instruments and are initially recognised at fair value, and then subsequently carried at amortised cost. Statutory payables are recognised and measured similarly to contractual payables, but are not classified as financial instruments and not included in the category of financial liabilities at amortised cost, because they do not arise from a contract. Borrowings All borrowings are initially recognised at fair value of the consideration received, less directly attributable transaction costs (refer also to note 1(m) Leases). The measurement basis subsequent to initial recognition depends on whether the Hospital has categorised its borrowings as either, financial liabilities designated at fair value through profit or loss, or financial liabilities at amortised cost. Any difference between the initial recognised amount and the redemption value is recognised in net result over the period of the borrowings using the effective interest method. The classification depends on the nature and purpose of the borrowing. The Hospital determines the classification of its borrowing at initial recognition. 53

Notes to Financial Statements for the Year Ended 30 June 2014 Note 1: Summary of significant accounting policies Provisions Provisions are recognised when the Hospital has a present obligation, the future sacrifice of economic benefits is probable, and the amount of the provision can be measured reliably. The amount recognised as a liability is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows, using a discount rate that reflects the time value of money and risks specific to the provision. When some or all of the economic benefits required to settle a provision are expected to be received from a third party, the receivable is recognised as an asset if it is virtually certain that recovery will be received and the amount of the receivable can be measured reliably. Employee benefits This provision arises for benefits accruing to employees in respect of wages and salaries, annual leave and long service leave for services rendered to the reporting date. Wages and salaries, annual leave and accrued days off Liabilities for wages and salaries, including non-monetary benefits, annual leave and accrued days off are all recognised in the provision for employee benefits as current liabilities, because the hospital does not have an unconditional right to defer settlements of these liabilities. Depending on the expectation of the timing of settlement, liabilities for wages and salaries, annual leave and accrued days off are measured at: Undiscounted value - if the hospital expects to wholly settle within 12 months; or Present value - if the hospital does not expect to wholly settle within 12 months. Long service leave (LSL) The liability for long service leave (LSL) is recognised in the provision for employee benefits. Unconditional LSL (representing 10 or more years of continuous service) is disclosed in the notes to the financial statements as a current liability even where the Hospital does not expect to settle the liability within 12 months because it will not have the unconditional right to defer the settlement of the entitlement should an employee take leave within 12 months. The components of this current LSL liability are measured at: Undiscounted value - if the Hospital expects to wholly settle within 12 months; and Present value - if the Hospital does not expect to wholly settle within 12 months. Conditional LSL (representing less than 10 years of continuous service) is disclosed as a non-current liability. There is an unconditional right to defer the settlement of the entitlement until the employee has completed the requisite years of service. This non-current LSL liability is measured at present value. Any gain or loss followed revaluation of the present value of non-current LSL liability is recognised as a transaction, except to the extent that a gain or loss arises due to changes in bond interest rates for which it is then recognised as another economic flow. Termination benefits Termination benefits are payable when employment is terminated before the normal retirement date or when an employee decides to accept an offer of benefits in exchange for the termination of employment. The hospital recognises termination benefits when it is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after the end of the reporting period are discounted to present value. On-costs Provisions for on-costs, such as payroll tax, workers compensation and superannuation are recognised together with provisions for employee benefits. Superannuation liabilities The Hospital does not recognise any unfunded defined benefit liability in respect of the superannuation plans because the Hospital has no legal or constructive obligation to pay future benefits relating to its employees; its only obligation is to pay superannuation contributions as they fall due. (m) Leases A lease is a right to use an asset for an agreed period of time in exchange for payment. Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as to reflect the risks and rewards incidental to ownership. Leases of property, plant and equipment are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Operating leases Entity as lessee Operating lease payments, including any contingent rentals, are recognised as an expense in the comprehensive operating statement on a straight line basis over the lease term, except where another systematic basis is more representative of the time pattern of the benefits derived from the use of the leased asset. The leased asset is not recognised in the balance sheet.

Notes to Financial Statements for the Year Ended 30 June 2014 Note 1: Summary of significant accounting policies Lease Incentives All incentives for the agreement of a new or renewed operating lease are recognised as an integral part of the net consideration agreed for the use of the leased asset, irrespective of the incentive s nature or form or the timing of payments. In the event that lease incentives are received by the lessee to enter into operating leases, such incentives are recognised as a liability. The aggregate benefits of incentives are recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset is diminished. Leasehold Improvements The cost of leasehold improvements are capitalised as an asset and depreciated over the remaining term of the lease or the estimated useful life of the improvements, whichever is the shorter. (n) Equity Contributed capital Consistent with Australian Accounting Interpretation 1038 Contributions by Owners Made to Wholly-Owned Public Sector Entities and FRD 119 Contributions by Owners, appropriations for additions to the net asset base have been designated as contributed capital. Other transfers that are in the nature of contributions to or distributions by owners that have been designated as contributed capital are also treated as contributed capital. Property, plant & equipment revaluation surplus The asset revaluation surplus is used to record increments and decrements on the revaluation of non-current physical assets. Financial asset available-for-sale revaluation surplus The available-for-sale revaluation surplus arises on the revaluation of available-for-sale financial assets. Where a re-valued financial asset is sold that portion of the surplus which relates to that financial asset is effectively realised, and is recognised in the comprehensive operating statement. Where a re-valued financial asset is impaired that portion of the surplus which relates to that financial asset is recognised in the comprehensive operating statement. Restricted specific purpose surplus A restricted specific purpose surplus is established where the Hospital has possession or title to the funds but has no discretion to amend or vary the restriction and/or condition underlying the funds received. (o) Commitments Commitments for future expenditure include operating and capital commitments arising from contracts. These commitments are disclosed by way of a note (refer to note 17) at their nominal value and are inclusive of the GST payable. In addition, where it is considered appropriate and provides additional relevant information to users, the net present values of significant individual projects are stated. These future expenditures cease to be disclosed as commitments once the related liabilities are recognised on the balance sheet. (p) Contingent assets and contingent liabilities Contingent assets and contingent liabilities are not recognised in the balance sheet, but are disclosed by way of note and, if quantifiable, are measured at nominal value. Contingent assets and contingent liabilities are presented inclusive of GST receivable or payable respectively. (q) Goods and Services Tax ( GST ) Income, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case, the GST payable is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as an operating cash flow. Commitments for expenditure and contingent assets and liabilities are presented on a gross basis. (r) Events after the reporting period Assets, liabilities, income or expenses arise from past transactions or other past events. Where the transactions result from an agreement between the Hospital and other parties, the transactions are only recognised when the agreement is irrevocable at or before the end of the reporting period. Adjustments are made to amounts recognised in the financial statements for events which occur between the end of the reporting period and the date when the financial statements are authorised for issue, where those events provide information about conditions which existed at the reporting date. Note disclosure is made about events between the end of the reporting period and the date the financial statements are authorised for issue where the events relate to conditions which arose after the end of the reporting period that are considered to be of material interest. (s) Foreign currency All foreign currency transactions during the financial year are brought to account using the exchange rate in effect at the date of the transaction. Foreign monetary items existing at the end of the reporting period are translated at the closing rate at 55

Notes to Financial Statements for the Year Ended 30 June 2014 Note 1: Summary of significant accounting policies the date of the end of the reporting period. Non-monetary assets carried at fair value that are denominated in foreign currencies are translated to the functional currency at the rates prevailing at the date when the fair value was determined. (t) AASs issued that are not yet effective Certain new Australian accounting standards have been published that are not mandatory for the 30 June 2014 reporting period. DTF assesses the impact of all these new standards and advises the Hospital of their applicability and early adoption where applicable. As at 30 June 2014, the following standards and interpretations had been issued by the AASB but were not yet effective. They become effective for the first financial statements for reporting periods commencing after the stated operative dates as detailed in the table below. Latrobe Regional Hospital has not and does not intend to adopt these standards early. Applicable for Standard/ Summary Annual reporting Impact on financial statements Interpretation periods beginning on AASB 9 Financial instruments This standard simplifies requirements for the classification and measurement of financial assets resulting from Phase 1 of the IASB s project to replace IAS 39 Financial Instruments: Recognition and Measurement (AASB 139 Financial Instruments: Recognition and Measurement). 1 Jan 2017 The preliminary assessment has identified that the financial impact of available for sale (AFS) assets will now be reported through other comprehensive income (OCI) and no longer recycled to the profit and loss. While the preliminary assessment has not identified any material impact arising from AASB 9, it will continue to be monitored and assessed. AASB 10 Consolidated Financial Statements This Standard forms the basis for determining which entities should be consolidated into an entity s financial statements. AASB 10 defines control as requiring exposure or rights to variable returns and the ability to affect those returns through power over an investee, which may broaden the concept of control for public sector entities. The AASB has issued an Australian Implementation Guidance for Not-for-Profit Entities Control and Structured Entities that explains and illustrates how the principles in the Standard apply from the perspective of not-for-profit entities in the private and public sectors. 1 Jan 2014 (not-for-profit entities) For the public sector, AASB 10 builds on the control guidance that existed in AASB 127 and Interpretation 112 and is not expected to change which entities need to be consolidated. Ongoing work is being done to monitor and assess the impact of this standard. AASB 11 Joint Arrangements This Standard deals with the concept of joint control, and sets out a new principles-based approach for determining the type of joint arrangement that exists and the corresponding accounting treatment. The new categories of joint arrangements under AASB 11 are more aligned to the actual rights and obligations of the parties to the arrangement. 1 Jan 2014 (not-for-profit entities) Based on current assessment, entities already apply the equity method when accounting for joint ventures. It is anticipated that there would be no material impact. Ongoing work is being done to monitor and assess the impact of this standard.

Notes to Financial Statements for the Year Ended 30 June 2014 Note 1: Summary of significant accounting policies Applicable for Standard/ Summary Annual reporting Impact on financial statements Interpretation periods beginning on AASB 12 Disclosure of Interests in Other Entities This Standard requires disclosure of information that enables users of financial statements to evaluate the nature of, and risks associated with, interests in other entities and the effects of those interests on the financial statements. This Standard replaces the disclosure requirements in AASB 127 Separate Financial Statements and AASB 131 Interests in Joint Ventures. 1 Jan 2014 (not-for-profit entities) The new standard is likely to require additional disclosures and ongoing work is being done to determine the extent of additional disclosure required. AASB 127 Separate Financial Statements This revised Standard prescribes the accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates when an entity prepares separate financial statements. 1 Jan 2014 (not-for-profit entities) Current assessment indicates that there is limited impact on Victorian Public Sector entities. Ongoing work is being done to monitor and assess the impact of this standard. AASB 128 Investments in Associates and Joint Ventures This revised Standard sets out the requirements for the application of the equity method when accounting for investments in associates and joint ventures. 1 Jan 2014 (not-for-profit entities) Current assessment indicates that there is limited impact on Victorian Public Sector entities. Ongoing work is being done to monitor and assess the impact of this standard. AASB 1055 Budgetary Reporting AASB 1056 Superannuation Entities AASB 1055 extends the scope of budgetary reporting that is currently applicable for the whole of government and general government sector (GGS) to NFP entities within the GGS, provided that these entities present separate budget to the parliament. AASB 1056 replaces AAS 25 Financial Reporting by Superannuation Plans. The standard was developed in light of changes in recent years, developments in the superannuation industry and Australia s adoption of IFRS. 1 July 2014 [If separate budget is presented to the parliament]: The entity will be required to restate in the financial statements the budgetary information in accordance with the presentation format prescribed in Australian Accounting Standards and explain the significant variances from the original budget. [If separate budget is not presented to the parliament]: This Standard is not applicable as no budget disclosure is required. 1 July 2016 The standard was issued in June 2014. While preliminary assessment has not identified any material impact arising from AASB 1056, further work to assess the impact of this standard will be undertaken. In addition to the new standards above, the AASB has issued a list of amending standards that are not effective for the 2013-14 reporting period. In general, these amending standards include editorial and references changes that are expected to have insignificant impacts on public sector reporting. 57

Notes to Financial Statements for the Year Ended 30 June 2014 Note 1: Summary of significant accounting policies (u) Category groups The Hospital has used the following category groups for reporting purposes for the current and previous financial years. Admitted Patient Services (Admitted Patients) comprises all recurrent health revenue/expenditure on admitted patient services, where services are delivered in public hospitals, or free standing day hospital facilities, or alcohol and drug treatment units or hospitals specialising in dental services, hearing and ophthalmic aids. Mental Hospitals (Mental Health) comprises all recurrent health revenue/expenditure on specialised mental Hospitals (child and adolescent, general and adult, community and forensic) managed or funded by the state or territory health administrations, and includes: Admitted patient services (including forensic mental health), outpatient services, emergency department services (where it is possible to separate emergency department mental Hospitals), community-based services, residential and ambulatory services. Other Services excluded from Australian Health Care Agreement (AHCA) (Other) comprises revenue/expenditure for services not separately classified above, including: Public Hospitals including Laboratory testing, Blood Borne Viruses/Sexually Transmitted Infections clinical services, Koori liaison officers, immunisation and screening services, Drugs services including drug withdrawal, counselling and the needle and syringe program, Dental Hospitals including general and specialist dental care, school dental services and clinical education, Disability services including aids and equipment and flexible support packages to people with a disability, Community Care programs including sexual assault support, early parenting services, parenting assessment and skills development, and various support services. Health and Community Initiatives also falls in this category group. Outpatient Services (Outpatients) comprises all recurrent health revenue/expenditure on public hospital-type outpatient services, where services are delivered in public hospital outpatient clinics, or free standing day hospital facilities, or rehabilitation facilities, or alcohol and drug treatment units, or outpatient clinics specialising in ophthalmic aids or palliative care. Emergency Department Services (EDS) comprises all recurrent health revenue/expenditure on emergency department services that are available free of charge to public patients. Primary Health comprises revenue/expenditure for Community Hospitals including health promotion and counselling, physiotherapy, speech therapy, podiatry and occupational therapy. Off Campus, Ambulatory Services (Ambulatory) comprises all recurrent health revenue/expenditure on public hospital type services including palliative care facilities and rehabilitation facilities, as well as services provided under the following agreements: Services that are provided or received by hospitals (or area Hospitals) but are delivered/received outside a hospital campus, services which have moved from a hospital to a community setting since June 1998, services which fall within the agreed scope of inclusions under the new system, which have been delivered within hospitals i.e. in rural/remote areas. Residential Aged Care including Mental Health (RAC incl. Mental Health) referred to in the past as psychogeriatric residential services, comprises those Commonwealth-licensed residential aged care services in receipt of supplementary funding from DH under the mental health program. It excludes all other residential services funded under the mental health program, such as mental health funded community care units (CCUs) and secure extended care units (SECs).

Notes to Financial Statements for the Year Ended 30 June 2014 Note 2: Revenue HSA HSA H&CI H&CI Total Total 2014 2013 2014 2013 2014 2013 Revenue from Operating Activities Government Grants - Department of Health 37,269 86,452 - - 37,269 86,452 - Victorian Health Funding Pool * 121,798 65,494 - - 121,798 65,494 - Commonwealth Government Residential Aged Care Subsidy 411 313 - - 411 313 Other 12,222 12,614 500 495 12,722 13,109 Total Government Grants 171,700 164,873 500 495 172,200 165,368 Indirect Contributions by Department of Health - Insurance 94 213 - - 94 213 - Long Service Leave 293 1,007 - - 293 1,007 Total Indirect Contributions by Department of Health 387 1,220 - - 387 1,220 Patient and Resident Fees - Patient and Resident Fees (refer Note 2b) 2,786 2,337 1,503 1,304 4,289 3,641 - Residential Aged Care (refer Note 2b) 238 222 - - 238 222 Total Patient & Resident Fees 3,024 2,559 1,503 1,304 4,527 3,863 Commercial Activities & Specific Purpose Funds - Private Practice and Other Patient Activities Fees 134 103 - - 134 103 - Pharmacy Services 226 168 - - 226 168 Total Commercial Activities & Specific Purpose Funds 360 271 - - 360 271 Donations & Bequests - - 498 437 498 437 Other Revenue from Operating Activities 7,517 7,541 - - 7,517 7,541 Total Revenue from Operating Activities 182,988 176,464 2,501 2,236 185,489 178,700 Revenue from Non-Operating Activities Interest & Dividends 1,874 1,564 18 188 1,892 1,752 Breastscreen Victoria - - 1,451 867 1,451 867 Pharmacy Services - - 585 629 585 629 Property Income 377 391 518 542 895 933 Other Revenue from Non-Operating Activities - - 2,338 2,440 2,338 2,440 Total Revenue from Non-Operating Activities 2,251 1,955 4,910 4,666 7,161 6,621 Capital Purpose Income State Government Capital Grants - Targeted Capital Works and Equipment - - 13,001 12,531 13,001 12,531 Assets Received Free of Charge (refer Note 2c) - - - 501-501 Donations & Bequests - - 108-108 - Other Capital Purpose Income - Capital Project Externally Funded - - 67 276 67 276 Total Capital Purpose Income - - 13,176 13,308 13,176 13,308 Reversal of Impairment Loss on Financial Asset - - - 2-2 Total Revenue (refer Note 2a) 185,239 178,419 20,587 20,212 205,826 198,631 (*) The Victorian Health Funding Pool line is for reporting activity based funding payments received via the National Health Funding Administrator. Indirect contributions by Department of Health: Department of Health makes certain payments on behalf of the Hospital. These amounts have been brought to account in determining the operating result for the year by recording them as revenue and expenses. This note relates to revenues above the net result line only, and does not reconcile to comprehensive income. 59

Notes to Financial Statements for the Year Ended 30 June 2014 Note 2a: Analysis of Revenue by Source (based on the consolidated view of Note 2) RAC inc. Admitted Mental Mental Primary Patients Outpatients EDS Ambulatory Health Health Health Other Total 2014 2014 2014 2014 2014 2014 2014 2014 2014 Revenue from Services Supported by Health Services Agreement Government Grants 95,323 2,455 12,380 22,138 38,446 758 58 142 171,700 Indirect contributions by Department of Health 205 15 43 23 101 - - - 387 Patient & Resident Fees (refer Note 2b) 2,066 93-627 - 238 - - 3,024 Private Practice Fees - 101-33 - - - - 134 Other Revenue from Operating Activities 4,165 2,277 175 251 1,110 - - 142 8,120 Interest & Dividends 1,088 35 192 105 454 - - - 1,874 Total Revenue from Services Supported by Health Services Agreement 102,847 4,976 12,790 23,177 40,111 996 58 284 185,239 Revenue from Services Supported by Hospital and Community Initiatives Government Grants - - - - - - - 500 500 Donations & Bequests (non capital) - - - - - - - 498 498 Other - - - - - - - 6,413 6,413 Capital Purpose Income (refer Note 2) - - - - - - - 13,176 13,176 Total Revenue from Services Supported by Hospital and Community Initiatives - - - - - - - 20,587 20,587 Total Revenue 102,847 4,976 12,790 23,177 40,111 996 58 20,871 205,826 Indirect contributions by Department of Health: Department of Health makes certain payments on behalf of the Health Service. These amounts have been brought to account in determining the operating result for the year by recording them as revenue and expenses.

Notes to Financial Statements for the Year Ended 30 June 2014 Note 2a: Analysis of Revenue by Source (continued) (based on the consolidated view of Note 2) RAC inc. Admitted Mental Mental Primary Patients Outpatients EDS Ambulatory Health Health Health Other Total 2013 2013 2013 2013 2013 2013 2013 2013 2013 Revenue from Services Supported by Health Services Agreement Government Grants 88,119 2,331 17,454 19,075 37,194 649-51 164,873 Indirect contributions by Department of Health 647 49 134 73 317 - - - 1,220 Patient & Resident Fees (refer Note 2b) 1,741 99-497 - 222 - - 2,559 Private Practice Fees - 81-22 - - - - 103 Other Revenue from Operating Activities 4,239 2,288 189 284 963 - - 137 8,100 Interest & Dividends 860 31 172 94 407 - - - 1,564 Total Revenue from Services Supported by Health Services Agreement 95,606 4,879 17,949 20,045 38,881 871-188 178,419 Revenue from Services Supported by Hospital and Community Initiatives Government Grants - - - - - - - 495 495 Donations & Bequests (non capital) - - - - - - - 437 437 Other - - - - - - - 5,970 5,970 Capital Purpose Income (refer Note 2) - - - - - - - 13,308 13,308 Reversal of Impairment Loss on Financial Assets - - - - - - - 2 2 Total Revenue from Services Supported by Hospital and Community Initiatives - - - - - - - 20,212 20,212 Total Revenue 95,606 4,879 17,949 20,045 38,881 871-20,400 198,631 Indirect contributions by Department of Health: Department of Health makes certain payments on behalf of the Health Service. These amounts have been brought to account in determining the operating result for the year by recording them as revenue and expenses. 61

Notes to Financial Statements for the Year Ended 30 June 2014 Note 2b: Private and Residential Fees TOTAL TOTAL 2014 2013 Patient and Resident Fees Acute Inpatients 4,157 3,526 Outpatients 132 115 Residential Aged Care Mental Health 649 535 Total Patient and Resident Fees 4,938 4,176 Comprised of:- Commonwealth Government 411 313 Patient & Resident Fees 4,527 3,863 4,938 4,176 Commonwealth Nursing Home Inpatient benefits are included in patient fee revenue. The Hospital charges fees in accordance with the Department of Health directives. Note 2c: Assets Received Free of Charge or For Nominal Consideration TOTAL TOTAL 2014 2013 During the reporting period, the fair value of assets received free of charge, was as follows: Plant and Equipment - - Land - 501 TOTAL - 501 Land at 16 Village Avenue, Traralgon was brought to account for the first time in 2013, after receiving the land from the Department of Health.

Notes to Financial Statements for the Year Ended 30 June 2014 Note 3: Expenses HSA HSA H&CI H&CI Total Total 2014 2013 2014 2013 2014 2013 Employee Expenses Salaries & Wages 103,376 97,553 2,641 2,490 106,017 100,043 WorkCover Premium 1,433 1,443 35 33 1,468 1,476 Departure Packages 20 90 - - 20 90 Long Service Leave 2,706 3,324 107 83 2,813 3,407 Superannuation 8,503 8,041 232 205 8,735 8,246 Fringe Benefits Tax 81 72 22 22 103 94 Total Employee Expenses 116,119 110,523 3,037 2,833 119,156 113,356 Non Salary Labour Costs Fees for Visiting Medical Officers 10,857 10,764 17-10,874 10,764 Total Non Salary Labour Costs 10,857 10,764 17-10,874 10,764 Supplies & Consumables Drug Supplies 10,213 9,213 601 642 10,814 9,855 S100 Drugs 1,366 1,000 - - 1,366 1,000 Medical, Surgical Supplies and Prosthesis 16,335 14,878 638 535 16,973 15,413 Pathology Supplies 1,750 1,670 26 15 1,776 1,685 Food Supplies 1,031 980 24 1 1,055 981 Other Supplies & Consumables 3,708 3,778 51 38 3,759 3,816 Total Supplies & Consumables 34,403 31,519 1,340 1,231 35,743 32,750 Other Expenses Building Rental & Property Taxes 531 455-7 531 462 Communication & Travel 419 423 17 17 436 440 Computer Costs 2,061 2,141 113 185 2,174 2,326 Consultants 18 32-1 18 33 Domestic Services & Supplies 1,481 1,460 32 41 1,513 1,501 Fuel, Light, Power and Water 1,565 1,454 162 132 1,727 1,586 Insurance costs funded by the Department of Health 94 213 - - 94 213 Minor Asset Purchases 109 249 6 9 115 258 Motor Vehicle Expenses 1,265 1,261 91 88 1,356 1,349 Repairs & Maintenance 637 777 62 57 699 834 Maintenance Contracts 2,997 2,922 67 16 3,064 2,938 Patient Transport 1,625 1,533 4-1,629 1,533 Bad & Doubtful Debts (32) 16 - - (32) 16 Staff Recruitment & Training 141 512 1 18 142 530 Uniforms 178 187 4 5 182 192 Other Administrative Expenses 4,746 4,707 212 281 4,958 4,988 Research & Development (Monash University) 814 803 - - 814 803 Disbursements to External Organisations 1,257 1,273 - - 1,257 1,273 Audit Fees - VAGO - Audit of Financial Statements 55 61 7 6 62 67 - Other (30) 85 - - (30) 85 Total Other Expenses 19,931 20,564 778 863 20,709 21,427 Depreciation & Amortisation - - 8,406 8,176 8,406 8,176 Total Expenses 181,310 173,370 13,578 13,103 194,888 186,473 63

Notes to Financial Statements for the Year Ended 30 June 2014 Note 3a: Analysis of Expenses by Source (based on the consolidated view of Note 3) RAC inc. Admitted Mental Mental Primary Patients Outpatients EDS Ambulatory Health Health Health Other Total 2014 2014 2014 2014 2014 2014 2014 2014 2014 Services Supported by by Health Services Agreement Employee Expenses 58,576 1,795 8,909 11,092 34,380 1,231-136 116,119 Non Salary Labour Costs 10,204-168 48 437 - - - 10,857 Supplies & Consumables 21,683 94 5,012 5,625 1,934 55 - - 34,403 Other Expenses from Continuing Operations 8,838 2,078 2,083 1,355 5,520 54-3 19,931 Total Expenses from Services Supported by Health Services Agreement 99,301 3,967 16,172 18,120 42,271 1,340-139 181,310 Services Supported by Hospital and Community Initiatives Employee Expenses - - - - - - - 3,037 3,037 Non Salary Labour Costs - - - - - - - 17 17 Supplies & Consumables - - - - - - - 1,340 1,340 Other Expenses from Continuing Operations - - - - - - - 778 778 Total Expenses from Services Supported by Hospital and Community Initiatives - - - - - - - 5,172 5,172 Depreciation & Amortisation (refer Note 4) 8,406 8,406 Total Expenditure from Services supported by Health Services Agreement and by Hospital and Community Initiatives - - - - - - - 8,406 8,406 Total Expenses 99,301 3,967 16,172 18,120 42,271 1,340-13,717 194,888

Notes to Financial Statements for the Year Ended 30 June 2014 Note 3a: Analysis of Expenses by Source (continued) (based on the consolidated view of Note 3) RAC inc. Admitted Mental Mental Primary Patients Outpatients EDS Ambulatory Health Health Health Other Total 2013 2013 2013 2013 2013 2013 2013 2013 2013 Services Supported by by Health Services Agreement Employee Expenses 55,288 1,683 8,649 10,350 33,082 1,198-273 110,523 Non Salary Labour Costs 9,811-255 20 678 - - - 10,764 Supplies & Consumables 19,437 114 4,617 5,470 1,829 52 - - 31,519 Other Expenses from Continuing Operations 8,986 2,145 2,134 1,542 5,705 47 1 4 20,564 Total Expenses from Services Supported by Health Services Agreement 93,522 3,942 15,655 17,382 41,294 1,297 1 277 173,370 Services Supported by Hospital and Community Initiatives Employee Expenses - - - - - - - 2,833 2,833 Supplies & Consumables - - - - - - - 1,231 1,231 Other Expenses from Continuing Operations - - - - - - - 863 863 Total Expenses from Services Supported by Hospital and Community Initiatives - - - - - - - 4,927 4,927 Depreciation & Amortisation (refer Note 4) 8,176 8,176 Total Expenditure from Services supported by Health Services Agreement and by Hospital and Community Initiatives - - - - - - - 8,176 8,176 Total Expenses 93,522 3,942 15,655 17,382 41,294 1,297 1 13,380 186,473 65

Notes to Financial Statements for the Year Ended 30 June 2014 Note 3b: Analysis of Expenses by Internally Managed and Restricted Specific Purpose Funds for Services Supported by Hospital and Community Initiatives TOTAL TOTAL 2014 2013 Commercial Activities Pharmacy Services Regional 585 629 Consulting Suites 565 566 ICT External Sales 156 154 Salary Packaging 147 147 Regional Biomedical 25 25 External Supply 79 84 Tandara Caravan Park 337 319 Television Service 4 8 Non-Commercial Activities Gippsland Health Alliance 1,664 1,572 BreastScreen Victoria 1,465 1,242 Private Practice Fund 46 - William Buckland (Rad/Onc) Special Projects - 82 Other SPFI's Expenditure 99 99 TOTAL 5,172 4,927 Note 4: Depreciation and Amortisation TOTAL TOTAL 2014 2013 Depreciation Buildings 5,782 5,538 Site Improvements 160 94 Plant & Equipment - Medical Equipment 1,945 1,883 - Non Medical Equipment 242 229 - Computers & Communication 81 76 - Furniture & Fittings 95 90 - Motor Vehicles 56 53 Total Depreciation 8,361 7,963 Amortisation Amortisation of Leasehold Improvements 45 213 Total Amortisation 45 213 Total Depreciation and Amortisation 8,406 8,176

Notes to Financial Statements for the Year Ended 30 June 2014 Note 5: Cash and Cash Equivalents For the purposes of the cash flow statement, cash assets includes cash on hand and in banks, and short-term deposits which are readily convertible to cash on hand, and are subject to an insignificant risk of change in value, net of outstanding bank overdrafts. TOTAL TOTAL 2014 2013 Cash on hand 2,113 2,011 Patient Trust Account 15 12 Employee Salary Packaging Account 761 714 Deposits at call - Financial Institutions 42,622 35,506 Total Cash and Cash Equivalents 45,511 38,243 Represented by: Cash for Health Service Operations (as per Cash Flow Statement) 45,496 38,231 Total Cash and Cash Equivalents 45,496 38,231 Note 6: Receivables TOTAL TOTAL 2014 2013 CURRENT Contractual Inter Hospital Debtors 471 359 Trade Debtors 864 1,580 Patient Fees 719 346 Accrued Investment Income 269 180 Sundry Debtors 1,212 979 Less Allowance for Doubtful Debts Trade Debtors (31) (71) Sundry Debtors (126) (122) Patient Fees (17) (13) 3,361 3,238 Statutory GST Receivable 791 1,151 791 1,151 TOTAL CURRENT RECEIVABLES 4,152 4,389 NON CURRENT Statutory Long Service Leave - Department of Health 2,760 2,467 TOTAL NON-CURRENT RECEIVABLES 2,760 2,467 TOTAL RECEIVABLES 6,912 6,856 67

Notes to Financial Statements for the Year Ended 30 June 2014 Note 6: Receivables (continued) (a) Movement in the Allowance for doubtful debts TOTAL TOTAL 2014 2013 Balance at beginning of year 206 196 Amounts written off during the year - (6) Increase/(decrease) in allowance recognised in net result (32) 16 Balance at end of year 174 206 (b) Ageing analysis of receivables Please refer to note 16 for the ageing analysis of contractual receivables. (c) Nature and extent of risk arising from receivables Please refer to note 16 for the nature and extent of credit risk arising from contractual receivables. Note 7: Inventories TOTAL TOTAL 2014 2013 Pharmaceuticals At cost 1,030 776 Other Consumables At cost 160 247 TOTAL INVENTORIES 1,190 1,023

Notes to Financial Statements for the Year Ended 30 June 2014 Note 8: Property, Plant & Equipment TOTAL TOTAL 2014 2013 Land Land at Fair Value 6,790 4,697 Total Land 6,790 4,697 Buildings & Improvements Buildings & Improvements at Fair Value 99,701 101,659 Less Acc'd Depreciation 243 20,969 99,458 80,690 Site Improvements at Fair Value 2,281 3,691 Less Acc'd Depreciation - 356 2,281 3,335 Total Buildings & Improvements 101,739 84,025 Leasehold Improvements Leasehold Improvements at cost 1,238 1,280 Less Acc'd Depreciation 1,126 1,123 Total Leasehold Improvements 112 157 Plant and Equipment Non Medical Equipment at Fair Value 2,741 2,652 Less Acc'd Depreciation 1,801 1,559 940 1,093 Medical Equipment at Fair Value 24,166 22,668 Less Acc'd Depreciation 14,506 12,561 9,660 10,107 Computer Equipment at Fair Value 1,047 883 Less Acc'd Depreciation 642 790 405 93 Furniture & Fittings at Fair Value 1,585 1,433 Less Acc'd Depreciation 1,082 987 503 446 Motor Vehicles at Fair Value 317 317 Less Acc'd Depreciation 248 192 69 125 Total Plant & Equipment 11,577 11,864 Under Construction Assets under construction 19,574 12,889 Total Assets Under Construction 19,574 12,889 TOTAL PROPERTY, PLANT & EQUIPMENT 139,792 113,632 69

Notes to Financial Statements for the Year Ended 30 June 2014 Note 8: Property, Plant & Equipment (continued) Reconciliations of the carrying amounts of each class of asset for the consolidated entity at the beginning and end of the previous and current financial year is set out below. Assets Buildings & Plant & Under Leasehold Land Improvements Equipment Construction Improvements Total $ Balance at 1 July 2012 3,696 81,147 12,152 5,060 305 102,360 Additions 500 8,510 2,043 13,130 65 24,248 Assets Received Free of Charge 501 - - - - 501 Transfers from Works In Progress - - - (5,301) - (5,301) Depreciation and Amortisation (Note 4) - (5,632) (2,331) - (213) (8,176) Balance at 1 July 2013 4,697 84,025 11,864 12,889 157 113,632 Additions 561 7,055 2,132 14,616-24,364 Transfers from Works In Progress - - (7,931) - (7,931) Revaluation Increments/(Decrements) 1,532 16,601 - - - 18,133 Depreciation and Amortisation (Note 4) (5,942) (2,419) - (45) (8,406) Balance at 30 June 2014 6,790 101,739 11,577 19,574 112 139,792 Land and buildings carried at valuation An independent valuation of the Hospital's land and buildings was performed by the Valuer-General Victoria to determine the fair value of the land and buildings. The valuation, which conforms to Australian Valuation Standards, was determined by reference to the amounts for which assets could be exchanged between knowledgeable willing parties in an arm's length transaction. The valuation was based on independent assessments. The effective date of the valuation is 30 June 2014. Other plant & equipment All other plant & equipment (medical and non-medical) were reviewed using indexation (Health, Melbourne) due to a lack of a reliable second hand market. The Purchase Value and Written Down Value (WDV) are indexed to determine if a material revaluation exists. If the fair value adjustment of total plant and equipment is less than 10% of WDV, it would be considered that WDV approximates fair value.

Notes to Financial Statements for the Year Ended 30 June 2014 Note 8: Property, Plant & Equipment (continued) (c) Fair value measurement hierarchy for assets as at 30 June 2014 Carrying Fair value measurement at end amount as at of reporting period 30 June 2014 Level 1 (1) Level 2 (1) Level 3 (1) Land at fair value Specialised land 6,790-2,746 4,044 Total of land at fair value 6,790-2,746 4,044 Buildings at fair value Specialised buildings 99,458 - - 99,458 Total of building at fair value 99,458 - - 99,458 Plant and equipment at fair value Plant equipment and vehicles at fair value - Vehicles 69 - - 69 - Plant and equipment 1,848 - - 1,848 Total of plant, equipment and vehicles at fair value 1,917 - - 1,917 Medical equipment at fair value - Medical equipment 9,660 - - 9,660 Total medical equipment at fair value 9,660 - - 9,660 Assets under construction at fair value Assets under construction 19,574 19,574 - - Total assets under construction at fair value 19,574 19,574 - - 137,399 19,574 2,746 115,079 Note (i) Classified in accordance with the fair value hierarchy, see Note 1 There have been no transfers between levels during the period. Non-specialised land and non-specialised buildings Non-specialised land and non-specialised buildings are valued using the market approach. Under this valuation method, the assets are compared to recent comparable sales or sales of comparable assets which are considered to have nominal or no added improvement value. For non-specialised land and non-specialised buildings, an independent valuation was performed by independent valuers Opteon to determine the fair value using the market approach. Valuation of the assets was determined by analysing comparable sales and allowing for share, size, topography, location and other relevant factors specific to the asset being valued. An appropriate rate per square metre has been applied to the subject asset. The effective date of the valuation is 30 June 2014. To the extent that non-specialised land and non-specialised buildings do not contain significant, unobservable adjustments, these assets are classified as Level 2 under the market approach. Specialised land and specialised buildings The market approach is also used for specialised land and specialised buildings although is adjusted for the community service obligation (CSO) to reflect the specialised nature of the assets being valued. Specialised assets contain significant, unobservable adjustments; therefore these assets are classified as Level 3 under the market based direct comparison approach. The CSO adjustment is a reflection of the valuer s assessment of the impact of restrictions associated with an asset to the extent that is also equally applicable to market participants. This approach is in light of the highest and best use consideration required for fair value measurement, and takes into account the use of the asset that is physically possible, legally permissible and financially feasible. As adjustments of CSO are considered as significant unobservable inputs, specialised land would be classified as Level 3 assets. For the health services, the depreciated replacement cost method is used for the majority of specialised buildings, adjusting for the associated depreciation. As depreciation adjustments are considered as significant and unobservable inputs in nature, specialised buildings are classified as Level 3 for fair value measurements. An independent valuation of the Hospital s specialised land and specialised buildings was performed by the Valuer-General Victoria. The valuation was performed using the market approach adjusted for CSO. The effective date of the valuation is 30 June 2014. 71

Notes to Financial Statements for the Year Ended 30 June 2014 Note 8: Property, Plant & Equipment (continued) (c) Fair value measurement hierarchy for assets as at 30 June 2014 Vehicles The Health Service acquires new vehicles and at times disposes of them before completion of their economic life. The process of acquisition, use and disposal in the market is managed by the Health Service who set relevant depreciation rates during use to reflect the consumption of the vehicles. As a result, the fair value of vehicles does not differ materially from the carrying value (depreciated cost). Plant and equipment Plant and equipment is held at carrying value (depreciated cost). When plant and equipment is specialised in use, such that it is rarely sold other than as part of a going concern, the depreciated replacement cost is used to estimate the fair value. Unless there is market evidence that current replacement costs are significantly different from the original acquisition cost, it is considered unlikely that depreciated replacement cost will be materially different from the existing carrying value. There were no changes in valuation techniques throughout the period to 30 June 2014. For all assets measured at fair value, the current use is considered the highest and best use. (d) Reconciliation of Level 3 fair value Plant and Medical 2014 Land Buildings equipment equipment Opening Balance 2,556 80,690 1,757 10,107 Purchases (sales) - 7,010 634 1,498 Transfers in (out) of Level 3 - - - - Gains or losses recognised in net result - Depreciation - (5,753) (474) (1,945) - Impairment loss - - - - Subtotal - 1,257 160 (447) Items recognised in other comprehensive income - Revaluation 1,488 17,511 - - Subtotal 1,488 17,511 - - Closing Balance 4,044 99,458 1,917 9,660 Unrealised gains/(losses) on non-financial assets - - - - 4,044 99,458 1,917 9,660 Note (i) Classified in accordance with the fair value hierarchy, see Note 1 There have been no transfers between levels during the period.

Notes to Financial Statements for the Year Ended 30 June 2014 Note 8: Property, Plant & Equipment (continued) (e) Description of significant unobservable inputs to Level 3 valuations: Significant Range Sensitivity of fair value Specialised Valuation unobservable (weighted measurement to changes in land technique inputs average significant unobservable inputs Land - 9 Village Avenue, Traralgon Market/Direct Comparison Sales evidence - Unit of 20% approach value by comparative basis ($ per m 2 ) Land - 10 Village Avenue, Traralgon Market/Direct Comparison approach Sales evidence - Unit of value by comparative basis ($ per m 2 ) 20% Land - 10 Village Avenue, Traralgon Market/Adjusted Community Service Obligation (CSO) adjustment 20% (i) A significant increase or decrease in the CSO adjustment would result in a significantly lower (higher) fair value Land - 16 Village Avenue, Traralgon Market/Direct Comparison approach Sales evidence - Unit of value by comparative basis ($ per m 2 ) 20% Land - 158-160 Princes Hwy, Traralgon Market/Direct Comparison approach Sales evidence - Unit of value by comparative basis ($ per m 2 ) 20% Land - 158-160 Princes Hwy, Traralgon Market/Adjusted Community Service Obligation (CSO) adjustment 20% (i) A significant increase or decrease in the CSO adjustment would result in a significantly lower (higher) fair value Specialised buildings Buildings - 39 Valley Drive, Traralgon Cost Approach or DRC Building Costs - Cost approach using best available evidence from recognised building cost indicators and/or Quantity Surveyors and examples of current costs. $1,000 - $1,500/m 2 ($1,300) A significant increase or decrease in direct cost per square metre adjustment would result in a significantly higher or lower fair value Buildings- 10 Village Ave, Traralgon Market/Direct Comparison approach Sales evidence - Unit of value by comparative basis ($ per m 2 ) 20% Buildings - 10 Village Ave, Traralgon Cost Approach or DRC Building Costs - Cost approach using best available evidence from recognised building cost indicators and/or Quantity Surveyors and examples of current costs. $1,000 - $1,500/m 2 ($1,300) A significant increase or decrease in direct cost per square metre adjustment would result in a significantly higher or lower fair value Buildings - 158-160 Princes Hwy, Traralgon Market/Direct Comparison approach Sales evidence - Unit of value by comparative basis ($ per m 2 ) 20% 73

Notes to Financial Statements for the Year Ended 30 June 2014 Note 8: Property, Plant & Equipment (continued) (e) Description of significant unobservable inputs to Level 3 valuations: Significant Range Sensitivity of fair value Specialised Valuation unobserved (weighted measurement to changes in land technique inputs average significant unobservable inputs Specialised buildings (cont) Buildings- 158-160 Princes Hwy, Traralgon Plant and equipment at fair value Cost Approach or DRC Building Costs- Cost approach using best available evidence from recognised building cost indicators and/or Quantity Surveyors and examples of current costs. $1,000 - $1,500/m 2 ($1,300) Plant and equipment Depreciated replacement cost Cost per unit $9,000 - $10,000 ($9,500) Vehicles Useful life of PPE 5-10 years (7 years) Motor Vehicles Depreciated replacement cost Cost per unit $9,000 - $10,000 per unit ($9500 per unit) A significant increase or decrease in direct cost per square metre adjustment would result in a significantly higher or lower fair value A significant increase or decrease in cost per unit would result in a significantly higher or lower fair value A significant increase or decrease in the estimated useful life of the asset would result in a significantly higher or lower valuation A significant increase or decrease in cost per unit would result in a significantly higher or lower fair value Useful life of vehicles 3-5 years (3 years) A significant increase or decrease in the estimated useful life of the asset would result in a significantly higher or lower valuation Medical equipment at fair value Medical equipment Depreciated replacement cost Cost per unit $6,000 - $7,000 ($6,500) Useful life of medical equipment 10-15 years (12 years) Increase (decrease) in gross replacement cost would result in a significantly higher (lower) fair value Increase (decrease) in useful life would result in a significantly higher (lower) fair value Assets under construction at fair value Assets under construction - various capital works Depreciated replacement cost Cost per unit $500 - $600 ($550) A significant increase or decrease in direct cost per unit adjustment would result in a significantly higher or lower fair value (i) CSO adjustments of 20% were applied to reduce the market approach value for the Department s specialised land.

Notes to Financial Statements for the Year Ended 30 June 2014 Note 9: Payables TOTAL TOTAL 2014 2013 CURRENT Contractual Trade Creditors (i) 3,760 3,617 Other Creditors 40 50 Accrued Expenses 5,234 4,679 9,034 8,346 Statutory GST Payable 97 92 Department of Health (ii) - - 1,541 281 1,638 373 TOTAL CURRENT 10,672 8,719 (i) The average credit period is 30 days. No interest is charged on the other payables. (ii) Terms and conditions of amounts payable to the Department of Health vary according to the particular agreement with the Department. (a) Maturity analysis of payables Please refer to Note 16 for the ageing analysis of contractual payables. (b) Nature and extent of risk arising from payables Please refer to note 16 for the nature and extent of risks arising from contractual payables. 75

Notes to Financial Statements for the Year Ended 30 June 2014 Note 10: Provisions TOTAL TOTAL 2014 2013 Current Provisions Employee Benefits (i) Annual Leave - Unconditional and expected to be settled within 12 months (ii) 8,255 7,557 - Unconditional and expected to be settled after 12 months (iii) 1,121 1,268 Long Service Leave - Unconditional and expected to be settled within 12 months (ii) 12,830 11,856 Other - Unconditional and expected to be settled within 12 months (ii) 3,341 2,907 25,547 23,588 Provisions related to Employee Benefit On-Costs - Unconditional and expected to be settled within 12 months (ii) 1,198 1,084 - Unconditional and expected to be settled after 12 months (iii) 1,567 1,442 2,765 2,526 Total Current Provisions 28,312 26,114 Non-Current Provisions Employee Benefits (i) 4,541 4,382 Provisions related to Employee Benefit On-Costs 482 456 Total Non-Current Provisions 5,023 4,838 Total Provisions 33,335 30,952 (a) Employee Benefits and Related On-Costs Current Employee Benefits and related on-costs Unconditional LSL Entitlement 14,274 13,159 Annual Leave Entitlements 10,639 9,993 Accrued Wages and Salaries 2,908 2,490 Substitution Leave 75 80 Accrued Days Off 416 392 Non-Current Employee Benefits and related on-costs Conditional Long Service Leave Entitlements 5,023 4,838 Total Employee Benefits and Related On-Costs 33,335 30,952 (b) Movements in provisions Movement in Long Service Leave: Balance at start of year 17,997 16,146 Provision made during the year - Revaluations 7 (48) - Expense recognising Employee Service 2,806 3,455 Settlement made during the year (1,513) (1,556) Balance at end of year 19,297 17,997 Notes: (i) Provisions for employee benefits consist of amounts for annual leave and long service leave accrued by employees, not including on-costs. (ii) The amounts disclosed are nominal amounts. (iii) The amounts disclosed are discounted to present values.

Notes to Financial Statements for the Year Ended 30 June 2014 Note 11: Superannuation Employees of the Hospital are entitled to receive superannuation benefits and the Hospital contributes to both defined benefit and defined contribution plans. The defined benefit plan(s) provides benefits based on years of service and final average salary. The Hospital does not recognise any defined benefit liability in respect of the plan(s) because the entity has no legal or constructive obligation to pay future benefits relating to its employees; its only obligation is to pay superannuation contributions as they fall due. The Department of Treasury and Finance discloses the State s defined benefits liabilities in its disclosure for administered items. However superannuation contributions paid or payable for the reporting period are included as part of employee benefits in the comprehensive operating statement of the Hospital. The name, details and amounts expense in relation to the major employee superannuation funds and contributions made by the Hospital are as follows: Paid contribution for the year Contribution Outstanding at Year End TOTAL TOTAL TOTAL TOTAL 2014 2013 2014 2013 $ 000 $ 000 $ 000 $ 000 (i) Defined benefit plans: First State 7 12 - - Defined contribution plans: HESTA 4,476 4,119 141 109 First State 4,081 3,961 116 108 Other 171 154 - - Total 8,735 8,246 257 217 (i) The bases for determining the level of contributions is determined by the various actuaries of the defined benefit superannuation plans. Note 12: Other Liabilities TOTAL TOTAL 2014 2013 CURRENT Monies Held in Trust* - Patient Monies Held in Trust 15 12 - Employee Salary Packaging Trust 761 714 Total Current 776 726 * Total Monies Held in Trust Represented by the following assets: Cash Assets (refer to Note 5) 776 726 TOTAL 776 726 Note 13: Non Interest Bearing Liabilities TOTAL TOTAL 2014 2013 CURRENT Department of Health - Funded Loan 50 50 NON-CURRENT Department of Health - Funded Loan 500 550 Department of Health - Loan Discount (90) (112) TOTAL 410 438 The Department of Health provided the Hospital with an operating loan of $1,000,000 in 2001 to assist in the transition from a privately operated facility. Annual repayments are $50,000 with the completion date being 30 June 2025. 77

Notes to Financial Statements for the Year Ended 30 June 2014 Note 14: Equity TOTAL TOTAL 2014 2013 (a) Surpluses Property, Plant & Equipment Revaluation Surplus 1 Balance at the beginning of the reporting period 32,262 32,262 Revaluation Increment/(Decrements) - Land 1,532 - - Buildings 16,601 - Balance at the end of the reporting period 50,395 32,262 Represented by: - Land 2,774 1,242 - Buildings 47,621 31,020 50,395 32,262 Restricted Specific Purpose Surplus Balance at the beginning of the reporting period 13,540 13,823 Transfer from Accumulated Surplus 1,571 (283) Balance at the end of the reporting period 15,111 13,540 Represented by: Business Unit - External Supply 76 76 Business Unit - ICT External 885 783 Business Unit - Regional Biomedical Engineering 266 242 Business Unit - Salary Packaging 770 663 Business Unit - TVs 264 157 Business Unit - Tandara Caravan Park 3 68 Capital Donations 80 45 Chemotherapy Donor Funds 59 43 Critical Care Donor Funds 44 38 Dialysis Donor Funds 19 19 Donor Funds 483 303 Emergency Donor Funds 25 25 Gippsland Cancer Support Group Donor Fund 52 48 LSL Funds Received From DH 4,180 4,180 Macalister Donor Funds 2 2 ME Cole Staff Training Fund 37 35 Medical Library Fund 113 84 Mental Health - CAMental HealthS Camp Donor Funds 20 19 Mental Health - CRCU Accom & Patient Benefit Donor Fund 16 16 Mental Health - East Patient Benefit Donor Fund 5 7 Mental Health - Education Donor Funds 6 6 Mental Health - Flynn Donor Funds 7 7 Mental Health - Latrobe Valley Patient Benefit Donor Funds 9 8 Mental Health - Patient Activities Donor Funds 28 28 Mental Health - South West Patient Benefit Donor Fund 2 2 Mental Health Training Fund 26 29 Operation LRH Appeal Donor Fund 98 95 Allied Health Donor 339 242 Private Patient Scheme 810 925 Gippsland Allied Health Symposium 5 3 Radiation/Oncology Special Projects- Capital 2,019 1,519 Radiotherapy (WBRG) Donor Fund 27 35 Restricted Funds - BreastScreen Victoria 284 - Restricted Funds - Gippsland Cancer Care Centre 3,760 3,622 Restricted Funds - ME Cole 50 50 Sub Acute Donor Funds 62 19 Tarra Paediatric Donor Funds 84 79 Theatre Instrument Donor Funds 74 - Thomson Special Care Nursery Donor Funds 11 8 Tyers Medical Surgical Donor Funds 11 10 Total Restricted Specific Purpose Surplus 15,111 13,540 Total Surpluses 65,506 45,802 (1) The property, plant & equipment asset revaluation surplus arises on the revaluation of property, plant & equipment.

Notes to Financial Statements for the Year Ended 30 June 2014 Note 14: Equity (continued) TOTAL TOTAL 2014 2013 (b) Contributed Capital Balance at the beginning of the reporting period 23,584 23,584 Balance at the end of the reporting period 23,584 23,584 (c) Accumulated Surpluses/(Deficits) Balance at the beginning of the reporting period 50,058 37,617 Net Result for the Year 10,938 12,158 Transfers to and from Surplus (Identify the transfers from each of the above reserves) (1,571) 283 Balance at the end of the reporting period 59,425 50,058 Total Equity at end of financial year 148,515 119,444 Note 15: Reconciliation of Net Result for the Year to Net Cash Inflow/(Outflow) from Operating Activities TOTAL TOTAL 2014 2013 Net result for the period 10,938 12,158 Non-cash movements: Depreciation and amortisation 8,406 8,176 Non Cash Grants (472) (1) Write down of inventories 43 54 Long term investments (non-cash) - (2) Assets received free of charge - (501) Movements included in investing & financing activities: Movement in capital payables (659) - Movements in assets and liabilities: Change in operating assets and liabilities (Increase)/decrease in receivables (56) 54 (Increase)/decrease in prepayments 222 (138) Increase/(decrease) in payables 1,953 (1,399) Increase/(decrease) in provisions 2,383 1,643 Increase/(decrease) in other liabilities 22 39 Change in inventories (167) (22) NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES 22,613 20,061 79

Notes to Financial Statements for the Year Ended 30 June 2014 Note 16: Financial Instruments (a) Financial risk management objectives and policies The Hospital's principal financial instruments comprise of: - cash assets - term deposits - receivables (excluding statutory receivables) - payables (excluding statutory payables) Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, with respect to each class of financial asset, financial liability and equity instrument are disclosed in note 1 to the financial statements. The Hospital's main financial risks include credit risk, liquidity risk and interest rate risk. The Hospital manages these financial risks in accordance with its financial risk management policy. The Hospital uses different methods to measure and manage the different risks to which it is exposed. Primary responsibility for the identification and management of financial risks rests with the financial risk management committee of the Hospital. The main purpose in holding financial instruments is to prudentially manage the Hospital's financial risks within the government policy parameters. Categorisation of financial instruments Contractual Contractual Financial Financial Asset - loans Liabilities at & receivables amortised cost Total 2014 Contractual Financial Assets Cash and cash equivalents $ 000 45,511 $ 000 - $ 000 45,511 Trade Debtors & Other Receivables 3,361-3,361 Total Financial Assets (i) 48,872-48,872 Financial Liabilities Payables & Borrowings - 10,270 10,270 Total Financial Liabilities (ii) - 10,270 10,270 2013 Contractual Financial Assets Cash and cash equivalents 38,243-38,243 Trade Debtors & Other Receivables 3,238-3,238 Total Financial Assets (i) 41,481-41,481 Financial Liabilities Payables & Borrowings - 9,560 9,560 Total Financial Liabilities (ii) - 9,560 9,560 (i) The total amount of financial assets disclosed here excludes statutory receivables (i.e. GST input tax credit recoverable) (ii) The total amount of financial liabilities disclosed here excludes statutory payables (i.e. Taxes payable)

Notes to Financial Statements for the Year Ended 30 June 2014 Note 16: Financial Instruments (continued) Net holding gain/(loss) on financial instruments by category Total interest income/(expense) Total 2014 Financial Assets Cash and Cash Equivalents (i) 1,893 1,893 Total Financial Assets 1,893 1,893 Financial Liabilities At Amortised Cost (ii ) (22) (22) Total Financial Liabilities (22) (22) Total interest income/(expense) Net holding gain/(loss) 2013 Financial Assets Cash and Cash Equivalents (i) 1,752 1,752 Total Financial Assets 1,752 1,752 Financial Liabilities At Amortised Cost (ii) - - Total Financial Liabilities - - (i) For cash and cash equivalents, loans or receivables and available-for-sale financial assets, the net gain or loss is calculated by taking the movement in the fair value of the asset, interest revenue, plus or minus foreign exchange gains or losses arising from revaluation of the financial assets, and minus any impairment recognised in the net result; (ii) For financial liabilities measured at amortised cost, the net gain or loss is calculated by taking the interest expense, plus or minus foreign exchange gains or losses arising from the revaluation of financial liabilities measured at amortised cost; and (iii) For financial assets and liabilities that are held-for-trading or designated at fair value through profit or loss, the net gain or loss is calculated by taking the movement in the fair value of the financial asset or liability. (b) Credit risk Credit risk arises from the contractual financial assets of the Health Service, which comprise cash and deposits, non-statutory receivables and available for sale contractual financial assets. The Health Service s exposure to credit risk arises from the potential default of a counter party on their contractual obligations resulting in financial loss to the Health Service. Credit risk is measured at fair value and is monitored on a regular basis. Credit risk associated with the Health Service s contractual financial assets is minimal because the main debtor is the Victorian Government. For debtors other than the Government, it is the Health Service s policy to only deal with entities with high credit ratings of a minimum Triple-B rating and to obtain sufficient collateral or credit enhancements, where appropriate. In addition, the Health Service does not engage in hedging for its contractual financial assets and mainly obtains contractual financial assets that are on fixed interest, except for cash assets, which are mainly cash at bank. As with the policy for debtors, the Health Service s policy is to only deal with banks with high credit ratings. Provision of impairment for contractual financial assets is recognised when there is objective evidence that the Health Service will not be able to collect a receivable. Objective evidence includes financial difficulties of the debtor, default payments, debts which are more than 60 days overdue, and changes in debtor credit ratings. Except as otherwise detailed in the following table, the carrying amount of contractual financial assets recorded in the financial statements, net of any allowances for losses, represents Latrobe Regional Hospital's maximum exposure to credit risk without taking account of the value of any collateral obtained. 81

Notes to Financial Statements for the Year Ended 30 June 2014 Note 16: Financial Instruments (continued) (b) Credit risk Credit quality of contractual financial assets that are neither past due nor impaired Financial Government Government institutions agencies agencies Other (AAA credit (AAA credit (BBB credit (min BBB rating ) rating) rating) credit rating) Total $ 000 $ 000 $ 000 $ 000 $ 000 2014 Financial Assets Cash and Cash Equivalents 43,398 - - 2,113 45,511 Receivables - Trade Debtors - 471-2,890 3,361 Total Financial Assets 43,398 471-5,003 48,872 2013 Financial Assets Cash and Cash Equivalents 36,232 - - 2,011 38,243 Receivables - Trade Debtors - 359-2,879 3,238 Total Financial Assets 36,232 359-4,890 41,481 (i) The total amounts disclosed here exclude statutory amounts (e.g. amounts owing from Victorian Government and GST input tax credit recoverable). The Latrobe Regional Hospital's exposure to credit risk and effective weighted average interest rate by ageing periods is set out in the following table. For interest rates applicable to each class of asset refer to individual notes to the financial statements. Ageing analysis of Financial Assets as at 30 June Past Due But Not Impaired Consol d Not Past Impaired Carrying Due and Less than 1-3 3 Months 1-5 Financial Amount Not Impaired 1 Month Months - 1 Year Years Assets 2014 Financial Assets Cash and Cash Equivalents 45,511 45,511 - - - - - Receivables (i) - Trade Debtors 3,361 1,721 1,197 303 133 7 - - Other Receivables - - - - - - - Total Financial Assets 48,872 47,232 1,197 303 133 7-2013 Financial Assets Cash and Cash Equivalents 38,243 38,243 - - - - - Receivables (i) - Trade Debtors 3,238 1,467 876 666 228 1 - - Other Receivables - - - - - - - Total Financial Assets 41,481 39,710 876 666 228 1 - (i) Ageing analysis of financial assets must exclude the types of statutory financial assets (i.e GST input tax credit). There are no material financial assets which are individually determined to be impaired. Currently the Latrobe Regional Hospital does not hold any collateral as security nor credit enhancements relating to any of its financial assets. There are no financial assets that have had their terms renegotiated so as to prevent them from being past due or impaired, and they are stated at the carrying amounts as indicated. The ageing analysis table above discloses the ageing only of contractual financial assets that are past due but not impaired.

Notes to Financial Statements for the Year Ended 30 June 2014 Note 16: Financial Instruments (continued) (c) Liquidity risk Liquidity risk is the risk that the Health Service would be unable to meet its financial obligations as and when they fall due. The Health Services operates under the Government's fair payments policy of settling financial obligations within 30 days and in the event of a dispute, making payments within 30 days from the date of resolution. The Health Service s maximum exposure to liquidity risk is the carrying amounts of financial liabilities as disclosed in the face of the balance sheet. The Health Service manages its liquidity risk as follows: Establish investment strategies to be used in the management of funds surplus to the immediate operating requirements of Latrobe Regional Hospital and for deposits held by the Health Service (e.g. Long Service Leave amounts that are quarantined and Restricted Special Purpose Funds). Ensure that funds are invested in a prudent manner, with an appropriate spread of risk. Ensure sufficient liquidity exists within the investment portfolio so that the Hospital can continue to meet its day to day cash flow requirements and committed expenditure. Ensure there is a minimal risk of loss. Enable a regular and consistent income to be received from the investment of surplus funds. The following table discloses the contractual maturity analysis for Hospital's financial liabilities. For interest rates applicable to each class of liability refer to individual notes to the financial statements. Maturity analysis of Financial Liabilities as at 30 June Maturity Dates Carrying Nominal Less than 1-3 3 months 1-5 Amount Amount 1 Month Months - 1 Year Years 2014 Financial Liabilities Payables 9,034 9,034 9,034 - - - Other 1,236 1,236 761-65 410 Total Financial Liabilities 10,270 10,270 9,795-65 410 2013 Financial Liabilities Payables 8,346 8,346 8,346 - - - Other 1,214 1,214 714-62 438 Total Financial Liabilities 9,560 9,560 9,060-62 438 (d) Market risk The Hospital's exposures to market risk are primarily through interest rate risk with only insignificant exposure to foreign currency and other price risks. Objectives, policies and processes used to manage each of these risks are disclosed in the paragraph below. Currency risk The Hospital is exposed to insignificant foreign currency risk through its payables relating to purchases of supplies and consumables from overseas. This is because of a limited amount of purchases denominated in foreign currencies and a short timeframe between commitment and settlement. Interest rate risk Exposure to interest rate risk might arise primarily through the Hospital's interest bearing liabilities. Minimisation of risk is achieved by mainly undertaking fixed rate or non-interest bearing financial instruments. For financial liabilities, the health service mainly undertakes financial liabilities with relatively even maturity profiles. Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Hospital has minimal exposure to cash flow interest rate risks through its cash and deposits, term deposits and bank overdrafts that are at floating rate. The Hospital manages this risk by mainly undertaking fixed rate or non-interest bearing financial instruments with relatively even maturity profiles, with only insignificant amounts of financial instruments at floating rate. Management has concluded for cash at bank and bank overdraft, as financial assets that can be left at floating rate without necessarily exposing the Hospital to significant bad risk, management monitors movement in interest rates on a daily basis. 83

Notes to Financial Statements for the Year Ended 30 June 2014 Note 16: Financial Instruments (continued) (d) Market risk (continued) Interest rate exposure of financial assets and liabilities as at 30 June Interest Rate Exposure Weighted Fixed Variable Non - Effective Carrying Interest Interest Interest Interest Amount Rate Rate Bearing Rate (%) $ 000 $ 000 $ 000 $ 000 2014 Financial Assets Cash and Cash Equivalents 3.00% 45,511 50 45,452 9 Receivables - Trade Debtors 3,361 - - 3,361 48,872 50 45,452 3,370 Financial Liabilities Payables 9,034 - - 9,034 Other 1,236 - - 1,236 10,270 - - 10,270 2013 Financial Assets Cash and Cash Equivalents 2.70% 38,243 1,419 36,815 9 Receivables - Trade Debtors 3,238 - - 3,238 41,481 1,419 36,815 3,247 Financial Liabilities Payables 8,346 - - 8,346 Other 1,214 - - 1,214 9,560 - - 9,560 Sensitivity disclosure analysis Taking into account past performance, future expectations, economic forecasts, and management's knowledge and experience of the financial markets, the Hospital believes the following movements are 'reasonably possible' over the next 12 months (Base rates are sourced from the Reserve Bank of Australia) - A shift of +1% and -1% in market interest rates (AUD) from year-end rates of 3.00% (2.70% 12/13); The following table discloses the impact on net operating result and equity for each category of financial instrument held by the Hospital at year end as presented to key management personnel, if changes in the relevant risk occur.

Notes to Financial Statements for the Year Ended 30 June 2014 Note 16: Financial Instruments (continued) (d) Market risk (continued) Interest Rate Risk Carrying - 1% + 1% Amount Profit Equity Profit Equity 2014 Financial Assets Cash and Cash Equivalents $ 000 45,511 $ 000 (455) $ 000 (455) $ 000 455 $ 000 455 Receivables - Trade Debtors 3,361 - - - - Financial Liabilities Payables 9,034 - - - - Other 1,236 - - - - (455) (455) 455 455 2013 Financial Assets Cash and Cash Equivalents 38,243 (368) (368) 368 368 Receivables - Trade Debtors 3,238 - - - - Financial Liabilities Payables 8,346 - - - - Other 1,214 - - - - (368) (368) 368 368 (e) Fair value The fair values and net fair values of financial instrument assets and liabilities are determined as follows: Level 1 - the fair value of financial instrument with standard terms and conditions and traded in active liquid markets are determined with reference to quoted market prices; Level 2 - the fair value is determined using inputs other than quoted prices that are observable for the financial asset or liability, either directly or indirectly; and Level 3 - the fair value is determined in accordance with generally accepted pricing models based on discounted cash flow analysis using unobservable market inputs. The Hospital considers that the carrying amount of financial instrument assets and liabilities recorded in the financial statements to be a fair approximation of their fair values, because of the short-term nature of the financial instruments and the expectation that they will be paid in full. The following table shows that the fair values of most of the contractual financial assets and liabilities are the same as the carrying amounts. Comparison between carrying amount Carrying Fair Carrying Fair and fair value Amount Value Amount Value 2014 2014 2013 2013 $ 000 $ 000 $ 000 $ 000 Financial Assets Cash and Cash Equivalents 45,511 45,511 38,243 38,243 Receivables - Trade Debtors 3,361 3,361 3,238 3,238 Total Financial Assets 48,872 48,872 41,481 41,481 Financial Liabilities At amortised cost Payables 9,034 9,034 8,346 8,346 Other 1,236 1,236 1,214 1,214 Total Financial Liabilities 10,270 10,270 9,560 9,560 85

Notes to Financial Statements for the Year Ended 30 June 2014 Note 17: Commitments (a) Commitments other than public private partnerships TOTAL TOTAL 2014 2013 Capital expenditure commitments Payable: Land and buildings 2,725 11,974 Plant and equipment 536 455 Total capital expenditure commitments 3,261 12,429 Not later than one year 3,261 12,429 Total 3,261 12,429 Other expenditure commitments Payable: Maintenance Services Contracts 3,249 5,896 Total other expenditure commitments 3,249 5,896 Not later than one year 1,900 3,288 Later than 1 year and not later than 5 years 1,336 2,581 Later than 5 years 13 27 TOTAL 3,249 5,896 Lease commitments Commitments in relation to leases contracted for at the reporting date: Operating leases 1,113 1,910 Total lease commitments 1,113 1,910 Operating leases Operating Leases- Motor Vehicles Cancellable Not later than one year 782 1,303 Sub Total 782 1,303 Operating Leases - Other Cancellable Not later than one year 175 354 Later than 1 year and not later than 5 years 156 253 Sub Total 331 607 Total operating lease commitments 1,113 1,910 Total lease commitments 1,113 1,910 Total Commitments (inclusive of GST) other than public private partnerships 7,623 20,235 less GST recoverable from the Australian Tax Office (397) (709) Total Commitments (exclusive of GST) other than public private partnerships 7,226 19,526

Notes to Financial Statements for the Year Ended 30 June 2014 Note 18: Contingent Assets and Contingent Liabilities Details of estimates of maximum amounts of Contingent Assets or Contingent Liabilities are as follows: TOTAL TOTAL 2014 2013 Contingent Assets There were no known contingent assets. - - Contingent Liabilities Enterprise Bargaining Agreements - 165 In relation to June 2013, the Doctors EBA was confirmed in early August 2013, with an increase of 3.33%, effective from 1 April, 2013, and the expected cost for the backpay to LRH had been disclosed as a Contingent Liability. Note 19: Operating Segments RAC Hospital Consolidated 2014 2013 2014 2013 2014 2013 REVENUE External Segment Revenue 996 871 202,938 195,505 203,934 196,376 Total Revenue 996 871 202,938 195,505 203,934 196,376 EXPENSES External Segment Expenses (1,340) (1,297) (185,142) (177,000) (186,482) (178,297) Total Expenses (1,340) (1,297) (185,142) (177,000) (186,482) (178,297) Net Result from ordinary activities (344) (426) 17,796 18,505 17,452 18,079 Interest Income - - 1,892 1,752 1,892 1,752 Assets Received Free of Charge - - - 501-501 Impairment of Financial Assets - - - 2-2 Depreciation & Amortisation Expense - - (8,406) (8,176) (8,406) (8,176) Net Result for Year (344) (426) 11,282 12,584 10,938 12,158 OTHER INFORMATION Segment Assets - - 193,758 160,329 193,758 160,329 Total Assets - - 193,758 160,329 193,758 160,329 Segment Liabilities - - 45,243 40,885 45,243 40,885 Total Liabilities - - 45,243 40,885 45,243 40,885 The major products/services from which the above segments derive revenue are: Business Segments Services Hospital Provision of Acute, Sub-Acute and Mental Health care services Residential Aged Care Services (RACS) Provider of residential aged care beds Geographical Segment Latrobe Regional Hospital operates predominantly in Traralgon, Victoria. More than 90% of revenue, net surplus from ordinary activities and segment assets relate to operations in Traralgon, Victoria. 87

Notes to Financial Statements for the Year Ended 30 June 2014 Note 20: Jointly Controlled Operations and Assets Ownership Interest Name of Entity 2014 2013 % % Gippsland Health Alliance 23.68% 24.85% Published Fair Value () 3,251 2,979 Interest in IT Alliance Summarised Financial information of Jointly Controlled Assets & Liabilities During 2009/10, the Alliance members signed a new agreement, which was effective 1 July 2009, which determines the interest in the Gippsland Health Alliance as a jointly controlled asset. Accounting for a jointly controlled asset requires the member Hospital to now recognise its share of the Alliance s assets and liabilities, together with any income and expenditure arising, under the respective line item in the member Hospital s financial statements from the year ending 30 June 2010 onwards. The Hospital's interest in assets employed in the above jointly controlled operations and assets is detailed below. The amounts are included in the financial statements and consolidated financial statements under their respective asset and liability categories: TOTAL TOTAL 2014 2013 Current Assets Cash and Cash Equivalents 989 986 Receivables 96 384 Other Current Assets 86 90 Total Current Assets 1,171 1,460 Non Current Assets Property, Plant and Equipment 10 12 Total Non Current Assets 10 12 Share of Total Assets 1,181 1,472 Current Liabilities Payables 151 147 Other Current Liabilities 162 521 Total Current Liabilities 313 668 Share of Total Liabilities 313 668 Net Assets 868 804 Reconciliation of jointly controlled assets: Share of funds at beginning of the reporting period 804 860 Contributions made in current reporting period 1,579 1,728 Share of current year Surplus/(Deficit) (1,515) (1,784) Share of funds at end of reporting period 868 804 The Hospital's interest in revenues and expenses resulting from jointly controlled operations and assets is detailed below: Revenues GHA revenue 681 446 Total Revenue 681 446 Expenses Information Technology and Administrative Expenses 2,195 2,230 Depreciation 1 1 Total Expenses 2,196 2,230 Net result (1,515) (1,784)

Notes to Financial Statements for the Year Ended 30 June 2014 Note 21a: Responsible Persons Disclosures In accordance with the Ministerial Directions issued by the Minister for Finance under the Financial Management Act 1994, the following disclosures are made regarding responsible persons for the reporting period. Period Responsible Ministers: The Honourable David Davis, MLC, Minister for Health and Ageing 1/7/2013-30/6/2014 The Honourable Mary Wooldridge, MLA, Minister for Mental Health 1/7/2013-30/6/2014 Governing Boards Kellie O'Callaghan (Chair) 1/7/2013-30/6/2014 Annie Moulden OAM 1/7/2013-30/6/2014 Leah Young 1/7/2013-30/6/2014 Ian Gibson 1/7/2013-30/6/2014 Elizabeth Board 1/7/2013-30/6/2014 Mary Draper 1/7/2013-30/6/2014 Sean Dignum 1/7/2013-30/6/2014 Accountable Officers Peter Craighead 1/7/2013-30/6/2014 Remuneration of Responsible Persons The number of Responsible Persons are shown in their relevant income bands; Total Remuneration Base Rumeration 2014 2013 2014 2013 No. No. No. No. Income Band $10,000 - $19,999 1 2 1 2 $20,000 - $29,999 5 5 5 5 $40,000 - $49,999 1 1 1 1 $370,000 - $379,999-1 - 1 $390,000 - $399,999 1-1 - Total Numbers 8 9 8 9 Total remuneration received or due and receivable by Responsible Persons from the reporting entity amounted to: $555,876 $555,088 $555,876 $555,088 Amounts relating to Responsible Ministers are reported in the financial statements of the Department of Premier and Cabinet Other Transactions of Responsible Persons and their Related Parties. Ms Kellie O'Callaghan was a Latrobe City Council Councillor. For the financial year, services billed to Latrobe City were as follows:- 6 28 The Hospital was also billed for services provided from Latrobe City Council:- 68 111 89

Notes to Financial Statements for the Year Ended 30 June 2014 Note 21a: Responsible Persons Disclosures (continued) Other details of Board member involvement are as follows:- Board Member Kellie O'Callaghan Mary Draper Ian Gibson Elizabeth Board Leah Young Annie Moulden Related Parties Latrobe City Council - Councillor, Clean Coal Victoria, Chair - Advisory Committee, Gippsland Medicare Local Health Issues Centre (Chief Executive Officer) West Gippsland Catchment Management Authority, Latrobe City Council, Monash University School of Business and Economics, Planning Panels Victoria MAS National Australia, A-Plus - GTO, Work & Training Tasmania, INGT Pty Ltd, Inner North Community Foundation Gippsland Medicare Local and St Paul s Anglican Grammar School Monash Health Executive Management Peter Craighead Catherine Greaves Gippsland Regional Integrated Cancer Service, Wellington Shire Audit Committee, Victorian Healthcare Association, Chair Gippsland Health Alliance Advance TAFE All transactions with related parties are normal, commercial transactions. Note 21b: Executive Officer Disclosures Executive Officers' Remuneration The numbers of executive officers, other than Ministers and Accountable Officers, and their total remuneration during the reporting period are shown in the first two columns in the table below in their relevant income bands. The base remuneration of executive officers is shown in the third and fourth columns. Base remuneration is exclusive of bonus payments, long-service leave payments, redundancy payments and retirement benefits. Total Remuneration Base Rumeration 2014 2013 2014 2013 No. No. No. No. $130,000 $139,999 1 1 1 1 $150,000 $159,999 1 1 1 1 $190,000 $199,999 1 1 1 1 $220,000 $229,999-1 - 1 $240,000 $249,999 1-1 - Total 4 4 4 4 Total annualised employee equivalents (AEE) (i) 3.4 3.4 3.4 3.4 Total Remuneration $743,296 $709,761 $743,296 $709,761 (i) Annualised employee equivalent is based on paid working hours of 38 ordinary hours per week over 52 weeks for a reporting period.

Notes to Financial Statements for the Year Ended 30 June 2014 Note 22: Remuneration of auditors TOTAL TOTAL 2014 2013 Audit or review of financial statement 57 55 Note 23: Events Occurring after the Balance Sheet Date There have been no events occurring after reporting date which are likely to materially affect these financial statements. 91

Acknowledgements Thank you to the staff and patients of Latrobe Regional Hospital Design: Phil Smith Design Printing: easyaz Photography: Laura Ferguson, John Ansell Photography and Claire Kent LRH Mental Health Appeal logo design: Scribblevision Designs Stage 2a drawing on page 5: Vincent Chrisp Architects

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