Victoria’s Health Department struggling to pay bills on time

Victoria’s budget-troubled Department of Health is making late payments to suppliers more than half the time, breaches that should result in financial penalties under state government policy.

Government departments and agencies are required to pay invoices within 10 business days for contracts valued below $3 million, but the Department of Health has paid just 46.29 per cent on time since the requirement was tightened in 2021.

Victoria’s Health Department is struggling to pay bills on time. Credit: Nic Walker

The data was released to the state opposition under freedom of information laws and provided to The Age.

It shows the department’s performance was worst during the COVID-19 pandemic, when 64.33 per cent of suppliers were paid late in 2021-22. This improved to about 40 per cent in 2023-24 and 37.61 per cent so far in 2024-25.

A Department of Health spokeswoman said there had been a 25 per cent improvement since the pandemic, with late payments now back at pre-COVID levels.

“We invested significantly in the COVID-19 response to protect all Victorians, and that understandably put pressure on the department’s procurement resources,” she said.

“There is no relation between the time taken to pay invoices and the department’s financial position.”

The state’s fair payments policy previously required departments and agencies to pay within 30 days, but this was tightened to 10 business days in 2021.

Other departments performed significantly better but still did not manage to pay suppliers within two weeks every time, according to further freedom of information data releases to the opposition.

The Department of Families, Fairness and Housing met payment deadlines 84 per cent of the time in 2021-22 and improved to 92 per cent by 2023-24.

The Department of Energy, Environment and Climate Action reported a low of 88 per cent in 2021-22, but reached 99 per cent in July this year, with a long-term average of 89 per cent.

The Department of Premier and Cabinet (DPC) paid 94 per cent of invoices by deadline in the first two years of the requirement, and has paid 100 per cent on time so far this financial year.

While the government’s policy means suppliers can claim a penalty for lost interest, it is not automatically paid. Of the four departments, only DPC had received such a claim and paid a penalty since 2021 – of $26.59 in lost interest.

The Victorian Small Business Commission, in its most recent annual report from 2022-23, said government departments and agencies paid an average of 72 per cent of invoices valued below $3 million by deadline that year.

The average time it took was 13.87 days.

“Reasons for not meeting the 10 business day payment terms requirement include administrative errors, incomplete or incorrect invoices, staff shortages and disputes over goods or services provided,” the commission said in its report.

The commission does not break down results for individual departments and agencies.

Opposition finance spokeswoman Jess Wilson said unpaid invoices were piling up under the Allan government because of financial mismanagement.

“These figures reflect exactly how dire Victoria’s financial position has become under Labor,” Wilson said.

“Cash flow certainty is vital for small businesses and the jobs they support; there is no excuse for Labor’s widespread failure to pay suppliers on time.”

The Health Department recorded a $415.5 million net loss from transactions in its most recent annual report for 2022-23.

Last month, The Age revealed Health Minister Mary-Anne Thomas had sought an urgent $422 million cash bailout in 2022-23 for more than 20 health services at risk of being unable to make payroll payments and of having insufficient operating cash to pay creditors.

In August, the state government announced an extra $1.5 billion for the state’s hospitals in response to complaints that funding would force them to find savings and cut back. The top-up prompted a warning from Treasurer Tim Pallas that cash could not keep flowing like it had.

A government spokeswoman said the ambitious target for paying invoices acknowledged cash flow was vital to business.

She said the Health Department had invested heavily during COVID-19.

“We did what was needed to protect Victorians in the face of an unprecedented global pandemic – this included significant procurement by the Department of Health for relevant supplies,” she said.

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