The federal health department does not have enough funding to pay for its staff, a Senate hearing has been told.
Department secretary Jane Halton told an estimates committee on Wednesday she had had a "full and frank discussion" with the government about the state of her department's balance sheet.
"We have more staff than we have funding for," she said.
The department has been the subject of efficiency dividends and a strategic review.
Between June 30, 2011 and January 31 this year the department went from 4223 staff to 3661, mostly through not filling positions made vacant.
During the past three years 341 staff had taken voluntary redundancies, with more expected to come this year.
Ms Halton said the department did not have the funding to pay for the redundancies without running a loss.
