The latest scandal that had hit Queensland's multi-million dollar health department served as the last straw for Premier Anna Bligh as she announced late Monday the definite abolition of the problem-prone state service.

Bligh's move came as police authorities arrested Queensland Health finance manager Hohepa Morehu-Barlow and detained him for allegedly defrauding the state government of up to $16 million.

Queensland authorities link Morehu-Barlow to the plundered fund when a Queensland Health official alerted higher-ups of suspicious money movements last week that were traced to the suspect's office.

Apparently sensing the probe, state authorities told Agence France Presse (AFP) that Morehu-Barlow failed to report for work on Friday, triggering a police manhunt that ended on his luxurious waterfront apartment early Monday.

Initial investigation showed that Morehu-Barlow, who also uses the alias Joel Barlow, splurged on a lifestyle far exceeding his pay grade, with The Australian reporting that the suspect owns a number of sports cars.

A native of New Zealand, the 36-year-old Morehu-Barlow also posed as a Tahitian royalty, according to Queensland acquaintances interviewed by the publication.

The controversy is the latest that had tarnished the reputation of Queensland Health, prompting Bligh to declare that "this latest failure has made it clear to me that we need a new beginning for the administration of health services in Queensland."

"No more reviews, no more taskforces or committees. Queensland Health as we know it will be abolished," the Premier was reported by AFP as saying on Monday.

"We have done everything possible to turn this ship around. We have doubled the budget, implemented every reform and accepted every recommendation of a Commission of Inquiry and extensive reviews," Bligh added.

Officials also revealed that what Morehu-Barlow had gotten from the department represent only the tip of the iceberg as Bligh conceded that huge amounts of money have been lost du to the "sick administrative performance of this mammoth organisation."

Bligh said that Queensland Health will cease to exist by July 2012 and its functions will be devolved to in-placed hospital and health care agencies, with a planned administrative office to supervise their operations.

According to AFP, Queensland Health normally matches the earnings posted by Fortune 500 firms and is even considered at par with Australia's top corporations in terms of its financial capacity.