Financial Overview

Page Index

• Audit report
• Operating result
• Statement of Financial Performance
• Statement of Financial Position
• Administered Items
• Factors affecting future performance

This section provides a summary of the department’s financial performance for 2003–04. Departmental and administered results are shown in the audited financial statements, and this summary should be read in conjunction with those statements. The departmental total resources are shown in some detail in Table 1.

Audit report

The department received an unqualified audit report for 2003–04.

Operating result

The department’s Statement of Financial Performance reports an operating surplus for 2003–04 of $0.2 million (in 2002–03 a $0.7 million operating surplus was reported). The result was less than the operating result of $0.5 million forecast in the 2003–04 Portfolio Budget Statements.

The reduction in the operating surplus was due to expenditure associated with the Inquiry into Australian Intelligence Agencies and expenditure associated with building and security enhancements, at the department’s premises at 3–5 National Circuit, Canberra.

Table 2 demonstrates the department’s key results for the financial years 2002–03 and 2003–04.

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Special account

The department manages the Campaign Special Account. This account derives revenue through the imposition of a levy on campaign advertising undertaken by government agencies. The revenue generated is used to fund the operating expenses of the Central Advertising System of the department’s Government Communications Unit. These expenses are included in tables 1 and 2 above. The account achieved a small surplus for the 2003–04 financial year.

Statement of financial performance

Revenue

Total revenue received in 2003–04 was $60 million, made up of $55 million from appropriations for outputs, $1.7 million from resources received free of charge, and $3.3 million from revenue from other sources. This represented an increase of $12.6 million over the revenue for 2002–03.

Appropriation revenue increased by $10.4 million, due to the establishment of the National Security Division, the bushfire inquiry, and the water and energy taskforces.

Revenue from other sources increased by $2.2 million. This was due to an increase of $1 million in resources received as a result of the increase in the number of officers seconded from other agencies, particularly to the National Security Division; a $0.9 million increase in revenue from the sale of goods and services; and an increase of $0.5 million in independent revenue from the Campaign Special Account, offset by a reduction in departmental interest of $0.2 million due to the abolition of the Agency Banking Incentive Scheme.

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Expenses

The department’s expenses for 2003–04 were $13.1 million higher than in 2002–03. This was due to the increased employee, supplier, building enhancement and security expenses required to deliver the new activities outlined above.

Statement of financial position

Equity

The department’s total equity increased from $6.2 million in 2002–03 to $12.5 million in 2003–04. The increase in equity was due to the transfer of the 2003–04 $0.2 million operating surplus to reserves, and the correction of two previous accounting transactions, namely the $4.0 million dividend to the Official Public Account and the $2.1 million contributed equity related to the department’s special accounts (see Note 9 to the 2003–04 audited financial statements for further explanation).

The increase of $6.1 million arising from the accounting corrections referred to above is only temporary, as the cash holdings will be transferred to consolidated revenue during 2004–05 when the purpose clauses of the special accounts have been changed. This will return the department’s equity to $6.5 million.

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Assets

The department’s assets may be broken into four main categories:

• cash
• infrastructure, plant and equipment
• intangibles (non-physical assets such as software)
• receivables (amounts due to be paid to the department).

There is also an ‘other’ category comprising other departmental assets which relate to prepayments, and other administered assets which relate to prepayments and inventories.

The proportions of each category of asset held during 2003–04 are illustrated in Figure 6.

Figure 6 Composition of departmental assets at 30 June 2004

Figure 6 text description

The department has $12.2 million in cash holdings recorded as a receivable in the Official Public Account. Of this amount $7.7 million relates to the Campaign Special Account and $4.5 million relates to departmental funds. The department’s total assets increased from $20 million in 2002–03 to $26.8 million. This increase was made up of $3 million in financial assets and $3.8 million in non‑financial assets.

Financial assets

The $3 million increase in the department’s financial assets referred to above resulted from a $4.7 million increase in receivables offset by a reduction in cash reserves of $1.7 million. The increase in receivables is due to the reversal of prior year transactions (see Note 9 to the 2003–04 audited financial statements for further explanation).

Non-financial assets

The $3.8 million increase in non‑financial assets referred to above was comprised of a $3.6 million increase due to information technology purchases and security and building enhancements, increased intangibles of $0.4 million due to the upgrading of the department’s information systems standard operating environment and a decrease in prepayments of $0.2 million.

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Liabilities

The department’s total liabilities increased by $0.5 million to $14.3 million from $13.8 million in 2002–03. This resulted from an increase of $0.9 million in employee entitlements and $0.2 million in payables offset by a decrease of $0.6 million in outstanding leasehold payments.

Administered items

Administered items are those assets, liabilities, revenues and expenses that are controlled by the Australian Government but managed or overseen by the department on the government’s behalf.

Expenses

Table 3 provides for comparison between the department’s 2002–03 and 2003–04 administered expenses.

a This is a new item for 2003–04; responsibility for the committee was transferred to the department from the Attorney-General’s Department in September 2003.

b This item did not carry over into 2003–04 as responsibility was transferred to the Attorney-General’s Department.

c Expenses from the Media Commissions Special Account do not form part of administered expenses as these are funded from revenue earned by the account and not from appropriations.

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Significant variations in expenses

The significant variations (10 per cent or more) in administered expenses for 2003–04 are explained below.

Expenses for the ‘Allowance to former Governors-General’ item decreased by $2.5 million in 2003–04. This was due to a significant actuarial adjustment from $3.3 million in 2002–03, when Dr Hollingworth’s lifetime entitlements were recognised for the first time, to $0.7 million in 2003–04 to cover the provision of future entitlements including those of the current Governor-General. Notwithstanding the high-profile visits of presidents George W Bush and Hu Jintao, expenses for ‘State occasions and official visits’ decreased by $1.2 million due to overall visit numbers declining during 2003–04.

Expenses in 2003–04 for ‘Women’s programmes’ increased by $16.2 million primarily due to the allocation of $7.6 million in the 2003–04 Budget to maintain the government’s commitment to the Partnerships Against Domestic Violence programme and the National Initiative to Combat Sexual Assault. In addition, funding of $5.1 million was provided through the 2003–04 supplementary additional estimates process for the National Campaign for the Elimination of Violence Against Women. Expenses for the ‘Compensation and legal expenses’ item decreased by 26 per cent in comparison to those for 2002–03. This is a demand-driven item and expenditure is unpredictable.

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Special account

The department manages the Media Commissions Special Account. This account is administered on behalf of the Australian Government. This special account earns revenue from commissions received from government advertising. The revenue is used to remunerate the Australian Government’s contracted master media placement agencies and, if required, any creative advertising agencies, for the placement of Australian Government advertising. The account achieved a balanced outcome for the 2003–04 financial year with expenses equalling revenue (see Note 19 of the financial statements for more details).

Assets

The majority of administered assets are comprised of land and buildings. The main change in the composition of the department’s administered assets during 2003–04 related to a $1.5 million increase in receivables. This was due to goods and services tax input credits owed to the department by the Australian Taxation Office. Other administered assets remained stable during 2003–04. The composition of the department’s administered assets is set out in Figure 7.

Figure 7 Composition of administered assets at 30 June 2004

Figure 7 text description

Factors affecting future performance

In the 2004–05 Budget, the department received additional funding of $0.5 million for 2004–05 and 2005–06 for the project management costs associated with the fitting out of the department’s new long-term accommodation. Provision will be made for the cost of the fit-out (the final amount available to be the subject of later determination) and for additional funding for rent from 2006–07 to bring resources provided to the department up to a level comparable to those provided to similarly located agencies. The department also received additional funding of $1 million for 2004–05 and $2 million (indexed) ongoing from 2005–06 to coordinate research into counter-terrorism technology.

The department is facing increasing operating expenses, particularly salary expenses, and relatively fixed funding. Careful management will be required to ensure that pressures are met and outcomes continue to be achieved within budget.