Chapter 1 - Annual reports of departments
Department of Defence
1.1
The Defence Annual Report 2006–2007 was presented on 31 October 2007 and tabled in the Senate on 12 February 2008.
Military justice system
1.2
The committee draws attention to the chapter in Defence's annual
report devoted to justice and fairness in Defence, particularly the section on
military justice reforms. It notes the statement by Defence that significant
progress has been made in the first eighteen months of the two–year
implementation period of 'enhancements to the military justice system'. The
changes are in response to the Senate Standing Committee on Foreign Affairs, Defence
and Trade's 2005 Report into the Effectiveness of Australia's Military
Justice System.
1.3
The two year implementation period sets out to deliver impartial,
rigorous and fair outcomes through better oversight, greater transparency and
improved timeliness. According to the Annual Report:
At 30 June 2007, 21 of the 30 agreed recommendations from the
Committee's report had been completed. Action in respect of the remaining
recommendations is well under way.
...
Work remains to be done to embed the changes, but the
substantial progress achieved to date provides a strong base for making further
reforms. Progress is being reviewed monthly by the Chiefs of Service Committee
and reported six–monthly to the Senate Standing Committee on Foreign Affairs, Defence
and Trade.[1]
Significant matters relating to the
operations and performance of the department
Defence's financial statements
1.4
The committee is required to note any significant matters
relating to the operations and performance of the bodies presenting their
annual reports. The committee draws attention to the department's financial
statements.
1.5
It is mandatory under section 57 of the Financial
Management and Accountability Act 1997 for the annual report to include a
copy of the audited financial statements and the Auditor–General's report
thereon. Over recent years, Defence's financial statements have shown
significant deficiencies.
A history of qualified financial
statements
1.6
In 2001, the ANAO found that there were significant internal
control issues which cast doubt on the accuracy of Defence's financial
statements for the year ending June 2001. For the years ending June 2002, 2003
and 2004, the ANAO similarly reported that the Department's financial
statements had significant internal control issues and contained
qualifications. The Secretary and the Chief Finance Officer of Defence were not
able to meet the financial reporting requirements of the Finance Minister's
Orders in 2003–04.
1.7
In its review of the 2003–04 Defence annual report, the committee
noted, with regard to the financial statements, that 'Defence and ANAO have
accepted that while some of the problems might be quickly solved, others are
more deeply entrenched and will take some years to resolve'.[2]
1.8
For the financial year 2004–05, the Secretary and the Chief
Finance Officer of Defence were again not able to meet the financial reporting
requirements of the Finance Minister's Orders. In their review, the Secretary
and CDF stated that 'the Secretary and Acting Chief Finance Officer again
concluded this year, as in 2003–04, that they could not attest that the overall
statements were true and fairly stated'.[3]
1.9
Defence reported that it had resolved some audit findings in 2004–05,
but enduring improvements may take some years.[4]
The 2004–2005 report stated that the Defence Financial Controls Framework
Project was set to a five year time frame which reflected 'the fundamental
nature of the changes to be put in place'.[5]
1.10
The committee, in its report on annual reports no 1 of 2006,
stated:
The committee appreciates that the Department needs time to
redress the problems identified in its financial management and business
systems and processes as well as the need for 'significant cultural and
behavioural change' for staff working in these areas. Even so, the committee
expects to see marked improvement recorded in next year's annual report. It
urges Defence not to relax its endeavours to address the problems identified by
ANAO.[6]
1.11
In their joint review of the year 2005–2006, Mr Warner, and Air
Chief Marshal Angus Houston noted that they were pleased to be able to sign
this year's financial statements on an 'except for' basis:
After two years of being unable to form an opinion, it is
pleasing to see the significant effort and focus on financial management
delivering a tangible result. Improving Defence's financial management has been
a high priority for the organisation and we have made significant progress this
year.
The 2005–2006 financial year represented a complex and extremely
challenging year for Defence. Not only has there been extensive remediation
work but the additional activity of the DMO demerger, and the introduction of
the Australian equivalents to International Financial Reporting Standards
(AIFRS) has seen Defence experience the most complex financial year in its
history. [7]
1.12
The Secretary went on to explain that, with regard to Defence's
accounts, the remediation work has delivered significant improvements in four
key areas. He reported that improvements had been made in the reporting of
military and civilian leave liabilities, the valuation and reporting of
explosive ordnance, the introduction of a more rigorous asset capitalisation
approach and, the completion of asset valuation work in information and
communication technology.[8]
Financial statements for year
ending 2006–2007
1.13
On 17 October 2007, the Auditor–General issued a qualified
opinion on Defence's financial statements. The opinion stated that Defence's
financial statements were true and fair with the exception of Inventories–General.
...due to pricing and system related issues there is uncertainty
in relation to the reported balance of Inventories–General of $1.974
billion (2005–2006 $1.797 billion). Inventories–General is a component
of the reported balance of Inventories totalling $4.702 billion (2005–2006
$4.017 billion). Consequently, I have not been able to obtain all the
information necessary to be satisfied as to the balance of Inventories–General...
This constitutes a limitation on the scope of the audit.[9]
1.14
The ANAO's results of the Audits of Financial Statements
supported the views expressed in the 2006-07 annual report. In the 'financial
overview' section, the report concluded:
Defence's financial management continues to meet improvement
targets and significant progress has been made in financial reporting and
financial controls management.
The financial statements are once again signed off on a 'true and
fair except for' basis. The level of uncertainty surrounding the financial
statements balances is now contained to $1,974m of general stores inventory. During
the year, uncertainty around repairable items and not–in–catalogue issues was
removed. Plans are now in place to deal with the remaining uncertainty
surrounding general stores inventory.
The financial controls framework is now fully established and
has allowed Defence's Chief Financial Officer (CFO) to be able to attest that a
sound and effective system of internal control exists across all significant
financial areas...The financial reform agenda achieved positive results during
the year and Defence is now within striking distance of producing unqualified
financial statements.[10]
Summary
1.15
The committee was pleased to note the department's progress outlined
in the section entitled 'financial overview'. The section provides the reader
with an excellent overview of the department's financial operating environment
without requiring any technical expertise.[11]
1.16
This annual report presents the activities of the Department in a
clear, concise manner, which helps the reader to locate any issue or subject of
interest with a minimum of effort. The committee finds Defence's annual report
to be both an informative and a well produced account of the Department's
activities over the past year and that it meets all the requirements for
departmental annual reports.
Department of Foreign Affairs
1.17
The Department of Foreign Affairs and Trade Annual Report 2006–2007
was presented on 31 October 2007 and tabled in the Senate on 12 February 2008.
1.18
In the Secretary's review, Mr Michael L'Estrange stated that 'in
2006–2007 the department advanced Australia's interests against the background
of a fluid and challenging international environment':
...We contributed significantly to whole of government efforts to
strengthen bilateral relations with key partners, promote regional and global
cooperation, enhance Australia's security, strengthen Australia's economic
prosperity, respond expeditiously to crises involving Australians, and project Australia
and its values internationally.[12]
1.19
The Secretary stated that DFAT's international agenda was broad
and complex, and cited as examples the Government's objectives in international
counter–terrorism and security and good governance in our region:
We advanced the Government's international counter–terrorism
objectives by implementing well–targeted and effective activities focusing on
regional initiatives to address the ideological dimensions of terrorism and
preventing access by terrorists to chemical, biological, radiological and nuclear
weapons. To this end, we hosted the Asia–Pacific Seminar on Combating Nuclear
Terrorism. We also accorded priority to Australia's counter–proliferation
efforts, including by managing Australia's policy response to the proliferation
challenges of Iran and North Korea.
...
We promoted security and good governance in our region by
coordinating the Government's response to the situation in East Timor. We led
international initiatives promoting good governance and sustainable development
in the South Pacific, with particular focus on Solomon Islands, Papua New
Guinea, Fiji and Tonga. Our contributions in this context were concentrated
on Solomon Islands, through the Regional Assistance Mission to Solomon Islands,
and Fiji in response to the military coup, and Tonga in the aftermath of civil
unrest in 2006.[13]
1.20
The committee notes that the department continued to respond to
'the shifting demands of its operating environment' and the need for
'innovative and flexible staffing arrangements, underpinned by sound management
and corporate governance structures'.
...The skills of our staff and our adaptable structures enabled us
to establish discrete taskforces to address priority and emerging issues such
as consular crises. In 2006–2007 we created a temporary Fiji task force (in
response to the military coup) and the Japan Free Trade Agreement Task Force to
advance bilateral FTA negotiations. In July 2006 the department reshaped its
internal structure by creating new divisions to sharpen the focus on key
policy, advocacy and service functions and to ensure greater alignment with the
Government's foreign and trade policy priorities.[14]
1.21
Finally, the report noted that DFAT, in conjunction with the
Australia–Indonesia Institute, will sponsor the establishment of the Elizabeth
O'Neill Journalism Award. It will be an annual award to sponsor two
journalists—one Australian, one Indonesian, to provide them with opportunities
for cross–cultural visits. The aim is to help foster a stronger appreciation of
contemporary issues facing each society.
1.22
The award honours the memory of Elizabeth O'Neill, OAM,
Counsellor (Public Affairs), from the Embassy in Jakarta, who died in the crash
of Garuda Airlines jet at Yogyakarta airport in Indonesia in March 2007.
Elizabeth O'Neill was a respected and admired diplomat. She
served with distinction in Indonesia and built bridges of understanding between
the two countries. She rose to the often imposing challenges asked of her,
responding magnificently and selflessly to the aftermath of both Bali bombings,
the Jakarta Embassy bombing, the helicopter crash on the island of Nias and the
Indian Ocean tsunami. ...DFAT is immensely proud of her contribution.[15]
1.23
Once again, for ease of reporting, the report of the Department
of Foreign Affairs and Trade (DFAT) has been divided into two volumes. Volume
1, which is examined in this chapter deals with the Department of Foreign
Affairs and Trade, while volume 2 reports on the Australian Agency for
International Development (AusAID).
Reporting public diplomacy
1.24
The Department has produced a report that presents its activities
in a clear, concise manner allowing the reader to locate almost all issues or
subjects of interest with a minimum of effort. The committee notes, however,
that some witnesses to the committee's inquiry into Australia's public
diplomacy raised concerns about the quality of reporting on DFAT's public
diplomacy programs. Based on the committee's reading of DFAT's annual reports
up to 2005–2006 and the comments by a number of witnesses, it found that DFAT's
annual report:
...does not provide the information required to actually measure
the effectiveness of its public diplomacy programs. In most cases, the report
lists and describes activities without providing any indication of the direct
outcomes from these activities. There appears to be an untested assumption that
these activities produce positive outcomes. There is no indication in the
Annual Report that DFAT measures the immediate effect of its public diplomacy
programs or the long-term contribution they make to the department's foreign
policy objectives.[16]
1.25
The committee understands that its report on public diplomacy,
tabled in August 2007, was produced too late to offer any guidance to DFAT in preparing
their current Annual Report. Furthermore, the committee has not received the
government's response to the committee's findings. Nonetheless, the committee
takes this opportunity to remind DFAT of criticism of its Annual Report and of
the committee's findings about inadequate information in its Annual Report on
DFAT's public diplomacy programs.
Summary
1.26
Overall, the committee finds that the report has been prepared in
accordance with the guidelines and finds that DFAT has met the reporting
requirements for a departmental report.
Department of Veterans' Affairs (DVA)
1.27
The Department of Veterans' Affairs Annual Report 2006–2007 was presented
on 22 October 2007 and tabled in the Senate on 12 February 2008.
1.28
The annual report for Department of Veterans' Affairs also
includes the annual reports of the Repatriation Commission, the Military
Rehabilitation and Compensation Commission (MRCC); and the National Treatment
Monitoring Committee (NTMC). The Secretary of the Department is also the
President of the Repatriation Commission and Chair of both the MRCC and the
NTMC.[17]
1.29
In the President/Secretary's overview, Mr Mark Sullivan stated
that 2006–2007 was another year of both internal and external challenges.
Focusing on the department, Mr Sullivan commented that...
2006–2007 was the first full year of oneDVA,
the department's reorganisation that replaced state office divisions with a
national model organised by function. I am pleased to report that the veteran
and defence force communities have not noticed any changes in the way the
department interacts with them. Indeed, in many important areas, DVA has been
able to improve the level of services it has provided its clients, much to the
credit of its staff.
The department, nevertheless, continues to face significant
challenges, including the need to decrease the department's size commensurate
with the decline in the veteran population and the workloads they generate
whilst at the same time ensuring that service levels do not fall. [18]
1.30
The committee notes that in the year under review, the department
has improved much of its delivery of services, doubling its range of contracted
private hospitals, and extending the services provided under its transport,
rehabilitation appliances, preventative health and optical programs.[19]
1.31
In previous reports on annual reports, the committee has taken an
interest in DVA's efforts to streamline and improve its information technology
infrastructure. The committee notes the department's telephone service is
undergoing reform.
Over the last ten years, the telephone has become the most
common method for contacting the department among the veteran community: nearly
three–quarters of the four million calls DVA receives each year are from
veterans or their families. To ensure that the department continues to provide
an accurate, comprehensive telephone service, DVA has introduced the veterans
service centre, a telephone handling service operated by staff with the skills
and experience to answer most calls as they arrive. Where these calls cannot be
answered immediately, they are transferred to the relevant business area.[20]
1.32
The government's introduction of a new health and social services
access card is of particular interest to the committee. The Secretary explained
that the access card 'is another important project for the department,
particularly to ensure that veterans' needs are taken into account in its
development'.
DVA is working with the Department of Human Services to ensure
the implementation of the access card will not affect DVA's standards of service
delivery to the veteran community.[21]
1.33
In conclusion, the committee finds that the Department of
Veterans' Affairs has submitted a comprehensive and well designed annual report
that meets all the reporting requirements for a Commonwealth department.
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