Chapter 1
Annual reports of departments
Department of Defence
1.1
The Department of Defence Annual Report 2010–11 was tabled in the House
of Representatives on 31 October 2011 and in the Senate on 1 November 2011.
Matters relating to the operations
and performance of the department
Defence's financial statements
1.2
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.
1.3
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.
ANAO audit
1.4
The ANAO report for the Department of Defence stated:
During the final phase of the 2010–11 audit, Defence
partially resolved one significant and two moderate audit issues that had been
previously identified. The significant audit issue related to MILIS [Military
Integrated Logistics Information System] change management; and the two
moderate issues related to delays in the rollout of AUC [Assets Under
Construction] to General and SME [Specialist Military Equipment] asset classes.
In addition, one moderate audit issue relating to the management of EO [Explosive
Ordinance] disposal and destruction was resolved. No new moderate issues were
identified during the 2010–11 final audit.
At the conclusion of the 2010–11 audit, two significant and
twelve moderate audit issues remained outstanding. The majority of these audit
issues relate to Defence’s inventory and asset management, including supporting
IT systems.
An unqualified auditor’s report was issued on 16 September
2011.[1]
1.5
The areas where significant or moderate risks remain outstanding in
2010–11 were:
-
Inventory and assets management
-
Management of Specialist Military Assets
-
Financial Reporting Framework—Assurance over DMO services
-
Defence’s financial management information system: ROMAN
[Resource and Output Management and Accounting Network]
-
Human resource management
-
IT general controls environment[2]
Financial reporting framework
1.6
The committee's review of the previous 2009–10 Annual Report referred to
seeking evidence of progress on
the outstanding matter of management and oversight of service bureau
arrangements between Defence and the Defence Materiel Organisation (DMO).
1.7
ANAO noted in its
Audit Report No.17 2011–12 that one moderate audit issue had remained
outstanding at the completion of the previous 2009–10 audit.
Defence has advised that, in conjunction with DMO, work is
continuing on strengthening and documenting the assurance activities between
the two agencies. Defence expects this work to be completed in May 2012.[3]
Strategic Reform Program
1.8
The committee has previously noted the significance of the roll-out of
the Strategic Reform Program (SRP). In 2010–11, the SRP moved well into its
implementation phase with the achievement of a cost reduction target of
$1,016 million for the year.[4]
The Secretary and Chief of the Defence Force (CDF) stated in their overview
that:
Over 2010–11, Defence generated Strategic Reform Program
savings in excess of one billion dollars and commissioned a review into shared
services that will create further opportunities for efficiency. This will
fundamentally change the way Defence delivers services and will achieve further
savings that can be returned to Government.[5]
1.9
Areas identified in the report where cost reductions were achieved
included:
-
upgrading and consolidating Defence's ageing Information and
Communications Technology (ICT) infrastructure
-
conversion of military and contract positions into Australian
Public Service (APS) positions
-
improved demand management of travel, training, professional
services and garrison support
-
streamlining the maintenance of military equipment
-
making contract improvements across a range of support and
sustainment services
-
changes in the way that financial risk is managed.[6]
1.10
The committee notes that the Minister for Defence announced in May 2011
that the government would implement a second phase of further SRP-related
savings that would include reducing the growth of Defence's APS workforce,
further shared services reforms, and project management accountability reforms.[7]
Operations
1.11
The Secretary and CDF's overview stated that the 2010–11 financial year
represented 'one of the most intense and sustained operational periods in
recent history'.[8]
Defence conducted 17 operations in 2010–11 ranging from combat deployments
overseas to border protection and disaster relief within Australia and the
surrounding region.[9]
1.12
The Defence Annual Report outlined Defence's recent activities under
Operation SLIPPER, the Australian Defence Force's (ADF) contribution to the
North Atlantic Treaty Organisation-led International Security Assistance Force
in Afghanistan. Operation SLIPPER represented the most significant operation
for the ADF with around 1550 personnel based within Afghanistan and another 800
deployed across the broader Middle East Area of Operations.[10]
In 2010–11, the ADF continued mentoring the Afghan National Army's 4th
Brigade of the 205th (Hero) Corps to enable it to take on
responsibility for security in Uruzgan Province.[11]
According to the Annual Report, the key components of the ADF's contribution
included the troops in the Mentoring Task Force and Special Operations Task
Group; Air Force C-130, P-3 and C-17 Globemaster III aircraft; and logistics,
communication and movements personnel within the Middle East.[12]
1.13
The report acknowledged the deaths of 11 Australian soldiers on operations
in Afghanistan in 2010–11.[13]
1.14
Other overseas operations in 2010–11 included deployments of ADF
soldiers to Iraq, Darfur, East Timor, Solomon Islands, Sudan, Israel/Lebanon,
Egypt, Japan and New Zealand. Domestic operations included disaster relief
efforts in Queensland and Victoria.
Reviews and consultants
1.15
The Secretary and CDF's overview noted the number of reviews into
various aspects of Defence conducted recently:
Defence has undertaken a large number of reviews into
business, financial and processes over the last year to improve outcomes. The
Black Review into accountability will challenge institutional performance and
accountability as well as the management of skills and specialisation. Defence
is determined to rise to this challenge. We are currently considering the
recommendations of several reviews into the Defence culture that were announced
by the Minister for Defence in April 2011. Action plans will be developed to
adjust aspects of our culture where necessary.[14]
1.16
In 2010–11, Defence and DMO spent a total of $59.8 million on
consultancies and $35.4 million on external legal expenses.[15]
Summary
1.17
The committee finds Defence's 2010–2011 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. The committee, notes, however, that the activities detailed in the
annual report are subject to inquiry by the Senate Foreign Affairs, Defence and
Trade References Committee in relation to its inquiry into Procurement
procedures for Defence capital projects. Whilst this committee finds the annual
report to be 'apparently satisfactory' in complying with the relevant
requirements for the preparation of annual reports, it takes note of the fact
that the references committee is considering the efficacy of the activities
themselves.
Department of Foreign Affairs and Trade
1.18
The Department of Foreign Affairs and Trade (DFAT) Annual Report
2010–2011 was tabled in the Senate on 31 October 2011.[16]
Review by Departmental Secretary
1.19
The Secretary of the Department, Mr Dennis Richardson AO, included a
helpful summary of the significant issues and developments during the year; an
overview of the department's performance and financial results; and the outlook
for the following year. In regards to the 'international year in review', Mr
Richardson stated:
The department worked over the last year in a global and
regional environment that is being reshaped by changing economic and strategic
relativities...Continuing fragilities in the global economy and the need for a
coordinated international response was also an important context for the
department's work.[17]
International economy, trade and
investment
1.20
The Secretary stated that the department managed an active schedule of
Free Trade Agreement negotiations:
...including with Australia's top three individual country
export destinations: China, Japan and Republic of Korea. Since March 2010, the
department has led seven rounds of Trans-Pacific Partnership (TPP)
negotiations, seeking agreement on new approaches to regulating trade in goods,
services and investment in the Asia-Pacific region.[18]
Regional and international issues
1.21
The Secretary stated:
We advanced Australia's non-proliferation and disarmament
agenda by establishing, with Japan, the Non-Proliferation and Disarmament
Initiative (NPDI)—a cross-regional ministerial-level grouping to promote and
support implementation of the outcomes of the May 2010 Nuclear
Non-Proliferation Treaty (NPT) Review Conference. We engaged partners,
including the US, Japan, UK, France, NATO and the EU in traditional security
and non-traditional areas such as cyber and counter-terrorism.[19]
Corporate governance and management
1.22
The committee notes that the department established a position of Chief
Information Officer, and initiated an Information Communications Technology
reform program.
Departmental Overview
1.23
The departmental overview included the mandatory annual report
requirements—the roles and functions of the department; the organisations
structure; and the outcome and program structure.
Report on Performance
1.24
The Requirements for Annual Reports[20]
require that the annual report must include a review of how the department has
performed during the year in relation to the deliverables and Key Performance
Indicators (KPIs) of the department's programs and their effectiveness in
achieving the planned outcomes. The annual report meets this requirement.
Management and Accountability
Corporate Governance
1.25
The annual report contained a statement of the structures and processes
that the department had in place during the year to implement the principles
and objectives of corporate governance.
External Security
1.26
The annual report provided information on the significant developments
in external scrutiny of the department and the department's response.
1.27
In 2010–11, the Auditor-General tabled in Parliament, three reports by
the ANAO relating to the department's operations: Report No. 22 Audits of the
Financial Statements of Australian Government Entities for the period ended 30
June 2010; Report No. 35 Management of the Overseas Leased Estate; and Report
No. 54 The Interim Phase of the Audit of Financial Statements of Major General
Government Sector Agencies for the year ending 30 June 2011.
Management of Human Resources
1.28
The report included an assessment of the department's effectiveness in
managing and developing its staff to achieve its objectives.
Assets Management
1.29
The department also provided an assessment of the effectiveness of
assets management.
Consultants
1.30
The annual report included a summary statement detailing expenditure on
new consultancy contracts; and expenditure on ongoing consultancy contracts.
Grant programs
1.31
The annual report produced a list of the grant programs administered or
managed by the department in 2010–11.
Financial Statements
1.32
Section 57 of the Financial Management and Accountability Act requires
a copy of the audited financial statements and the Auditor-General's report to
be included in each department's annual report. The ANAO statement by the Chief
Executive and Chief Financial Officer said:
In our opinion, the attached financial statements for the
year ended 30 June 2011 are based on properly maintained financial records and
give a true and fair view of the matters required by the Finance Minister's
Orders made under the Financial Management and Accountability Act 1997,
as amended.
Summary
1.33
The committee finds that the DFAT Annual Report adequately complies with
all reporting requirements for a department.
Department of Veterans' Affairs
1.34
The Department of Veterans' Affairs (DVA) is the primary service
delivery agency that develops and implements programs to assist the veteran and
defence force communities. It provides administrative support to the
Repatriation Commission and the Military Rehabilitation and Compensation
Commission. The Repatriation Commission administers the Veterans'
Entitlements Act 1986, and is responsible for granting pensions, allowances
and other benefits, providing treatment and other services. The Military and
Rehabilitation and Compensation Commission is responsible for the
administration of benefits and arrangements under the Military
Rehabilitation and Compensation Act 2004.
1.35
DVA's Annual Report 2010–2011 was presented to the Parliament on 31
October 2011.[21]
The report also included separate reports of both the Repatriation Commission
and the Military Rehabilitation and Compensation Commission. They described how
each commission interrelates with DVA, its membership and main activities for
the reporting period. The reports do not include performance reporting, which
is covered in DVA's report.
1.36
The May 2011 Budget allocated a modest increase of $147 million to DVA,
taking the full amount to $12.3 billion for the financial year. According to
the Secretary, Mr Ian Campbell, the funding would enable the department to
continue to provide 'a high level of service to members of the veteran
community.' He said:
Although we face the challenge of delivering that high level
of service with a lower departmental operating budget, I am confident that
changes such as the shared services agreement with the Department of Human
Services will allow us to better focus our resources on meeting the needs of
the veteran community.[22]
1.37
Some of the notable developments cited in the reports include:
-
The establishment of the National Commission on the Commemoration
of the Anzac Centenary to consider ways in which Australia could commemorate
100 years of Anzac tradition starting in 2014. After receiving 600 submissions,
which assisted its deliberations, the commission submitted a report on 28 March
2011 to the Prime Minister. On the same day the Prime Minister announced the
establishment of the Anzac Centenary Advisory Board to provide strategic advice
to government on the planning and implementation of Anzac Centenary events and
initiatives.
-
The release of the Review of Military Compensation Arrangements report
in March 2011.
-
A major rationalisation of DVA's ICT infrastructure following the
signing of a five-year memorandum of understanding for shared services with the
Department of Human Services. [23]
1.38
The Secretary noted in his comments regarding the year ahead for DVA
that:
The Rehabilitation and Compensation Business Redesign project
will identify how we can improve the delivery of rehabilitation and
compensation services into the future. The Budget also allocated $3.4 million
to develop a business proposal for a pilot project to revamp current processes,
which would vastly improve the service for our clients.
With better business processes combined with advancements in
how veterans and defence personnel engage with us, we will make great strides
in ensuring the interaction between DVA and the people we serve is state of the
art.[24]
1.39
Mr Campbell also indicated that the Anzac Centenary in 2015 would be a
key focus for DVA and would 'become more so as we get closer to the date'.[25]
Data-matching program
1.40
The Department of Veterans' Affairs—Data-matching program—Report on
progress 2010–2011 was tabled in the Senate on 31 October 2011. This is the
twentieth report of the Data Matching Program.
Report on Progress
1.41
The report shows the prosecution statistics; the discrepancy statistics;
the departmental expenses for the 2010–11 reporting year; the projected savings
statistics; the total savings for the 2010–11 financial year; and cumulative
savings from the data matching program.
Summary
1.42
The committee finds that the DVA Annual Report complies adequately with
all reporting requirements for a department.
Navigation: Previous Page | Contents | Next Page