Chapter 16 Financial Management

Analysis of financial performance

This section provides a summary of the Department’s financial performance for 2010–11. Departmental and administered results are shown in the audited financial statements of this report.

Strong financial management across the Department’s operations has meant that our total income of $552.1 million continues to be effectively managed. FaHCSIA is showing an operating deficit attributable to the Australian Government of $63.5 million for 2010–11. This is the result of the revised net cash funding arrangements introduced under Operation Sunlight, whereby asset replacement is now funded through a capital appropriation rather than through the departmental operating appropriation.

The Department continues to address audit recommendations from the Australian National Audit Office in a timely and effective manner. This has resulted in FaHCSIA having no category B findings and only two category C findings at the end of 2010–11.

Changes affecting FaHCSIA’s 30 June 2011 financial statements

The 2010–11 financial statements reflect a number of significant changes to FaHCSIA’s operations as well as whole‑of‑government changes to financial reporting arrangements. The key changes and their impact are detailed below.

Changes in administrative arrangements

The Government issued new Administrative Arrangement Orders on 14 September and 14 October 2010, transferring administrative responsibility for some of FaHCSIA’s programs to the Department of Sustainability, Environment, Water, Population and Communities, the Department of the Prime Minister and Cabinet and the Attorney-General’s Department. In addition, a determination decision on 9 July 2010 transferred the responsibility for the Family Assistance Office function to the Department of Human Services.

Under the Financial Management and Accountability Act 1997, a transfer of appropriations through a section 32 determination was completed with each respective department.

Change in presentation—Statement of comprehensive income

FaHCSIA’s operating deficit attributable to the Australian Government of $63.5 million for 2010–11 is the result of the revised net cash funding arrangements introduced under Operation Sunlight. After allowing for depreciation expenses and deducting the changes in asset revaluation reserves of $0.093 million, the total attributable to FaHCSIA is $9.2 million for 2010–11.

Administered Paid Parental Leave

Payments under the Australian Government’s PPL scheme commenced from 1 January 2011. The scheme provides eligible working parents with up to 18 weeks of Parental Leave Pay at the national minimum wage, and complements parents’ existing entitlements to leave.

FaHCSIA is the lead agency and has worked closely with other Commonwealth agencies on the development and implementation of the scheme.

There are two components for calculating a liability at 30 June 2011:

Departmental operating result

Operating income

Total operating income was $552.1 million (2009–10: $611.2 million). Operating income consists of:

Revenue from government decreased from $573.1 million to $519.0 million due to a reduction in FaHCSIA appropriation as well as section 32 machinery of government appropriation transfers.

Operating expenses

Total operating expenses were $615.6 million (2009–10: $621.4 million). Operating expenses consist of:

Overall, this decrease in operating expenses reflects the Department’s efforts in effectively managing its resources in the current economic climate.

Balance sheet

Departmental

Total assets at 30 June 2011 were $362.4 million (2010: $392.3 million). The majority of the asset base is in land and buildings, property, plant and equipment and internally developed software. The decrease in the asset base mainly occurred in trade and other receivables. The decrease reflects the Department’s delivery of various government initiatives including the Tuggeranong Office Park refurbishment and remote service delivery.

Total liabilities at 30 June 2011 were $129.2 million (2010: $131.9 million). Employee provisions and other payables comprise a major portion of the liabilities. The decrease in liabilities is due to a reduction in amounts owed to suppliers as at 30 June 2011.

Administered

Total assets at 30 June 2011 were $5,065.6 million (2010: $4,763.2 million). The increase mainly relates to an increase in receivables by $115 million. Most of this increase is due to a recent government measure where social security payments can now be made in advance and the growth in the fair value of the investment in Commonwealth entities and the value of financial investments held by the Aboriginals Benefit Account and the Torres Strait Islander Land Account.

Total liabilities at 30 June 2011 were $8,047.5 million (2010: $7,576.9 million). This increase is driven mainly by personal benefits provisions which reflects an increase in the Family Tax Benefit provision of $106 million as a result of increased customer numbers. It also reflects an increase in the Pension Bonus Scheme of $195 million and the creation of a new PPL provision of $138 million that was recognised for the first time.

Consultants

During 2010–11, 212 new consultancy contracts were entered into, involving total actual expenditure of $14.6 million. In addition, 93 ongoing consultancy contracts were active during 2010–11, involving total expenditure of $9.5 million.

Summary information on consultancy services for FaHCSIA and the Social Security Appeals Tribunal is set out in Tables 16.1 to 16.3.

Table 16.1 New consultancies let in 2010–11

Number Expenditure ($ million, GST inclusive)
FaHCSIA core 201 14.2
Social Security Appeals Tribunal 11 0.4
Total 212 14.6

Table 16.2 Ongoing consultancies active in 2010–11

Number Expenditure ($ million, GST inclusive)
FaHCSIA core 87 9.1
Social Security Appeals Tribunal 6 0.4
Total 93 9.5

Table 16.3 Total expenditure on new and ongoing consultancy contracts, 2008–09, 2009–10 and 2010–11

Expenditure ($ million, GST inclusive)
2008–09 2009–10 2010–11
20.3 23.3 24.1

Annual reports contain information about actual expenditure on contracts for consultancies. Information on the value of contracts and consultancies is available on the AusTender website.

Australian National Audit Office access clauses and exempt contracts

Access clauses

During 2010–11, no contracts were let that did not require the Auditor-General to have access to the contractor’s premises.

Exempt contracts

During 2010–11, in accordance with section 5.8 of the Department of Finance and Deregulation’s Guidance No. 15 (July 2007), FaHCSIA did not publish on AusTender the details of one contract arrangement with a total value of $1,018,308.78 (GST inclusive).

Legal services expenditure

Under paragraph 11.1(ba) of the Legal Services Directions 2005, the Department must report on its legal services expenditure each financial year.

Table 16.4 sets out the legal services expenditure for the portfolio in 2010–11.

Table 16.4 Legal services expenditure ($, GST inclusive), 2010–11

Legal services expenditure Aboriginal Hostels Limited Indigenous Business Australia Indigenous Land Corporation Outback Stores Social Security Appeals Tribunal Torres Strait Regional Authority Wreck Bay Aboriginal Community Council NT Land  Councils Office of the Registrar of Indigenous Corporations FaHCSIA Portfolio
Totals
Total costs recovered 0 90,703 0 0 0 0 0 14,320 0 6,800 111,823
Total external legal services expenditure 178,379 3,370,544 1,200,624 36,648 144,051 1,634,369 2,200 434,947 166,947 2,154,300 9,322,783
Total internal legal services expenditure 0 429,182 624,342 101,639 233,295 960,144 0 2,688,709 131,893 9,349,907 14,519,111
Total (external and internal) expenditure 178,379 3,799,726 1,824,966 138,287 377,346 2,594,513 2,200 3,123,656 298,614 11,504,207 23,841,894
Summary of external legal services expenditure
Total value of briefs to counsel 0 8,038 0 2,750 25,144 363,407 0 245,789 59,672 6,392 711,192
Total value of disbursements (excluding counsel) 0 173,350 0 416 0 2,122 0 0 1,512 50,989 228,389
Total value of professional fees paid 178,379 3,189,156 1,200,624 33,482 118,907 1,268,840 2,200 189,158 105,537 2,096,919 8,383,202
Total external legal services expenditure 178,379 3,370,544 1,200,624 36,648 144,051 1,634,369 2,200 434,947 166,721 2,154,300 9,322,783
Counsel
Number of briefs to male counsel 0 3 3 1 0 4 0 4 4 1 20
Number of briefs to female counsel 0 0 0 0 3 2 0 1 0 0 6
Total number of briefs to counsel 0 3 3 1 3 6 0 5 4 1 26
Number of direct briefs to male counsel 0 3 0 0 0 4 0 4 0 0 11
Number of direct briefs to female counsel 0 0 0 0 0 2 0 1 0 0 3
Total number of direct briefs to counsel 0 3 0 0 0 6 0 5 0 0 14
Total value of briefs to male counsel (including direct briefs) 0 8,038 0 2,750 0 350,072 0 243,789 59,672 6,392 670,713
Total value of briefs to female counsel (including direct briefs) 0 0 0 0 25,144 13,335 0 2,000 0 0 40,479
Total value of briefs to counsel 0 8,038 0 2,750 25,144 363,407 0 245,789 59,672 6,392 711,192
Disbursements
Total value of disbursements (excluding counsel) 0 173,350 0 416 0 2,122 0 0 1,512 50,989 228,389
Professional fees
Total value of professional fees paid 178,379 3,189,156 1,200,624 33,482 118,907 1,268,840 2,200 189,158 105,537 2,096,919 8,383,202

Purchasing

The Department’s purchasing activities are consistent with the FaHCSIA Chief Executive Instructions and internal procurement guidelines, which are in accordance with the Commonwealth Procurement Guidelines (December 2008). All activities have ensured the efficient, effective and ethical use of public monies and have delivered value for money. Purchasing decisions have been made in an accountable and transparent manner, complying with Australian Government policies and meeting relevant international obligations.

Assets management

FaHCSIA manages its assets in accordance with the Chief Executive Instructions, relevant accounting standards and Department of Finance and Deregulation requirements and continues to review its asset management processes and procedures to achieve best practice outcomes. For example, during 2010–11 a new personal issue policy and online systems have been used to achieve more efficient management of portable work equipment on issue to staff.

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