Financial Performance
Financial Performance of Departmental Activities
Finance’s departmental financial performance for 2008-09 is summarised in Table 10, below. Departmental resourcing includes assets, liabilities, revenues and expenses that Finance controls directly and uses to produce outputs on behalf of the government.
For the 2008-09 financial year, the department recorded an operating deficit of $49.3 million compared to an operating surplus of $129.7 million in 2007-08. The result was $81.5 million less than the revised estimates as published in the 2009-10 Portfolio Budget Statements – primarily due to large losses from investment property revaluations. These valuations were undertaken during the last few months of the financial year.
Total income increased by $46.9 million, from $524.7 million in 2007-08 to $571.6 million in 2008-09. This was mainly a consequence of a $76.2 million increase in reinsurance and other recoveries, primarily as a result of Pan Pharmaceuticals related claims 1. In addition, revenues from government decreased by $14.5 million to $246.3 million reflecting completion of the Telstra 3 sale; rental income increased by $10.4 million primarily due to amounts received as a result of a break lease for the Anzac Park West building in Parkes, Canberra; and Comcover 2 increased its insurance premiums by $9.4 million to $82.3 million.
Total gains of $58.6 million were recognised in 2008-09, $32.3 million less than 2007-08 due to a smaller increase in land values in the current year and the sale of the Tuggeranong Office Park property in 2007-08.
The department’s total operating expenses increased from $383.7 million in 2007-08 to $610.4 million in 2008-09. Write-down and impairment of assets expenses increased by $145.7 million reflecting downward revaluations of investment properties. The insurance claims expense increased by $76.6 million commensurate with the increase in reinsurance and other recoveries3. Employee expenses increased by $7.1 million reflecting increased salaries and changes to the provisions made to fund future employee liabilities.
An income tax equivalent regime is applied to the department’s major business activities which operate through the Property Special Account and the Comcover Special Account. The Property Special Account’s income tax equivalent expense was $10.5 million in 2008-09, compared with $11.3 million in 2007-08. The Comcover Special Account was not required to pay an income tax equivalent in 2008-09 due to prior year losses carried forward.
Finance returned a total of $160.0 million to the government in 2008-09, comprising a cash return of $44.9 million from the operations of the Property Special Account, $97.4 million from a permanent reduction of the Property Special Account, and $17.7 million of prior year savings for asset sales funding.
The department has budgeted for an operating surplus of $24.1 million in 2009-10, which is an increase of $73.4 million from the 2008-09 actual deficit. This reflects an expected improvement in the property portfolio’s operation.
Figure E below outlines the department’s financial performance over the past four years and the budget for the 2009-10 year.
Figure E: Departmental Financial Performance 2005-06 to 2009-10 ($million)
Text description of Figure E: Departmental Financial Performance 2005-06 to 2009-10 ($million)
Financial Performance of Administered Activities
The financial performance of Finance’s administered activities for 2008-09 is summarised in table 11, below. Administered items are assets, liabilities, revenues and expenses that are controlled by the executive government but managed or overseen by the department on behalf of the government.
The department recognised $1.8 billion of income on behalf of the government in 2008-09. This is $0.2 billion less than in 2007-08 as a result of the Telstra 3 sale transaction being finalised in 2007-08.
Finance administered $7.0 billion in expenses on behalf of the government during 2008-09. Of this, $5.3 billion represented superannuation payments to retirees from the government’s Commonwealth superannuation schemes. Of the remaining expenses, $1.3 billion represented payments to the Nation-building Funds Portfolio Special Accounts in other agencies and $0.3 billion represented payments made to Senators, Members and their staff by virtue of the entitlements legislation that Finance administers on behalf of the government.
Figure F below outlines the department’s financial performance in relation to administered activities over the past five years.
Figure F: Administered Activities 2005-06 to 2009-10 ($million)
Text description of Figure F: Administered Activities 2005-06 to 2009-10 ($million)
Footnotes:
- Refer to note 7B of the Financial Statements for further information.
- Comcover is the Australian Government's general insurance fund and is managed by Finance as part of Outcome 2 – Improved and more Efficient Government Operations.
- Refer to note 7B of the Financial Statements for further information.