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Australia's Coat of Arms topDepartment of Finance and Administration Annual Report 2001-2002
Department of Finance and Administration Annual Report 2001-2002
ContentsChapter 1Chapter 2Chapter 3Chapter 4Chapter 5Chapter 6Chapter 7Chapter 8Chapter 9AppendicesFinancial StatementsGlossarySite MapBack to Previous PageNext page

Changes to Finance's Departmental Functions

Focus on Core Activities

Departmental Financial Performance

Finance's People
 Future Direction

Chapter 1
Secretary's Review

The past year has been one of challenge, change and consolidation for the Department of Finance and Administration (Finance).

The federal election in November 2001 affected the Department's operations in several substantial ways. These included operating under the requirements of the Charter of Budget Honesty Act 1998 during the election campaign; implementing arrangements for a new Minister for Finance and Administration, Senator the Hon Nick Minchin, and the return of existing portfolio ministers, Senator the Hon Eric Abetz, and the Hon Peter Slipper MP; and implementation of the Administrative Arrangements Order (AAO) changes announced by the Prime Minister on 23 November 2001. Finance facilitated the smooth transition of its portfolio ministers into their respective roles through the provision of briefing and administrative support.

Changes to Finance's Departmental Functions

The Department's functions were changed significantly as a result of the new AAO. A number of functions which came from the former Department of Administrative Services in October 1997 were transferred to other departments. These included responsibility for the administration of Royal Commissions, management of the overseas property portfolio, and access to government information. Other functions transferred from Finance were responsibility for the Remuneration Tribunal secretariat, service charters, and administration of the natural disaster relief and sugar industry assistance packages.

The Department absorbed the functions of the Office of Asset Sales and Commercial Support (OASACS) following its abolition on 27 November 2001.

Drawing on its experience with the amalgamation of the former Departments of Finance and of Administrative Services in 1997, Finance undertook the preparatory work necessary to implement any possible machinery of government changes in the run up to the election. A Transition Coordination Committee was set up to identify potential issues and prepare a possible implementation plan. Once the Prime Minister announced the new ministry and administrative arrangements to take effect on 26 November 2001, Finance responded promptly to effect the smooth divestment and acquisition of functions. An internal audit of this process found that the processes adopted to transfer the functions were robust and that each transition was completed in an effective manner.

The AAO changes necessitated changes to the Department's internal management and business structure and consolidation of its outcomes and outputs structure. These changes were in addition to those resulting from the September 2001 reorganisation which consolidated overhead functions such as information technology support, placed whole-of-government procurement responsibilities together, and co-located the delivery of information access services with a number of other business services.

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Focus on Core Activities

The AAO changes have helped Finance focus more closely on its core business. This includes Finance playing the role of the 'Chief Financial Officer' of the Commonwealth. This encompasses extensive involvement in the preparation of the Budget (particularly the expense and non-tax revenue components) and related whole-of-government advice on expenditure priorities and appropriation resourcing; maintenance of the accounts and preparation of the financial statements for the Commonwealth; development of financial management and reporting frameworks; shareholder advice on the management of Government Business Enterprises; and management of the asset sales programme. Finance also provides critical support services to Senators, Members and their staff. These activities continue to be represented by three outcomes: sustainable government finances; improved and more efficient government operations; and an efficiently functioning Parliament.

During December and January, Budget Group was restructured to improve its capacity to provide whole-of-government advice on expenditure priorities and resourcing. The restructuring included the establishment of single contact points for departments and agencies to provide advice on the full range of portfolio policy issues. Since this restructuring, Budget Group has worked to strengthen relationships with all departments and agencies and to develop greater knowledge of key government programmes. Staff numbers have been increased to help build the necessary greater analytical capability and understanding.

The restructuring contributed to Finance's successful delivery of its part in the 2002–03 Budget despite the compressed timeframe resulting from the November 2001 election. Preparation of the Budget usually commences in November/December when Senior Ministers review policy proposals, prior to consideration of the Budget by the Expenditure Review Committee in March/April. As a result of the election, the promulgation of new administrative arrangements, and the appointment of a number of new portfolio ministers, Senior Ministers did not meet until late January 2002. During this period, Budget Group also had to prepare the Additional Estimates legislation for February 2002. Against this background, the successful delivery of the 2002–03 Budget represented a significant achievement for the Department.

At the request of the Prime Minister, a review of the budget estimates and advice system was commenced in May 2002 and will report to the Government in October 2002. The key objectives of the review are to ensure greater timeliness and accuracy in budget estimates information, and enhance the ability of Finance to provide advice on whole-of-government expenditure priorities.

During the election period, the Secretaries of Treasury and Finance fulfilled their statutory obligations under the Charter of Budget Honesty by releasing the Pre-election Economic and Fiscal Outlook (PEFO) report on 18 October 2001. This was within the statutory ten days requirement from the issuing of the writs for an election. This release involved a high degree of co-operation between Finance and Treasury and other Commonwealth departments and agencies. Throughout the year, Finance worked closely with the relevant parties to ensure that the budget estimates were ready for publication at short notice. This was the first time that PEFO had been prepared on an accruals basis.

Finance also worked with Treasury to assist the Government in releasing the Mid-year Economic and Fiscal Outlook report on 17 October 2001.

Finance provided costings on over 200 Government and Opposition election commitments under the Charter of Budget Honesty, following requests by the Prime Minister and the Leader of the Opposition during the caretaker period. A majority of these requests were made, and costings provided, during the last week of the campaign.

Throughout the year, Finance continued to provide advice and support aimed at improving and increasing the efficiency of government operations across the Commonwealth, including implementation of the Government's asset sales programme. Two major asset sales were completed in the first half of 2002: the sale of Sydney Airports Corporation Limited (SACL) for approximately $5.6 billion and the combined sale of the National Rail Corporation Limited (NRC) (owned by the Commonwealth, New South Wales and Victorian Governments) and the Freight Rail Corporation (FreightCorp), which was owned by the New South Wales Government, for a total transaction value of approximately $1.2 billion. The shareholders of NRC received a total of $328.3 million, of which the Commonwealth received $220 million for its interest.

The sale of SACL on 25 June 2002 was the biggest government trade sale in Australia's history and the world's largest airport trade sale. It was conducted against a background of downturn, and then recovery, in air travel following the events of 11 September 2001 in the United States of America and the collapse of Ansett Airlines.

The sale of NRC followed extensive negotiations between the three government shareholders and was the first time anywhere in the world that three governments had combined to sell two separate businesses in one sale package.

In February 2002, the Minister for Finance and Administration released revised Commonwealth Procurement Guidelines and Best Practice Guidance which included model payment clauses for contracts. These documents were developed by Finance in consultation with the financial sector and various Commonwealth departments. Finance also issued revised guidance materials on the Commonwealth's devolved transactional banking framework and concluded work with the Australian Payment and Clearing Association to improve the efficiency of processing Commonwealth direct entry payments.

At the 15th Government Technology Productivity Awards in March 2002, Finance received a Gold Award for the development of the Endorsed Supplier Arrangement Management Information System and the Government Information Technology and Communications contracting framework version 4. Both are second-generation systems utilising web-based technologies, which deliver a streamlined, simplified purchasing framework for suppliers and government buyers. The systems have resulted in significant savings in staff costs, a reduction in paper work and streamlined processes for businesses dealing with the Government.

On 28 May 2002, the Government announced a revision of its foreign exchange risk management policy, with effect from 1 July 2002. Under the policy, the Commonwealth will self-insure, allowing agencies to individually manage their foreign exchange risks but without hedging externally. Finance is developing guidelines on foreign exchange risk management practices, complementing the already available material on risk management.

Finance continues to manage Comcover, the Government's self-managed fund for insurance and risk management. Agencies increased their use of Comcover's risk management services in 2001–02, which saw a marked increase in senior management commitment to risk management reform. The events of 11 September 2001 impacted severely on an already hardening global insurance market and Comcover had to re-evaluate its reinsurance strategies for 2002–03 to meet the new market conditions. Comcover continues to focus on meeting the needs of its members and the Government.

Finance also provided advice on a range of superannuation issues, including the development of legislation relating to Commonwealth civilian employees and the Government's policy of choice of superannuation.

Turning to an efficiently functioning Parliament, Finance's Ministerial and Parliamentary Services Group continued to provide a high standard of service to parliamentarians and their staff throughout the year. It also initiated a number of measures to enhance its performance in this area.

Following the announcement of the election, Finance advised all Senators and Members of the entitlements that would apply during the election period in October/November 2001. During the caretaker period, Finance continued to support the role of Senators, Members and their staff by providing accommodation and travel services. Services were also provided for the Prime Minister and the Leader of the Opposition during this period.

After the election, a suite of updated entitlements handbooks was issued to all Senators and Members to facilitate their smooth transition to the new Parliament. Finance also held induction sessions for new Senators, Members and their staff.

The Group also finalised negotiations of the Members of Parliament (Staff) Certified Agreement 2001—02 which commenced on 29 October 2001.

COMCAR provided transport for the Commonwealth Heads of Government Meeting (CHOGM), originally scheduled for October 2001, and subsequently held at Coolum, Queensland, in March 2002.

The transport needs of Her Majesty The Queen and His Royal Highness The Duke of Edinburgh were also met by COMCAR during their visit to Australia. Finance received positive feedback from the CHOGM 2002 Task Force for its professional support of these important events.

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Departmental Financial Performance

Finance recorded an operating surplus of $100.4 million in 2001–02, derived mainly from the commercial operations of the property portfolio. This result was down on the operating surplus of $187.6 million recorded in 2000–01, primarily as a result of AAO changes which included the transfer of the Commonwealth overseas property estate to the Department of Foreign Affairs and Trade. However, the operating surplus was $12.2 million better than the budgeted operating surplus of $88.2 million, in large part due to a better than expected gain on the sale of property portfolio assets. This is the third year in a row that Finance has exceeded its projected surplus.

Finance returned $201.8 million to the Government in 2001–02, comprising dividends of $59.8 million and property asset sales of $142 million. Continuing sound financial management has lifted Finance's cumulative cash returns to government to $1.5 billion over the past four years. Maintaining a focus on financial management will ensure that Finance continues to deliver solid operating results for the Commonwealth in future years.

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Finance's People

Finance is committed to building the expertise and capabilities of its people. On 16 May 2002, the Special Minister of State opened the Finance Learning Centre which provides opportunities for Finance staff to share knowledge and develop skills through a range of workshops and presentations by guest speakers, including academics and industry experts. The workshops and presentations are conducted around a range of themes related to the Department's core business. In addition, Finance's continued participation in the Leadership Consortium, which includes some of Australia's leading companies, and its in-house Future Leaders' Programme, represent a special investment in developing leadership capabilities in the organisation.

The leaders and managers of any organisation need to be closely in touch with the opinions and views of all members of that organisation. Accordingly, in April 2002, all staff were invited to participate in the Finance Staff Attitude Survey. The survey was conducted, and the results analysed, independently. The response rate of 64 per cent of all staff compares favourably with response rates in other organisations. Overall, the results show that the Department is in good shape and has many strengths. The vast majority of respondents enjoy working in Finance and many see a direct relationship between their efforts and the achievement of departmental outcomes. This suggests that we have a good linkage between organisational and individual goals.

While the survey demonstrated Finance's strengths, it also highlighted a number of areas where improvement is necessary. These included people management, staff retention, the remuneration structure, and training and development opportunities. Finance's Management Board will consider strategies to improve Finance's performance in these areas and has given staff its commitment to act on the survey's results in 2002.

Finance's commitment to staff was further enhanced when the Abacus Early Childhood Centre, situated in the newly refurbished Treasury Building in Parkes, was completed in June 2002. Children of Finance staff have priority access to places at the Centre, which commenced operations in July 2002. The Centre was officially opened by the Minister for Finance and Administration in September 2002. This on-site facility will assist the Department in meeting its goal of becoming an employer of choice and allow staff with children to help balance their work and home responsibilities.

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Future Direction

I believe there are two things that are essential for Finance to get right in order for it to carry out its functions effectively. Firstly, we need to retain corporate memory so that we have a better understanding of our core functions and are able to properly undertake them. Some of the changes that will flow from the Finance Staff Attitude Survey will address staff retention to help improve that corporate memory. Secondly, we need to engage more constructively with other areas of the Australian Public Service. We need to build good working relationships with other departments and agencies to ensure that we are able to provide creative, robust and transparent policy and programme advice to our ministers, Government, Parliament and the Australian community.

I would like to thank all Finance staff for their contribution to the Department's achievements during 2001–02. We can be proud of these results and the way we have performed our work. We can also look forward to continuing to improve our performance in the coming year.

I J Watt

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