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Superannuation

During 2003–04, Finance advised the government in relation to significant changes to the framework of superannuation arrangements for Australian Government employees and parliamentarians, and the implementation of other superannuation changes.

Payments to Telstra and Australia Post Superannuation Schemes

Consistent with the government's policy of reducing net debt and other forms of debt arrangements, including unfunded superannuation liabilities, the Australian Government decided to pay out its superannuation liabilities to the Telstra Superannuation Scheme (TSS) and Australia Post Superannuation Scheme (APSS) in single lump sum payments. The payments finalise the previous quarterly instalments arrangements, which date back to 1990, when both Telstra and Australia Post were corporatised. The finalisation of these arrangements removes the risk to taxpayers associated with this high cost outstanding liability and provides greater certainty to both superannuation funds.

The department provided extensive advice to the Minister for Finance and Administration on the strategic benefits of paying out the government's superannuation liabilities to the TSS and the APSS, the possible basis for doing so, and the legal and financial implications of making the lump sum payments. The department, with the assistance of an expert commercial negotiator, also made a substantial contribution to the negotiations with Telstra and Australia Post.

Ministerial Determinations providing for payment of lump sum superannuation payments to the TSS and the APSS were tabled in parliament on 8 March 2004. The disallowance period for the Ministerial Determinations expired at midnight on 15 June 2004 without any motions of disallowance being moved. The payments of $3.1 billion to the TSS and $1.4 billion to the APSS, which must be two of the largest single "cheques" ever drawn by the Australian Government, were made on 17 June and 1 July 2004, respectively. The payments have reduced the government's unfunded superannuation liability by $4.7 billion and brought to a close an issue that has been on the agenda for several years.

PSS accumulation plan

In October 2003, the government announced that the Public Sector Superannuation Scheme (PSS) would provide fully funded accumulation benefits for new Australian Government employees who become PSS members from 1 July 2005. Members of the new PSS accumulation plan would receive an employer contribution rate of 15.4 per cent of superannuation salary within a modern accumulation scheme. In addition, funding the employer contributions to the new accumulation plan will slow the growth of the PSS unfunded liabilities which, after 13 years of operation, have already reached around $9 billion.

Finance provided advice to the government on this issue and assisted in government consultation with key stakeholders including the PSS Board, Australian Government employers, relevant unions and ComSuper on the policy development and establishment of an agreed model for the new superannuation arrangements. Finance also prepared the amending trust deed and rules to give effect to the superannuation arrangements. The deed was made by the Minister for Finance and Administration on 23 March 2004.

New Parliamentary Superannuation arrangements

The Prime Minister announced on 12 February 2004, that the Parliamentary Contributory Superannuation Scheme will be closed to new senators and members joining the parliament from the next general election and replaced with an accumulation arrangement involving a government contribution of nine per cent of parliamentary salaries. Finance provided advice to and assisted the Minister for Finance and Administration in relation to the parliament's consideration and passage of the Parliamentary Superannuation Bill 2004 and the Parliamentary and Other Entitlements Legislation Amendment Bill 2004, which give effect to those new arrangements.

Superannuation Legislation Amendment (Family Law and Other Matters) Act 2004

Finance also provided advice to, and assisted, the Minister for Finance and Administration in relation to the parliament's consideration and passage of the Superannuation Legislation Amendment (Family Law and Other Matters) Act 2004. This Act, combined with associated delegated legislative instruments, made significant changes to the Australian Government civilian superannuation schemes and also the Parliamentary Contributory Superannuation Scheme to facilitate the splitting of superannuation interests on marriage breakdown.

Under the changes, in most cases where a scheme member's benefit is to be split, a former spouse will be provided with a separate superannuation interest in the scheme at the time of marriage breakdown. This ensures a clean break of superannuation entitlements between the parties at the time of marriage breakdown and provides both parties with control over their respective individual benefits.

Table 3 Performance Information for Outcome 1 Effectiveness – Overall Achievement of Outcome 1

The primary objective of the government's fiscal strategy is to achieve sustainable government finances. Finance contributes to this objective through high quality budget advice and accurate and timely reporting, and policy advice on the financial framework and public sector superannuation.

Output 1.1.1 Budget Advice
QUALITY
Target Result
Minister's satisfaction with budget documentation and briefings for budget decision-making. Achieved. Ninety-nine per cent of ministerial documents and 97 per cent of briefing documents, that were rated, were rated as average or above.
Timeliness of budget updates. Achieved. All budget updates were delivered on time.
Accurate budget estimates:
One per cent difference between first forward year estimated expenses and final outcome (excluding government decisions and economic parameters). Not achieved. Deviation from estimated expenses was 2.6 per cent.
0.5 per cent difference between budget estimated expenses and final outcome (excluding government decisions and economic parameters). Not achieved. Deviation from estimated expenses was 1.8 per cent.
0.3 per cent difference between revised estimated expenses at Mid-Year Economic and Fiscal Outlook and final outcome (excluding government decisions and economic parameters). Not achieved. Deviation from estimated expenses was 2.2 per cent.
0.25 per cent difference between revised estimated expenses at budget time and final outcome (excluding government decisions and economic parameters). Not achieved. Deviation from estimated expenses was 1.0 per cent.
Support to Expenditure Review Committee (ERC) and senior ministers for budget decision-making. Achieved. Delivered to the satisfaction of the Minister for Finance and Administration and ERC's satisfaction.
Advice to the Minister on whole-of-government expenditure priorities. Achieved. Continuous briefing and advice to the Minister occurred throughout the year.
Prepare budget estimates and budget updates. Achieved. Three major estimates updates were undertaken and estimates were monitored throughout the year.
Author relevant budget documentation. Achieved. Budget documentation delivered and tabled in parliament by the Treasurer and the Minister for Finance and Administration.

Output 1.2.1 Financial Framework
QUALITY
Target Result
The legislative framework and administrative arrangements meet the objectives of effective governance, performance and accountability, as assessed by the Minister and stakeholders. Achieved. The Joint Committee of Public Accounts and Audit (JCPAA) was supportive of the Financial Framework Legislation Amendment Bill, which is directed to improving the integrity of the financial framework. The JCPAA recommended that it be introduced in parliament as soon as is feasible. Advice was also provided to agencies directed at achieving greater consistency in governance and financial management arrangements applying to bodies being established or amended in proposed legislation. In addition, Finance published a list of Australian Government bodies for 2002–03.
Achieve the government's objectives in government procurement as measured by the Minister and stakeholders. Achieved. The department assisted an independent assessment of government air travel. The government accepted its recommendations and implementation commenced in December 2003. The Government Procurement (GP) chapter of the Australia–United States Free Trade Agreement was negotiated and the GP chapter of the Singapore–Australia Free Trade Agreement was implemented. The Guidance on the Listing of Contract Details on the Internet (meeting the Senate Order on Departmental and Agency Contracts) and the Guidance on Complying with Legislation and Government Policy in Procurement were published to provide assistance to agencies in delivering against government policy.
Ministers' satisfaction with briefings and advice. Ninety-six per cent of briefing documents that were rated, were rated as average or above and 81 per cent were rated as above average or excellent.
Review and refine the legislative framework and administrative arrangements to enhance governance, performance and accountability. Achieved. The Financial Management and Accountability Regulations 1997, the Commonwealth Authorities and Companies Regulations 1997, Determinations of the Finance Minister that establish special accounts and the Finance Minister's delegations have all been amended to reflect government policy and operational requirements.
Seventy-five per cent of businesses applying for endorsed supplier status will be assessed within 6 weeks of the receipt of a completed application. Achieved. Seventy-six per cent were assessed within six weeks.
Issue guidance to agencies on the operation and interpretation of the financial framework. Achieved. Guidance was issued on a range of matters including the management of special accounts; issuing and managing indemnities, guarantees, warranties and letters of comfort; competitive neutrality; spending public money and entering into commitments; and annual reporting requirements under the Commonwealth Authorities and Companies Act 1997.

Output 1.2.2 – Financial Reporting
QUALITY
Target Result
Budget estimates system which meets Minister's requirements and useability for agencies. Achieved. In addition, planning has commenced for a more comprehensive and integrated budget management system.
Monthly reports prepared within 20 days of month end. Not achieved. While not all statements were prepared within the 20-day target, overall, timeliness has improved over 2003–04 due to more timely submission of data by agencies and improvements in internal processes. Further improvements are expected in 2004–05.
Consolidated Financial Statements (CFS) prepared by the end of September. Not achieved. 2002–03 CFS were delayed by late audit clearance for some agencies. CFS were issued on 4 December 2003 and met the statutory reporting requirements. The 2002–03 Final Budget Outcome Statements were issued on 30 September 2003, within the statutory reporting timetable.
Provision of a preliminary underlying cash balance for 2003–04 within 5 days of the end of the financial year. Not achieved. The preliminary outcome was provided to the Finance Minister on 7 July 2004.
Ministers' satisfaction with briefings and advice. One hundred per cent of briefing documents that were rated, were rated as average or above.
Produce a range of financial tables and statements for budget documentation. Achieved. Mid-Year Economic and Fiscal Outlook and budget tables and statements were completed in accordance with the required timetable.
Prepare monthly financial statements and annual consolidated statements for the Commonwealth. Achieved. Monthly reports were produced throughout the year, in addition to the annual CFS.
Produce Appropriation Bills in draft form.

Achieved. Additional Estimates Bills for 2003–04, plus Bills 5 and 6 for 2003–04, and Bills 1 and 2 for 2004–05 were prepared. The following Appropriation Bills were produced:

Additional estimates 2003–04 (February 2004):

  • Appropriation Bill (No.3) 2003–04;
  • Appropriation Bill (No.4) 2003–04; and
  • Appropriation (Parliamentary Departments) Bill (No.2) 2003–04;

Budget 2004–05 (May 2004):

  • Appropriation Bill (No.1) 2004–05;
  • Appropriation Bill (No.2) 2004–05; and
  • Appropriation (Parliamentary Departments) Bill (No.1) 2004–05;

Supplementary additional estimates (May 2004):

  • Appropriation Bill (No.5) 2003–04; and
  • Appropriation Bill (No.6) 2003–04.
Maintain financial controls over the operation of the Official Public Account. Achieved. Controls over the operation of the Official Public Account were met with all reconciliations completed on time.
Finance Minister's Orders necessary to enable the Minister to meet his statutory reporting requirements issued by December each year. Not achieved. Final Finance Minister's Orders were gazetted on 17 March 2004, following a period of consultation with agencies.

Output 1.2.3 – Public Sector Superannuation Advice
QUALITY
Target Result
Accuracy of financial forecasts are within budget management requirements. Not achieved. Due to variations in expenses reflecting the revaluation of unfunded superannuation liabilities.
Agency employer superannuation contributions and payments for the year are within five per cent of the due amount as measured through quarterly reconciliation of contributions and payments. Achieved. Employer contributions for the period 1 July 2003 to 30 June 2004 were reviewed in July 2004. The variance between amounts due and amounts paid was –0.5 per cent. This falls within the five per cent target.
Ninety per cent of Parliamentary Contributory Superannuation Scheme (PCSS) superannuation payment variations received prior to cut off, will be processed in that pay. Exceeded. One hundred per cent processed during the pay period received.
Departmental Items:
Ministers' satisfaction with briefings and advice. Ninety-nine per cent of briefing documents that were rated, were rated as average or above.
Administered Items:
Unfunded superannuation liabilities reviewed through a formal actuarial long term cost report produced tri-annually. Achieved. 2002 Long Term Cost Report completed in February 2003.
Agency employer superannuation contribution rates reviewed annually, by December, for 180 agencies. Achieved. Agency employer contribution rates were reviewed and advice was sent to all agencies by mid-December 2003.
PCSS superannuation statements issued to 226 members by 31 December each year. Achieved. The PCSS superannuation statement was issued to all PCSS members in December 2003.

Table 4 Resources for Outcome 1
  Budget* 2003–04 $'000 Actual 2003–04 $'000 Variation $'000 Budget** 2004–05 $'000
Administered Expenses (including third party outputs) 4,542,961 3,751,679 (791,282) 4,430,060
Total Administered Expenses 4,542,961 3,751,679 (791,282) 4,430,060
Price Of Departmental Outputs
Output Group 1.1: Budget
Output 1.1.1 Budget Advice 41,065 43,322 2,257 46,813
Subtotal Output Group 1.1 41,065 43,322 2,257 46,813
Output Group 1.2: Financial Management
Output 1.2.1 Financial Framework 11,125 11,226 101 20,659
Output 1.2.2 Financial Reporting 18,756 18,788 32 17,397
Output 1.2.3 Public Sector Superannuation Advice 6,389 6,225 (165) 6,445
Subtotal Output Group 1.2 36,271 36,239 (32) 44,501
Revenue from Government (Appropriation) for Departmental Outputs 74,674 76,592 1,919 88,922
Revenue from Other Sources 2,662 2,968 306 2,392
Total Price of Outputs 77,336 79,561 2,225 91,314
TOTAL FOR OUTCOME 1
(Total Price of Outputs and Administered Expenses)
4,620,297 3,831,240 (789,057) 4,521,374
Average Staffing Level 376.1 439.8 63.7 529.5
  1. * Full year budget including additional estimates.
  2. ** Budget prior to additional estimates.

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