Introduction and Overview:Secretary's Review

Secretary’s Review

September 2010 marks my first full year as Secretary of the Department of Finance and Deregulation. In this year, Finance has continued to provide strong support for the government as it dealt with the aftermath of the global financial crisis and continued economic uncertainty. Budget processes shifted to the task of restoring the Budget to surplus over the next few years and supporting major initiatives such as national broadband and health and hospitals reform. Finance played a key role in these processes providing essential budget support and financial expertise.

We also kept our eye on the medium term, ensuring that the financial management framework and processes for supporting the parliament continue to meet current and future demands. Our ICT procurement and deregulation activities gained momentum during the year and started to generate some strong results. Importantly, we have continued our efforts to build on the expertise and capability of our staff, strengthening my confidence that Finance is well placed for the challenges ahead.

It is always difficult to draw out particular achievements from the rich and varied things that Finance does but a small number warrant particular mention.

Delivery of the 2010-11 Budget

The annual Budget is always the key focus for Finance. The 2010-11 Budget was prepared against a backdrop of continuing instability in the global economy and the government’s response was to target an early return to budget surplus. To achieve this objective, growth in spending was limited to two per cent in real terms. This fiscal environment was in contrast to the events of the previous year where the focus was on providing emergency fiscal stimulus.

The shift in the fiscal environment had a significant effect on our work. The constraint on spending meant that only the most urgent items could be considered. This reduced the volume of briefing Finance prepared and the number of measures we were called upon to process and document. For example, we prepared only 77 briefings for the Expenditure Review Committee of Cabinet in 2009-10 compared to 134 in 2008-09. The measures tally told a similar story. The 2010-11 Budget contained 396 measures with a net cost of $1.3 billion over five years. In contrast, the previous Budget contained 601 measures with a net cost of $26.9 billion over five years.

Our central agency perspective, combined with a detailed knowledge of Commonwealth programs and good working relationships with agencies, served us well in assisting the government to draw the Budget together.

We played an important role in the development of the major budget initiatives. Finance worked closely with the Department of Health and Ageing, and with other central agencies, in developing the health and hospitals package subsequently agreed by the Council of Australian Governments (COAG).

We also worked on the national broadband initiative, setting up the shareholder oversight arrangements for the new NBN company, providing policy advice on the implementation study, and advice on the provision of equity funding through the Building Australia Fund.

Better regulation

In the two years since Finance was given responsibility for deregulation, the scale and breadth of this work have grown considerably and significant results have been achieved:

  • Partnerships have been developed with key regulatory departments to simplify regulation and ease compliance costs for business. Simplified financial product disclosure statements and speedier access to new medical technologies are now in place as a result of this work.
  • New Regulation Impact Statement requirements have focused on making the requirements easier to apply and the results more transparent; again an important reform designed to improve compliance and build cultural support for better regulation.
  • We are working closely with the states on an ambitious regulatory reform agenda to ease the burden for business in complying with multiple requirements where they operate across state boundaries.

This work is developing into a strong foundation for future national productivity gains and we will continue to build on it.

Framework developments

Amid budget demands we also kept a focus on the important governance and financial management frameworks.

Finance and ComSuper have been working for some time on how to make the administration of the Australian Government’s superannuation schemes more sustainable in the longer term. As a result, the government has announced the outsourcing of the administration of the Public Sector Superannuation accumulation plan and measures to improve member superannuation data, additional investment in ICT infrastructure, and administration processes.

The governance and administration of superannuation are not typically seen as first order issues, but good governance and administration is in the long term interests of the beneficiaries and is essential for the responsible management of these very significant Commonwealth liabilities.

We also advanced the Operation Sunlight agenda. This work focused on enhancing transparency and accountability while removing unnecessary complexity and red tape:

  • Ongoing funding for depreciation, amortisation and ‘make good’ expenses has been replaced by a departmental capital budget. In future, funding will only be provided when payments are expected to be made.
  • The government has provided additional funding to the Parliamentary Library so it can assist non-government parties develop their policies before they are costed under the Charter of Budget Honesty.
  • The first public report on the certificate of compliance was released in January 2010, reporting on the period 2008-09. The report indicated that the most common areas of non-compliance were in the commitment, approval and spending of public money and we have strengthened our training activity in these area.

Coordinated procurement has continued to be developed as a source of future savings and efficiency. We have built our understanding of the government’s suppliers and honed our tendering and contracting expertise. Whole-of-government contracts are expected to generate savings of around $370 million over the next two years, with $135 million of this to come from the coordinated procurement initiative. Extension of this initiative into new areas such as desktops, phones and internet based network connections, stationery and office supplies, courier services and guarding, is expected to improve on these impressive results.

ICT developments

An important milestone was reached in 2009 with the release of the 2010-11 Budget under a Creative Commons License. This innovation allows users of the budget papers much greater flexibility in how they can use the information and data than the previous Crown copyright arrangements.

2009 also saw two rounds of investment from the ICT Business as Usual Reinvestment Fund. This initiative was a key outcome of the Gershon review and provided for a proportion of ICT savings to be reinvested in the redevelopment of legacy systems. Forty-four projects were funded across 20 agencies at a cost of some $231 million.

Finance has continued its lead role in making better use of the internet to improve access to government information and services. The ‘’ site has been redeveloped as the government’s principal online service point. The new site simplifies many common transactions and allows people to establish a single customer account. This is an important step towards the goal of making web-based services much more user focused.

In last year’s annual report I foreshadowed the development of a national intergovernmental TelePresence system. The aim was to build and operate 20 secure video conference facilities to support meetings of COAG and other ministerial councils. This system is now in place and fully operational. The facility allows ministers to hold secure, face-to-face meetings without the delay and cost of interstate air travel. The facilities have been used to hold over 100 meetings and have resulted in savings of over $1 million in airfares and productivity gains. This has been a very successful collaboration between Finance, the Department of the Prime Minister and Cabinet (PM&C), and the states and territories.

Regional cooperation – Papua New Guinea Liquified Natural Gas Project

In recent years Finance has developed a close relationship with its counterpart department in Papua New Guinea (PNG). This partnership has focused on improving the control and management of public finances by developing capability and exchanging staff. Faced with the prospect of managing a very large flow of royalty revenue over a long period from a new liquified natural gas project, PNG was keen to tap into Finance’s expertise on sovereign wealth funds. To date our dialogue has focused on legislation and governance arrangements and the application of the principles and practices of the international working group on sovereign wealth funds. The opportunity this project offers PNG to develop its economy and improve the lives of its citizens is enormous and Finance is well placed to help it maximise the benefits.

Property and construction

Finance has also been busy changing the Canberra skyline. The construction of the building project to house the Australian Security Intelligence Organisation’s central office is now well advanced. Site preparation is complete and almost half the building structure is in place. Design work for the base building is complete and design work for the fit out is well advanced. Finance is also applying its management and construction expertise to the redevelopment of the Villawood Immigration Detention Facility.

Last year I foreshadowed the development of a whole-of-government property management framework that would include an accommodation density target. This work is now complete. The guidelines provide greater transparency and include a universal 16 square metres per person density target.

Supporting the parliament

Important changes have also been made to the way in which parliamentary entitlements are reported. In September 2009, the government decided that parliamentary entitlements would be subject to more detailed and regular public reporting. Reports are now published twice a year and detail office administrative costs, travel allowances and overseas travel reports. These reports are accessible on the Finance website.

Finance’s people

Finance is heavily reliant on its people. Their knowledge, experience, judgment and professionalism are the cornerstones of Finance’s performance and reputation. As my predecessor Dr Watt observed, Finance can be a challenging environment in which to work. But it is also a rewarding environment, rich in intellectual and conceptual texture. To support our people, we encourage a sensible work-life balance, constructive interpersonal behaviour, retention of experienced staff and succession planning to support career advancement. Feedback and our human resource metrics are positive, but we know that this is an area where sustained effort is required to future-proof the department and ensure our continuing capability to meet the government’s needs.

Departmental financial performance

Finance recorded an operating deficit of $25.3 million in 2009-10 compared to an operating deficit of $49.3 million in 2008-09. The deficits in both years were due to a devaluation in the investment properties. The Australian National Audit Office audited the department’s financial statements and issued an unqualified audit opinion for these statements on 28 August 2010.

The department has budgeted for an operating surplus of $8.3 million in 2010-11, an increase of $33.6 million from the 2009-10 deficit. This reflects the view that a further devaluation of the department’s property portfolio is not anticipated in 2010-11.

Future issues and directions

As a central agency, Finance will again be closely involved in all new policy proposals, especially in the context of the 2011-12 Budget. I have every confidence that the department will continue to serve the government well, drawing on our unique expertise in governance and financial management and our emerging strategic capability.

Finance is also well placed to support government efforts to improve the capacity of the Australian Public Service to deliver services, provide sound policy advice and operate efficiently. Finance will work closely with PM&C, the Department of the Treasury and the Australian Public Service Commission in these efforts.

We are also examining the scope to reduce the cost of our internal operations. Finance is participating in a study with PM&C and the Treasury to see if the three departments can find a way to share human resource and financial services systems.

The future is sure to hold new and interesting challenges. I believe the department is well positioned to address them with confidence.

David Tune


Top of Page