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Financial Overview

ADF Operations

The Government provided $910.9m in the 2003-04 Budget for the net additional costs of current operations including $319.9m for force generation. Funding levels were increased by $88.5m to $999.4m in the 2003-04 Additional Estimates, and further adjustments were made in the 2004-05 Budget process (see Projected Result). Subsequently, the Government agreed to a request by Defence to re-program $14.6m relating to Operation Catalyst and $12.8m relating to Operation Anode from 2003-04 to 2004-05, resulting in a final allocation for current operations in 2003-04 of $933.2m.

After taking into account the re-programming of funds to 2004-05, actual expenditure was $933.7m or $0.5m more than the final allocation as shown at Table 1.11.

Table 1.11 Net Additional Cost of Operations
  2003-04
  Budget Estimate
$'000
Revised Estimate
$'000
Projected Result
$'000
Final Allocation
$'000
Actual Result
$'000
Variation
$'000
Deployment (Citadel) 260.7 233.1 157.0 157.0 169.1 12.1
Force Generation 319.9 319.9 384.9 384.9 384.9 -
Sub Total East Timor 580.6 553.0 541.9 541.9 554.0 12.1
Catalyst(1) 282.9 282.9 255.2 240.6 240.6 -
Anode - 111.1 111.1 98.3 90.4 -7.9
Slipper -5.0 -5.0 -5.0 -5.0 -5.0 -
Relex II 17.8 17.8 17.8 17.8 15.9 -1.9
Bel Isi II - 5.0 5.0 5.0 3.0 -2.0
Safebase 34.6 34.6 34.6 34.6 34.8 0.2
Total 910.9 999.4 960.6 933.2 933.7 0.5

Note

  1. Includes remaining funding from Operations Bastille and Falconer.

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Explanation of Major Variations

East Timor including Operation Citadel (+$12.1m)

Operation Citadel was established to replace Operation Tanager following East Timor's independence in May 2002. Its objective was to contribute to the UN support to East Timor. In addition, the Government provided additional funding for force generation to sustain two battalion groups, provide for an additional airfield defence squadron and meet the increased costs of supporting operations covering the period to 2004-05. The extra forces were to ensure the ADF could deal with contingencies such as East Timor into the future. As part of the White Paper funding commitment, funding of $448.9m in today's prices was allocated on an on-going basis from 2004-05. All up, the 2003-04 Budget provided $580.6m for East Timor-related operations comprising $260.7m for deployment (Operation Citadel) and $319.9m for force generation.

The mix of the two elements of the East Timor budget was varied in the 2004-05 Budget context (see Portfolio Budget Statements 2004-05 p.35) having regard for the actual costs incurred in 2002-03, the rate of force generation build up and the progressive wind down of the deployment. The final result for East Timor operations was $12.1m more than the final allocation mainly due to increased capital expenditure (+$10.0m) and increased ADF personnel costs (+$5.7m) offset by reduced ADF movement and communications costs (-$4.5m).

Australia has been a lead participant in successive UN missions in East Timor to date. The UN approved a one-year extension of the current UN mission in East Timor to May 2005. Operation Spire, an Australian contribution to the United Nations Peace Keeping Force, forms a major part of the extended UN mission. To give effect to the Australian contribution, the Government provided supplementation of $20.1m over financial years 2004-05 ($16.0m) and 2005-06 ($4.1m) for Operation Spire.

Operation Catalyst (Nil)

Operations Bastille and Falconer were Australia's predeployment to the Middle East and its contribution to the United States-led war in Iraq. In July 2003, the ADF transitioned into Operation Catalyst. Operation Catalyst is the ADF's contribution to developing a secure environment in Iraq, assisting national rehabilitation and facilitating the transition to Iraqi self-government in June 2004. The net additional cost of operations in Iraq as published in the Portfolio Budget Statements 2004-05 (p. 36) was $776.3m including $131.6m for the continuation of Operation Catalyst beyond the transition to self-government and throughout 2004-05.

The Government subsequently agreed to Defence reprogramming $14.6m from 2003-04 to 2004-05, associated with timing issues for inventory purchases and equipment remediation programs. After allowing for this adjustment to the estimates, the actual result was in line with the final allocation.The Government subsequently agreed to Defence reprogramming $14.6m from 2003-04 to 2004-05, associated with timing issues for inventory purchases and equipment remediation programs. After allowing for this adjustment to the estimates, the actual result was in line with the final allocation.

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Operation Anode (-$7.9m)

Operation Anode is the Defence contribution to the Regional Assistance Mission to the Solomon Islands. In the 2003-04 Additional Estimates, the Government provided Defence with supplementation totalling $133.3m spread over two financial years.

The Government subsequently agreed to Defence reprogramming $12.8m from 2003-04 to 2004-05 and has provided additional supplementation of $4.7m in 2004-05, $8.9m in 2005-06 and $3.4m in 2006-07 to allow an ADF contingent to remain deployed to the Solomon Islands for up to two years to support Regional Assistance Mission to the Solomon Islands and provide the capacity to respond to any serious security threat. After the re-programming of funds to 2004-05, the actual result for Operation Anode in 2003-04 was $7.9m less than the final allocation mainly due to reduced ADF personnel, logistic and movement costs.

Operation Slipper (Nil)

Operation Slipper is the ADF contribution to the war against terrorism. There are support elements assigned to both the coalition operation against terrorism and the rehabilitation operation in Iraq (Operation Catalyst). As assets deployed under Operation Slipper are dual assigned to Operation Catalyst, any expenditure for Operation Slipper is captured and reported against Operation Catalyst.

Operation Relex II (-$1.9m)

Operation Relex II involves the conduct of air and surface surveillance and interception operations to protect Australia's northern and western borders from unauthorised boat arrivals. The actual result for Operation Relex II was $1.9m less than the approved allocation mainly due to inventory purchases for ships deployed on the operation being less than originally estimated.

Operation Bel Isi II (-$2.0m)

Operation Bel Isi II commenced in 1998 with the objective of supporting the regional Peace Monitoring Group to monitor and report on the maintenance of the cease-fire on Bougainville. The ADF involvement in Operation Bel Isi II ceased in August 2003. Defence was supplemented $5.0m in the 2003-04 Additional Estimates to cover the estimated cost of the operation post 30 June 2003. The actual result for Operation Bel Isi II was $2.0m less than the projected result due to final logistics and transport support costs involved in completing the operation being less than anticipated.

Operation Safebase (+$0.2m)

Operation Safebase provides enhanced protective security measures for Defence personnel and facilities. The actual result for Operation Safebase was $0.2m more than the projected result due to guarding services and facilities upgrades costs being higher than anticipated.

Status of Funding from all Operations

Table 1.12 provides a summary of the current actual and planned expenditure on operations covering the period 1999-2000 to 2006-07.

Table 1.12 Cost of Operations 2003-04
  1999-2000
Actual
Result
2000-01
Actual
Result
2001-02
Actual
Result
2002-03
Actual
Result
2003-04
Actual
Result
2004-05
Budget
Estimate
2005-06
Forward
Estimate
2006-07
Forward
Estimate
Total
  $m $m $m $m $m $m $m $m $m
East Timor
Citadel 429.7 335.9 187.5 172.4 169.1 11.1 - - 1,305.7
Force Generation(1) 168.4 462.6 445.4 406.9 384.9 - - - 1,868.2
Spire - - - - - 16.0 4.1 - 20.1
Sub Total East Timor 598.1 798.5 632.9 579.3 554.0 27.1 4.1 - 3,194.0
Catalyst(2) - - - 285.3 240.6 227.2 19.3 4.0 776.4
Anode(3) - - - - 90.4 39.7 8.9 3.4 142.4
Slipper - - 320.0 176.0 -5.0 - - - 491.0
Relex II - - 22.2 27.8 15.9 16.0 - - 81.9
Bel Isi II - 20.0 10.1 14.6 3.0 - - - 47.7
Safebase - - 27.0 34.5 34.8 36.1 - - 132.4
Total 598.1 818.5 1,012.2 1,117.5 933.7 346.1 32.3 7.4 4,865.8

Notes

  1. An ongoing amount of $448.9m is included in Defence's funding base from 2004-05 for force generation purposes. Separate reporting on these funds from 2004-05 onwards is not required, with any variation explained in the main body of Defence's explanation.
  2. Includes remaining funding from Operations Bastille and Falconer.
  3. The Operation Anode allocation has been notionally reduced by $7.9m from $150.3m to $142.4m to offset increases in other operations in 2003-04 (see Table 1.11). This is yet to be formalised with the Government.

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