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Chapter 12 - DMO financial performance

The DMO receives around 90 per cent of its funding from Defence under agency agreements. The remaining 10 per cent of its funding is provided via a direct appropriation and own-source revenue. The DMO's audited 2012-13 financial statements are included in Part 5 of this report.

Operating performance

The DMO budgeted for a break-even result in the Portfolio Additional Estimates Statements 2012-13. This reflects a model under which the DMO is funded for the activity it performs.

Table W12.13 Statement of comprehensive income for the period ended 30 June 2013

Table W12.13 Statement of comprehensive income for the period ended 30 June 2013
  Revised budget Actual result Variation[1]
2012-13 2012-13 2012-13
$'000 $'000 $'000 
EXPENSES        
Employee benefits   603,285 591,070 -12,215
Suppliers   8,262,227 8,494,163 231,936
Grants   27,911 19,262 -8,649
Depreciation and amortisation   2,527 1,707 -820
Write-down and impairment of assets   - 13,239 13,239
Foreign Exchange Losses     15,299 15,299
Other expenses   - 54 54
Total expenses A 8,895,950 9,134,794 238,844
LESS:        
OWN-SOURCE INCOME        
Revenue        
Sale of goods and rendering of services   7,945,498 8,217,929 272,431
Interest   - 5,452 5,452
Other revenue   37,948 31,848 -6,100
Total revenue   7,983,446 8,255,229 271,783
Gains        
Other gains   1,400 1,100 -300
Total gains   1,400 1,100 -300
Total own-source income B 7,984,846 8,256,329 271,483
Net Cost of (contribution by) services C=(A-B) 911,104 878,465 -32,639
Revenue from Government D 911,104 911,104 -
Items not subject to subsequent reclassification to profit or loss        
Changes in asset revaluation reserves   - 13 13
Total other comprehensive income E - 13 13
Surplus (Deficit) F=(D+E-C) - 32,652 32,652
Note
  1. The variation is between the actual result as disclosed in the DMO's audited 2012-13 financial statements and the revised budget published in the Portfolio Additional Estimates Statements 2012-13.

Explanation of major variations-income statement

The DMO achieved a small operating surplus of $32.7m. This is less than one per cent of total budgeted expenses. The main reasons for this surplus were relatively lower operating expenses achieved through increased efficiencies, an underachievement against funded staffing levels resulting in lower employee expenses, and lower than expected activity in industry programs.

Financial position

Table W12.14 Balance sheet as at 30 June 2013

Table W12.14 Balance sheet as at 30 June 2013
  Revised budget Actual result Variation[1]
2012-13 2012-13 2012-13
$'000 $'000 $'000
ASSETS      
Financial assets      
Cash and cash equivalents 50,000 135,805 85,805
Trade and other receivables 496,063 1,165,560 669,497
Total financial assets 546,063 1,301,365 755,302
Non-financial assets      
Property, plant and equipment 7,199 5,560 -1,639
Intangibles 139 28 -111
Other non-financial assets 1,366,024 1,204,647 -161,377
Total non-financial assets 1,373,362 1,210,235 -163,127
Total assets 1,919,425 2,511,600 592,175
LIABILITIES      
Payables      
Suppliers 1,273,567 1,405,576 132,009
Grants 5,161 5,111 -50
Other payables 77,704 517,377 439,673
Total payables 1,356,432 1,928,064 571,632
Provisions      
Employees 187,270 174,981 -12,289
Other Provisions 5,698 5,881 183
Total provisions 192,968 180,862 -12,106
Total liabilities 1,549,400 2,108,926 559,526
Net assets 370,025 402,674 32,649
EQUITY      
Parent entity interest      
Retained surpluses or      
accumulated deficits 214,418 247,054 32,636
Asset revaluation reserves 239 252 13
Contributed equity 155,368 155,368 -
Total parent entity interest 370,025 402,674 32,649
Total equity 370,025 402,674 32,649
Note
  1. The variation is between the actual result as disclosed in the DMO's audited 2012-13 financial statements and the revised budget published in the Portfolio Additional Estimates Statements 2012-13.

Explanation of major variations-balance sheet

The variances between the revised budget and the actual result for 2012-13 in the balance sheet mainly reflect:

  • an increase in assets of $592.2m-mainly representing an increase in receivables and cash, which was offset by a decrease in other non-financial assets (prepayments)
  • an increase in liabilities of $559.5m-mainly representing an increase in supplier and other payables offset by an reduction in employee provisions.

The main driver for the increase in Trade and Other Receivables and Other Payables was a change in the accounting treatment of Liquidated Damages. A detailed explanation of this change is provided in notes to the DMO financial statements. The relevant notes are the Accounting Policy Note (Note 1.15), Note 5B Receivables and Note 7C Other Payables.

Table W12.15 Cash flow statement for the period ended 30 June 2013

Table W12.15 Cash flow statement for the period ended 30 June 2013
  Revised budget Actual result Variation[1]
2012-13 2012-13 2012-13
$'000 $'000 $'000
OPERATING ACTIVITIES      
Cash received      
Goods and services 8,243,463 8,350,682 107,219
Appropriations 943,029 1,014,441 71,412
Net GST received 558,795 618,088 59,293
Activities performed on behalf of foreign governments 56,647[2] 47,829 -8,818
Other cash received 1,061[2] 5,395 4,334
Total cash received 9,802,995 10,036,435 233,440
Cash used      
Employees 609,521 616,037 6,516
Suppliers 8,435,766 8,407,885 -27,881
GST paid 558,795 597,732 38,937
Funds returned to Defence 142,786 283,901 141,115
Grants 27,911 19,312 -8,599
Other cash used - 25 25
Total cash used 9,774,779 9,924,892 150,113
Net cash from or (used by) operating activities 28,216 111,543 83,327
INVESTING ACTIVITIES      
Cash used      
Purchase of property, plant and      
equipment and intangibles 2,938 460 -2,478
Total cash used 2,938 460 -2,478
Net cash from or (used by) investing activities -2,938 -460 2,478
Net increase or (decrease) in cash held 25,278 111,083 85,805
Cash at the beginning of the reporting period 24,722 24,722 -
Cash at the end of the reporting period 50,000 135,805 85,805
Notes
  1. The variation is between the actual result as disclosed in the DMO's audited 2012-13 financial statements and the revised budget published in the Portfolio Additional Estimates Statements 2012-13.
  2. The estimate in the Portfolio Additional Estimates 2012-13 has been adjusted to ensure consistency at a line item level with the Actual Result. This involved moving $56.647m from 'Other Cash Received' to 'Activities from other government'. This has no impact on the overall cash flow.

Explanation of major variations-cash flow

The variation in the cash flow statement are consistent with the variation in the income statement and balance sheet. As at 30 June 2013, the DMO had cash at bank of $135.8m. The variance of $85.8m from the revised budget relates to increased balances in overseas accounts that are required for procurement activity in early 2013-14.

Administered schedules

Table W12.16 Income administered on behalf of government for the period ended 30 June 2013

Table W12.16 Income administered on behalf of government for the period ended 30 June 2013
  Revised budget Actual result Variation[1]
2012-13 2012-13 2012-13
$'000 $'000 $'000
Expenses administered on behalf of government      
Foreign Exchange losses - - -
Total Expenses - - -
Income administered on behalf of Government      
Interest 6 85 79
Foreign Exchange Gains - 189 189
Total Income 6 274 268
Note
  1. The variation is between the actual result as disclosed in the DMO's audited 2012-13 financial statements and the revised budget published in the Portfolio Additional Estimates Statements 2012-13.

Table W12.17 Assets administered on behalf of government for the period ended 30 June 2013

Table W12.17 Assets administered on behalf of government for the period ended 30 June 2013
  Revised budget Actual result Variation[1]
2012-13 2012-13 2012-13
$'000 $'000 $'000
ASSETS      
Financial assets      
Receivables - 2,059 2,059
Total financial assets - 2,059 2,059
Total assets administered on behalf of government - 2,059 2,059
Note
  1. The variation is between the actual result as disclosed in the DMO's audited 2012-13 financial statements and the revised budget published in the Portfolio Additional Estimates Statements 2012-13.

Table W12.18 Administered cash flows for the period ended 30 June 2013

Table W12.18 Administered cash flows for the period ended 30 June 2013
  Revised budget Actual result Variation[1]
2012-13 2012-13 2012-13
$'000 $'000 $'000
OPERATING ACTIVITIES      
Cash received      
Interest 4,348 1,799 -2,549
Total cash received 4,348 1,799 -2,549
Net increase or (decrease) in cash held 4,348 1,799 -2,549
Cash at the beginning of the reporting period - - -
Cash to the Official Public Account for interest 4,348 1,799 -2,549
Cash at the end of the reporting period - - -
Note
  1. The variation is between the actual result as disclosed in the DMO's audited 2012-13 financial statements and the revised budget published in the Portfolio Additional Estimates Statements 2012-13.

Special accounts

The Defence Materiel Special Account is the main operating account from which most business activities are conducted.

All sources of revenue, including direct appropriation, related party appropriation (revenue from Defence) and other non-appropriation sources of revenue are recorded in the Special Account. These amounts remain in the Special Account even if not fully used in the budget year. They are held as an appropriation receivable in the Official Public Account and are available to meet future expenditure requirements and liabilities when they fall due.

Table W12.19 Actual special account cash flows and balances

Table W12.19 Actual special account cash flows and balances
  Outcome Opening balance Receipts Payments Adjustments Closingbalance
  2012-13 2012-13 2012-13 2012-13 2012-13
  $'000 $'000 $'000 $'000 $'000
Defence Materiel            
Special Account [D&A]Services for Other Entities and Trust Monies-Defence Materiel Organisation [T] 1 326,647 9,261,980 9,341,491 - 247,136
           
1 - - - - -
Total special accounts   326,647 9,261,980 9,341,491 - 247,136
Notes
  1. [D&A] = Departmental and Administered.
  2. [T] = Trust Money for Comcare Receipts: This account was closed in 2012-13.

2012-13 financial summary

The total net resourcing available to the DMO in 2012-13, as published in the Portfolio Budget Statements 2013-14, was $9,407m. This comprised:

  • payment from Defence: $8,111.8m
  • special account opening balance: $326.6m
  • appropriation receipts: $911.1m
  • non-appropriation receipts: $57.7m.

During the course of a financial year, the DMO budget may vary for a number of reasons, such as changes in demand by Defence, foreign exchange fluctuations or reprogramming of cash flow to meet contractual obligations.

Table 12.1 reflects the financial resource position taking all of these factors into consideration as at 30 June 2013. The 2012-13 total actual resourcing was slightly higher than the estimate above due to an increase in appropriation receipts from other agencies (Defence) of $141.1m and an increase in non-appropriation receipts of $40.2m, resulting in a total resourcing of $9,589m.

The DMO made payments of $9,341.5m in 2012-13 resulting in a special account closing balance of $247.1m as at 30 June 2013. The special account balance remains within the overall official public account providing the flexibility to meet cash flow requirements across financial years to align with capability delivery across DMO programs.

Table 12.1 - DMO resource statement 2012-13

Table 12.1 - DMO resource statement 2012-13
Actual available appropriations for 2012-13 $'000 Payments made 2012-13 $'000 Balance remaining 2012-13 $'000
(a) (b) (a−b)
Ordinary Annual Services ¹
Departmental appropriation 911,104 860,000 51,104
Departmental appropriation ¹
Total departmental appropriation A 911,104 860,000 51,104
Special account
(departmental and administered)
Opening balance 326,647
Appropriation receipts ¹ 911,104
Appropriation receipts
- other agencies² 8,111,760
- adjustment for other agencies²³ 141,056
Non-appropriation receipts to special accounts 57,708
Adjustment for non-appropriation receipts to special accounts³ 40,195
GST credits
Interest 157
Payments made[5] 9,341,491
Appropriation reduction
Closing balance 247,136
Total special account B 9,588,627 9,341,491 247,136
Less appropriations drawn from annual or special appropriations above and credited to special accounts C 911,104 860,000 51,104
Total resourcing and payments (A+B−C) 9,588,627 9,341,491 247,136
Notes
  1. Appropriation Bill (No. 1) 2012-13 and Appropriation Bill (No. 3) 2012-13.
  2. Appropriation receipts from Defence credited to DMO's special accounts.
  3. Adjustment is variance between estimated actuals as at Portfolio Budget Statements 2013-14 and actual available appropriations for 2012-13 as at 30 June 2013.
  4. Administered interest received from overseas bank accounts, which is remitted to the Official Public Account.
  5. Includes GST.

Appropriations and other resources

The DMO workforce and operating expenses (along with Industry programs) are directly appropriated by government through Appropriation Bill (No. 1). The DMO has flexibility over the allocation of its workforce across the various programs it delivers. Variations for programs from the revised budget to the actual result may reflect ongoing changes to activity levels prescribed by Defence, budgeted cash flow adjustments for movements in foreign exchange rates or delivery of programs with fewer resources.

Programs 1.1 and 1.2 were largely funded by payments from Defence for goods and services provided, as set out in the materiel acquisition agreements and materiel sustainment agreements. Program 1.3 was funded largely through a direct appropriation.

Table 12.2 - Budgeted expenses and resources for DMO outcome

Table 12.2 - Budgeted expenses and resources for DMO outcome
Outcome: Contributing to the preparedness of Australian Defence Organisation through acquisition and through-life support of military equipment and supplies Revised budget 2012-13 $'000 Actual result 2012-13 $'000 Variation ¹ 2012-13 $'000
Program 1.1: Management of Capability Acquisition
Departmental expenses
Ordinary annual services (Appropriation Bills Nos 1 & 3) 254,727 221,455 −33,272
Special accounts 3,353,530 3,733,528 379,998
Expenses not requiring appropriation 10,170 8,967 −1,203
Subtotal for Program 1.1 3,618,427 3,963,950 345,523
Program 1.2: Management of Capability Sustainment
Departmental expenses
Ordinary annual services (Appropriation Bills Nos 1 & 3) 551,054 554,128 3,074
Special accounts 4,590,907 4,484,405 −106,502
Expenses not requiring appropriation 22,996 19,027 −3,969
Subtotal for Program 1.2 5,164,957 5,057,560 −107,397
Program 1.3: Provision of Policy Advice and Management Services
Departmental expenses
Ordinary annual services (Appropriation Bills Nos 1 & 3) 105,323 103,742 −1,581
Special accounts 1,061 5,396 4,335
Expenses not requiring appropriation 6,182 4,146 −2,036
Subtotal for Program 1.3 112,566 113,284 718
Total departmental expenses for DMO Outcome 8,895,950 9,134,794 238,844
Notes
  1. The variation is between the actual result as disclosed in the DMO's audited 2012-13 financial statements and the revised budget published in the Portfolio Additional Estimates Statements 2012-13.