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Chapter two: Departmental overview

Role

The primary role of Defence is to defend Australia against armed attack. Australia's defence policy is founded on the principle of self-reliance in the direct defence of Australia, but with a capacity to do more where there are shared interests with partners and allies.

Strategic direction

Soldiers from the Brisbane based 2nd/14th Light Horse Regiment assist with the cleanup effort at Liberty Villas Retirement Village in Bundaberg.

Defence White Papers are Australia's principal public policy documents regarding defence. The White Paper presents the Government's long-term strategic direction and commitments for Australia's national defence as well as future capability requirements.

The 2013 Defence White Paper represents the government of the day's judgment. It was released on 3 May 2013 by the Prime Minister, Julia Gillard, and Minister for Defence, Stephen Smith.

The Government brought forward delivery of the new White Paper by one year from its original 2014 timetable to address the international and domestic developments influencing Australia's national security and defence posture, internationally and domestically, that have emerged since the 2009 Defence White Paper. These include:

  • the strategic shift and focus, particularly economically, to the Asia-Pacific and Indian Ocean Rim regions
  • the United States re-balance to the Asia-Pacific and Australia's enhanced practical cooperation with the United States pursuant to our 60-year-old alliance relationship
  • the Australian Defence Force's operational drawdown from Afghanistan, Timor-Leste and Solomon Islands
  • the Australian Defence Force Posture Review
  • the adverse effects of the global financial crisis.

The 2013 Defence White Paper outlined the Government's judgment that the strategic shift to the Indo-Pacific means growing prosperity but also brings some uncertainty and risk. The security architecture in our region that will help manage security risks continues to evolve but, as the region's countries modernise their defence forces, there is scope to implement deeper security and strategic partnerships. The White Paper details plans to strengthen these partnerships.

The 2013 Defence White Paper reaffirms the importance of our longstanding alliance with the United States and the core capability commitments the Government made in the 2009 Defence White Paper and since then. The White Paper assumes Australia will maintain a first-class air combat capability during the transition period to the Joint Strike Fighter. It also describes how the Future Submarine Program will focus on the various options available-an evolved Collins class design or new design options-to best identify an option that meets Australia's strategic requirements.

Portfolio structure

An F/A-18A Hornet refuels as another sits comfortably alongside, in the skies above the Northern Territory during Exercise Aces North 13.

The Defence portfolio consists of a number of component organisations that together are responsible for supporting the defence of Australia and its national interests. The three most significant elements are:

  • the Department of Defence is a department of state, headed by the Secretary of the Department of Defence
  • the Australian Defence Force (ADF), commanded by the Chief of the Defence Force (CDF), consists of the three Services - the Royal Australian Navy, the Australian Army and the Royal Australian Air Force(including Reserves). These Services are commanded by Service Chiefs. Each Service Chief also administers their respective Cadet service, although the Cadet service is not a component of the parent Service
  • the Defence Materiel Organisation (DMO), a prescribed agency within the Department of Defence, headed by its Chief Executive Officer.

In practice, these elements work closely together and they are broadly regarded as one organisation known simply as Defence.

The portfolio contains some smaller entities, including a number of statutory offices created by the Defence Force Discipline Act 1982, which are independent but reside administratively within Defence, and various trusts and companies such as Defence Housing Australia and the Australian Strategic Policy Institute.

Defence Housing Australia is required by legislation to perform its functions in accordance with the policies of the Australian Government and in accordance with sound commercial practice. This means that it has a targeted rate of return and a requirement to make annual dividends and income tax payments.

Defence Housing Australia's main function is to provide adequate and suitable housing for members of the ADF. As at 30 June 2013, it had two shareholder ministers: the Minister for Defence and the Minister for Finance and Deregulation.

The Defence portfolio also contains the Department of Veterans' Affairs and associated bodies, as designated in the Administrative Arrangements Order. This department is administered and reports separately to Defence.

The Australian Strategic Policy Institute is an independent, non-partisan policy institute. It was set up by government to provide fresh ideas on Australia's defence and strategic policy choices. It aims to help Australians understand the critical strategic choices that the country will face over coming years.

Organisational structure

Senator The Hon David Johnston MP, discusses the situation in Afghanistan with members of the Australian Defence Force currently deployed to Kandahar Air Field in southern Afghanistan.

Defence's workforce consists of the ADF members of the Navy, Army and Air Force and members of the Australian Public Service. The joint leadership of the Department by the Secretary and the CDF is known as the 'diarchy'. The diarchy reflects the individual and joint responsibilities and accountabilities of the Secretary and the CDF through the directions given by the Minister for Defence.

Secretary, Mr Dennis Richardson AO

Mr Dennis Richardson was appointed Secretary of the Department of Defence from 18 October 2012, following the appointment of his predecessor Mr Duncan Lewis as Ambassador to Belgium, the European Union and the North Atlantic Treaty Organization. The Secretary is the principal civilian adviser to the minister and carries out the functions of the agency head under the Public Service Act 1999. The Secretary has responsibilities for the administration of Defence under the Financial Management and Accountability Act 1997 and is responsible for the civilian workforce under the Public Service Act 1999.

Chief of the Defence Force,
General David Hurley AC, DSC

General David Hurley was appointed as CDF on 4 July 2011. The CDF is the commander of the ADF, in line with the statutory responsibilities and authority under the Defence Act 1903, and is the principal military adviser to the minister.

Chief Operating Officer

Mr Simon Lewis vacated the Chief Operating Officer position on 18 April 2013 to transfer to the Department of Veterans' Affairs. The position is responsible for strategic reform, support and policy advice to Defence.

Chief Executive Officer DMO, Mr Warren King

Mr Warren King took up the position of Chief Executive Officer DMO on 16 February 2012, following the retirement of Dr Stephen Gumley. The Chief Executive Officer DMO is accountable for the DMO's performance in purchasing and sustaining capital equipment assets for the ADF, and for the development and implementation of significant reforms in procurement, sustainment and contracting.

Organisational structure changes

On 22 October 2012, the Defence Support Group was renamed the Defence Support and Reform Group (DSRG). The change of name reflected the structural changes in the Chief Operating Officer organisation, with the Ministerial and Executive Coordination and Communication Division and the Strategic Reform Management Office joining the group.

The formation of the Defence People Group, which commenced on 30 May 2012, was completed on 4 March 2013, with the transfer of People Services Branch from DSRG. The Defence People Group's internal structure will continue to be adjusted to reflect the lessons being learned through the significant reform activities being undertaken across the group.

Logistics Information Systems Branch made the transition from DMO to the Chief Information Officer Group on 14 February 2013. The transition signalled a new era in cooperation between the Defence logistics community and the Chief Information Officer Group.

Senior Executive changes

A Royal Australian Air Force C-17 Globemaster aircraft carrying a Kalmar container carrier arrives at Multi National Base - Tarin Kot.

With effect 18 April 2013, Mr Simon Lewis, Chief Operating Officer, transferred to the Department of Veterans' Affairs to act as Secretary prior to being promoted to that position in July 2013. As at 30 June 2013, the position remained vacant.

With effect 29 January 2013, Mr Steven Grzeskowiak commenced as the Deputy Secretary Defence Support and Reform.

With effect 26 November 2012, Dr Peter Lawrence commenced as the Chief Information Officer, following the retirement of Mr Greg Farr.

With effect 23 July 2012, Mr David Gould commenced as General Manager Submarines within DMO.

With effect 12 July 2012, Ms Jane Wolfe ceased employment with Defence.

Changes in ministerial responsibilities

Following the Prime Minister's announcement on changes to the ministry on 4 February 2013, the Hon Dr Mike Kelly AM MP was sworn in as the Minister for Defence Materiel, replacing the Hon Jason Clare MP.

Figure 2.1 Defence organisational structure as at 30 June 2013

Defence organisational structure as at 30 June 2013

Figure 2.2 Structure of Defence outcomes

Figure 2.2 Structure of Defence outcomes

Resource Summary

Table 2.1 - Total cost of Defence outcomes and programs on an accrual basis

Table 2.1 - Total cost of Defence outcomes and programs on an accrual basis
2012-13 budget estimate ¹ $'000 2012-13 revised estimate ² $'000 2012-13 actual result $'000 Variation $'000 %
Outcome 1: The protection and advancement of Australia's national interests through the provision of military capabilities and the promotion of security and stability
Departmental net cost of service 21,943,465 21,383,224 21,480,625 97,401 ..
Administered net cost of service 2,885,557 4,567,792 4,512,225 −55,567 −1
Net cost of service for Outcome 1 24,829,022 25,951,016 25,992,850 41,834 ..
Outcome 2: The advancement of Australia's strategic interests through the conduct of military operations and other tasks as directed by government
Net cost of service for Outcome 2 1,341,283 1,394,516 931,563 −462,953 −33
Outcome 3: Support to the Australian community and civilian authorities as requested by government
Net cost of service for Outcome 3 9,500 9,500 15,182 5,682 60
Net cost of service for Defence outcomes
Departmental net cost of service 23,294,248 22,787,240 22,427,370 −359,870 −2
Administered net cost of service 2,885,557 4,567,792 4,512,225 −55,567 −1
Total cost of Defence outcomes 26,179,805 27,355,032 26,939,595 −415,437 2
Notes
  1. As published in the Portfolio Budget Statements 2012-13.
  2. As published in the Portfolio Budget Statements 2013-14.

Table 2.2 - Overall cost to government of Defence outcomes (departmental and administered)

Table 2.2 - Overall cost to government of Defence outcomes(departmental and administered)
Outcome 1 $'000 Outcome 2 $'000 Outcome 3 $'000 Total $'000
Departmental
Expenses
Employees 9,691,951 293,608 577 9,986,136
Suppliers 9,168,409 629,419 14,605 9,812,433
Grants 12,036 38,700 - 50,736
Depreciation and amortisation 3,999,977 - - 3,999,977
Finance cost 85,049 - - 85,049
Write-down of assets and impairment of assets 800,598 - - 800,598
Net losses from sale of assets 11,642 - - 11,642
Other expenses 89,645 65 - 89,710
Total expenses 23,859,307 961,792 15,182 24,836,281
Income
Revenue
Goods and services 735,640 30,229 - 765,869
Other revenue 1,259,255 - - 1,259,255
Total revenue 1,994,895 30,229 - 2,025,124
Gains
Reversals of previous asset write-downs 317,915 - - 317,915
Net gains from sale of assets - - - -
Other gains 65,872 - - 65,872
Total gains 383,787 - - 383,787
Total income 2,378,682 30,229 - 2,408,911
Net cost of departmental outcomes 21,480,625 931,563 15,182 22,427,370
Administered
Expenses 5,870,658 - - 5,870,658
Revenue 1,358,433 - - 1,358,433
Net cost of administered outcomes 4,512,225 - - 4,512,2250
Total departmental and administered outcomes 25,992,850 931,563 15,182 26,939,595

Table 2.3 - Defence resource statement

Table 2.3 - Defence resource statement
Actual available appropriation for 2012-13 $'000 Payments made 2012-13 $'000 Balance remaining 2012-13 $'000
ORDINARY ANNUAL SERVICES
Outcome 1 21,491,302 21,707,481 −216,179
Outcome 2 1,394,539 1,182,186 212,353
Outcome 3 9,500 15,182 −5,682
Total departmental outputs 22,895,341 22,904,849 −9,508
Total ordinary annual services 22,895,341 22,904,849 −9,508
OTHER SERVICES
Departmental non-operating
Equity injection 456,289 456,289 -
Total departmental non-operating 456,289 456,289 -
Total other services 456,289 456,289 -
Total available annual appropriation 23,351,630 23,361,138 −9,508
SPECIAL APPROPRIATIONS
Special appropriations limited by criteria/entitlement
Defence Forces Retirement Benefits Act, 1948 Part 1 s.15D and VIC , s.82ZJ 18,855 18,800 55
Defence Force Retirement and Death Benefits Act, 1973 Part XII, s.125 1,368,449 1,294,625 73,824
Military Superannuation and Benefits Act, 1991 Part V, s.17 4,462,881 4,461,205 1,676
Defence Force (Home Loan Assistance) Act, 1990 Part IV, s.38 2,443 2,264 179
Defence Home Ownership Assistance Scheme Act 2008 Part VI, s.84 95,593 93,680 1,913
Other Administered - 84 −84
Total special appropriations 5,948,221 5,870,658 77,563
Total appropriations 29,299,851 29,231,796 68,055
Funding from other sources 2,366,309 2,367,090 −781
Returns to the OPA (net) −1,398,291 −1,415,995 17,704
Previous years' outputs (appropriation receivable) 76,857 67,349 9,508
Cash available 18,091 68,460 −50,369
Total other available resources 1,062,966 1,086,904 −23,938
Total resourcing 30,362,817 30,318,700 44,117
Special accounts
Opening balance 112,451 112,451 -
Appropriation receipts - - -
Appropriation receipts - other agencies - - -
Non-appropriation receipts to special accounts 50,064 29,673 20,391
Total special accounts 162,515 142,124 20,391

Figure 2.3 - Departmental net cost of services (cash): six-year trend

Figure 2.3 - Departmental net cost of services (cash): six-year trend

Departmental net cost of services (cash): six-year trend

Note
  1. Departmental net cost of services figures are based on in-year dollars.

Table 2.4 - Departmental net cost of services (cash)

Table 2.4 - Departmental net cost of services (cash)
2012-13 budget estimate ¹ $'000 2012-13 revised estimate ² $'000 2012-13 actual result $'000 Variation $'000
Cost of service
Employee payments 9,841,548 9,879,207 9,921,248 42,041
Supplier payments 8,910,692 8,772,069 8,582,206 −189,863
Purchase of specialist military equipment 2,936,004 3,281,071 3,364,046 82,975
Purchase of inventory 988,753 894,485 900,963 6,478
Purchase of property, plant and equipment ³ 1,301,497 1,209,487 1,268,215 58,728
Other 876,795 898,179 818,310 −79,869
Total cash used 24,855,289 24,934,498 24,854,988 −79,510
Own source revenue 1,675,737 1,596,945 1,555,614 −1,331
Net cost of service (cash) 23,179,552 23,337,553 23,299,374 −38,179
Funded by
Appropriation Bills 1 & 3 (Price of Outcomes) 23,269,856 22,895,341 22,827,992 −67,349
Appropriation Bills 2 & 4 (Equity injection) - 456,289 456,289 -
Other appropriation movements - - 76,857 76,857
Return of contributed equity −90,304 −14,077 −15,067 −990
Cash holdings from previous appropriations - - 3,268 3,268
Increase to cash at bank - - −49,965 −49,965
Total funding source 23,179,552 23,337,553 23,299,374 −38,179
Additional output funding - - - -
Revised total funding source 23,179,552 23,337,553 23,299,374 −38,179
Defence no-win/no-loss hand-back(net) 165,343
Departmental variance 127,164
Notes
  1. As published in the Portfolio Budget Statements 2012-13, Table 60.
  2. As published in the Portfolio Budget Statements 2013-14, Table 53.
  3. Includes purchase of land and buildings, infrastructure, plant and equipment, intangibles and heritage and cultural assets.
  4. Includes grants, GST payments, finance costs, repayment of debt, selling costs on sale of assets and other cash used.
  5. Includes sale of goods and services, other cash received, GST and proceeds from sale of assets and interest received.
  6. Includes Section 31 receipts from OPA less Section 31 receipts transferred to OPA.

Table 2.5 - Departmental income and expenses

Table 2.5 - Departmental income and expenses
2012-13 budget estimate ¹ $'000 2012-13 revised estimate ² $'000 2012-13 actual result $'000 Variation $'000
Expenses
Employees 9,862,642 9,919,926 9,986,136 66,210
Suppliers 9,640,819 10,010,392 9,812,433 −197,959
Depreciation and amortisation 3,883,375 3,683,071 3,999,977 316,906
Other expenses³ 1,345,045 1,337,724 1,037,735 −299,989
Total expenses 24,731,881 24,951,113 24,836,281 −114,832
Income
Revenue from government 23,269,856 22,895,341 22,707,890 -187,451
Other income 1,437,633 2,163,873 2,408,911 245,038
Total income 24,707,489 25,059,214 25,116,801 57,587
Surplus/(deficit) attributable to the government −24,392 108,101 280,520 172,419
Notes
  1. As published in the Portfolio Budget Statements 2012-13, Table 58.
  2. As published in the Portfolio Budget Statements 2013-14, Table 51.
  3. Includes grants, finance costs, write-down of assets and impairment of assets, foreign exchance losses, losses from sale of assets and other expenses.
  4. Includes sale of goods and rendering of services, rental income, other revenue and gains.

Table 2.6 - Departmental income and expenses net variations

Table 2.6 - Departmental income and expenses net variations
income and expense variation $'000 Variation adjustment $'000 Net variation $'000
Expenses
Employees 66,210
offset by: 23,058
No win / no loss 23,058
Net employees 89,268
Suppliers −197,959
offset by: 207,173
Net suppliers 9,214
Depreciation and amortisation 316,906
Net depreciation 316,906
Other −299,989
offset by:
Reversal of previous asset write-downs and impairment 291,229
No win / no loss −409
Net other expenses −9,169
Total expenses −114,832 521,051 406,219
Income
Revenue from government −187,451
offset by:
No win / no loss 212,353
Net revenue from government 24,902
Other income 245,038
offset by:
No win / no loss 17,469
Reversal of previous asset write-downs and impairment 291,229
Net other income 553,736
Total income 57,587 521,051 578,638
Surplus/(deficit) attributable to the government 172,419 - 172,419

Figure 2.4: Administered net cost of services (cash): six-year trend

Figure 2.4: Administered net cost of services (cash): six-year trend

Administered net cost of services (cash): six-year trend

Note

Administered net cost of services firgures based on in-year dollars.

Table 2.7 - Administered net cost of services (cash)

Table 2.7 - Administered net cost of services (cash)
2012-13 budget estimate ¹ $'000 2012-13 revised estimate ² $'000 2012-13 actual result $'000 Variation $'000 %
Cost of service
Employees 1,910,631 1,890,164 1,920,671 30,507 2
Subsidies 109,236 98,036 95,547 −2,489 −3
Grants - - - - -
Loans to CAC Act bodies - - - - -
CAC Act body investments - - - - -
Other - - - - -
Total cash used 2,019,867 1,988,200 2,016,218 28,018 1
Cash received
Military superannuation contributions 1,215,132 1,250,148 1,265,959 15,811 1
Fees 9,963 11,115 11,231 116 1
Interest 31,849 31,849 30,854 −995 −3
Dividends 48,594 49,654 49,654 - -
Other 39,057 41,448 46,499 5,051 12
Total cash received 1,344,595 1,384,214 1,404,197 19,983 1
Net cost of service (cash) 675,272 603,986 612,021 8,035 1
Funded by
Appropriations
Cash from the Official Public Account for appropriations 2,019,867 1,988,200 2,016,218 28,018 1
Cash transfer to the Official Public Account −1,344,595 −1,384,214 −1,404,197 −19,983 1
Cash holdings at the beginning of the reporting period
Total funding source 675,272 603,986 612,021 8,035 1
Notes
  1. As published in the Portfolio Budget Statements 2012-13, Table 69.
  2. As published in the Portfolio Budget Statements 2013-14, Table 62.

Table 2.8 - Administered income and expenses

Table 2.8 - Administered income and expenses
2012-13 budget estimate ¹ $'000 2012-13 revised estimate ² $'000 2012-13 actual result $'000 Variation $'000 %
Expenses administered on behalf of government
Military superannuation benefits 4,053,968 5,785,962 5,712,747 −73,215 −1
Military retention benefits 64,223 64,223 61,883 −2,340 −4
Subsidies 109,236 98,036 95,944 −2,092 −2
Grants - - - - -
Foreign exchange losses - - - - -
Other - - 84 84 -
Total expenses 4,227,427 5,948,221 5,870,658 −77,563 −1
Income administered on behalf of government
Interest 31,849 31,849 30,854 −995 −3
Foreign exchange gains - - 321 321 -
Military superannuation contributions 1,215,188 1,250,204 1,213,777 −36,427 −3
Dividends 45,813 45,813 51,073 5,260 11
Fees 9,963 11,115 14,239 3,124 28
Other 39,057 41,448 48,169 6,721 16
Total income 1,341,870 1,380,429 1,358,433 −21,996 −2
Notes
  1. As published in the Portfolio Budget Statements 2012-13, Table 67.
  2. As published in the Portfolio Budget Statements 2013-14, Table 60.

Workforce summary

Lance Corporal Justine Peronchik, 25 from Kawana Waters, Queensland, is a clerk with Combined Team Uruzgan in Tarin Kot, Afghanistan.

The headline figures for the Defence workforce are the funded strength for the ADF and the actual staffing level (full-time equivalent) for the APS as at 30 June 2013. These figures were 56,117 for the ADF and 21,006 for the APS. The comparable figures for 30 June 2012 were 57,285 and 22,284 respectively.

For the APS, this represents a reduction of 1,278 in actual numbers for the full-time equivalent workforce year on year. This downward trend is also evident in other Defence workforce statistical data. The average full-time equivalent for 2012-13 of 21,534 reflects the average number of employees receiving salary or wages over the financial year, with adjustments for casual and part-time staff to show the average full-time equivalent. This compares to the average full-time equivalent for 2011-12 of 21,818.

There was a higher number of separations in the second half of 2012-13, resulting in the average full-time equivalent for the year being higher than the actual full-time equivalent at the end of the financial year. As the APS workforce trends downwards, the average figure for the year will always be above the end-of-year actual figure. This downward trend will continue during 2013-14.

Defence's headcount APS staffing figure for the year also showed a downward trend: from 23,299 at 30 June 2012 to 22,107 at 30 June 2013, a reduction of 1,192. The headcount figure includes paid and unpaid employees, covering full-time, part-time, ongoing and non-ongoing employees.