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Chapter 4 - Financial performance


Summary

As at 30 June 2016, the Defence departmental net cash spend was $31.5 billion. This was an underspend of $356 million when compared to the revised estimate in the Defence Portfolio Budget Statements 2016–17, primarily as a result of an underspend of $326 million in no-win/no-loss operations funding and foreign exchange movements.

In 2015–16, Defence was required to record its military equipment at fair value for the first time. This complex undertaking was led by the Chief Finance Officer Group and required contributions from military personnel to ensure that the valuation methodology was fit for purpose, complied with accounting standards and could be agreed with the Department of Finance and the Australian National Audit Office. The valuation was completed within the required timeframe for inclusion in the financial statements in Volume Two.

Resource statement

Table 4.1 Defence resource statement, 2015–16

 

Actual available appropriation for
2015-16
$'000

Payments made
2015-16
$'000

Balance remaining
2015-16
$'000

Ordinary annual services

 

 

 

Outcome 1

28,300,010

28,123,995

176,015

Outcome 2

863,834

727,655

136,179

Outcome 3

48,701

31,250

17,451

Total departmental outputs

29,212,545

28,882,900

329,645

Total ordinary annual services

29,212,545

28,882,900

329,645

Other services

 

 

 

Departmental non-operating

 

 

 

Equity injection

2,535,548

2,535,548

-

Total departmental non-operating

2,535,548

2,535,548

-

Total other services

2,535,548

2,535,548

-

Total available annual appropriation

31,748,093

31,418,448

329,645

Special appropriations

 

 

 

Special appropriations limited by criteria/entitlement

 

 

 

Defence Forces Retirement Benefits Act 1948, Part 1, s. 15D and VIC, s. 82ZJ

19,021

19,000

21

Defence Force Retirement and Death Benefits Act 1973, Part XII, s. 125

1,697,896

1,696,922

974

Military Superannuation and Benefits Act 1991, Part V, s. 17

4,337,115

5,034,493

(697,378)

Defence Force (Home Loans Assistance) Act 1990, Part IV, s. 38

917

828

89

Defence Home Ownership Assistance Scheme Act 2008, Part VI, s. 84

102,339

103,741

(1,402)

Other administered

-

72

(72)

Total special appropriations

6,157,288

6,855,056

(697,768)

Total appropriations

37,905,381

38,273,504

(368,123)

Funding from other sources

2,209,913

2,518,002

(308,089)

Returns to the Official Public Account (net)

(1,463,796)

(1,759,156)

295,360

Previous years' outputs (appropriation receivable)

10,166

687,345

(677,179)

Cash available

11,530

47,597

(36,067)

Total other available resources

767,813

1,493,788

(725,975)

Total resourcing

38,673,194

39,767,292

(1,094,098)

Special accounts

 

 

 

Opening balance

66,417

66,417

-

Appropriation receipts

-

-

-

Appropriation receipts - other agencies

-

-

-

Non-appropriation receipts to special accounts

34,989

39,259

(4,270)

Total special accounts

101,406

105,676

(4,270)

Expenses by outcomes

Table 4.2: Total cost of Defence outcomes and programs on an accrual basis, 2015–16

 

2015–16
budget
estimate1
$’000

2015–16
revised
estimate2
$’000

2015–16
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

28,063,724

28,255,328

27,947,601

(307,727)

(1)

Administered net cost of service

3,756,049

4,531,035

5,207,684

676,649

15

Net cost of service for Outcome 1

31,819,773

32,786,363

33,155,285

368,922

1

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

863,807

863,834

727,353

(136,481)

(16)

Outcome 3: Support for the Australian community and civilian authorities as requested by Government

Net cost of service for Outcome 3

48,705

48,701

31,825

(16,876)

(35)

Net cost of service for Defence Outcomes

Departmental net cost of service

28,976,236

29,167,863

28,706,779

(461,084)

(2)

Administered net cost of service

3,756,049

4,531,035

5,207,684

676,649

15

Total cost of Defence Outcomes

32,732,285

33,698,898

33,914,463

215,565

1

Notes:
1. As published in the Portfolio Budget Statements 2015–16.
2. As published in the Portfolio Budget Statements 2016–17.

Table 4.3: Overall cost to Government of Defence outcomes (departmental and administered), 2015–16

 

Outcome 1
$'000

Outcome 2
$'000

Outcome 3
$'000

Total
$'000

Departmental

Expenses

Employees

11,540,683

104,394

10,895

11,655,972

Suppliers

11,642,829

527,771

20,930

12,191,530

Grants

21,573

107,052

-

128,625

Depreciation and amortisation

4,511,504

-

-

4,511,504

Finance cost

114,908

-

-

114,908

Write-down of assets and impairment of assets

696,765

-

-

696,765

Foreign exchange losses

18,624

-

-

18,624

Net losses from sale of assets

657

-

-

657

Other expenses

244,911

6

-

244,917

Total expenses

28,792,454

739,223

31,825

29,563,502

Income

 

 

 

 

Revenue

 

 

 

 

Goods and services

435,547

11,870

-

447,417

Other revenue

80,586

-

-

80,586

Total revenue

516,133

11,870

-

528,003

Gains

 

 

 

 

Reversals of previous asset writedowns

258,502

-

-

258,502

Net gains from sale of assets

-

-

-

-

Other gains

70,218

-

-

70,218

Total gains

328,720

-

-

328,720

Total income

844,853

11,870

-

856,723

Net cost of departmental outcomes

27,947,601

727,353

31,825

28,706,779

Administered

Expenses

6,855,056

-

-

6,855,056

Revenue

1,647,372

-

-

1,647,372

Net cost of administered outcomes

5,207,684

-

-

5,207,684

Total departmental and administered outcomes

33,155,285

727,353

31,825

33,914,463

Table 4.4: Total cost of Defence Outcome 1

 

2015–16
Budget
Estimate
1$'000

2015–16
Revised
Estimate
2$'000

2015–16
Actual
Result
3$'000



Variation
$'000




%

Program 1.1 Strategy4

 

 

 

 

 

Revenues from other sources

434

443

4,824

4,381

989

Departmental outputs

175,385

232,946

218,995

(13,951)

(6)

Program 1.2 Navy Capabilities4

 

 

 

 

 

Revenues from other sources

125,611

92,805

86,121

(6,684)

(7)

Departmental outputs

5,208,839

5,494,370

5,030,213

(464,157)

(8)

Program 1.3 Army Capabilities4

 

 

 

 

 

Revenues from other sources

111,768

41,588

34,696

(6,892)

(17)

Departmental outputs

6,774,894

7,186,684

6,664,411

(522,273)

(7)

Program 1.4 Air Force Capabilities4

 

 

 

 

 

Revenues from other sources

190,900

78,975

76,917

(2,058)

(3)

Departmental outputs

5,505,105

5,713,283

5,211,038

(502,245)

(9)

Program 1.5 Joint Operations Command

 

 

 

 

 

Revenues from other sources

-

-

142

142

-

Departmental outputs

50,452

48,722

55,933

7,211

15

Program 1.6 Intelligence Capabilities

 

 

 

 

 

Revenues from other sources

12,073

1,571

7,074

5,503

350

Departmental outputs

641,560

535,771

609,764

73,993

14

Program 1.7 Vice Chief of the Defence Force4

 

 

 

 

 

Revenues from other sources

348,585

208,437

189,161

(19,276)

(9)

Departmental outputs

1,197,436

1,308,641

1,570,958

262,317

20

Program 1.8 Capability Acquisition and Sustainment

Revenues from other sources

-

917

1,618

701

76

Departmental outputs

-

591,183

573,174

(18,009)

(3)

Program 1.9 Defence Executive Support

 

 

 

 

 

Revenues from other sources

116

9,692

16,412

6,720

69

Departmental outputs

119,050

200,319

209,366

9,047

5

Program 1.10 Estate and Infrastructure5

 

 

 

 

 

Revenues from other sources

371,810

340,172

358,955

18,783

6

Departmental outputs

3,955,552

4,239,401

4,432,847

193,446

5

Program 1.11 Chief Information Officer

 

 

 

 

 

Revenues from other sources

1,983

4,282

10,267

5,985

140

Departmental outputs

1,147,300

1,059,046

1,405,667

346,621

33

Program 1.12 Defence People

 

 

 

 

 

Revenues from other sources

-

-

311

311

-

Departmental outputs

446,297

500,836

488,239

(12,597)

(3)

Program 1.13 Defence Science and Technology

 

 

 

 

 

Revenues from other sources

32,744

3,557

2,352

(1,205)

(34)

Departmental outputs

431,649

464,340

503,483

39,143

8

Program 1.14 Capability Development4

 

 

 

 

 

Revenues from other sources

21,938

-

35,974

35,974

-

Departmental outputs

1,433,761

399,933

789,766

389,833

97

Program 1.15 Chief Finance Officer

 

 

 

 

 

Revenues from other sources

6,059

4,700

20,030

15,330

326

Departmental outputs

976,444

279,853

183,746

(96,107)

(34)

Program 1.16 Defence Force Superannuation Benefits

 

 

 

 

 

Defence Forces Retirement Benefits Act 1948, Part 1, s. 15D and VIC, s. 82ZJ(1)

-

-

-

-

-

Defence Force Retirements and Death Benefits Act 1973, Part XII, s. 125(3)

99,981

152,113

152,922

809

1

Military Superannuation and Benefits Act 1991, Part V, s. 17

1,453,170

2,408,097

3,095,493

687,396

29

Total Administered expenses

1,553,151

2,560,210

3,248,415

688,205

27

Administered revenue from other sources

1,347,113

1,470,576

1,522,810

52,234

4

Total Program 1.16

206,038

1,089,634

1,725,605

635,971

58

Program 1.17 Defence Force Superannuation Nominal Interest

 

 

 

 

 

Defence Forces Retirement Benefits Act 1948, Part 1, s. 15D and VIC, s. 82ZJ(1)

25,542

19,021

19,000

(21)

-

Defence Force Retirements and Death Benefits Act 1973, Part XII, s. 125(3)

1,772,645

1,545,783

1,544,000

(1,783)

-

Military Superannuation and Benefits Act 1991, Part V, s.17

1,759,277

1,929,018

1,939,000

9,982

1

Total Administered expenses

3,557,464

3,493,822

3,502,000

8,178

-

Administered revenue from other sources

-

-

-

-

-

Total Program 1.17

3,557,464

3,493,822

3,502,000

8,178

-

Program 1.18 Housing Assistance

 

 

 

 

 

Defence Force (Home Loan Assistance) Act 1990, Part IV, s. 38

1,116

917

828

(89)

(10)

Defence Home Ownership Assistance Scheme Act 2008, Part VI, s. 84

118,661

102,339

103,741

1,402

1

Total Administered expenses

119,777

103,256

104,569

1,313

1

Administered revenue from other sources

14,416

13,871

15,094

1,223

9

Total Program 1.18

105,361

89,385

89,475

90

-

Program 1.19 Other Administered

 

 

 

 

 

Expenses

-

-

72

72

-

Administered revenue from other sources

112,814

141,806

109,468

(32,338)

(23)

Total Program 1.19

(112,814)

(141,806)

(109,396)

32,410

(23)

Total resourcing

 

 

 

 

 

Total departmental outputs

28,063,724

28,255,328

27,947,600

(307,728)

(1)

Total administered

3,756,049

4,531,035

5,207,684

676,649

15

Total departmental revenue from other sources

1,224,021

787,139

844,854

57,715

7

Total administered revenue from other sources

1,474,343

1,626,253

1,647,372

21,119

1

Equity injection

2,875,209

2,535,548

2,535,548

-

-

Total resources for Outcome 1

37,393,346

37,735,303

38,183,058

447,755

1

Notes:
1. As published in the Portfolio Budget Statements 2015–16, table 12.
2. As published in the Portfolio Budget Statements 2016–17, table 12.
3. At the program level, departmental revenues from other sources include minor reclassifications from expenses.
4. Program 1.14 Capability Development was disbanded on 1 April 2016, with relevant functions transferred to the following programs: 1.1 Strategy, 1.2 Navy Capabilities, 1.3 Army Capabilities, 1.4 Air Force Capabilities, and 1.7 Vice Chief of the Defence Force.
5. On 1 July 2015, the Program 1.9 Chief Operating Officer – Defence Support and Reform was renamed to Program 1.10 Estate and Infrastructure.

Table 4.5: Total Cost of Defence Outcome 2 1

 

2015–16
Budget
Estimate
2$'000

2015–16
Revised
Estimate
3$'000

2015-16
Actual
Result
$'000



Variation
$'000




%

Programme 2.1 Operations Contributing to the Security of the Immediate Neighbourhood

Revenue from other sources

-

-

30

30

-

Departmental outputs

74

97

6,071

5,974

6,159

Program 2.2 Operations Supporting Wider Interests

 

 

 

 

 

Revenue from other sources

15,192

15,190

11,840

(3,350)

(22)

Departmental outputs

863,733

863,737

721,282

(142,455)

(16)

Total resourcing

 

 

 

 

 

Total departmental outputs

863,807

863,834

727,353

(136,481)

(16)

Total departmental revenue from other sources

15,192

15,190

11,870

(3,320)

(22)

Total resources for Outcome 2

878,999

879,024

739,223

(139,801)

(16)

Notes:
1. This table excludes capital payments for outcomes.
2. As published in the Portfolio Budget Statements 2015-16, table 38.
3. As published in the Portfolio Budget Statements 2016-17, table 38.

Table 4.6: Total Cost of Defence Outcome 3 1

 

2015–16
Budget
Estimate
2
$'000

2015–16
Revised
Estimate
3$'000

2015–16
Actual
Result
$'000



Variation
$'000




%

Programme 3.1 Defence Contribution to National Support Tasks in Australia

Revenue from other sources

-

-

-

-

-

Departmental outputs

48,705

48,701

31,825

(16,876)

(35)

Total resourcing

 

 

 

 

 

Total departmental outputs

48,705

48,701

31,825

(16,876)

(35)

Total departmental revenue from other sources

-

-

-

-

-

Total resources for Outcome 3

48,705

48,701

31,825

(16,876)

(35)

Notes:
1. This table excludes capital payments for outcomes.
2. As published in the Portfolio Budget Statements 2015–16, table 41.
3. As published in the Portfolio Budget Statements 2016–17, table 41.

Cost of operations

Table 4.7: Net additional cost of operations, 1999–00 to 2019–20

 

1999–00 to
2014–15
actual result
$m

2015–16
actual
result
$m

2016–17
budget
estimate
$m

2017–18
forward
estimate
$m

2018–19
forward
estimate
$m

2019–20
forward
estimate
$m

Total
$m

Operation Astute

4,312.0

-

-

-

-

-

4,312.0

Operation Bel Isi

47.7

-

-

-

-

-

47.7

Operation Slipper

7,177.3

25.3

103.9

-

-

-

7,306.5

Operation Manitou

39.4

33.6

40.2

11.5

11.9

-

136.6

Operation Accordion

123.5

166.4

179.4

3.3

3.2

-

475.8

Operation Highroad

40.5

203.2

59.0

7.8

11.2

-

321.7

Operation Resolute1

220.0

31.1

22.5

2.8

-

-

276.4

Operation Catalyst

2,364.5

-

-

-

-

-

2,364.5

Operation Okra

159.4

286.6

353.0

23.6

13.9

-

836.5

Operation Anode

355.2

-

-

-

-

-

355.2

Operation Sumatra Assist

44.5

-

-

-

-

-

44.5

Operation Acolyte

10.5

-

-

-

-

-

10.5

Operation Deluge

6.7

-

-

-

-

-

6.7

Operation Pakistan Assist

9.8

-

-

-

-

-

9.8

Operation Outreach

14.6

-

-

-

-

-

14.6

Operation Kruger

45.3

-

-

-

-

-

45.3

Operation Southern Indian Ocean

11.9

-

-

-

-

-

11.9

Enhanced Force Protection in Afghanistan

540.0

-

-

-

-

-

540.0

Defence Support to 2014 G20 Summit

3.6

-

-

-

-

-

3.6

Total net additional costs

15,526.5

746.2

757.9

49.0

40.2

-

17,119.9

Sources of funding for Operations

 

 

 

 

 

 

Government Supplementation

13,891.0

746.2

757.9

49.0

40.2

-

15,484.3

Department of Foreign Affairs and Trade

9.1

-

-

-

-

-

9.1

Department of Defence (absorbed)

1,626.4

-

-

-

-

-

1,626.4

Total cost

15,526.5

746.2

757.9

49.0

40.2

-

17,119.8

Note:
Includes funding for expanded activities under Operation Sovereign Borders

Table 4.8: Net additional cost of operations, 2015–16

 

2015–16 budget
estimate1
$m

2015–16 estimated
actual2
$m

2015–16 actual result
$m


Variation
$m

Operation Astute

-

-

-

-

Operation Slipper3

121.9

121.9

25.3

-96.6

Operation Manitou

43.2

43.2

33.6

-9.6

Operation Accordion

191.0

191.0

166.4

-24.6

Operation Highroad

115.1

115.1

203.2

88.1

Operation Resolute4

48.7

48.7

31.1

-17.6

Operation Okra

390.8

390.8

286.6

-104.2

Operation Anode

-

-

-

-

Operation Southern Indian Ocean

-

-

-

-

Enhanced Force Protection in Afghanistan3

-

-

-

-

Defence Support to 2014 G20 Summit

-

-

-

-

Total Net Additional Costs

910.7

910.7

746.2

-164.5

Notes:
1. As published in the Portfolio Budget Statements 2015–16, table 4.
2. As published in the Portfolio Budget Statements 2016–17, table 4.
3. Government supplementation for the Force Protection Review is included under Operation Slipper (Outcome 2) and Enhanced Force Protection in Afghanistan (Outcome 1).
4. Includes funding for expanded activities under Operation Sovereign Borders.