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Chapter 4 - Financial performance


Summary

Defence closely manages its performance against its cash based budget throughout the year. The cash based budget is the primary focus of the organisation on which it judges its financial performance. The final cash outcome for 2017–18 (after adjustments) was a cash surplus of $26.2 million against our cash based budget of $35,168 million. This represents a variance of 0.08 per cent and demonstrates the close scrutiny the Department has placed on its financial management during 2017–18. In the 2017–18 accrual based financial statements included at Section 11 Defence incurred an operating surplus of $853.1 million. From a cash perspective, the operating surplus has been offset by a commensurate increase in capital expenditure associated with specialist military equipment.

Table 4.1 contains the Defence resource statement for 2017–18. Expenses by outcomes are detailed in tables 4.2 to 4.5, while the cost of operations is shown in tables 4.6 and 4.7.

Table 4.1: Defence Resource Statement, 2017-18


Actual available
appropriation for 2017-18
$’000
Payments made
2017-18
$’000
Balance remaining
2017-18
$’000
ORDINARY ANNUAL SERVICES
Prior year departmental appropriation available
18,579
18,579
Departmental appropriation
33,171,4201
32,930,464
240,9562
Receipts retained under PGPA Act - section 74
392,391
392,391
Total Departmental Outputs
33,582,390
33,322,855
259,535
Total Ordinary Annual Services
33,582,390
33,322,855
 
OTHER SERVICES
Departmental non-operating
Prior year equity injection available
407,411
407,411
Equity injection
1,995,5193
1,995,519
Total Departmental non-operating
2,402,930
1,995,519
407,411
Total other services
2,402,930
1,995,519
 
Total Available Annual Appropriation and Payments
35,985,320
35,318,374
 
SPECIAL APPROPRIATIONS
Special appropriations limited by criteria/entitlement
Defence Force Retirement Benefits Act 1948 Part 1 s. 15D and VIC, s. 82ZJ
 
41,144
 
Defence Force Retirement and Death Benefits Act 1973 Part XII, s. 125
 
1,560,425
 
Military Superannuation and Benefits Act 1991 Part V, s. 17
 
853,435
 
Defence Force (Home Loan Assistance) Act 1990 Part IV, s. 38
 
441
 
Australian Defence Force Cover Act 2015
 
1,647
 
Defence Home Ownership Assistance Scheme Act 2008 Part VI, s. 84
 
105,219
 
Other Administered
 
1,743
 
Total Special Appropriations
 
2,564,054
 
Special Accounts
Opening balance
88,264
 
 
Non-appropriation receipts to special accounts
68,118
 
 
Payments made
 
43,071
 
Total Special Accounts
156,382
43,071
113,311
Total Resourcing and Payments
36,141,702
37,925,499
 

Notes:

  1. This represents actual appropriations available, reduced by $1 million transferred to the Department of Jobs and Small Business
  2. Includes No Win No Loss amounts in relation to Operations of $215.7 million
  3. This represents actual equity injection available, reduced by $369.8 million withheld under section 51 of the PGPA Act, as outlined in Note 5.1A of the 2017-18 Financial Statements

Expenses by outcomes

Table 4.2: Total Cost of Defence Outcomes and Programs on an Accrual Basis, 2017-18

2017-18
budget
estimate1
$’000
2017-18
revised
estimate2
$’000
2017-18
actual
result
$’000
Variation
$’000
Variation
%
Outcome 1: Defend Australia and its national interests through the conduct of operations and provision of support for the Australian community and civilian authorities in accordance with Government direction

Net cost of service for Outcome 1

1,010,331
944,785
715,785
(229,000)
(24)
Outcome 2: Protect and advance Australia’s strategic interests through the provision of strategic policy, the development, delivery and sustainment of military, intelligence and enabling capabilities, and the promotion of regional and global security and stability as directed by Government
Departmental net cost of service
31,194,895
32,227,635
31,471,898
(755,737)
(2)
Administered net cost of service
4,090,963
5,625,515
5,503,087
(122,428)
(2)
Net cost of service for Outcome 2
35,285,858
37,853,150
36,974,985
(878,165)
(2)
Net cost of service for Defence Outcomes
Departmental net cost of service
32,205,226
33,172,420
32,187,683
(984,737)
(3)
Administered net cost of service
4,090,963
5,625,515
5,503,087
(122,428)
(2)
Total cost of Defence Outcomes
36,296,189
38,797,935
37,690,770
(1,107,165)
(3)

Notes:

  1. As published in the Portfolio Budget Statements 2017-18.
  2. As published in the Portfolio Budget Statements 2018-19.

Table 4.3: Overall Cost to Government of Defence Outcomes (Departmental and Administered), 2017-18

 
Outcome 1
$’000
Outcome 2
$’000
Total
$’000
DEPARTMENTAL
Expenses
Employees
110,524
11,868,361
11,978,885
Suppliers
628,949
12,684,633
13,313,582
Grants
129,805
129,805
Depreciation and amortisation
5,935,531
5,935,531
Finance cost
115,225
115,225
Write-down of assets and impairment of assets
906,722
906,722
Net Foreign exchange losses
(1,912)
13,858
11,946
Net losses from sale of assets
44,073
44,073
Other expenses
6
403,993
403,999
Total expenses
737,567
32,102,201
32,839,768
Income
Revenue
Goods and services
21,768
433,173
454,941
Rental income
3,698
3,698
Other revenue
14
57,231
57,245
Total revenue
21,782
494,102
515,884
Gains
Reversals of previous asset writedowns
82,605
82,605
Other gains
53,596
53,596
Total gains
136,201
136,201
Total income
21,782
630,303
652,085
Net cost of Departmental Outcomes
715,785
31,471,898
32,187,683
ADMINISTERED
Expenses
7,066,582
7,066,582
Revenue
1,563,495
1,563,495
Net cost of Administered Outcomes
5,503,087
5,503,087
Total Departmental and Administered Outcomes
715,785
36,974,985
37,690,770

Table 4.4: Total Cost of Defence Outcome 1

2017-18
budget
estimate1
$’000
2017-18
revised
estimate2
$’000
2017-18
actual
result
$’000
Variation
$’000
Variation
%
Program 1.1 Operations Contributing to the Security of the Immediate Neighbourhood
Revenues from other sources
Departmental outputs
792
39,784
19,811
(19,973)
(50)
Program 1.2 Operations Supporting Wider Interests
Revenues from other sources
22,809
22,809
21,768
(1,041)
(5)
Departmental outputs
919,986
815,448
632,337
(183,111)
(22)
Program 1.3 Defence Contribution to National Support Tasks in Australia
Revenues from other sources
14
14
Departmental outputs
89,553
89,553
63,637
(25,916)
(29)
Total resourcing
Total Departmental outputs
1,010,331
944,785
715,785
(229,000)
(24)
Total Departmental revenue from other sources
22,809
22,809
21,782
(1,027)
(5)
Total resources for Outcome 1
1,033,140
967,594
737,567
(230,027)
(24)

Notes: This table excludes capital payments for outcomes.

  1. As published in the Portfolio Budget Statements 2017-18, table 11.
  2. As published in the Portfolio Budget Statements 2018-19, table 11.

Table 4.5: Total Budgeted Resources Available for Outcome 2

2017-18
budget
estimate1
$’000
2017-18
revised
estimate2
$’000
2017-18
actual
result3
$’000
Variation
$’000
Variation
%
Program 2.1 - Strategic Policy and Intelligence
Revenue from other sources
7,048
6,789
5,460
(1,329)
(20)
1,031,349
1,162,456
1,163,001
545
0
Program 2.2 - Defence Executive Support
Revenue from other sources
22,568
23,425
25,284
1,859
8
212,629
246,886
287,003
40,117
16
Program 2.3 - Chief Finance Officer
Revenue from other sources
5,053
4,938
1,496
(3,442)
(70)
Departmental outputs
244,128
207,956
151,052
(56,904)
(27)
Program 2.4 - Joint Capabilities Group4
Revenue from other sources
168,065
124,584
(43,481)
(26)
Departmental outputs
1,710,192
1,784,939
74,747
4
Program 2.5 - Navy Capabilities
Revenue from other sources
72,274
60,555
17,814
(42,741)
(71)
Departmental outputs
6,413,617
6,750,755
6,075,814
(674,941)
(10)
Program 2.6 - Army Capabilities
Revenue from other sources
38,226
30,054
14,286
(15,768)
(52)
Departmental outputs
7,325,798
7,393,181
7,172,670
(220,511)
(3)
Program 2.7 - Air Force Capabilities
Revenue from other sources
65,355
52,499
39,303
(13,196)
(25)
Departmental outputs
6,821,824
6,964,710
6,460,306
(504,404)
(7)
Program 2.8 - Australian Defence Force Headquarters4
Revenue from other sources
4,214
4,214
Departmental outputs
118,686
104,444
(14,242)
(12)
Program 2.9 - Capability Acquisition and Sustainment
Revenue from other sources
963
963
3,947
2,984
310
Departmental outputs
653,823
691,354
621,316
(70,038)
(10)
Program 2.10 - Estate and Infrastructure
Revenue from other sources
363,206
332,692
375,828
43,136
13
Departmental outputs
4,546,774
4,490,084
5,047,947
557,863
12
Program 2.11 - Chief Information Officer
Revenue from other sources
11,116
6,572
13,728
7,156
109
Departmental outputs
1,500,627
1,468,535
1,629,683
161,148
11
Program 2.12 - Defence People
Revenue from other sources
118
118
Departmental outputs
486,039
550,974
494,035
(56,939)
(10)
Program 2.13 - Defence Science and Technology
Revenue from other sources
4,862
5,126
4,241
(885)
(17)
Departmental outputs
472,997
471,866
479,688
7,822
2
Program 2.14 - Defence Force Superannuation Benefits
Defence Force 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)
80,316
120,984
122,000
1,016
1
Military Superannuation and Benefits Act 1991 Part V, s.17
1,408,240
2,919,709
3,059,660
139,951
5
Australian Defence Force Cover Act 2015
116,675
101,880
66,600
(35,280)
(35)
Total Administered expenses
1,605,231
3,142,573
3,248,260
105,687
3
Administered revenue from other sources
1,352,073
1,237,907
1,444,915
207,009
17
Total Program 2.14
253,158
1,904,666
1,803,344
(101,322)
(5)
Program 2.15 - Defence Force Superannuation Nominal Interest
Defence Force Retirement Benefits Act 1948 Part 1, s.15D and VIC, s.82ZJ (1)
21,611
13,295
13,300
5
Defence Force Retirements and Death Benefits Act 1973 Part XII, s.125 (3)
1,725,008
1,437,009
1,437,000
(9)
Military Superannuation and Benefits Act 1991 Part V, s.17
2,074,992
2,258,287
2,258,000
(287)
Australian Defence Force Cover Act 2015
5,901
2,382
1,800
(582)
(24)
Total Administered expenses
3,827,512
3,710,973
3,710,100
(873)
Administered revenue from other sources
Total Program 2.15
3,827,512
3,710,973
3,710,100
(873)
Program 2.16 - Housing Assistance
Defence Force (Home Loan Assistance) Act 1990 Part IV, s.38
484
476
19
(457)
(96)
Defence Home Ownership Assistance Scheme Act 2008 Part VI, s.84
117,015
116,400
108,159
(8,241)
(7)
Total Administered expenses
117,499
116,876
108,178
(8,698)
(7)
Administered revenue from other sources
15,932
15,599
15,305
(294)
(2)
Total Program 2.16
101,567
101,277
92,873
(8,404)
Program 2.17 - Other Administered
Expenses
45
45
Administered revenue from other sources
91,274
91,401
103,275
11,874
13
Total Program 2.17
(91,274)
(91,401)
(103,230)
(11,829)
13
Total resourcing
Total Departmental outputs
31,194,895
32,227,635
31,471,898
(755,737)
(2)
Total Administered
4,090,963
5,625,515
5,503,087
(122,428)
(2)
Total Departmental revenue from other sources
808,395
691,678
630,303
(61,375)
(9)
Total Administered revenue from other sources
1,459,279
1,344,907
1,563,495
218,588
16
Equity Injection
2,365,307
1,995,519
1,995,519
Total resources for Outcome 2
39,918,839
41,885,255
41,164,302
(720,952)
(2)

Notes: This table excludes Capital Payments for Outcomes.

  1. As published in the Portfolio Budget Statements 2017-18, table 15.
  2. As published in the Portfolio Budget Statements 2018-19, table 15.
  3. At the program level, departmental revenues from other sources include minor reclassifications from expenses.
  4. Pursuant to a restructure of the Defence Programs, the revised estimates were reported under the following programs:
2017-18
budget
estimate1
$’000
2017-18
revised
estimate2
$’000
2017-18
actual
result3
$’000
Variation
$’000
Variation
%
Program 2.4 - Vice Chief of the Defence Force
Revenues from other sources
217,724
Departmental outputs
1,433,960
Program 2.8 - Joint Operations Command
Revenues from other sources
Departmental outputs
51,330

Cost of operations

Table 4.6: Net additional cost of operations from 1999-2000 to 2021-22

1999-00 to
2016-17
actual result
$m
2017-18
actual
result
$m
2018-19
budget
estimate1
$m
2019-20
forward
estimate1
$m
2020-21
forward
estimate1
$m
2021-22
forward
estimate1
$m
Total
$m
Operation MANITOU
117.9
62.3
64.9
18.9
18.7
282.7
Operation ACCORDION
463.2
215.2
235.8
24.8
24.7
963.7
Operation HIGHROAD
357.3
82.4
89.5
 
 
529.2
Operation RESOLUTE2
281.7
50.2
53.2
24.5
8.8
418.4
Operation OKRA
814.4
305.7
306.5
28.1
26.9
1,481.6
Operation AUGURY - Philippines3
12.5
40.1
52.6
Defence Support to the 2018 Commonwealth Games4
..
7.7
0.3
8.0
Total Net Additional Costs
2,034.5
736.0
790.2
96.2
79.2
3,736.1
Sources of Funding for Operations
Government Supplementation
2,034.5
736.0
790.2
96.2
79.2
3,728.4
Department of Defence (absorbed)
7.7
7.7
Total Cost
2,034.5
736.0
790.2
96.2
79.2
3,736.1

Notes: This table reflects on-going and new Operations funded under No Win, No Loss arrangements. Double period (..) indicates ‘not zero, but rounded to zero’.

  1. As published in the Portfolio Budget Statements 2018-19, table 3.
  2. Includes funding for expanded activities under Operation Sovereign Borders.
  3. A decision was made in early May 2018 that the figures for Operation Augury - Philippines could be publicly released but this was not determined in time to incorporate the figures in the published Portfolio Budget Statements 2018-19.
  4. The expenditure for Defence Support to the 2018 Commonwealth Games measure in 2016-17 actual result was $0.004m.

Table 4.7: Net additional cost of operations, 2017-18

 
2017-18
budget
estimate1
$m
2017-18
estimated
actual2
$m
2017-18
actual result
$m
Variation
$m
Operation MANITOU
54.2
54.2
62.3
8.1
Operation ACCORDION
222.2
222.2
215.2
(7.0)
Operation HIGHROAD
83.5
83.5
82.4
(1.1)
Operation RESOLUTE3
55.6
55.6
50.2
(5.4)
Operation OKRA
453.6
453.6
305.7
(147.9)
Operation AUGURY - Philippines4
39.1
12.5
(26.6)
Defence Support to the 2018 Commonwealth Games
33.9
33.9
7.7
(26.2)
Total Net Additional Costs
903.1
942.2
736.0
(206.2)

Notes: This table reflects on-going and new Operations funded under No Win, No Loss arrangements.

  1. As published in the Portfolio Budget Statements 2017-18 table 3.
  2. As published in the Portfolio Budget Statements 2018-19 table 3.
  3. Includes funding for expanded activities under Operation Sovereign Borders.
  4. A decision was made in early May 2018 that the figures for Operation Augury - Philippines could be publicly released but this was not determined in time to incorporate the figures in the published Portfolio Budget Statements 2018-19.

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