Output One: Defence Operations

Price to Government

Table 2.2: Price of Output One: Defence Operations
	Adjusted Budget Estimate	Revised Estimate	Projected Result	Actual Result	Variation
	2002-03	2002-03	2002-03	2002-03	Variation
	$'000	$'000	$'000	$'000	$'000
Operating Expenses
Employees - Military	236,851	228,557	159,410	309,204	149,794
Employees - Civilian	77,339	82,602	82,567	69,103	-13,464
Sub-total Employees	314,190	311,159	241,976	378,307	136,331
Suppliers - Non-inventory	261,543	236,329	231,564	423,828	192,264
Suppliers - Inventory	98,321	129,958	90,276	96,314	6,038
Sub-total Suppliers	359,863	366,287	321,839	520,142	198,303
Depreciation and amortisation	65,599	35,687	30,720	66,251	35,531
Value of assets sold	-	-	-	18,275	18,275
Write down of assets (includes net losses on sale of assets and net foreign exchange losses)	8,032	15,259	23,027	36,702	13,675
Other expenses (includes borrowing cost expense and grants)	749	738	736	22,673	21,937
Total Operating Expenses From Ordinary Activities	748,433	729,130	618,298	1,042,350	424,052
Revenues
Assets now recognised	2,216	-22,367	-23,743	-45,141	-21,398
Revenue from sale of assets	-	-494	-	-22,096	-22,096
Other	-36,948	-37,002	-48,373	-106,000	-57,627
Total Own Source Revenues	-34,733	-59,863	-72,116	-173,237	-101,121
Price to Government for Output One	713,700	669,267	546,183	869,113	322,930

Explanation Of Significant Variation

The overall price of Output One was $323m higher than the 2002-03 projected result, representing an increase of 59 per cent. This overall result reflects the high level of operational tempo with net additional costs for current operations attributed to Output One. The major variations were due to:

a net increase in military employee expenses (+$150m) attributed to Output One associated with a higher level of operational involvement of the ADF, including Operation Bastille/Falconer, together with a refinement of attribution rules;
a decrease in civilian employee expenses (-$13m) due to a variation in the number of civilian staff attributed to Output One by Defence Groups;
an increase in suppliers non-inventory (+$192m) and suppliers inventory (+$6m) expenses due to:
- the need to meet logistic and operational requirements, including Operation Bastille/Falconer which was partially funded out of Defence's cash reserves pending reimbursement in 2003-04 (+$175m);
- a change in the accounting treatment between the capital and operating mix in the major capital equipment program (+$16m); and
- an accounting adjustment due to a correction of data reported in 2001-02 (+$1m);
a net increase in depreciation expenses (+$36m) due to a refinement of attribution rules to reflect a move from a generic to a more output-specific attribution of costs;
an increase in the value of assets sold (+$18m) due to the Minister for Finance's new requirement in 2002-03 for Defence to separately disclose the value of both the assets sold and the revenue proceeds;
a net increase in write down of assets expenses (+$14m) due to ongoing work to refine Defence's asset holdings and valuations;
an increase in other expenses (+$22m) due to the recognition of Defence's potential liability for compensation claims arising from asbestos exposure that was identified in a recent whole-of-government actuarial report;
an increase in assets now recognised revenue (-$21m) due to inventory price adjustments and other variations predominantly due to the booking of the SDSS to ROMAN reconciliation;
an increase in revenue from sale of assets (-$22m) due predominantly to the Minister for Finance's new requirement in 2002-03 for Defence to separately disclose the value of both the assets sold and the revenue proceeds (-$18m); and
an increase in other revenue (-$58m) due to a variation in the revenue attributed to Output One by Defence Groups, which has been corrected for future years.