Output Two: Navy Capabilities
Price to Government
| Adjusted Budget Estimate | Revised Estimate | Projected Result | Actual Result | Variation | |
|---|---|---|---|---|---|
| 2002-03 | 2002-03 | 2002-03 | 2002-03 | ||
| $'000 | $'000 | $'000 | $'000 | $'000 | |
| Operating Expenses | |||||
| Employees - Military | 1,140,690 | 1,117,821 | 1,164,009 | 1,057,916 | -106,093 |
| Employees - Civilian | 243,296 | 274,132 | 284,281 | 307,705 | 23,424 |
| Sub-total Employees | 1,383,986 | 1,391,953 | 1,448,290 | 1,365,621 | -82,669 |
| Suppliers - Non-inventory | 1,058,996 | 1,084,442 | 1,022,075 | 1,166,280 | 144,205 |
| Suppliers - Inventory | 235,488 | 233,953 | 212,128 | 238,922 | 26,794 |
| Sub-total Suppliers | 1,294,484 | 1,318,393 | 1,234,203 | 1,405,202 | 170,999 |
| Depreciation and amortisation | 991,731 | 886,701 | 1,006,469 | 888,766 | -117,703 |
| Value of assets sold | - | - | - | 138,335 | 138,335 |
| Write down of assets (includes net losses on sale of assets and net foreign exchange losses) | 16,161 | 203,859 | 228,525 | 212,738 | -15,787 |
| Other expenses (includes borrowing cost expense and grants) | 6,766 | 6,736 | 6,688 | 80,551 | 73,863 |
| Total Operating Expenses From Ordinary Activities | 3,693,128 | 3,807,642 | 3,924,175 | 4,091,213 | 167,038 |
| Revenues | |||||
| Assets now recognised | 6,760 | -81,470 | -109,256 | -284,977 | -175,721 |
| Revenue from sale of assets | - | -3,815 | - | -165,334 | -165,334 |
| Other revenue | -55,248 | -68,274 | -62,617 | -72,730 | -10,113 |
| Total Own Source Revenues | -48,488 | -153,558 | -171,873 | -523,041 | -351,168 |
| Price to Government for Output Two | 3,644,640 | 3,654,084 | 3,752,300 | 3,568,172 | -184,128 |
Explanation Of Significant Variation
The overall price of Output Two was $184m lower than the 2002-03 projected result, representing a decrease of five per cent. The major variations were due to:
- a net decrease in military employee expenses (-$106m) due to:
- an underestimation of the salary arrears estimates which has been corrected in future years (+$9m);
- an understatement of overseas allowances incorrectly accounted for in Output Three (-$13m);
- an overestimation of the budget which did not reflect the completion of pilot retention and other bonuses (-$18m);
- refinement of the attribution rules to Output One to better reflect the cost of current operations (-$27m);
- variation in costs attributed by the Defence Materiel Organisation and the Corporate Support and Infrastructure Group to Output Two (-$35m); and
- other attribution variations (-$22m).
- an increase in civilian employee expenses (+$23m) due to higher than planned strength in the enabling and owner support areas as well as growth in civilian per capita costs;
- an increase in suppliers non-inventory expenses (+$144m) due to:
- a change in the accounting treatment between the capital and operating mix in the major capital equipment program (+$55m);
- the use of cash reserves in 2002-03 (+$57m) to meet logistics and operational requirements;
- accounting adjustments due to correction of data reported in 2001-02 (+$18m);
- accrual accounting expense not budgeted for (+$5m); and
- other miscellaneous variations (+$9m).
- an increase in suppliers inventory expenses (+$27m) reflecting the purchases of additional inventory items to meet logistic and operational requirements, part of which was funded out of Defence's cash reserves;
- a decrease in depreciation expenses (-$118m) 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 (+$138m) 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 decrease in write down of assets expenses (-$16m) due to an overestimation of the projected result in equipment obsolescence provisions and pricing adjustments;
- an increase in other expenses due mainly 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 (+$76m);
- an increase in assets now recognised revenue (-$176m) due to the attribution to Output Two of the SDSS and ship inventory alignment process and the subsequent SDSS to ROMAN reconciliation including other miscellaneous adjustments;
- an increase in revenue from sale of assets (-$165m) 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 (-$138m); and
- a net increase in other revenue (-$10m) due to:
- the change in accounting treatment of fuel excise refunds (-$43m); and
- a variation in the revenue attributed to Output Two by Defence Groups (+$33m).