Output Four: Air Force 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 | 1,079,568 | 1,071,469 | 1,126,419 | 1,127,771 | 1,352 |
| Employees - Civilian | 230,608 | 273,068 | 294,177 | 319,388 | 25,211 |
| Sub-total Employees | 1,310,175 | 1,344,537 | 1,420,595 | 1,447,159 | 26,564 |
| Suppliers - Non-inventory | 1,147,073 | 1,153,672 | 1,113,128 | 1,216,654 | 103,526 |
| Suppliers - Inventory | 249,664 | 248,648 | 285,814 | 318,349 | 32,535 |
| Sub-total Suppliers | 1,396,737 | 1,402,320 | 1,398,941 | 1,535,003 | 136,062 |
| Depreciation and amortisation | 1,002,280 | 1,132,538 | 953,964 | 1,330,872 | 376,908 |
| Value of assets sold | - | - | - | 203,024 | 203,024 |
| Write down of assets (includes net losses on sale of assets and net foreign exchange losses) | 21,567 | 210,409 | 215,400 | 67,945 | -147,455 |
| Other expenses (includes borrowing cost expense and grants) | 7,452 | 7,409 | 7,394 | 85,708 | 78,314 |
| Total Operating Expenses From Ordinary Activities | 3,738,211 | 4,097,213 | 3,996,296 | 4,669,711 | 673,415 |
| Revenues | |||||
| Assets now recognised | -20,471 | -147,873 | -137,511 | -265,927 | -128,416 |
| Revenue from sale of assets | - | -4,042 | - | -179,240 | -179,240 |
| Other revenues | -44,664 | -82,851 | -51,166 | -66,422 | -15,256 |
| Total Own Source Revenues | -65,135 | -234,766 | -188,677 | -511,589 | -322,912 |
| Price to Government for Output Four | 3,673,076 | 3,862,447 | 3,807,619 | 4,158,122 | 350,503 |
Explanation Of Significant Variation
The overall price of Output Four was $351m higher than the 2002-03 projected result, representing an increase of nine per cent. The major variations were due to:
- a net increase in military employee expenses (+$1m) due to:
- an underestimation of the salary arrears estimates which has been corrected in future years (+$8m);
- an actuarial adjustment to update parameters for military workers compensation liability (+$26m);
- a refinement of attribution rules for housing (-$20m);
- a refinement of attribution rules for health costs (-$6m); and
- other minor variations, including an overestimation of allowances (-$7m).
- an increase in civilian employee expenses (+$25m) due to a higher than planned strength and per capita costs attributed to Output Four, together with refinement of the attribution rules including the allocation of security staff costs across all outputs;
- the increase in suppliers non-inventory expenses (+$104m) due mainly to:
- a change in accounting treatment between the capital and operating mix in the major capital equipment program (+$126m); and
- other variations including refinement in costs attributed to Output Four by Defence Groups to better reflect the attribution of suppliers expenses across all outputs (-$22m).
- an increase in suppliers inventory expenses (+$33m) due to the purchases of additional inventory items to meet operational requirements, part of which was funded out of Defence's cash reserves;
- an increase in depreciation expenses (+$377m), due mainly to:
- the different treatments applied at budget and in the actual results associated with disposal of APG-65 radars from the F/A-18 aircraft (+$155m); and
- a refinement of attribution rules to reflect a move from a generic to a more output-specific attribution of costs, including other minor variations (+$221m).
- an increase in the value of assets sold (+$203m) 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 decrease in write down of assets expenses (-$147m) due to an overestimation of the projected result in equipment obsolescence provisions and pricing adjustments;
- an increase in other expenses (+$78m) due mainly to the attribution to Output Four 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 (-$128m) due to additional inventory price adjustments, and the booking of the SDSS to ROMAN reconciliation and other miscellaneous adjustments;
- an increase in revenue from sale of assets (-$179m) due mainly 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; and
- a net increase in other revenue (-$15m) due mainly to a variation in the revenue attributed to Output Four by Defence Groups, which has been corrected for future years.