Department of Defence
Statement by the Chief Executive and Chief Finance Officer

In our opinion, the attached financial statements for the year ended 30 June 2003 give a true and fair view of the matters required by the Finance Minister's Orders made under the Financial Management and Accountability Act 1997, except for uncertainty relating to:

• the reported value of approximately 32 per cent of some general stores inventory, including all items acquired prior to 1993. The book value of the general stores inventory at issue is $610 million (Note 7G refers). In 2001-02, general stores inventory was qualified by the Australian National Audit Office (ANAO) to the extent of $1.88 billion;
• the reported value of approximately 62 per cent of explosive ordnance inventory being all items acquired before 1996 and items acquired as part of assets under construction contracts between 1997 and 2000. The book value of the explosive ordnance at issue is $1.2 billion (Note 7G refers). In 2001-02, explosive ordnance inventory was qualified by the ANAO to the extent of $1.74 billion;
• the reported value of approximately 21 per cent of repairable items (a component of specialist military equipment). The book value of the repairable items at issue is $550 million (note 7F refers). In 2001-02, repairable items were qualified by the ANAO to the extent of $2.77 billion; and
• the reported value of military leave balances with a book value of $732 million (Note 9A refers). As a consequence of this uncertainty, it is possible that leave entitlements used in the compilation of the disclosure for executive remuneration for military personnel may also be in error (Note 14 refers).

Considerable progress has been made over the past year in identifying and addressing the pricing issues associated with general stores and explosive ordnance inventory. The reliability of recording and tracking movements in repairable items has also improved. Military leave records are subject to a comprehensive data quality review of leave processes and balances. Further progress on these issues will be made in 2003-04.

The Department has, for a number of years, consistently reported on two 'Special Accounts' although only one of these accounts was determined by the Minister for Finance. The Department has now rectified this matter (Note 28 refers).