2002-03 Financial Statements

*Department of Defence*
**Notes To And Forming Part Of The Financial Statements**
for the year ended 30 June 2003
		2002-03	2001-02
		$'000	$'000
Note 4:	Operating Expenses

Note 4A:	Employee Expenses

	Australian Public Service (APS) employee expenses
	Wages and salary	898,573	783,728
	Superannuation	173,805	138,670
	Leave and other entitlements	111,608	114,360
	Separation and redundancies	6,046	9,228
	Fringe benefits tax	6,482	4,902
	Other employee expenses	2,603	2,134
	Other allowances	22,295	20,762
	Health expenses	1,451	1,187
	Total APS employee benefit expenses	1,222,862	1,074.970
	Workers compensation premiums	12,890	11,146
	Total APS employee expenses	1,235,752	1,086,116


	Australian Defence Force (ADF) employee expenses
	Wages and salary	2,537,836	2,425,052
	Superannuation	620,822	631,305
	Leave and other entitlements	86,768	105,062
	Separation and redundancies	5,826	2,413
	Overseas allowance	183,529	204,417
	Other allowances	286,003	254,422
	Fringe benefits tax	268,541	235,066
	Health services	130,551	110,098
	Housing	361,262	323,992
	Other employee expenses	87,355	85,999
	Total ADF employee benefit expenses	4,568,493	4,377,826
	Military compensation scheme*	390,327	268,108
	Total ADF employee expenses	4,958,820	4,645,935


	Total employee expenses	6,194,572	5,732,050

* The 2003 amount includes $131.7m in administration fees for the future processing of these claims. This is the first year that administration fees have been included in the military compensation expense.

Note 4B:	Suppliers Expenses

	Suppliers expenses is represented by:
	Supply of goods and services
	General goods and services	839,611	748,774
	Communications and information technology	244,340	180,316
	Consultants and professional services*	261,075	257,977
	Inventory supplies (non capital)	301,884	130,225
	Domestic travel	126,846	111,225
	Training	174,939	183,464
	Removal costs	148,826	150,182
	Utilities	96,497	96,903
	Overseas travel	63,887	60,206
	Advertising	28,943	39,702
	Freight and storage	45,023	42,007
	Security services	19,404	18,519
	Total supply of goods and services	2,351,275	2,019,499

	Inventory consumption
	Inventory consumption	772,794	676,898
	Total inventory consumption	772,794	676,898

	Property, plant and equipment related items
	Repair and overhaul	1,225,780	1,050,960
	Facilities operations (non utilities)	313,603	331,708
	Asset purchases not capitalised under asset policy thresholds	217,344	302,210
	Operating leases**	331,540	222,035
	Property disposals related costs	41,428	32,467
	Total property, plant and equipment related items	2,129,696	1,939,380

	Other suppliers expenses
	Research and development	92,591	51,372
	Assistance to states/territories (non grants)	3,518	3,508
	Total other suppliers expenses	96,109	54,880

	Total suppliers expenses	5,349,874	4,690,657

	Suppliers Expenses
	Goods from related entities	10,138	16,860
	Goods from external entities	1,316,086	1.133,002
	Services from related entities	339,763	269,928
	Services from external entities	3,683,887	3,270,867
	Total supplier expenses	5,349,874	4,690,657

* Legal compensation expenses for 2001-02 of $23m have been reclassified to General Goods and Services, resulting in a decrease for the total Consultants and Professional Service category from $280m to $257m in the comparative figure. Legal compensation expenses for 2002-03 were $54m.
** These comprise minimum lease payments only.

Note 4C:	Grants

	Private sector	2,544	2,587
	Overseas	-	20,000
	Total grants	2,544	22,587

	Grants are represented by:
	Defence rebuilding program Papua New Guinea	-	20,000
	Defence Family Support Program	1,143	1,337
	Research and other grants	1,401	1,250
		2,544	22,587

Note 4D:	Depreciation and Amortisation

	Depreciation
	Specialist military equipment	2,190,785	1,877,243

	Buildings	288,542	249,590
	Buildings under finance lease	25,126	26,187
	Total Buildings	313,668	275,777

	Other infrastructure, plant and equipment	337,012	339,167
	Total depreciation	2,841,465	2,492,187

	Amortisation
	Computer Software	14,456	11,885
	Intangibles - internally developed software	7,495	22,125
	Total amortisation	21,951	34,010

	Total depreciation and amortisation	2,863,416	2,526,197

	The aggregate amounts of depreciation and amortisation expensed during the reporting period for each class of depreciable asset are as follows:

	Buildings	288,542	249,590
	Specialist military equipment	2,190,785	1,877,243
	Plant and equipment	337,012	339,167
	Leasehold improvements	25,126	26,187
	Computer Software	14,456	11,885
	Intangibles - internally developed software	7,495	22,125
	Total depreciation and amortisation	2,863,416	2,526,197

No depreciation or amortisation was allocated to the carrying amounts of other assets.

Note 4E:	Write Down of Assets

	Financial assets
	Bad and doubtful debts expense	23,599	31,029
		23,599	31,029
	This is to represented by:
	Bad debts written-off	24	269
	Provision for doubtful debts	580	10,726
	Adjustment to correct receivable balances for past errors	22,995	20,034
		23,599	31,029

	Non-financial assets

	Specialist military equipment
	Fixed assets	81,298	426,384
	Major project activities expensed*	27,053	889,727
	Total specialist military equipment	108,351	1,316,111

	Other property, plant and equipment
	Land and buildings	8,011	14,506
	Other infrastructure, plant and equipment	169,143	54,820
	Software and Intangibles	184	8,182
	Major other plant and equipment project activities expensed	23,501	15,000
	Major intangibles project activities expensed	3,518	-
	Total other property, plant and equipment	204,357	92,508

	Inventory
	Write-down of inventory	250,168	133,987
		250,168	133,987

	Total write-down of assets	586,475	1,573,645

* In 2002-03 an amount of $69.5m was reversed against Major project activities write-downs. This adjustment relates to write-offs which occurred in prior years.

Note 4F:	Other Expenses

	Defective Administration Scheme payments	288	343
	Financial and other expenses	1,708	1,427
	Asbestos Related Disease Exposure*	343,600	-
	Total other expenses	345,596	1,770

* Refer to Note 1.7