Annual Report 2003-04

Financial Overview

Defence's Cash Position

Overview

Defence sources its annual cash requirements mainly from appropriations (appropriations for outcomes and the equity injection), own-source revenue, capital receipts and cash reserves. The allocations are subject to Government approval as part of the annual budget process. Once funds are appropriated for Defence purposes, they remain in Defence's accounts even if not fully used in the budget year. They are held as an appropriation receivable in the Official Public Account and are available to meet liabilities as they fall due, including employee liabilities, subject to Government approval.

With the approval of the Government, Defence had planned to have cash reserves totalling $741m at 30 June 2004, comprising cash at bank ($100m) and $641m held in the appropriation receivable. At the end of the financial year, there was $238m in the bank and $538m in the appropriation receivable, for a total of $776m - some $35m higher than forecast.

Use of Cash in 2003-04

Defence was able to source $17,746m in cash in 2003-04 and used $17,508, leaving it with a cash balance at 30 June 2004 of $238m. This was $138m higher than the $100m forecast due mainly to the need to draw down $150m on 30 June 2004 for the pay day on 1 July 2004. When this factor is taken into account, the balance reduces to $88m, representing an underlying variance of $12m, which was within 0.06 per cent of the total available cash. Table 1.8 provides details.

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Table 1.8 shows the actual movement of cash in 2003-04.

Notes

1. Includes sale of goods and services ($274.3m), other revenue ($157.9m), proceeds from sale of assets ($184.4m), reclassification of foreign military sales advance payments as cash (+$59.7m) and interest revenue ($0.1m)
2. See Table 1.9 for detailed breakdown of this figure.

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Current Status of the Appropriation Receivable

Defence used all of its 2003-04 appropriations, its own source revenue, and part of its cash reserves in 2003-04 (with the approval of the Government), leaving $538m in the appropriation receivable, or $103m less than the forecast of $641m. The reasons for the variation are explained in Table 1.9, but the major variation was the draw-down on 30 June 2004 of $150m for the pay day on 1 July 2004. The withdrawal more than fully explains the $103m reduction in the appropriation receivable.

Notes

1. Cross reference to Table 1.8.
2. The accrual appropriation receivable was due to the recognition of accrual appropriation revenue for initiatives approved by the Government for which cash will be reimbursed in 2004-05.

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Planned Rundown in Cash Levels

Table 1.10 shows how Defence intends to progressively reduce its cash reserves over the forward estimates in accordance with the schedule agreed by the Government.

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