Annual Report 2003-04

Program of Administrative Savings

The savings targets for 2003-04 have been fully achieved and are detailed in Table 1.14.

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Administrative savings to date have been achieved by:

• reductions in the civilian workforce (more details are provided in Chapter 5 - Workforce Overview);
• reductions in non capability-related supplier expenses, including professional service providers;
• a 20 per cent reduction in overseas travel;
• a 10 per cent reduction in domestic travel;
• renegotiation of the Australian Defence Force Academy agreement, resulting in savings totalling $0.9m in 2003-04 and $1.9m in the years thereafter;
• a reduction in non-operational overseas positions of 110 personnel programmed in 2003-04 and in the years thereafter;
• the rationalisation of the civilian personnel administration centres from three to two locations;
• the rationalisation of the former Public Affairs and Corporate Communication Division; and
• the removal from service of three P-3 Orion derivative training aircraft, following the introduction of the advanced flight simulator, resulting in operational savings, which have been redirected to P3-C Orion aircraft logistics.

Savings achieved and planned are being used to offset the unavoidable cost pressures shown in Table 1.15, thus ensuring cuts to capability are not required to absorb these costs in the longer term.

Note

1. Covers Defence Reform Program contracts not able to be funded due to lower than planned Defence Reform Program savings.

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Administered Items

Administered Revenue (+$50m)

The revenues administered on behalf of the Government include dividend payments by the Defence Housing Authority, military employee superannuation contributions and other non-taxation revenues (including reimbursement from the United Nations for costs associated with East Timor). Once collected by Defence, all of these revenues were returned to the Government through the Official Public Account. Total revenues were some $52m higher than the projected result of $810m, with the variation relating to an increase in military superannuation contributions reflecting a small increase in military personnel numbers as the ADF grows to the White Paper targets, and higher contributions by members reflecting the outcome of the ADF Workplace Remuneration Arrangement.

Administered Expenses - Special Appropriation (+$303m)

These expenses, administered on behalf of the Government, comprise:

• administered superannuation expenses representing members' accrual expenses and interest expenses for the two military superannuation schemes (Defence Force Retirement and Death Benefits and Military Superannuation and Benefits Schemes). The cash payments of benefits paid under these schemes are subject to biannual indexation of benefits, similar to the Australian Public Service superannuation schemes;
• the Defence HomeOwner Scheme, which provides assistance to current and retired Defence personnel. This scheme provides a subsidy on the interest payable on a home loan for members of the ADF under the Defence Force (Home Loans Assistance) Act 1990; and
• the retention benefit is a lump sum of one times salary paid directly to military personnel who, on completion of 15 years service, undertake to complete a further five years service. It is not a superannuation benefit, but is an incentive payment made via the administered accounts.

Financial Results

Administered expenses were some $303m higher than the projected result of $2,017m with $281m relating to an increase in military superannuation benefit payments. The increase reflects the most recent Australian Government Actuary's assessment of superannuation liability, compared with the information available at the time that the projected result was calculated. The revised actuarial assessment reflects higher consumer price index and wage growth than was anticipated in the previous actuarial report. Table 1.16 provides details.

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