Chief Finance Officer
Mr Phillip Prior, Chief Finance Officer, is responsible for the management of Defence's finances.
It was another busy year for the Chief Finance Officer Group. Key achievements included significant progress on financial statements remediation, implementation of AIFRS, bedding down of the DMO, development of the 2006–16 Defence Management and Finance Plan, and increased financial training. Most importantly though, the Chief Finance Officer Group was able to play its part in providing timely advice and support for the continuing high operational tempo that Defence is experiencing.
As a newcomer to the Department, I was delighted with the way the Group performed in what was a year of significant change. I was also impressed with the contribution across the Department from so many who work in and around the financial arena. The Group is taking a more active partnering approach to the ongoing improvements to financial management. The Group Finance Officer network is a real strength for the Department, as is the tremendous effort and focus that is being given to financial management by individuals from a wide range of disciplines and locations.
Financial Statements
After two years of financial statements being prepared on the basis of 'no opinion', the Secretary and I have been able to sign off the 2005–06 financial statements on an 'except for' basis. This is a significant indication of the Department's success in improving financial management within the organisation. It is also testimony to the focus and effort of a very large number of people, led by the Secretary, who have been involved in financial remediation for over three years.
The attention that has been directed at financial management over this period has been unprecedented in Defence, with improvements in financial reporting, and underlying financial controls and management systems, providing an enduring base for sound financial management into the future.
Achievements with the financial statements are particularly notable in light of the extensive financial reporting changes that have been accommodated during the year. Significantly, the prescription of the DMO and the introduction of international accounting standards have been dealt with comprehensively and properly. It is a clear demonstration of the quality of the staff working in the finance area that they are able to tackle such significant change and deliver a very successful outcome.
As well as implementing financial management reforms within Defence, the Financial Services Division team has made significant contributions to whole-of-Government accounting policy activities. With ongoing dialogue with the Australian Accounting Standards Board and the Department of Finance and Administration, Defence has made a major contribution to developing clear guidelines focusing on accounting for military environments.
Budget Management
Budget management continues to be one of the Group's enduring and stable strengths. This year has seen significant activity with major budget bids on key strategic issues successfully developed. It was also a year of significant change for budget management. The DMO prescription was managed and implemented from a financial perspective, largely through the professional effort of the Budget and Financial Planning Division and the DMO's Chief Finance Officer. The production of instructional material and guidance has been important in managing the financial risk associated with such an extensive structural change.
Budgeting and planning advice to the Department and the Government has again been of good quality and timely. The Group costed and developed resourcing strategies for all proposals considered by the Government during the year. Through the development of the 2006–16 Defence Management and Finance Plan and the Portfolio Budget Submission, the Government continued its three per cent per annum real growth commitment for a further five years to 2015–16, and funded a number of important budget measures including the purchase of C-17 heavy lift aircraft, stand-up of the High Readiness Reserve, the Hardening and Networking the Army initiative, and redevelopment of the explosive manufacturing facility at Mulwala.
The 2005–06 Budget was managed to within $7m in underlying cash terms, and the Chief Finance Officer Group supported current operations through costing, resourcing and reporting on Defence operations. Through their involvement in senior Defence committees, Chief Finance Officer executives were able to shape the resourcing strategies for Defence's workforce investment and operating budgets.
The Budget and Financial Planning Division's contribution to whole-of-Government resource management policy development should also be acknowledged. Engagement with the Department of Finance and Administration on budget management improvements is an ongoing feature of the Division's work and is a good indication of the leadership role it takes.
Financial Controls Framework
The Financial Controls Framework has seen its first year of activity, delivering some outstanding results which, over the next three years, will put in place a robust controls framework and fundamentally re-engineer financial management training in Defence. Key controls have been identified and documented, a comprehensive plan put in place and many achievements made in our drive to achieve the Secretary's vision to make the large and complex organisation that is Defence respected for its financial management.
Financial Training
Financial training continued to be an important component of the financial management reform program with more than 14,000 people undertaking training in a variety of fields. The two major fields – finance and business training – had over 7,000 participants (including the Senior Leadership Group and other senior officers). A similar number undertake training largely focusing on the Defence accounting system. Defence staff also undertook two tertiary training courses, with 46 graduates from the Diploma in Government (Financial Management) course and 47 graduates from the Graduate Certificate in Accounting course.
A Year of Solid Progress
Given all the financial management activity over the past year, it is satisfying to know that solid progress is being made where it is needed, successes are being sustained, and the opportunities for further improvements are being identified and planned for. The Chief Finance Officer Group has a responsibility to provide sound leadership in financial matters, and I am confident that it is well placed to provide that leadership to serve the Government in providing an environment of efficient, effective and ethical use of taxpayer's funds.