OUTCOME PERFORMANCE

Defence outcomes are the results that the Government seeks from Defence, and are achieved through the successful delivery of outputs, to the standards set in the Portfolio Budget Statements 2005–06 and, where applicable, revised in the Portfolio Additional Estimates Statements 2005–06. The Defence Annual Report 2005–06 reports our achievement against these targets, in both financial and non-financial terms.

The outcome and output structure has remained consistent for 2005–06 and covers 28 departmental outputs and three administered outputs.

Defence's departmental outcomes exceeded the revised estimate by $123.9m as detailed in TABLE 2.1. The variation is a reflection of the operating loss which is described in the financial overview and results mainly from significant accrual adjustments, in particular the write down of assets through impairment reviews of specialist military equipment, revaluation of building and infrastructure assets, and inventory adjustments following stocktaking activities and revaluation to meet AIFRS requirements.

The seventh outcome, Superannuation and Housing Support Services for Current and Retired Defence Personnel, covers activities not directly connected to the delivery of the capability outcomes and outputs. Outcome Seven and its three outputs are described on p. 144.

Defence continues to refine its cost attribution rules in order to improve the accuracy of its output costs. There are a number of variables that can influence output costs, including changes to preparedness levels and activity rates, operations, and redirecting funds to meet changing priorities and emergent cost pressures. Changes in the distribution of the workforce and technical adjustments aimed at improving the accounting for Defence's assets and liabilities can have a major impact.

Some of the variations evident between the revised estimate and actual result reflect accounting adjustments and refinements to attribution rules. There have been few changes to preparedness and activity levels from that which were planned, and few significant real variations between the revised estimate and actual result.

Table 2.1 Total Cost of Defence Outcomes and Outputs

	Budget Estimate(1)	Additional Estimate(2)	Actual Result	Variation(3)	Variation(3)
	2005–06	2005–06	2005–06	2005–06	2005–06
Outcome/Output	$'000	$'000	$'000	$'000	%
1. Command of Operations in Defence of Australia and its Interests
1.1—Command of Operations	371,713	554,315	465,084	–89,231	–16.1
1.2—Defence Force Military Operations and Exercises	499,032	526,433	492,549	–33,884	–6.4
1.3—Contribution to National Support Tasks	10,178	23,724	18,251	–5,473	–23.1
Sub-Total Outcome 1	880,924	1,104,472	975,884	–128,588	–11.6
2. Navy Capability for the Defence of Australia and its Interests
2.1—Capability for Major Surface Combatant Operations	1,605,701	1,601,949	1,680,156	78,207	4.9
2.2—Capability for Naval Aviation Operations	504,698	507,188	649,394	142,206	28.0
2.3—Capability for Patrol Boat Operations	277,648	282,488	282,476	–12	–0.0
2.4—Capability for Submarine Operations	779,765	776,763	824,639	47,876	6.2
2.5—Capability for Afloat Support	214,290	224,558	251,950	27,392	12.2
2.6—Capability for Mine Warfare	355,832	365,741	354,212	–11,529	–3.2
2.7—Capability for Amphibious Lift	370,160	381,772	438,500	56,728	14.9
2.8—Capability for Hydrographic, Meteorological and Oceanographic Operations	241,063	253,537	229,717	–23,820	–9.4
Sub-Total Outcome 2	4,349,157	4,393,997	4,711,044	317,047	7.2
3. Army Capability for the Defence of Australia and its Interests
3.1—Capability for Special Operations	500,281	499,767	489,658	–10,109	–2.0
3.2—Capability for Medium Combined Arms Operations	926,273	841,130	816,120	–25,010	–3.0
3.3—Capability for Light Combined Arms Operations	1,030,887	983,791	964,166	–19,625	–2.0
3.4—Capability for Army Aviation Operations	577,197	544,755	527,805	–16,950	–3.1
3.5—Capability for Ground Based Air Defence	129,625	109,898	107,658	–2,240	–2.0
3.6—Capability for Combat Support Operations	384,632	372,252	378,485	6,233	1.7
3.7—Capability for Regional Surveillance	124,492	130,832	127,481	–3,351	–2.6
3.8—Capability for Operational Logistic Support to Land Forces	575,652	570,362	556,601	–13,761	–2.4
3.9—Capability for Motorised Combined Arms Operations	550,510	549,217	535,943	–13,274	–2.4
3.10—Capability for Protective Operations	613,377	574,783	673,261	98,478	17.1
Sub-Total Outcome 3	5,412,926	5,176,788	5,177,177	389	0.0
4. Air Force Capability for the Defence of Australia and its Interests
4.1—Capability for Air Combat Operations	1,769,462	1,768,420	1,790,833	22,413	1.3
4.2—Capability for Combat Support of Air Operations	761,662	776,988	741,906	–35,082	–4.5
4.3—Capability for Surveillance and Response Operations	1,104,931	1,132,276	1,081,070	–51,206	–4.5
4.4—Capability for Airlift Operations	1,018,846	1,004,695	986,457	–18,238	–1.8
Sub-Total Outcome 4	4,654,901	4,682,379	4,600,266	–82,113	–1.8
5. Strategic Policy for the Defence of Australia and its Interests
5.1—International Policy, Activities and Engagement	188,067	190,039	190,445	406	0.2
5.2—Strategic Policy and Military Strategy	43,262	42,975	45,803	2,828	6.5
Sub-Total Outcome 5	231,329	233,013	236,248	3,234	1.4
6. Intelligence for the Defence of Australia and its Interests
6.1—Intelligence	467,384	494,291	508,255	13,964	2.8
Sub-Total Outcome 6	467,384	494,291	508,255	13,964	2.8
Net Cost for Defence Departmental Outcomes	15,996,621	16,084,941	16,208,876	123,935	0.8
Approved Allocated Profit/Loss	–18,900	48,600	–144,535	–193,135	–397.4
DEPARTMENTAL APPROPRIATIONS FROM GOVERNMENT	15,977,721	16,133,541	16,064,341	–69,200	–0.4
7. Superannuation Support Services for Current and Retired Defence Personnel
7.1—Superannuation Support Services for Current and Retired Defence Personnel	1,847,625	1,909,625	2,087,694	178,069	9.3
7.2—Housing Assistance for Current Defence Personnel	–6,026	–5,276	–58,219	–52,943	1,003.5
7.3—Other Administered Revenues and Expenses	–4,000	–4,000	–4,829	–829	20.7
Net Cost of Administered Outcomes	1,837,599	1,900,349	2,024,646	124,297	6.5
TOTAL COST TO GOVERNMENT	17,815,320	18,033,890	18,088,987	55,097	0.3

 

Table 2.2 Overall Cost to Government of Defence Outcomes (Departmental and Administered)

	Outcome 1—Command of Operations	Outcome 2—Navy Capabilities	Outcome 3—Army Capabilities	Outcome 4—Air Force Capabilities	Outcome 5—Strategic Policy	Outcome 6—Intelligence	Total Defence Departmental Outcome	Outcome 7—Superannuation and Housing Support Services for Current and Retired Defence Personnel	Grand Total
	2005–06	2005–06	2005–06	2005–06	2005–06	2005–06	2005–06	2005–06	2005–06
	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000
DEPARTMENTAL
Income
Revenue
Goods and services	35,555	113,987	211,668	174,395	6,954	5,140	547,700	–	547,700
Interest	–	10	–17	12	–4	–1	–	–	–
Other revenues	4,949	23,974	23,442	30,726	1,188	3,413	87,693	–	87,693
Total Revenue	40,505	137,972	235,093	205,133	8,138	8,552	635,392	–	635,392
Gains	–	–	–	–	–	–	–		–
Net foreign exchange gains	–	–	–	–	–	–	–	–	–
Assets now recognised	28,128	87,787	219,981	183,805	6,686	9,959	536,345	–	536,345
Net gains from sale of assets	–	–	–	–	–	–	–	–	–
Other Gains	936	3,793	4,055	3,813	301	402	13,300	–	13,300
Total Gains	29,064	91,580	224,036	187,618	6.987	10,361	549,645	–	549,645
Total Income	69,568	229,552	459,129	392,751	15,125	18,913	1,185,037	–	1,185,037
Operating Expenses
Employees	458,497	1,441,356	2,651,692	1,428,458	88,463	217,343	6,285,808	–	6,285,808
Suppliers	544,226	1,824,072	1,979,439	2,113,955	152,349	217,036	6,831,078	–	6,831,078
Grants	270	1,469	2,808	1,220	134	156	6,057	–	6,057
Finance cost	2,782	18,467	25,625	19,948	1,010	1,153	68,985	–	68,985
Depreciation and amortisation	26,937	1,233,701	721,576	1,208,528	6,604	69,965	3,267,310	–	3,267,310
Write-down and impairment of assets	13,110	419,014	264,252	218,549	2,934	9,921	927,780	–	927,780
Net foreign exchange losses	–5	131	719	14	–83	17	793	–	793
Net losses from sale of assets	–230	1,659	–11,473	1,587	–71	11,514	2,987	–	2,987
Other expenses	–132	726	1,669	758	32	63	3,115	–	3,115
Total Expenses	1,045,454	4,940,596	5,636,306	4,993,016	251,373	527,168	17,393,913	–	17,393,913
Price to Government for Defence Departmental Outcomes	975,885	4,711,044	5,177,177	4,600,266	236,248	508,255	16,208,876	–	16,208,876
ADMINISTERED
Revenues								729,562	729,562
Expenses								2,754,208	2,754,208
Price to Government for Defence Administered Outcomes								2,024,646	2,024,646

 

Table 2.3 Cost to the Government of Departmental Outcomes

	Budget Estimate(1)	Additional Estimate(2)	Actual Result	Variation(3)	Variation(3)
	2005–06	2005–06	2005–06	2005–06	2005–06
	$'000	$'000	$'000	$'000	%
Income
Revenue
Goods and Services	186,682	374,716	547,700	172,984	46.2
Interest	–	–	–	–	–
Other Revenues	186,159	248,536	87,693	–160,843	–64.7
Total Revenue	372,841	623,252	635,392	12,140	1.9
Gains
Net foreign exchange gains	–	–	–	–	–
Assets now recognised	30,000	250,000	536,345	286,345	114.5
Revenue from sale of assets	95,063	–	–	–	–
Other gains	–	–	13,300	13,300	–
Total Gains	125,063	250,000	549,645	299,645	119.9
Total Income	497,904	873,252	1,185,038	311,786	35.7
Expenses
Employees	6,587,528	6,358,716	6,285,808	–72,908	–1.1
Suppliers	6,946,746	7,121,909	6,831,078	–290,831	–4.1
Grants	1,275	7,275	6,057	–1,218	–16.7
Finance cost	32,075	29,914	68,985	39,071	130.6
Depreciation and amortisation	2,771,838	3,145,023	3,267,310	122,287	3.9
Write-down and impairment of assets	60,000	275,356	927,780	652,424	236.9
Net foreign exchange losses	–	–	793	793	–
Net losses from sale of assets	95,063	–	2,987	2,987	–
Other expenses	–	20,000	3,115	–16,885	–84.4
Total Expenses	16,494,525	16,958,193	17,393,913	435,720	2.6
Price to Government for Defence Outcomes	15,996,621	16,084,941	16,208,876	123,935	0.8
Approved Allocated Profit/Loss	–18,900	48,600	–144,535	–193,135	–397.4
Departmental Appropriation from Government for Outcomes	15,977,721	16,133,541	16,064,341	–69,200	–0.4

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