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Chapter 6

Financial Overview

This chapter describes the DMO business and accounting model, and provides an assessment of the DMO financial performance in 2005–06 against budget projections.

Financial Overview

DMO's Operating Performance

The purpose of the Income Statement is to measure and report the result of the DMO's activities over the financial year period. It also highlights whether the DMO is operating at a sustainable level in the short-term.

At the time of the Additional Estimates, the DMO expected Income and Expenses to equal each other. This assumption was because the DMO is funded for the activity it performs.

The DMO has reported an operating surplus of $8.8m in 2005–06 (which, in a budget set for zero operating result, indicates that expenses and revenue differed by only around 0.03 per cent). Table 6.2 provides a full comparative Income Statement. Explanations of the variation between actual and planned allocation follow Table 6.2.

Table 6.2 Income Statement for the Year Ended 30 June 2006
  2005–06
  Budget Estimate
$'000		 Revised Estimate
$'000		 Actual Result
$'000		 Variance(1)
$'000
INCOME
Revenue
Revenues from Government 44,211 44,257 44,257
Goods and Services 6,976,161 7,223,227 7,432,989 209,762
Other revenue 70,000 128,115 81,251 –46,864
Total revenue 7,090,372 7,395,599 7,558,497 162,898
Gains
Net Gains from Sale of Assets 33,537 33,572 - –33,572
Other gains(2) 1,500 1,500 42,383 40,883
Total Gains 35,037 35,072 42,383 7,311
Total Income 7,125,409 7,430,671 7,600,880 170,209
EXPENSE
Employees 358,296 354,654 353,892 –762
Suppliers 6,590,587 6,969,456 7,221,709 252,253
Depreciation and amortisation 72,989 72,989 6,374 –66,615
Write-down of assets 70,000 - 304 304
Net losses from sale of assets 33,537 33,572 - –33,572
Net foreign exchange losses - - 8,365 8,365
Other expenses - - 1,458 1,458
Total Expenses 7,430,671 7,430,671 7,592,102 161,431

Notes

  1. The variation is between actual result as disclosed in the 2005–06 audited financial statements and the revised budget published in the Portfolio Additional Estimates Statements 2005–06.
  2. Other gains include resources received free of charge.

Explanation of Major Variations

The variation in the DMO's overall operating performance of $8.8m comprises a $170.2m increase in income and an increase in expenses of $161.4m.

Income received was $170.2m more than the estimate of $7,430.7m.

Expenses were $161.4m higher than budget. The main elements were:

  • Supplier expenses (+$252.3m)—variation due to an increase in commissioned work required by Defence.
  • Depreciation (–$66.6m)—the transfer back from the DMO to Defence of commercial vehicles, resulting in a decreased depreciation expense on the DMO's books.
  • Net losses from sale of assets (–$33.6m)—the lower than planned expenses were due to the transfer back of commercial vehicles from the DMO to Defence.
  • Net Foreign Exchange Losses (+$8.4m)—the net variation was due to the timing difference between when invoices for transactions in foreign currencies are entered in the financial system for payment and the date they are paid.

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