Glossary
- Accrual accounting
- The system of accounting where items are
brought to account and included in the financial statements as they
are earned or incurred, rather than as they are received and paid.
It involves maintenance of three fundamental financial statements—the
income statement (showing expenses and revenue, and the operating
result), the balance sheet (showing assets and liabilities, and the
equity position) and the cash flows (showing payments and cash receipts).
- Additional Estimates
- Where amounts appropriated at Budget time are required to change,
the Parliament may make adjustments to portfolios through the Additional
Estimates Acts.
- Agency Agreement
- The DMO and Defence have negotiated a large number of agency agreements
to define the level of service the DMO will provide, and the fee that
Defence will pay for that service. Agency agreements cover acquisition
projects, fleet/product sustainment, services provided without charge,
and the military workforce in the DMO.
- Annual appropriation
- Two appropriation Bills are introduced into the Parliament in May
and comprise the Budget for the financial year beginning 1 July. Further
Bills are introduced later in the financial year as part of the additional
estimates.
- Appropriation
- An authorisation by the Parliament to spend money from the Consolidated
Revenue Fund (the principal working fund of the Commonwealth) for
a particular purpose.
- Assets
- Future economic benefits controlled by Defence as a result of past
transactions or other past events. Assets are initially recognised
at the cost of acquisition. Non-financial assets are subject to ongoing
revaluation assessment. Assets include specialist military equipment,
inventory, cash, buildings and prepayments to industry for which some
physical asset is to be provided.
- Assets under construction
- Assets under construction (AUC) represent the value of deliverables
to date in a construction contract. For the DMO, this is the value
of deliverables under major and minor projects that have been transferred
to the Defence balance sheet. When construction is complete and a
final product delivered, the AUC will be transferred on the Defence
balance sheet to a specialist military equipment asset.
- Average funded strength
- A budgetary measure used to count the average number of ADF members
paid on a full-time equivalent basis during a financial year. The
DMO military workforce agreement with Defence states the level of
AFS to be provided and the funding the DMO will receive in service
fee and pay back to Defence if the agreed AFS level is delivered.
- Business Plan Review
- As part of the Business Plan Review, presentations are held monthly
by the CEO DMO and his executive at major DMO sites around the country
to brief and answer questions from DMO staff on strategic directions.
- Capability
- The combination of military equipment, personnel, logistics support,
training, resources, etc. that provides Defence with the ability to
achieve its operational aims.
- Capability Manager
- A Capability Manager is responsible for raising, training and sustaining
in-service capabilities through the coordination of fundamental inputs
to capability. Capability Managers include the Service Chiefs, the
Chief of Joint Operations and the Chief Information Officer. The Capability
Managers are responsible for negotiating and signing Materiel Sustainment
Agreements with the DMO.
- Capital budget
- All proposed capital expenditure funded by appropriation for outcomes,
by equity injections or loans and/or appropriations for administered
capital, or by other sources. Defence passes a large part of its capital
budget to the DMO for delivery of major and minor acquisition projects
under Materiel Acquisition Agreements.
- Capital expenditure
- Expenditure by an agency on capital projects, for example purchasing
a building or specialist military equipment.
- Chief Executive Instructions
- Instructions issued by the CEO DMO for the administration of the
agency. These instructions are issued under the authority of the Financial
Management and Accountability Act 1997 and carry the force of
the law.
- Consolidated revenue fund
- Section 81 of the Constitution stipulates that all revenue raised
or money received by the Commonwealth forms one consolidated revenue
fund. The fund is not a bank account. The Official Public Account
reflects most of the operations of the fund.
- Consultants/ consultancies
- Individuals or organisations contracted to provide independent advice
on an agreed subject.
- Corporate governance
- The process by which agencies are directed and controlled. It is
generally understood to encompass authority, accountability, stewardship,
leadership, direction and control.
- Customer-supplier agreement
- An agreement between internal customers and suppliers for the supply
of a service at an agreed quantity, standard and price.
- Defence Capability Plan
- The Defence Capability Plan is a costed, detailed development plan
for Australia's military capabilities over a ten-year period. The
plan is reviewed regularly to take account of the changing strategic
circumstances, new technologies and changed priorities, in the context
of the overall Defence budget. The plan is the basis for the DMO to
project its forward expenditure on major capital acquisition projects.
- Defence Employees Certified Agreement
- An enterprise agreement made under the Workplace Relations Act 1996
about terms and conditions of service, including rates of pay, for
Australian Public Service Defence employees. The agreement is negotiated
between Defence, Australian Public Service employees and their representatives
and is certified by the Australian Industrial Relations Commission.
The agreement also applies to civilian staff in the DMO.
- Defence Management and Finance Plan
- The Defence Management and Finance Plan provides Ministers and central
agencies with a clear oversight of Defence and DMO planning and financing
strategies. It describes the strategies agreed through the 2000 Defence
White Paper and subsequent Strategic Review papers. As a compendium
of information attached to the Defence and DMO annual Portfolio Budget
Submission, it is intended to help Ministers make informed strategic
and budgetary decisions, by bringing into one document the expected
financial position, taking into account existing commitments and proposed
new investments. The Plan also provides the Government with the information
necessary to ensure that its investment in Defence and the DMO is
both affordable and sustainable.
- Defence Procurement Review
- An independent review initiated by the Government in December 2002
to examine the procurement process for major acquisitions in Defence.
The review was led by Mr Malcolm Kinnaird and is also known as the
'Kinnaird Review'. It provided the basis for the establishment of
the DMO as a prescribed agency, with independent accountability to
Government for financial management and reporting.
- Delegation
- Under Acts of Parliament various powers are allocated to Ministers
and public officials. The CEO DMO has a number of such powers under
the Financial Management and Accountability Act 1997. These
powers can be delegated to subordinate officers. No officer can exercise
a power unless they have a written delegation flowing ultimately from
an Act.
- Depreciation
- Apportionment of an asset's capital value as an expense over its
estimated useful life to take account of normal usage, obsolescence,
or the passage of time.
- Domain Division
- The DMO comprises a series of divisions categorised as 'domains',
'operations' and 'major projects'. The domain divisions are the major
business entities, aligned to each environment—aerospace, maritime,
land, and electronics and weapons. The domain divisions contain the
system program offices.
- Employee
- Any Australian Public Service officer of the DMO who receives a
salary or wage, along with other benefits, for the provision of services
whether on a full-time, part-time, permanent, casual or temporary
basis. Military personnel employed in DMO are paid by Defence and
have their leave and other entitlements funded through the Defence
balance sheet—DMO pays a fee for suppliers expenses for their
services.
- Employee expenses
- Includes, but are not limited to, benefits provided to employees
in the form of salaries and wages, performance pay, senior officers'
allowances, leave, and superannuation, but does not include amounts
paid or owed to employees as reimbursement of out-of-pocket expenses.
- Equity
- Equity is the net difference between assets and liabilities held
by an agency. It reflects the net financial value of the agency.
- Expense
- Total value of all the resources consumed in producing goods and
services or the loss of future economic benefits in the form of reductions
in assets or increase in liabilities of an entity.
- Financial Management and Accountability Act 1997
- The Act establishes the regulatory framework for the proper management
of public money and public property.
- Force element
- A component of a unit, a unit or an association of units in Defence
having common prime objectives and activities.
- Force Element Group
- A grouping of force elements with an appropriate command and control
structure for a specified role or roles (eg the Navy Submarine Group).
In general a DMO System Program Office exists to support each Defence
Force Element Group, and they are often collocated with them.
- Forward estimates
- The level of proposed expenditure for future years (based on relevant
demographic, economic and other future forecasting assumptions). The
Government requires forward estimates for the following three financial
years to be published in each annual Federal Budget paper.
- Industry Sector Plan
- The DMO developed a series of plans, endorsed by Government on how
each key sector of Australian Defence industry might be developed
to best meet Defence needs. Plans cover aerospace, shipbuilding, electronics
and land vehicles.
- Inventory
- Inventory is comprised of consumable stores and supplies, fuel and
explosive ordnance used in the delivery of services. These are items
which are consumed in normal use, lose their identity during periods
of use by incorporation into, or attachment upon, another assembly,
as a result of wear and tear, cannot be reconditioned because their
design does not make it possible or their specific values do not justify
it. The DMO is responsible for purchasing the bulk of Defence inventory,
including General Stores Inventory, Explosive Ordnance and Fuel, but
the items are stored and consumed by Defence and their value is recorded
on the Defence balance sheet.
- Liabilities
- Sacrifices of future economic benefits that the DMO is presently
obliged to make to other entities as a result of past transactions
or other past events. This includes amounts owed to employees to cover
leave entitlements, and amounts owed to suppliers for work completed.
- Material
- The substance or substances of which a thing is made or composed.
- Materiel
- All items (including ships, tanks, self-propelled weapons, aircraft,
etc and related spares, repair parts and support equipment but excluding
real property, installations and utilities) necessary to equip, operate,
maintain and support military activities without distinction as to
its application for administrative or combat purposes.
- Materiel Acquisition Agreements
- Materiel Acquisition Agreements cover the DMO's acquisition services
to Defence for both major and minor capital equipment.
- Materiel Assurance Boards
- Five materiel assurance boards, aligned to domains, have been established
to provide the CEO DMO with independent advice on progress with major
project and sustainment business. The boards comprise a mix of external
members and Defence and DMO personnel.
- Materiel Sustainment Agreements
- Materiel Sustainment Agreements are between the Capability Managers
and the CEO DMO. These agreements will cover the sustainment of current
capability, including services such as repairs, maintenance, fuel
and explosive ordnance.
- Net assets
- See equity
- Operating result
- Equals revenue less expense, commonly known as profit or loss.
- Other property, plant and equipment
- This comprises the following sub-classes of asset: administrative
assets, commercial vehicles, general military assets, heritage assets
and other (includes all items not specific to one of the classes or
sub-classes referred to above and can include testing equipment and
non-specific non-rotable spares.)
- Outcomes
- The results that the Government seeks from the DMO, achieved by
the successful delivery of its outputs, to the standards set in the
portfolio budget statements. The DMO has one outcome.
- Output
- The product or service produced by the DMO on behalf of the Government
for external organisations or individuals. The DMO has three outputs.
- Outturned prices
- Estimates adjusted to incorporate the expected rate of inflation.
- Platforms
- Refers to air, land, surface or sub-surface assets that are discrete
and taskable elements within the ADF. The platforms are the major
part of the Force Element Group that are sustained by the DMO under
agency agreements.
- Portfolio additional estimates statements
- Similar to the portfolio budget statements and prepared at additional
estimates time to support an update on the Government's original annual
budget for Defence and the DMO.
- Portfolio budget statements
- A document presented by the Minister for Defence to Parliament to
inform Senators and Members of the basis for the Defence and DMO budget
appropriations in support of the provisions in Appropriation Bills
1 and 2. The statements summarise the DMO budgets and provides detail
of outcome performance forecasts and resources in order to justify
expenditure for Defence.
- Prescribed agency
- A prescribed agency is an agency established by regulation under
the Financial Management and Accountability Act 1997. It
provides financial management authority to, and requires accountability
by, the Chief Executive of an agency. An agency can be prescribed
but not be an independent entity under the Public Service Act
1999 This is the case for the DMO, which is prescribed and so
independent under the FMA Act but is part of the Department of Defence
for the purposes of the Public Service Act 1999.
- Professional service providers
- Individuals with specialist skills contracted to fill a line position.
- Public Service Act 1999
- This Act of Parliament establishes government departments and agencies,
defining the powers and responsibilities of chief executives and rules
and responsibilities surrounding personnel and other administration.
- Readiness
- The readiness of forces to be committed to operations within a specified
time, dependent on the availability and proficiency of personnel,
equipment, facilities and consumables. Readiness is one of the measures
of service that the DMO seeks to provide in its sustainment of Defence
force element groups.
- Receivables
- Amounts payable to the DMO, including debtors, bills of exchange
and promissory notes, loans to other governments and other entities,
interest accrued but not yet received, and advances to employees and
other entities that are to be returned or acquitted.
- Reserves
- The Naval Reserve, the Army Reserve and the Air Force Reserve.
- Revenues
- Inflows or other enhancements, or savings in outflows, of future
economic benefits in the form of increases in assets or reductions
in liabilities of Defence, other than those relating to contributions
by the Commonwealth, that result in an increase in equity during the
reporting period. The great majority of revenue coming to the DMO
(over 99 per cent) comes from payments from Defence for acquisition
and sustainment services.
- Risk management
- At the highest level, it involves the identification and mitigation
of those risks that have the potential to affect adversely the achievement
of agreed output performance at the agreed output price.
- Resource and Output Management and Accounting Network (ROMAN)
- The primary financial management system for Defence and the DMO,
incorporating corporate budgeting, accounting and reporting.
- Special account
- Balances existing within the Consolidated Revenue Fund, that are
supported by standing appropriations (Financial Management and
Accountability Act 1997, ss.20 and 21). Special accounts allow
money in the Consolidated Revenue Fund to be acknowledged as set-aside
(hypothecated) for a particular purpose. Amounts credited to a Special
Account may only be spent for the purposes of the Special Account.
Special Accounts can only be established by a written determination
of the Finance Minister (s.20 of the Financial Management and
Accountability Act 1997) or through an Act of Parliament (referred
to in s.21 of the Financial Management and Accountability Act
1997). The DMO holds all its funds in special accounts, including
payments from Defence, direct appropriation and any other revenue.
- Special appropriations (including standing appropriations)
- An amount of money appropriated by a particular Act of Parliament
for a specific purpose and number of years. For special appropriations
the authority to withdraw funds from the Consolidated Revenue Fund
does not generally cease at the end of the financial year.
- Specialist military equipment
- Items of a specific military nature and that are not available though
the normal external market in their current form to other than government
military purchasers. It includes the prime military equipment plus
the direct support items associated with the equipment.
- Standard Defence Supply System (SDSS)
- A key information system for the financial management of inventory,
general stores, repairable items and other assets associated with
Defence's logistic capability. The system is maintained by the DMO
for Defence and is the basis for inventory purchases managed by the
DMO.
- System Program Office
- A System Program Office is the core business unit in the DMO. It
provides acquisition and sustainment services for one or more of the
nearly 100 defined sustainment products (force element groups or fleet
groups).
- 'Two pass' approval process
- The process by which major capital investment proposals are developed
for consideration and approval by the Government. It involves a first
pass approval through which initial funding is obtained to confirm
the feasibility of the project and to clarify cost and schedule. This
forms the basis for the Government to consider second pass approval
at which time projects cost, scope and schedule with be confirmed.
- Unit ready days
- The number of days that a force element is available for tasking,
by the Maritime Commander, either outside of major maintenance and
within planned readiness requirements, or in accordance with contracted
availability. Planned unit ready days are determined for each Force
Element Group by aggregating total days for the unit in commission,
less all days when the unit is programmed to be in major maintenance
and conducting associated pre-workup (preparations for initial operational
training) or based on the total number of days the force element is
contracted to be available to Defence. Contracted availability applies
to the Armidale-class patrol boats and may apply to other classes
in the future.
- Weighted average cost
- An inventory valuation method which considers the fluctuating prices
and quantities of acquired goods in computing of the cost of inventory.
The weighted average method takes the prices of units at the beginning
inventory and the varying prices of purchases made and are weighted
by the number of units to determine the weighted average cost per
unit. It may be computed as the weighted average cost of all available
goods present in a given period, or as a weighted moving average cost
adjusted when new goods are delivered.
- Write-offs
- The recording in the accounting records of irrecoverable or uneconomic
to recover debts.
- Write-downs
- The reduction in value of asset.
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