Financial management

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Financial performance

This section provides an overview of Finance’s financial performance during 2015–16 for both departmental and administered activities.

The department’s financial statements are presented in Part 4. The Australian National Audit Office issued an unqualified audit opinion for these statements on 29 August 2016.

Finance’s financial performance is summarised in Table 5. The department’s entity resource statement and tables showing expenses by outcome are presented in Appendix E.

Departmental activities

Departmental resourcing includes assets, liabilities, revenues and expenses that Finance controls directly and uses to produce outcomes on behalf of the government.

For 2015–16, the department recorded an operating surplus of $113.5 million. This is $72.8 million more than the revised surplus estimate of $40.7 million published in the Portfolio Budget Statements 2016–17. The increase was mainly due to higher valuations of investment properties and lower insurance claims.

The operating surplus of $113.5 million in 2015–16 compares to an operating surplus of $56.4 million in 2014–15. Finance has budgeted for an operating surplus of $18.1 million in 2016–17.

Operating expenses were $5.8 million higher than in 2014–15. This was primarily due to an increased provision for insurance claims and an increase in expenditure on centralised procurement.

Write-down and impairment of assets decreased by $43.0 million. This was primarily due to a reduction in the revaluation decrement for buildings and investment properties from $55.3 million in 2014–15 to $13.2 million in 2015–16.

The increase in own-source revenue of $103.0 million was primarily due to increased centralised procurement resulting from additional support and licensing arrangements and an increase in insurance premium revenue from Commonwealth entities.

Revenue from government decreased by $124.1 million, primarily because the 2014–15 figure contained a number of one-off budget items such as the sale of Medibank Private Limited, and funding for remediation of land at Cox Peninsula.

Table 5: Departmental financial performance

  30 June 16
$'000
30 June 15
$'000
Variance
$'000
Operating expenses 623,292 617,460 5,832
Write-down and impairment of assets 14,741 57,686 (42,945)
Total expenses 638,033 675,146 (37,113)
Own-source revenue 440,445 337,495 102,950
Gains 43,591 4,607 38,984
Net own-source 484,036 342,102 141,934
Net cost of services 153,997 333,044 (179,047)
Revenue from government 271,315 395,370 (124,055)
Income tax equivalent (3,843) (5,905) 2,062
Operating surplus (deficit) 113,475 56,421 57,054
Changes in asset revaluation surplus 25,133 16,445 8,688
Total comprehensive income (loss) 138,608 72,866 65,742

 

Figure 5 outlines the department’s departmental financial performance over the past four years and the budget for 2016–17.

Figure 5: Departmental financial performance, 2012–13 to 2016–17 ($ million)

Figure 5: Departmental financial performance, 2012–13 to 2016–17 ($ million). Text description below.

Text description for Figure 5: Departmental financial performance, 2012–13 to 2016–17 ($ million)

Administered activities

The financial performance of Finance’s administered activities for 2015–16 is summarised in Table 6. Administered items are assets, liabilities, revenues and expenses that are managed or overseen by Finance on behalf of the government.

Table 6: Administered financial performance

  30 June 16
$'000
30 June 15
$'000
Variance
$'000
Expenses administered on behalf of the government 9,509,540 10,512,964 (1,003,424)
Income administered on behalf of the government 1,906,567 8,004,016 (6,097,449)

 

Finance incurred $9.5 billion of expenses on behalf of the government. This was $1.0 billion less than in 2014–15 due to a reduction in the distributions to portfolio special accounts associated with the Australian Government investment funds.

Finance recognised $1.9 billion of income on behalf of the government. This was $6.1 billion less than in 2014–15, noting that the 2014–15 figure contained the proceeds from the sale of Medibank Private Limited.

Figure 6 outlines the financial performance of the department’s administered activities over the past four years and the budget for 2016–17.

Figure 6: Financial performance of administered activities, 2012–13 to 2016–17 ($ million)

Figure 6: Financial performance of administered activities, 2012–13 to 2016–17 ($ million). Text description below

Text description of Figure 6: Financial performance of administered activities, 2012–13 to 2016–17 ($ million)

Financial summary

Table 7: Financial summary, 2012–13 to 2015–16

Departmental summary of financial statements 2012–13
$ million
2013–14
$ million
2014–15
$ million
2015–16
$ million
Expenses
Employees 181.74 168.08 161.22 170.36
Suppliers 196.46 222.29 331.7 321.89
Write-down and impairment of assets 1.09 118.92 57.69 14.75
Insurance claims 92.85 108.39 76.46 94.30
Other 35.60 34.89 48.08 36.73
Total expenses 507.74 652.57 675.15 638.03
Own-source income
Rendering of services 111.56 143.02 152.82 230.94
Insurance premiums 82.71 86.26 100.87 125.15
Reinsurance and other recoveries 5.15 6.59 0.00 1.50
Rental income 47.67 48.18 76.48 72.12
Other revenues 13.11 9.66 7.33 10.74
Total own-source revenue 260.2 293.71 337.50 440.45
Gains 41.26 5.97 4.61 43.59
Net cost of services 206.28 352.89 333.04 153.99
Revenue from government 274.45 261.69 395.37 271.32
Income tax equivalent expense 5.54 5.86 5.91 3.84
Net surplus (deficit) 62.63 (97.06) 56.42 113.49
Equitya 1988.17 2085.77 2063.37 2148.08
Net operating cash flow 13.75 47.89 64.20 69.70
Returns to government 33.82 11.14 111.26 73.92

a In 2014–15 initially a provision of $18.7 million was raised for the cash return. However, changes in estimates and assumptions used have resulted in an adjustment to the 2014–15 figure to reflect the revised amount of $55.1 million.

Table 8: Economic performance summary

Indicator 2015-16 result
$000
Operating statement
Total expenditure 638,033
Total own-source income 484,036
Total net cost of service 153,997
Economic viability
Total assets 2,845,820
Total liabilities 697,740

Significant non-compliance with finance law

The department did not report any significant issues relating to non-compliance with the finance law to the Finance Minister under section 19(1)(e) of the PGPA Act in 2015–16.

Asset management

Finance manages the government’s non-defence domestic property portfolio of some 170 properties, with a value of approximately $1.6 billion (at 30 June 2016). Finance, with its private sector partner, manages these assets strategically to ensure that they are efficient and able to meet the government’s needs.

In 201516 new long-term leases were finalised which provide the opportunity to improve the quality and amenity of the portfolio in line with modern workforce standards. This will result in improved whole-of-government efficiency through full utilisation of assets.

Performance measures for the management of the domestic property portfolio are included in the annual performance statements in Annual Performance Statements.

Grants

Information on grants awarded by Finance during the period 1 July 2015 to 30 June 2015 is available on our website at http://www.finance.gov.au/publications/grants/.

Procurement

The department’s approach to procuring goods and services, including consultancies, is consistent with, and reflects the principles of, the Commonwealth Procurement Rules. These rules are applied to activities through the department’s accountable authority instructions, supporting operational guidelines and procurement framework.

No contracts of $100,000 or more (inclusive of GST) were let during 2015–16 that did not provide for the Auditor-General to have access to the contractor’s premises.

No contracts in excess of $10,000 (inclusive of GST) or standing offers were exempted by the Secretary from being published on AusTender on the basis that they would disclose exempt matters under the Freedom of Information Act 1982.

Information on procurements expected to be undertaken in 2015–16 is in the department’s annual procurement plan, available from the AusTender website (www.tenders.gov.au).

Initiatives to support small business

The department supports small business participation in the Commonwealth Government procurement market. Participation statistics for small and medium enterprises and small enterprises are available on the department’s website at www.finance.gov.au/procurement/statistics-on-commonwealth-purchasing-contracts.

The department recognises the importance of ensuring that small businesses are paid on time. The results of the survey of Australian Government payments to small business are available on the Department of the Treasury’s website (www.treasury.gov.au).

The department’s support for small business includes using the Commonwealth contractingsuite for low-risk procurements valued under $200,000.

Consultancies

The department engages consultants when it requires specialist expertise or when independent research, review or assessment is required. Decisions to engage consultants during 2015–16 were made in accordance with the PGPA Act and related regulations, including the Commonwealth Procurement Rules and relevant internal policies.

During 2015–16, the department entered into 218 new consultancy contracts involving total actual expenditure of $12.4 million. In addition, 58 ongoing consultancy contracts were active during 2015–16, involving total actual expenditure of $18.5 million.

Annual reports contain information about actual expenditure on contracts for consultancies. Information on the value of contracts and consultancies is available on the AusTender website (www.tenders.gov.au).

Table 9: Expenditure on consultancy contracts, 2013–14 to 2015–16

  2013–14
$ million
2014–15
$ million
2015–16
$ million
Total actual consultancy expenditure 9.2 33.4 30.9

 

Last updated: 18 November 2016