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Introduction and overview

1. Year in Review

Summary of financial performance

This section should be read in conjunction with the Department's audited financial statements for 2008-09 which appear in the 'Financial Statements' section of this annual report.

'Departmental activities' involve the use of assets, liabilities, revenues and expenses controlled or incurred by the Department in its own right. 'Administered activities' involve the management or oversight by the Department, on behalf of the Australian Government, of items controlled or incurred by the government.

Departmental finances

In 2008-09, the Department reported an operating deficit of $3.0 million. This result was within the Department's approved operating deficit of $3.5 million.

Total income available in 2008-09 increased by $3.1 million, due mainly to funding for government measures announced in, and since, the 2008-09 Budget.

The operating deficit, along with an increase in liabilities, contributed to a decrease of $4.1 million in the Department's net assets.

The Department's commitment to financial management continues to be reflected in its financial performance and unqualified financial statements. The government has expressed its commitment to ongoing management of public sector expenditure, and implemented savings measures in 2007-08 and 2008-09. The Department's 2008-09 operating result placed the Department in a strong position to manage its finances in a tighter fiscal environment.

The Department has continued its strong focus on compliance with the Financial Management and Accountability Act 1997, and has recently implemented systems to enhance its financial management and accountability compliance regime.

Table 1.1 summarises the departmental finances results over the past five reporting periods.

Table 1.1 Summary of departmental financial performance and position

		2004-05 $m	2005-06 $m	2006-07 $m	2007-08 $m	2008-09 $m	Change last year
Revenue from government		197.1	217.4	213.3	239.8	242.5	1.1%
Other revenue		40.1	5.1	4.1	4.5	4.6	1.7%
Gains		0.0	1.0	1.1	0.6	0.9	44.8%
Total income		237.2	223.5	218.5	244.9	248.0	1.3%
Employee and supplier expenses		176.6	209.5	208.2	220.5	234.8	6.5%
Depreciation		8.2	9.7	11.8	13.6	13.6	(0.2%)
Other expenses		7.2	4.0	3.2	5.0	2.7	(46.3%)
Total expenses		192.0	223.2	223.2	239.1	251.0	5.0%
Operating result (loss)		45.2	0.3	(4.7)	5.8	(3.0)	(100%)
Financial assets	A	93.0	105.0	92.2	98.6	100.9	2.4%
Non-financial assets	B	46.8	63.9	57.7	64.9	71.8	10.7%
Liabilities	C	74.1	51.1	55.1	54.7	68.9	25.9%
Net assets = A + B - C		65.6	117.7	94.8	108.0	103.9	(4.5)%

Note: Historical data prior to 2006-07 reflects the respective year's financial statements as signed off by the Australian National Audit Office at the time. As such, it may not reflect current accounting policies or comparative figures published in later statements. For comparative purposes, figures for 2006-07 have been amended to reflect current accounting policies. Where % is > or < 100, 100% has been used.

Asset management

The Department manages $71.8 million of non-financial assets comprising several asset classes: land and buildings; infrastructure, plant and equipment; artworks; intangibles (software); inventories; and other non-financial assets. Of these, our major investments are in land and buildings ($35.1 million) and intangibles ($24.1 million).

The Department's capital program is underpinned by centralised approval processes. Business divisions submit proposals for the consideration of the Department's Strategic Information Technology and Security Committee (for projects related to information technology) and to the Executive (for all other proposals above $50,000). The Chief Financial Officer can consider non-information technology project proposals below $50,000. All decisions are informed by input from the Financial Services Branch.

Assets were independently revalued to market selling price (for leasehold improvements to depreciated replacement cost), with the exception of leasehold makegood assets which were revalued internally on a current market basis.

The Secretary has issued a Chief Executive's Instruction on asset management and the Department also has documented asset policies and procedures on the management and safeguarding of assets. Asset registers are maintained and annual stocktakes are undertaken to verify their accuracy.

Administered finances

The government provided appropriations totalling $7.7 billion for grants, subsidies and other administered expenses in 2008-09, including additional appropriations of $0.9 million provided in the two Portfolio Supplementary Additional Estimates Statements.

Expenses totalling $8.6 billion were recognised during the year. The major contributors were:

Nation Building Program ($4.2 billion);
Local Government Financial Assistance Grants ($2.4 billion);
Nation Building Plan for the Future ($1.0 billion);
Regional and Local Community Infrastructure Program ($480.0 million);
Payments to Commonwealth Authorities and Companies Act 1997 bodies ($242.3 million);
Tasmanian Freight Equalisation Scheme ($109.4 million); and
Interstate Road Transport Fees ($54.7 million).

In aggregate, the administered programs managed by the Department were underexpensed by $27.0 million or 0.3 per cent, against the latest Budget published in the 2009-10 PBS.

Taxation revenue collected on behalf of the government rose by $3.3 million in 2008-09, largely due to increased revenue from the Oil Pollution Compensation Fund ($3.8 million) and airport land tax equivalents ($3.1 million), partially offset by decreased revenue from Airport Building Controllers ($1.0 million) and the transfer of revenue items to the Attorney-General's Department in 2007-08 ($1.5 million).

Non-taxation revenue increased by $935.0 million overall, due mainly to the receipt of funds from the Building Australia Fund ($1.0 billion) and an increase in AMSA levies ($6.5 million), partially offset by reduced dividends from Airservices Australia ($66.6 million), the transfer of revenue items to the Attorney-General's Department in 2007-08 ($7.2 million) and reduced revenue from Motor Vehicle Standards Regulations Fees ($2.4 million).

In 2008-09, administered net assets declined by $490.6 million, due to the expensing of prepayments made in 2005-06 and 2006-07 ($997.3 million), partially offset by an increase in investments due to an equity injection to the Australian Rail Track Corporation ($422.0 million) and increases in the net asset value of administered investments in government authorities and companies ($79.0 million).

Figure 1.1 illustrates the mix of administered assets at 30 June 2009. For more information, see the audited Financial Statements.

Table 1.2 summarises the administered finances results over the past five reporting periods.

Figure 1.1 Value of administered assets held at 30 June 2009

AMSA = Australian Maritime Safety Authority, ARTC = Australian Rail Track Corporation, CASA = Civil Aviation Safety Authority, NTC = National Transport Commission

Table 1.2 Summary of administered financial performance and position

	2004-05 $m	2005-06 $m	2006-07 $m	2007-08 $m	2008-09 $m	Change last year
Taxation revenue	151.6	150.1	77.1	80.7	84.0	4.1%
Non-taxation revenue	138.4	135.7	168.3	154.1	1,089.1	100.0%
Gains	0.0	36.7	0.6	7.7	0.0	(100.0%)
Total income	290.1	322.5	246.0	242.5	1,173.1	100.0%
Grants	3,620.9	3,841.7	4,319.8	4,966.6	8,465.5	70.4%
Subsidies	138.8	136.3	128	142.4	155.2	9.0%
Other expenses	113.7	88.9	117.6	123.8	22.2	(82.0%)
Total expenses	3,873.5	4,066.9	4,565.5	5,232.8	8,642.7	65.2%
Financial assets	719.5	2,118.3	1,937.3	1,974.1	2,468.9	25.1%
Non-financial assets	289.2	2,494.7	2,459.4	1,459.5	461.0	(68.4%)
Liabilities	70.6	25.2	31.5	30.3	17.2	(43.3%)
Net assets	936.0	4,587.8	4,365.1	3,403.3	2,912.7	(14.4%)

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