DFAT Annual Report 2004-2005 : Corporate Management and Accountability : Management of financial resources

The department's financial resource management function supports our operations in Australia and overseas by:

managing our internal and external financial and budgetary processes
further enhancing our financial management information system
providing comprehensive and timely financial and budgetary performance reports to the department's Senior Executive and the Government
developing and monitoring financial management, budgeting and contracting policies
implementing and monitoring a system of effective internal controls, including financial delegations
managing the internal and external financial audit process
managing our treasury and tax function.

We continued to improve our financial management framework, including by revising significantly our Finance Management Manual; adopting a project accounting framework; improving our asset management systems and processes; and better tailoring financial management training for staff taking up management positions overseas.

In the ANAO's review of major government agencies' control structures that underpin the 2004–05 financial statements, tabled in Parliament in June 2005, the department ranked equal first, with no significant business or financial risk noted. We were the only agency reported to achieve this result in both the 2003–04 and 2004–05 financial years.

Following the Jakarta embassy bombing, the Government provided the department with further appropriation funding through Additional Estimates to enhance physical security measures at overseas posts. Departmental funding of $238 million over four years was provided at 2004–05 Additional Estimates, comprising $73.7 million for 2004–05, $45.8 million for 2005–06, $24.6 million for 2006–07 and $94.8 million for 2007–08 for the installation of bomb blast protection, strengthening of perimeter barriers and security systems and the relocation of some overseas diplomatic missions. This funding forms part of the Government's $860 million package provided through the 2004–05 Additional Estimates and 2005–06 Budget for agencies represented at Australia's overseas posts.

In the wake of the Indian Ocean tsunami, the department also received Supplementary Additional Estimates funding of $2.3 million for the provision of emergency consular assistance and for managing the whole of government crisis response, as well as $15 million in administered funding for financial assistance to affected Australians, disaster victim identification and repatriation of remains, and compensation to the Export Finance Insurance Corporation for the temporary freezing of tsunami-affected countries' debts.

The department, including the operations of our Overseas Property Office (OPO), recorded an operating surplus of $123.7 million for 2004–05 before the payment of dividends. Dividends of $25.7 million were paid during the year, consisting of:

an OPO distribution of $22 million
the department's repayment of unspent funding of $3.7 million received on a 'no win–no loss' basis.

The department received audit clearance of its financial statements on 20 July 2005. The ANAO has again issued an unqualified audit report.

There have been no developments or events since 30 June 2005 that have affected or will affect the operations or financial results of the department.

Harmonisation with International Accounting Standards

From the financial year ending 30 June 2006, the department will be required to present financial information in compliance with Australian Equivalents to International Financial Reporting Standards (AEIFRS) as though the new standards had always been applied.

The department has implemented a comprehensive strategy in line with Department of Finance and Administration (DoFA) recommendations to ensure that it is AEIFRS compliant within the required timeframe. All issues relevant to our transition to AEIFRS for 2004–05 have been identified and resolved. We have reached the following milestones:

Our transitional AEIFRS balance sheet as at 1 July 2004 has been prepared and audited by the ANAO, which issued an unqualified audit report.
The adjustments to our 2004–05 financial data that would have resulted had AEIFRS been applied for that year have been disclosed as part of our audited 2004–05 financial statements.
Our 2004–05 financial statements have been restated as if they had been prepared under AEIFRS in preparation for the 2005–06 year and submission to DoFA.
We have put in place an appropriate governance structure with close monitoring of the project by our Chief Finance Officer and regular reporting to the Financial Statement Sub-Committee of the departmental Audit Committee.
We have categorised and addressed project issues on a risk management basis according to their impact on the department.
We have dedicated appropriate resources and expertise to the transition task.

Financial management information system

The department implemented a number of system enhancements to our financial management information system (SAP). We adopted a Project Accounting Framework, which will allow us to adopt a consistent approach to project accounting and project asset policy. The framework is being implemented via the SAP Project Systems module. This will capture, manage and report project costs.

We developed and implemented the Consular Loans Management module in SAP to improve accuracy and accountability for consular loans.

Assets management

The department continued to improve its asset management through close scrutiny of work areas' asset acquisition proposals. We ensured prudent replacement of our assets in accordance with their useful lives. Work areas continued to improve their five-year asset replacement planning cycles.

The department revalued nine asset classes to 'fair value': vehicles, information technology equipment with a useful life of five years, information technology equipment with a useful life of ten years, plant and equipment with a useful life of five years, plant and equipment with a useful life of ten years, furniture and fittings, works of art, office equipment and leasehold improvement. This ensured we complied with new international accounting standards.

Competitive tendering and contracting

The department reviewed and updated its Procurement Manual to comply with the newly released Commonwealth Procurement Guidelines—January 2005. We also developed new departmental standard contracts to streamline the contracting process.

The department's website provides notification of all tenders, including select tenders, as well as expressions of interest and pre-tender notices.

New contracts for outsourced services exceeding $100 000 included:

a three-year contract from July 2004 for the provision of Helpdesk and Desktop Support signed with Exceed Systems Integration Pty Ltd at a cost of approximately $6 million
a three-year contract from March 2005 for the provision of Facilities Management—Voice Operations Unit signed with Telstra Business Systems Pty Ltd at a cost of $3.9 million
a three-year contract from September 2004 for the provision of Technical Drawing Office—Facilities Management with Infinite Consulting Pty Ltd at a cost of $1 million
a three-year contract from September 2004 for the provision of Technical Services Support—Facilities Management with Bridge IT Engineering Pty Ltd at a cost of $2.7 million
a three-year panel contract from February 2005 for the provision of Overseas Cabling and Technical services with Allied Technologies Australia Pty Ltd, Bridge IT Engineering Pty Ltd, C & L Veit Family Trust and J & S McCluskey Family Trust, Ecowise Services (Australia) Pty Ltd, Exceed Systems Integration Pty Ltd, Kaz Technology Services Pty Ltd and Rivercorp Pty Ltd. This contract is on a fee-for-service basis at a total cost of approximately $1.5 million.

Contracts for outsourced services let in previous years but still current exceeding $100 000 include:

a three-year contract from April 2004 for the provision of travel management services to the Foreign Affairs and Trade portfolio signed with Carlson Wagonlit Travel Australia Pty Ltd. This contract is on a fee-for-service basis at a cost of approximately $550 000 a year to the department
a five-year contract from March 2004 for the provision of diplomatic mail management and freight services signed with DHL International (Aust) Pty Ltd at a cost of $8.3 million
a three-year contract from February 2003 for the management of language tuition services signed with CIT Solutions Pty Ltd at a cost of $5.7 million
a three-year contract from December 2002 for the provision of recruitment services signed with Spherion Recruitment Solutions Pty Ltd at a cost of $850 000
a five-year contract from May 2001 for the provision of the department's mainframe services signed with CITEC at a cost of $12.7 million over the period of the contract.

All competitive tendering and contracting contracts of $100 000 or more let during the reporting period provide for the Auditor-General to have access to the contractors' premises.

Purchasing performance

The department's procurement policy provides for the efficient, effective and ethical delivery of the Government's purchasing and procurement programs. All contractual arrangements entered into were conducted in accordance with the Commonwealth Procurement Guidelines—July 2004 (and subsequently the Commonwealth Procurement Guidelines—January 2005), industry development policies and the department's Procurement Manual guidelines. There were no contracts in excess of $10 000 or standing offers exempted from being published in the Purchasing and Disposal Gazette (AusTender) on the basis that publication would disclose exempt matters under the Freedom of Information Act 1982.

Consultancy services

The department engages recognised experts on an ad hoc basis where we lack specialist expertise or where independent assessments or input are considered desirable.

The selection process for consultancy services both in Australia and at overseas posts is consistent with our broader procurement policies and the Commonwealth Procurement Guidelines—July 2004 (and subsequently the Commonwealth Procurement Guidelines—January 2005).

During the 2004–05 financial year, $4 333 595 was spent on new and existing consultancies. A total of 38 new consultancy contracts over $10 000 were entered into during the 2004–05 financial year involving a total contract value of $2 273 110. In addition, 24 ongoing consultancy contracts were active during the 2004–05 financial year, involving total actual expenditure of $1 805 017.

More detailed information, including a summary of the department's policy on the selection and engagement of consultants and a detailed list of all consultancy contracts let during the year to the value of $10 000 or more, is available in an appendix to the Internet version of the annual report at www.dfat.gov.au/dept/annual_reports.

Overseas property—leased estate

The overseas property estate comprises owned and leased properties. The department's Overseas Property Office (OPO) manages the overseas owned estate, which is funded from a Special Account (see Outcome 4). The overseas leased estate comprises properties leased from private landlords, and is funded from the department's appropriations.

The department leases nearly 500 properties overseas, including chanceries, head of mission residences and staff accommodation and other facilities. Posts are funded by the department to pay for properties. They are responsible also for paying office and residential rent and meeting tenant maintenance obligations.

Properties in the overseas estate must meet functional needs and satisfy security requirements. Occupational health and safety and staff welfare are important aspects of managing the overseas estate.

In relation to the leased estate, OPO provides specialist property advice and oversees project management for refurbishment and relocation of leased chanceries and head of mission residences, as required.

Overseas owned and leased estate projects completed in 2004–05 included the relocation of our chanceries in Ankara, Athens and Rome, the establishment of new premises for the embassy in Baghdad (see Outcome 4), and the establishment of chanceries for new posts in Accra and Port of Spain. We successfully completed the urgent temporary relocation of the consulate-general in Bali, pending completion of new Australian Government owned purpose built premises. Ongoing projects during 2005 included the construction of a new chancery for our high commission in Port Vila and new premises for our embassy in Tehran, to provide improved protection against seismic risks. In 2005 we began the relocation of the chanceries in Brunei and Harare and the consulate-general in Guangzhou and of premises for our new embassy in Kuwait.

Head of mission residence refurbishments and furniture and fittings upgrades are managed from centrally held funds.

Domestic property

Within Australia, the department provides leased office accommodation for staff in the state and territory capitals, Newcastle and Thursday Island.

The department began rent review negotiations with the owners of the R G Casey Building in Canberra, which houses the department's central headquarters, to determine rent for the period 1 March 2005 to 28 February 2007.

To enhance the perimeter security of the R G Casey Building, the department began work to restrict access to the building to pass-holders and create a new visitor security processing facility. As part of this program, a new passport shop front was built in the Sydney Avenue courtyard, outside the controlled area of the building. The enhancement and relocation of the visitor processing facility to the building's main entrance is due for completion in the second half of 2005.

The department continued to develop our Environmental Management System (EMS) and to incorporate environmental considerations in its business systems, including procurement guidelines, and in building and maintenance work. We are working towards obtaining certification of its EMS in the R G Casey Building to International Standard ISO 14001 (see Appendix 8 for more information).

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