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Section 3: Corporate Management and Accountability
Management of financial resources
The department worked to consolidate its financial management and corporate governance systems and processes. The combination of a unified financial management information system, global banking and the implementation of improved business procedures generated rewards through more accurate and timely data about operations in Australia and overseas. This allowed more time to be devoted to analysis and strategic decision-making.
Once again we achieved a highly favourable outcome from an ANAO review of major Australian Government agencies of the control structures that underpinned the preparation of the 2001-02 financial statements. Among the 25 agencies reviewed, we were ranked equal fourth best, with no significant business or financial risk noted. The ANAO noted we had maintained a strong focus on continuously improving the quality of our financial information, reporting systems and processes, covering an extensive overseas network-and that there should be further improvements in the quality of our financial reporting and analysis as we continued to integrate accrual-based financial information into our management and decision-making processes.
Following Administrative Arrangement Orders issued on 26 November 2001, the department successfully consolidated the financial operations of the overseas property component of the former Property Group, in the Department of Finance and Administration, into our Financial Information Management System (FMIS) (see below). This included bringing an international portfolio of 141 properties with an estimated market value of $1.19 billion as at 30 June 2002 to account in our financial statements.
The department's new Overseas Property Office (OPO)-which assumed responsibility from the former Property Group for managing the Commonwealth's owned overseas property estate-was also integrated successfully into FMIS and our financial reporting processes.
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The department recorded an operating surplus of $88.9 million as at 30 June 2002. This surplus was attributable to the OPO, the operations of which are financially separate and discrete from work performed in support of the department's other outcomes, and are funded entirely from rents charged to occupying agencies (see Outcome 4-Efficient management of the Commonwealth overseas owned estate-for further detail on OPO, at page 182).
We conducted a number of reviews to optimise resource allocation to departmental priorities. This included a review of internal budgeting procedures to maximise accountability for the impact of decisions taken by line managers, in a manner fully compatible with accrual budgeting.
Forming part of the department's broad review agenda, the Senior Executive was further involved in budgetary decisions through the post, state and territory offices and divisional evaluation review processes. The accountability for financial management of heads of mission, state and territory directors and division heads was further emphasised. These review processes (outlined in more detail above) gave all work units an opportunity to review achievements and outline priorities. An assessment of financial and human resource performance was an important component of the review processes. These processes also provide a mechanism by which work units bid for additional financial and human resources to help them achieve their objectives.
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|CPA Australia Awards
The department won two major categories at the CPA Australia ACT Public Sector Awards, announced in November 2001. We won the CPA Australia Public Sector Organisational Achievement Award in recognition of outstanding achievement in implementing our global Financial Management Information System (SAP R/3) and the assumption of the complete overseas accounting role previously performed by the Department of Finance and Administration.
The department's Chief Finance Officer, Anne Hazell, won the Public Sector CPA of the Year Award for being the most outstanding public sector leader in finance, accounting and business activities. To win both awards was a significant achievement and one that highlighted publicly our achievements in resource management.
Review of post administrative resources
A review of post administrative resources was commissioned in January 2002. The aim of the review is to remove discrepancies in financial resourcing that may exist between posts with equivalent levels of activity and to identify any resources that might better be allocated to areas of higher priority. The review was prompted by recognition that there were some resources available for re-allocation to higher priorities following the introduction in recent years of improved technology across the network of posts, the implementation of streamlined administrative processes, and financial savings in many locations from events such as growing international competition in communications. The review is being conducted in close consultation with all relevant parties, and is expected to be completed by early 2003.
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Output pricing review
A pricing review of outputs contributing to output 2.1 (passport services) was conducted. This resulted in changes to charging for, and resourcing of, the department's passport function. The new Passports Output Purchasing Agreement negotiated with the Department of Finance and Administration will take effect from 2002-03 and operate for three years to 2004-05. The new agreement retains all the key features introduced in the original, including an agreement that funding available to the department will change in line with variations in the number of passports issued in a given budget year.
Devolved banking and cash management
During the year the department began a review of its European posts' treasury and cash management practices. The review's objective is to determine the feasibility of implementing pan-European banking arrangements while continuing to meet the local banking needs of posts. We hope that it will reduce foreign exchange cash balances; rationalise payment processes; and provide more timely aggregated balance and transactional information. If the outcome of the review is positive, we expect to undertake market testing with a view to implementing the new arrangements in mid 2003.
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Financial Management Information System (FMIS)
The department implemented a number of systems enhancements to build on our unified financial management information system (SAP FMIS). A human resource module (SAP HR) was successfully implemented in Washington in November 2001, resulting in significant efficiencies and economies for our Washington post's human resource management, processing and reporting. Planning began for expansion of the post's payroll services to support other North American posts.
Work also began to upgrade the FMIS. The upgrade is expected to be completed by the end of September 2002. It will allow a more efficient collection method for month-end accrual information, and a direct interface for staff with the SAP HR module.
Payment of rates on behalf of foreign government missions
An amount of $250 000 was transferred from the departmental appropriation to the administered appropriation to meet the payment of government land rates levied in Australia on foreign missions.
Payment of pensions under the North American Pension Scheme established for locally engaged staff
The total Commonwealth liability for the North American Pension Scheme, consisting of balances from all departments' statements of financial position, was transferred to our administered statement of financial position, effective July 2001. The liability represents a present value estimate of pension payments to be paid upon retiring age to locally engaged staff employed in Australian missions in North America.
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The department's Overseas Property Office manages the Commonwealth's overseas owned property estate on a commercial basis (see above, under management of financial resources, and Outcome 4).
Overseas property-leased estate
The department funds overseas posts to manage leased properties. Post responsibilities include payment of office and residential rent, meeting tenant maintenance obligations and maintaining furniture. Funds for new or additional commercial leases and chancery fit-outs are held and managed centrally.
The department managed several overseas chancery projects during the year. New commercial chancery leases and fit-outs were completed in Copenhagen, Zagreb, Dili and Chicago and relocations and fit-outs in Lisbon and Santiago. Current chancery projects in Moscow, Berlin, Amman, and Abuja (Nigeria) will be completed by the end of the 2002-03 financial year.
Heads of mission residence refurbishments and furniture and fittings upgrades are also managed from centrally held funds. During the year projects were completed in Bangkok, Copenhagen, Budapest and Buenos Aires. Projects in Noumea and Jakarta are expected to be completed by the end of the 2002-03 financial year. Work began in a number of posts to rationalise existing leased space where staff profiles have changed.
An important aspect of leased estate management is ensuring that office and residential accommodation used by the department overseas supports appropriately our work in pursuing the Government's international objectives. Main concerns are safety and, to the extent possible, providing staff and their families with a comfortable and secure environment in which to perform their duties and to live. Health risks, security and basic safety are therefore key issues taken into account in any commercial lease, as are concerns about location-specific environmental factors.
Within Australia, the department provides office accommodation for staff in Canberra, the state capitals, Darwin, Newcastle and Thursday Island. The New South Wales office relocated in March 2002 to more suitable Sydney premises (the Sydney Passports Office is scheduled to relocate to separate premises in the latter part of 2002). The department, through Asset Services Brisbane, let a contract for the construction of a new residence for the Torres Strait Treaty Liaison Officer on Thursday Island at a cost of $500 000, to be completed at the end of September 2002. The R G Casey Building housing our central headquarters was the subject of a rent review, with an independent valuer appointed to determine the current market value and ensure the Commonwealth's interests were fully protected.
Following the events of 11 September 2001 a number of initiatives were taken to improve security in the R G Casey Building. The first performance review of the five-year contract with Australian Protective Services for the provision of guarding services at the R G Casey Building confirmed a high level of performance.
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Assets management plans
The department produces a five-year strategic Assets Management Plan in accordance with the Financial Management and Accountability Act 1997. The plan is submitted to the Senior Executive for approval at the twice-yearly divisional evaluation review. It proposes asset acquisitions and disposals by work units (divisions, state and territory offices and posts) over five financial years. Each work unit's plan is considered, based on the financial implications to the work unit and the department, and the appropriateness of the department's asset holdings. The plans have allowed more accurate forecasting of asset requirements and budgeting for asset replacement.
In 2001-02, we began work on upgrading our asset retirement planning processes. We implemented all major recommendations in the ANAO's report on the disposal of infrastructure, plant and equipment, consistent with our move to include improved asset retirement planning in the existing asset management planning framework (see under external scrutiny on page 201 for further detail).
In addition to conducting an annual stocktake of all assets, the department undertook a revaluation of the major classes of its assets in accordance with our triennial cycle of revaluations. We also began reviewing accounting policies to ensure appropriate recognition and amortisation of assets.
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Competitive tendering and contracting
The department's procurement policy provides the means for the efficient, effective and ethical delivery of the Government's purchasing programs. All contractual arrangements entered into are conducted within the Commonwealth's procurement framework and industry development policies and the department's Procurement Manual requirements.
Standard departmental contracts were updated to reflect accurately changes required by current legislation.
In previous years, we prepared a number of documents to assist staff in procurement and contracting functions. New and improved departmental request for tender and expression of interest forms were introduced during 2001-02.
Three contracts for outsourced services exceeded the $100 000 threshold:
a three-year contract starting on 14 June 2002 was signed with Compaq Australia for new servers and electronic storage in relation to the Delta passports system at a cost of $1.85 million per year. This is a standard Compaq lease agreement which does not contain the clause allowing access by the Auditor-General. Negotiations are taking place to include this condition
a four-year contract starting 1 July 2001 was signed with Geoscience Australia for seismic monitoring and analysis of nuclear explosions at a cost of $3.21 million
a five-year contract starting 18 October 2001 was signed with Australian Protective Service for physical security at a total cost of $11.54 million.
Major new contracts were signed during the year for the provision of IT hardware and services, particularly in support of SATIN development and rollout (see output 1.2 at page 103 for further detail). Major undertakings included:
a contract for provision of telecommunications services with Asia Global Crossing (Aust) Pty Ltd at a total cost of $5.6 million over three years, which began on 14 May 2002
a contract for provision of telecommunications services with New Skies Networks Pty Ltd at a total cost of $8.7 million over three years, which began on 29 May 2002.
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Our procurement complied with Commonwealth procurement guidelines. To advise and instruct staff in correct purchasing processes, we conducted in-house tendering and contract management training courses at six-weekly intervals.
The department engages specialists and recognised experts on an ad hoc basis where it lacks 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 the department's broader procurement policies and the Commonwealth Procurement Guidelines. This year the department entered into 65 contracts for consultancy services valued at $10 000 or more. The total value of these contracts was $8 856 352. See Appendix 13 for details of these consultancy services engaged by the department during the year.
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