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Management of financial resources

The department strengthened its financial management and corporate governance systems and processes. Further rewards were generated from a combination of a unified financial management information system, global banking and the implementation of improved business procedures to ensure accurate and timely data. This has given us an increased ability to make informed decisions about resourcing operations both in Australia and overseas.

The review of major government agencies' control structures that underpin the 2002–03 financial statements was tabled by ANAO in Parliament on 30 June 2003. The department achieved a ranking of equal-third 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.

The department obtained further appropriation funding through the Additional Estimates process to enhance physical security at overseas posts. This funding, totalling $10.2 million in 2002–03 and $1.0 million a year thereafter, was to allow for strengthening of walls and fences, installation of bollards, metal detectors, intruder duress alarms and improved perimeter surveillance at a number of missions.

In 2002–03, the department, including the operations of the Overseas Property Office (OPO), recorded an operating surplus of $135 million before the payment of the capital use charge and dividends. This surplus is consistent with the expected results for the year as outlined in the Additional Estimates and is attributable mainly to OPO. It differs from the result estimated in Additional Estimates due mainly to higher than expected foreign exchange gains, which are returned to the Official Public Account.

We achieved oral clearance of the financial statements by the 15 August deadline and also achieved, again, an unqualified audit certificate with no ANAO observations relating to their audit of the financial statements. Our major focus for 2003–04 is working towards the new audit clearance deadline of 10 August 2004 for the 2003–04 financial year and 20 July 2005 for the following financial year.

There have been no developments or events since 30 June 2003 that have affected or will affect the operations or financial results of the department.

When the Government implemented the accrual framework in 1998, it was agreed that reviews of the budget system and framework would be undertaken periodically by the Department of Finance and Administration. The first of these reviews was completed in late 2002 with 22 recommendations, all of which the Government endorsed for implementation. In order to respond effectively to the recommendations of this Budget Estimates and Framework Review and in recognition of the importance of financial management in the department, we decided to restructure the Finance Management Branch, dividing it into two branches:

The new arrangements ensured further enhancements in internal budgeting procedures. Various work groups and line managers have developed a greater understanding of the financial implications of decisions. Detailed and consistent analysis of budget reporting has fostered better understanding of our financial status and helped the Senior Executive make decisions about the allocation of resources.

Review of post administrative resources

A review of post administrative resources continued over 2002–03. The aim of the review is two-fold: to remove discrepancies in financial resourcing that might exist between posts with equivalent levels of activity, and to identify resources that might better be allocated to areas of higher priority. The review was prompted by recognition that some resources were available for re-allocation to higher priorities following the introduction in recent years of improved technology across the network of posts, and from the implementation of streamlined administrative processes. We are conducting the review in close consultation with relevant stakeholders. It will be completed in the second half of 2003.

Human resource management information system

Improvements were made to the department's PeopleSoft human resource management information system. Enhanced telecommunications links to a range of overseas posts enabled final implementation of Employee Self-Service (ESS) at posts. We rolled out an upgraded version of the ESS in Canberra, to state and territory offices and to overseas posts. We also rolled out a posting module, developed in-house to achieve more efficient handling of the posting process, as part of the continuous business improvement of our management information systems.

Financial management information system

The department upgraded its financial management information system in September 2002 to SAP Version 4.6C. Work has also begun on the design of a new business process within SAP to record and provide for efficient management of administered appropriations, including the online management of consular loans.

The SAP upgrade facilitated the development of an in-house module for our financial management information system (FMIS) to improve the accuracy and efficiency of month-end data. Posts now enter all month-end data directly into the FMIS. This has improved uniformity of reporting, reduced workloads and improved decision-making due to increased accuracy.

Assets management

The department produces a five-year strategic asset management plan in accordance with the Financial Management and Accountability Act 1997. The plan is approved by the Senior Executive and an update occurs mid-year. 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 our asset holdings. The plans have allowed more accurate forecasting of asset requirements and budgeting for asset replacement.

We continued to refine our asset retirement planning processes. We implemented all major recommendations in the ANAO's report (no. 8 of 2001–02) 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.

In addition to conducting our annual stocktake of all assets, we revalued our artwork and some leasehold improvement assets in accordance with our triennial cycle of revaluations. As part of the Government's decision to phase in the requirement that agencies must report assets at fair value from 2002–03, these valuations were the first of a number of revaluations carried out at fair value that will be required over the next three years.

Competitive tendering and contracting

Standard departmental contracts were updated to reflect changes required by current legislation. In previous years, we prepared a number of documents to help staff in procurement and contracting functions. To these documents we added explanatory guides, conflict of interest declarations, and standard deeds and letters of variation.

Three major contracts for outsourced services exceeded the $100 000 threshold:

Major new contracts were signed during the year for the provision of IT hardware and services, particularly in support of the development and rollout of our Secure Australian Telecommunications and Information Network (SATIN). Major undertakings included:

Purchasing performance

The department's procurement policy provides the means for the efficient, effective and ethical delivery of the Government's purchasing and procurement programs. All contractual arrangements entered into were conducted within the Commonwealth Procurement Guidelines, industry development policies and the department's Procurement Manual Guidelines.

Consultancy services

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 our broader procurement policies and the Commonwealth Procurement Guidelines. The total expenditure on consultancy services during the year was $3?735?692 and we entered into 68 new consultancy contracts. 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 department funds posts to manage leased properties overseas. Post responsibilities include payment of office and residential rent, meeting tenant maintenance obligations and maintaining furniture. Funds for new commercial leases, substantial rent increases, and chancery fit-outs are held and managed centrally.

We managed a number of overseas chancery relocations and fit-outs during 2002–03, including in Moscow, Berlin, Amman and Abuja. Other projects under way during the year, expected to be completed in 2003–04, were the relocation of the Dublin chancery, refurbishment of the chancery in Pohnpei, relocation of the chancery in Rome, and work on the office in Taipei. Preparatory work was undertaken on relocation of the chancery in Port Vila, and accommodation for the Australian Representative Office in Baghdad. The embassy in Manila was relocated as a matter of urgency following a credible security threat to the former chancery (see Outcome 4 for more information).

Head of Mission residence refurbishments and furniture and fittings upgrades are also managed from centrally held funds. Projects completed or in progress included the residences in Jakarta and Moscow. We worked in a number of posts to rationalise existing leased space following staff profile changes.

Leased estate management is directed at ensuring effective support of the Government's international objectives. A major concern is to ensure that staff and their families can work in a secure and convenient environment overseas. Health, safety and security are important elements in property planning in the leased estate. The department undertook a risk assessment approach to properties requiring particular attention, specifically in relation to earthquake risk, and work is proceeding to relocate two chanceries—in Port Vila and Tehran—to ensure they are suitably protected against earthquake risk.

Domestic property

Within Australia, the department provides office accommodation for staff in Canberra, the state capitals, Darwin, Newcastle and Thursday Island. The Sydney Passports Office relocated to new premises in August 2002, the lease on the Perth Office was renewed in December 2002 and the Hobart Office is scheduled to move to more suitable premises in August 2003. The R G Casey Building, housing our central headquarters in Canberra, is the subject of a rent review. We have developed an environmental management system for the building in line with whole-of-government objectives to reduce the impact of government operations on the environment and to improve operating efficiencies. See Appendix 8 for more information.

We continued to strengthen physical security within and around the R G Casey Building and at state and territory offices. The department confirmed a high level of performance through ongoing performance reviews of the five-year contract with Australian Protective Services for the provision of guarding services at the R G Casey Building and at three overseas posts.

 

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Department of Foreign Affairs and Trade Annual Report 2002–2003
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