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Your location: Performance > Outcome 4 > Output 4.1 > Reporting against effectiveness indicators

OUTPUT 4.1: Property management

Reporting against effectiveness indicators

On this page: Overview :: Provision of accommodation overseas :: Physical management of assets :: Financial management of assets

Overview

This reporting period covers the department's first full year of responsibility for managing all aspects of the Government's overseas owned property estate. We took over that function from the Department of Finance and Administration in November 2001.

We manage the overseas estate through our Overseas Property Office (OPO), which operates within the terms of the Commonwealth Property Principles, the standard adopted by the Government to ensure that the value of the Government's property assets is maintained. In accordance with these principles, OPO applied rigorous commercial practice to all aspects of management of the estate throughout 2002–03.

In 2002–03, the department met indicative targets relating to the maintenance of the overseas property portfolio. We paid a dividend to the Government as agreed by ministers, returned expected equity from the property divestment program, and maintained a management expense ratio consistent with property industry guidelines. Return on investment on the portfolio was influenced by short-term factors including increased value from major construction projects brought to completion and the relatively low level of capital expenditure in the period. We consulted regularly with other Australian Government agencies represented at our overseas posts to ensure effective inter-agency communication on relevant property management issues.

The changed international security environment affected management of the overseas estate forward program, with some reallocation of project priorities.

Provision of accommodation overseas

The Government's overseas property needs are met through a combination of owned property and property leased from private landlords (see Section 3—Corporate management and accountability on page 213 for information about the department's leased estate).

In 2002–03, we managed 132 owned properties in 50 countries, comprising offices and residences. The estimated market value of the estate at 30 June 2003 was $1.2 billion. This value was assessed by a global real estate services firm we engaged for this purpose.

Throughout the year, we met the wide range of office and staff accommodation requirements of agencies representing the Government's interests overseas. We were also able to respond effectively to special concerns arising from the adverse international security environment. This included managing the urgent relocation of a major chancery—the embassy in Manila—to new and secure accommodation following a credible security threat (see box on page 182 for further information).

Physical management of assets

The department maintained a program of continuous assessment of all overseas property, involving annual inspections by qualified facilities managers and consultation with post management and agencies.

Properties are assessed using a model developed by OPO for measuring and monitoring their physical condition. The model is based on property industry standards including: expenditure on repairs and maintenance as a percentage of asset value; compliance with safety and storage codes; structural soundness; strategic importance of the individual properties; age of the properties with allowance for mid-life upgrades and refurbishments; and functionality and amenity of the properties. The model applies a four-point scale (unsatisfactory, poor, satisfactory, good).

The overall condition of the overseas-owned estate in 2002 was judged satisfactory. A review in 2003 showed an improvement in its overall condition (see quality information for more details).

The model also provides a basis for determining priorities for upgrading, disposal or acquisition of property, and for refurbishment under a five-year rolling program approved by the department's senior executive (see quality and quantity information).

Financial management of assets

For the OPO, the department operates a Special Account, separate from our Budget appropriations. The account was established in May 2002 by the Minister for Finance and Administration under the Financial Management and Accountability Act 1997. Revenue into the Special Account is derived from commercially based rents paid by agencies that occupy government-owned property overseas, and interest earned on the account balance.

We return an annual dividend to government, the quantum being agreed between the Minister for Finance and Administration and the Minister for Foreign Affairs. In 2002–03 an annual dividend of $90.75 million was paid to the Government.

The high rate of return on investment of 16.1 per cent reflected the unusual combination of factors in 2002–03 referred to in the quantity information below and is unlikely to be replicated. The result is consistent with projections of a 7 to 8 per cent return over the next five years.

Overseas property sales returned $15.1 million in net proceeds during 2002–03, the final year of a divestment program put in place by the Government.

We achieved a management expense ratio of 0.76 per cent in 2002–03, which was consistent with industry benchmarks determined by reference to the performance of listed Australian property management companies.

Relocation of the Australian embassy in Manila

The urgent relocation of the Australian embassy offices in Manila to more secure office accommodation following a credible security threat was successfully completed on schedule and within budget on 16 May 2003.

The new offices, located on floors 22 to 24 in the RCBC Plaza complex in central Manila, provide a high level of physical security for staff and visitors.

We completed the project within a very demanding timeframe—six months from initial temporary closure of the old chancery to complete relocation. The highly integrated project involved detailed commercial planning, a complex timeline for refit, the construction, shipping and installation of Australian-made equipment and fittings, and a 24-hour, seven days a week construction schedule. There was close oversight of the project by the department, and strong commitment and involvement by post management and staff. Local authorities were most cooperative.

The success of the operation owed much to the performance of the Australian head contractor (Bovis Lendlease) and departmental staff based in Manila and Canberra.

The quick relocation of one of our key regional missions in response to urgent security concerns demonstrated the benefits of having overseas property management fully within the portfolio.

 

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Department of Foreign Affairs and Trade Annual Report 2002–2003
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