DFAT Annual Report 2005-2006 : 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
supporting and improving our financial information system
providing comprehensive and timely budgetary performance reports to the department's managers and Senior Executive and the Government
developing and monitoring financial management, budgeting and contracting policies
monitoring and refining a system of effective internal controls, including financial delegations
managing our treasury and tax function
managing the external financial audit process.

The department continued to improve its financial management framework, including by undertaking a review of the department's Finance Management Manual; consolidating our project accounting framework; enhancing the department's forecasting and variance analysis; and improving the department's asset management systems and processes.

In the ANAO's review of major government agencies' control structures that underpin the 2005–06 financial statements, tabled in Parliament in June 2006, the department was recognised for having good financial management and a sound financial reporting framework. The department rated well, with no significant or moderate business or financial risk noted.

The unpredictable international environment continued to affect the department's operations in Australia and overseas. In 2005–06, the Government provided additional funding for the department to continue to advance Australia's interests internationally, including:

$34.2 million for improving security of Australia's overseas diplomatic missions
$13.6 million for the introduction of e-Passports
$10.0 million in administered funding to provide assistance following Hurricane Katrina in the United States
$4.1 million towards Australia's hosting of the Asia–Pacific Economic Cooperation forum in 2007
$3.9 million for the Regional Assistance Mission to Solomon Islands
$3.9 million to facilitate negotiation of an Australia–China Free Trade Agreement
$3.8 million to further Australia's interests in Nauru
$2.1 million to establish a consulate in Çanakkale, Turkey, to support the growing participation of Australians in Anzac Day events in Gallipoli
$1.8 million to provide antiviral medication, protective equipment and associated medical support for Australian Government staff at high-risk diplomatic missions overseas, to help ensure the department could continue to provide essential services overseas in the event of a major avian influenza outbreak.

During the year, the department paid dividends of $79.1 million consisting of:

an Overseas Property Office distribution of $77.0 million
the department's repayment of unspent funding of $2.1 million received on a 'no win–no loss' basis.

There have been no developments or events since 30 June 2006 that have affected or will affect the operations or financial results of the department.

Harmonisation with International Accounting Standards

As of the financial year ending 30 June 2006, the department is 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 implemented a comprehensive strategy in line with Department of Finance and Administration recommendations to ensure compliance with AEIFRS. The department is now compliant with AEIFRS and the financial statements as at 30 June 2006, including prior-year comparatives, are presented in accordance with AEIFRS.

Financial management information system

We implemented a number of system enhancements to our financial management information system (SAP). In particular, we developed and implemented the Consular Loans Management module in SAP to improve accuracy and accountability for consular loans, implemented a better context (online) help system, changed the manner in which we use purchase orders to control commitments, revised our SAP training modules to reflect the training needs of our post users and began planning for a Project Accounting Framework. This framework will allow us to adopt a consistent approach to project accounting and project asset policy and is being implemented via the SAP Project Systems module. This will capture, manage and report project costs.

Assets management

The department continues to ensure prudent asset management. Replacement of assets requires supporting business cases and evidence of need even when assets have reached the end of their recorded useful life. Work areas continually review and update their capital purchasing and disposal requirements in a five-year asset plan cycle.

To comply with the Finance Minister's Orders for 2005–06, the department moved to a five-year rolling cycle for revaluations. Under the rolling plan, asset classes will be revalued once every five years, with the exception of Land & Building and Leasehold improvements, which will be revalued every three years. Informal reviews and impairment testing of asset classes covered by the Australian accounting standard AASB136—Impairment of Assets will also be conducted annually to ensure asset values are fairly stated. In 2005–06, Motor Vehicles and Office Equipment were formally revalued under the new rolling plan.

Competitive tendering and contracting

We continued to develop new departmental standard contracts to streamline the contracting process.

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

In the reporting period there were no new contracts for outsourced services exceeding $100 000.

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

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 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
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 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 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 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.

Purchasing performance

The department's procurement policy provided for the efficient, effective and ethical delivery of the Government's purchasing and procurement programs. All contractual arrangements entered into by the department were conducted in accordance with the principles of value for money, encouraging competition and non-discrimination. They complied with relevant policies and legislation concerning procurement, in particular the Commonwealth Procurement Guidelines—January 2005.

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—January 2005.

During 2005–06, 21 new consultancy contracts over $10 000 were entered into involving total actual expenditure of $3 797 673. In addition, 12 ongoing consultancy contracts were active during the 2005–06 year, involving total actual expenditure of $360 955.

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 Overseas Property Office (OPO) manages the overseas owned estate, which is funded from a departmental 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 approximately 500 properties overseas, including chanceries, head of mission residences, staff accommodation and other facilities. Posts are responsible for ensuring staff accommodation meets appropriate standards, completing tenant maintenance obligations and paying rents.

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

OPO retains a role in relation to the leased estate by providing specialist property advice and support in overseeing project management for the refurbishment and relocation of leased chanceries and head of mission residences.

Overseas leased estate projects completed in 2005–06 included premises for our new mission in Kuwait and the relocation of our chancery in Brunei. Projects nearing completion included relocation of the consulate-general offices in Guangzhou. Ongoing projects included the relocation of offices in Taipei and Los Angeles and new chanceries for our missions in Port Vila (under construction) and Tehran (under negotiation) to provide improved protection against seismic risks.

Domestic property

The department leased and provided security for office accommodation in the state and territory capitals, Newcastle and Thursday Island.

We concluded a rent review of the R G Casey Building in Canberra, which houses the department's central headquarters, for the period 1 March 2005 to 28 February 2007. The independent valuer appointed by the Australian Property Institute on behalf of the building owner and the department determined that the rent would remain fixed at the same level as the previous two years.

The security of the R G Casey Building was upgraded to restrict access from the Sydney Avenue and Brisbane Avenue courtyards to departmental pass-holders. The central atrium was re-configured to prevent public access from the atrium to the north and south sides of the building. As part of this program, cafeteria access and facilities were renovated to allow public access from the Sydney Avenue courtyard and improved customer facilities.

The department developed an Environmental Management System (EMS) for the R G Casey Building to incorporate environmental considerations in its business systems, including procurement guidelines, and in building and maintenance work. The EMS was certified to International Standard ISO 14001:2004 in June 2006 (see Appendix 7 for more information).

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