DFAT Annual Report 2006-2007 : 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 completing a review of the department’s Finance Management Manual; enhancing the department’s forecasting and variance analysis; and improving the department’s capital management governance and supporting processes.

In the ANAO’s review of major government agencies’ control structures that underpin the 2006–07 financial statements, tabled in Parliament in June 2007, the department was recognised as having effective internal controls in place to ensure good financial management and a sound financial reporting framework. The department rated well, with no significant or moderate business or financial risks noted.

The challenging international environment continued to have an impact on the department’s operations in Australia and overseas. In 2006–07, the Government provided additional funding for the department to further advance Australia’s interests internationally, including:

$30.9 million for costs relating to evacuations from the Lebanon crisis in mid-2006
$18.0 million for the Australia Network television service to the Asia-Pacific region
$12.1 million for budget sustainability
$3.2 million for continuation of the smartraveller consular information program
$17.8 million for strengthening the department’s overseas crisis and response capability
$7.4 million for establishing an Australian diplomatic presence in Kabul, Afghanistan
$1.1 million for improving intelligence connectivity
$0.4 million for improving nuclear and radiological security
$5.7 million for strengthening the regional counter-terrorism capacity
$2.3 million for enhancing the security and integrity of Australian passports
$1.5 million for the purchase of new chancery premises in Amman, Jordan.

During the year, the department paid $25 million in the form of a dividend from the Overseas Property Office.

Since 30 June 2006, the department incorporated the Australia–Japan Foundation in its departmental accounts and assumed responsibility for the overseas property portfolio previously held by Austrade. Both of these events have been included in the department’s operations and financial results in 2006–07.

There have been no developments or events since 30 June 2007 that have affected or will affect the operations or financial results of the department.

Assets management

The department continues to ensure prudent asset management. Work areas continually review and update their capital purchasing and disposal requirements in a five-year asset plan cycle.

As of 2005–06, the department moved to a five-year rolling cycle for revaluations. Under the rolling plan, asset classes are revalued once every five years, with the exception of Land and Buildings, which are revalued every year. Informal reviews and impairment testing of asset classes covered by the relevant Australian accounting standards are conducted annually to ensure asset values are fairly stated. In 2006–07, the Plant and Equipment class was formally revalued under the new rolling plan.

Competitive tendering and contracting

The department continued to review and update its Procurement Manual to ensure full compliance with the Commonwealth Procurement Guidelines. A range of standard contracts were developed to streamline the contracting processes. Our website provides notification of all tenders, including select tenders, expressions of interest and pre-tender notices.

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

There were no contracts let during the reporting period for outsourced services, previously performed by a Commonwealth agency, of $100 000 or more.

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 by the department are conducted in accordance with the principles of value for money, encouraging competition and non-discrimination. They comply with all relevant Commonwealth procurement policies and legislation, in particular the Commonwealth Procurement Guidelines—January 2005.

Exempt contracts

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 to provide 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 2006–07, 30 new consultancy contracts over $10 000 were entered into involving total actual expenditure of $1 241 104. In addition, 9 ongoing consultancy contracts were active during the 2006–07 year, involving total actual expenditure of $1 443 628.

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 Appendix 11: Consultancy services.

Information on expenditure on contracts and consultancies is also available on the AusTender website www.tenders.gov.au.

Overseas property—leased estate

The overseas property estate comprises Australian Government owned properties, which are managed by the Overseas Property Office (OPO) and funded from the overseas property Special Account (see Outcome 4), and properties leased from private landlords, which are funded from the department’s appropriations.

OPO manages the overseas owned estate, and provides specialist project advice in overseeing projects for the refurbishment and relocation of leased chanceries and head of mission residences.

The department leases approximately 500 properties overseas, including chanceries, head of mission residences, staff accommodation and other facilities. Posts are responsible for ensuring that staff accommodation meets appropriate standards, and that tenant maintenance obligations are met and rents paid.

Properties in the overseas estate must meet functional needs and security requirements. Occupational health, safety and staff welfare are important aspects of managing the overseas estate. OPO has instituted a program of audits of properties in both the overseas owned and leased estates to ensure compliance with health and safety requirements.

Overseas leased estate projects completed in 2006–07 included a new chancery in Port Vila, and relocation of our offices in Guangzhou, Los Angeles and assistance with the relocation of the Australian Chamber of Commerce and Industry office in Taipei. Leased estate projects under way or in the planning and development stages include staff apartments in Baghdad and new chanceries in Madrid and Tel Aviv. Planning continued for relocation of our embassy in Tehran to provide improved protection against seismic risks.

Domestic property

Under the terms of the lease, a biennial review of the quantum of rent for the department’s central office, the R G Casey Building in Canberra is currently underway. An independent valuer appointed by the Australian Property Institute on behalf of the building owner and the department is due to commence valuation in October 2007.

We continue to review and upgrade security at our central office in Canberra and at state and territory offices. During the year, we completed an upgrade of security at the Torres Strait Treaty Liaison Office on Thursday Island.

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

Outlook

Key corporate management and accountability challenges for 2007–08 include:

maintaining an appropriately skilled workforce in a tight labour market
further improving budget planning and forecasting
issuing a plain English, intranet version of the Finance Management Manual
developing a standard suite of financial management reports for use across all areas of the department
further improving the governance framework for the department’s capital program
implementing the outcomes of the reviews on training and development and language training
establishing a new Service Level Agreement with attached agencies
managing the transition to the new Human Resources Management Information System (HRMIS)
implementing the Reconciliation Action Plan
implementing the Action Plan for Employing People with Disability
completing the replacement for the Corporate Information Database/Infolink
reviewing the department’s risk management and business continuity frameworks
strengthening the risk-based approach to our internal audit processes
improving portfolio coordination mechanisms
refreshing the department’s work/life balance framework, ‘Working Smarter’.

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