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Department of Defence

13

AGENCY RESOURCES ANDPLANNED PERFORMANCE


Defence Materiel Organisation

Defence Housing Authority

Defence Portfolio Budget Statements 2011-12

14


15

DEPARTMENT OF DEFENCE

AGENCY RESOURCES AND PLANNED PERFORMANCE

Section 1: Overview and Resources

1.1 Strategic Direction Statement1.2 Defence Resource Statement1.3 Budget Measures1.4 Capital Investment Program1.5 Workforce

Section 2: Outcomes and Planned Performance

2.1 Outcomes and Performance Information

Section 3: Explanatory Tables and Budgeted Financial Statements

3.1 Explanatory Tables3.2 Budgeted Financial Statements


16


17

DEPARTMENT OF DEFENCE

Section 1: Defence Overview and Resources

1.1 Strategic Direction Statement

Defence's primary focus continues to be to protect and advance Australia's strategic interests by providing military forces and supporting those forces in the defence of Australia and its strategic interests. To achieve this, Defence prepares for and conducts military operations and other tasks as directed by the Government.

Apart from the conduct of current operations, the Government's key initiative in 2011-12 will be implementing the Strategic Reform Program (SRP).

STRATEGIC REFORM PROGRAM

The SRP comprises a comprehensive set of reforms that will fundamentally overhaul the entire organisation, driving efficiency and creating around $20.6b in cost reductions over the decade from 2009-10 that are necessary to deliver Force 2030. This will deliver Australia a genuine strategic national advantage by significantly enhancing capability while constraining the call on national resources.

The program will:

• provide a vehicle for deep and enduring reform within Defence

• enhance management performance within Defence

• ensure that productivity within Defence is increased and able to be sustained, so that the maximum possible level of resources are directed to the front end of capability

• improve the way Defence does business, both in terms of efficiency and effectiveness

• help ensure that the goals set out in the White Paper are delivered.

Defence has successfully delivered the scheduled cost reductions and reforms without any adverse impact on capability or safety. In 2011-12, Defence will continue to focus on putting in place the necessary tools and mechanisms to track the progress of reforms and cost reductions while also monitoring any impacts on capability or safety. Capability and safety will not be compromised to deliver cost reductions. Furthermore, there will be an increased focus on ensuring that reforms are genuine and sustainable.

The delivery of Force 2030 and the deep reforms of Defence are considered national priorities for the Government. The Government continues to closely monitor the progress of the SRP, taking advice from the externally chaired Defence Strategic Reform Advisory Board and the Defence Audit and Risk Committee.

DEFENCE ACCOUNTABILITY AND PROJECT MANAGEMENT REFORM

Defence will implement initiatives aimed at improving Defence accountability. These will include implementation of the Government’s response to the Review of the Defence Accountability Framework undertaken by Dr Rufus Black. Initial priority will be directed to reforms in Defence project management to ensure that projects are monitored and controlled more effectively through their life-cycle, and that potential problems are identified and remediated early.


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CULTURAL REVIEWS

Continuing the work of making the Defence workplace safe and equitable for all is a key priority for 2011-12. A series of reviews have commenced into various aspects of the culture of the ADF and the Department of Defence, including the treatment of women.

DEFENCE MATERIEL ORGANISATION

The Defence Materiel Organisation (DMO) equips and sustains the Australian Defence Force (ADF) through the acquisition and sustainment of equipment. The DMO is currently managing more than 190 major acquisition projects and programs and more than 100 minor acquisition projects. It also provides sustainment for over 100 military fleets and commodities.

In 2011-12, the key priorities for the DMO will be:

• continuing support to ADF operations

• achieving the SRP’s targets for the DMO by continuing to:

- work with key customers (Navy, Army and Air Force) to reduce the cost of ownership of major Defence military fleets and commodities

- consult and engage with industry to jointly deliver savings and efficiencies

- reform internal functions to deliver savings and efficiencies

• improving performance on procurement and sustainment

• delivering the approved materiel elements of Defence Capability Plan (DCP) projects on time and on budget

• continuing implementation of the reforms resulting from the Defence Procurement and Sustainment Review (the Mortimer Review) and measuring outcomes.

The DMO has a major role in delivering on the SRP commitments through the Smart Sustainment Stream. Further information concerning the Smart Sustainment Stream is detailed separately under DMO’s Section 2 Outcomes and Planned Performance.


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ORGANISATIONAL STRUCTURE

The following changes have taken place since the Portfolio Additional Estimates Statements 2010-11.

Senior Executive changes• With effect 14 January 2011, Mr Simeon Gilding ceased acting in the temporary position of Deputy

Secretary Strategy (Operations).

• On 16 May 2011, Mr Simeon Gilding transfers from his position as Principal Adviser (Afghanistan-Pakistan) to take up the position of Deputy Director Intelligence in the Defence Signals Directorate.

• On 16 May 2011, Mr Neil Orme transfers from his position as First Assistant Secretary Ministerial and Executive Coordination and Communication (MECC) to take up the position of Principal Adviser Afghanistan-Pakistan.

• On 2 May 2011, Ms Rebecca Skinner transferred from her position as First Assistant Secretary Strategic Policy to take up the position of First Assistant Secretary Ministerial and Executive Coordination and Communication.

• On 23 May 2011, Mr Michael Shoebridge will transfer from his position as First Assistant Secretary Defence, Intelligence and Research Coordination Division at the Department of the Prime Minister and Cabinet (PM&C) to take up the position of First Assistant Secretary Strategic Policy.

Organisational structure• With effect 17 January 2011, Mr Simeon Gilding reverted to an SES Band 2 position of Principal

Adviser (Afghanistan-Pakistan), providing high level policy advice on Afghanistan and Pakistan issues.

• With effect 17 January 2011, Mr Ben Burdon ceased acting as First Assistant Secretary International Policy Division and resumed his role as Assistant Secretary Major Powers and Global Interests Branch. Mr Andrew Nikolić assumed the position of First Assistant Secretary International Policy Division from 17 January 2011.

• With effect from 4 May 2011, MECC Division transferred from the Strategy Executive to the Strategic Reform and Governance Executive (SRGE) in the Office of the Secretary and CDF Group. The move of the MECC division to SRGE will help consolidate governance-related functions around the leadership of Mr Brendan Sargeant, Deputy Secretary SRGE .

DMO Senior Executive changes

There has been one change to the DMO senior leadership group since the Portfolio Additional Estimates Statements 2010-11:

• In January 2011, Ms Michelle Kelly commenced acting in the position of Head Commercial Enabling Services.

Defence Portfolio Budget Statem

ents 2011-12

20 Figure 2: Defence organisational chart

(1) Statutory appointment.(2) Reports directly to the Minister for Defence in accordance with Section 196A of the Defence Force Discipline Act 1982.(3) The Inspector-General ADF is directly responsible to the Chief of the Defence Force (CDF).(4) Chief Audit Executive reports directly to the Secretary and CDF.(5) The Inspector-General Defence reports directly to the Secretary and CDF, and CEO DMO on investigative matters.

(6) Section 9(3) of the Defence Act 1903 requires the Service Chiefs to advise the Minister on matters relating to their command.(7) Deputy Secretary Strategic Reform and Governance is appointed as the Group Head for Office of the Secretary and Chief of the Defence Force Group to perform all the duties and exercise all the relevant delegations of that role. (8) Under the agreed business model for DMO as a prescribed agency, the CEO DMO Ministerial Directive identifies that the CEO DMO is directly accountable to the Minister for DMO’s performance but remains accountable to the Secretary and CDF.

Stars (*) refer to ADF Star rank or SES Band levels

Office of the Secretary & Chief of the Defence Force Group

Judge Advocate GeneralMAJGEN the Hon Justice

Richard Tracey** (1) (2)

Chief Judge AdvocateBRIG Ian Westwood

*(1) (2)

Director Military ProsecutionsBRIG Lyn McDade

*(1) (2)

Inspector-General DefenceMr Ray Bromwich

*(5)

Chief Audit ExecutiveMr Geoff Brown

**(4)

Inspector-General ADFMr Geoff Earley

**(1) (3)

Deputy Secretary Intelligenceand Security

Mr Stephen Merchant***

Chief Executive OfficerDefence Materiel Organisation

Dr Stephen Gumley(8)

Chief Defence ScientistProfessor Robert G. Clark

***

Deputy Secretary PeopleStrategies and Policy

Mr Phil Minns***

Deputy Secretary DefenceSupport

Mr Simon Lewis***

Chief Information OfficerMr Greg Farr

***

Chief Finance OfficerMr Phillip Prior

***

Chief Capability DevelopmentAIRMSHL John Harvey

***

(7)

Deputy Secretary StrategicReform and Governance

Mr Brendan Sargeant***

Deputy Secretary StrategyMr Peter Jennings

***

Chief of Joint OperationsLTGEN Mark Evans

***

Vice Chief of the Defence ForceLTGEN David Hurley

***(1)

Chief of NavyVADM Russ Crane

***(1) (6)

Chief of ArmyLTGEN Ken Gillespie

***(1) (6)

Chief of Air ForceAIRMSHL Mark Binskin

***(1) (6)

SecretaryDr Ian J Watt

****(1)

Chief of the Defence ForceACM Angus Houston

****(1)

Minister for DefenceThe Hon Stephen Smith MP

Minister forDefence Materiel

The Hon Jason Clare MP

Minister for Veterans’ Affairs andDefence Science and PersonnelThe Hon Warren Snowdon MP

Parliamentary Secretaryfor Defence

Senator David Feeney


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1.2 Portfolio Resource Statement

Departmental funding is presented in serial 13 of Table 4. The total level of departmental funding in 2011-12 has increased by $744.5m to $26,559.8m compared with $25,815.3m in the Portfolio Additional Estimates 2010-11. Defence funding is comprised of:

• an appropriation for departmental outputs ($22,640.8m)

• an equity injection ($2,909.3m)

• prior year appropriation relating to Operations no-win no-loss 2010-11 activity ($8.0m)

• drawdown of appropriations carried forward from previous years ($6.4m)

• return of equity to government (-$58.0m)

• net capital receipts ($117.9m)

• own source revenue ($935.5m)

There are several measures and adjustments which have increased Defence's funding by $740.7m. These measures are reflected in Table 10: 2011-12 Budget Measures and Other Budget Adjustments and are summarised below:

• an increase of $1,100.2m for Operations

• a decrease of -$174.5m for savings measures

• a decrease of -$185.0m for other budget adjustments


ents 2011-12

22 Table 4: Total Defence Resourcing

Notes1. Previous year's outputs totalling to $2.1m (appropriation receivable) rolled up into Ordinary Annual Services.2. Prior Year Appropriation in 2011-12 is related to Operation no-win no-loss expenditure drawn in 2010-11 and appropriated in 2011-12 which will be returned to Government.3. The value of interest administered by Defence for Defence Housing Australia loans taking out prior to 30 June 2008.

Seria

l No. 2010-11

EstimatedActual

$'000

2011-12Previous Estimate

$'000

2011-12Budget

Estimate$'000

Variation$'000

Variation

%

2012-13ForwardEstimate

$'000


$'000


$'000Defence resourcing

1 21,341,915 Appropriation for departmental outcomes 21,656,501 22,640,794 984,293 4.5 21,908,495 23,117,261 23,865,203 2 2,755,907 Equity injection appropriation 3,188,466 2,909,317 -279,149 -8.8 1,949,867 2,438,876 2,492,102 3 2,100 Prior year appropriation[1][2] - 8,000 8,000 - - - - 4 24,099,922 Current year's appropriation (1+2+3) 24,844,967 25,558,111 713,144 2.9 23,858,362 25,556,137 26,357,305 5 65,000 Draw dow n of appropriations carried forw ard 6,389 6,389 - - - - - 6 -2,100 Other appropriation receivable movements - - - - - - - 7 -93,269 Return to OPA -85,679 -58,026 27,653 -32.3 -112,951 -22,416 -22,783 8 -30,369 Funding from/to the OPA (5+6+7) -79,290 -51,637 27,653 -34.9 -112,951 -22,416 -22,783 9 24,069,553 Funding from Government (4+8) 24,765,677 25,506,474 740,797 3.0 23,745,411 25,533,721 26,334,522

10 154,749 Capital receipts 160,858 117,827 -43,031 -26.8 155,423 86,146 93,781 11 1,025,884 Ow n source revenue 888,791 935,515 46,724 5.3 925,354 967,089 1,008,364 12 1,180,633 Funding from Other Sources (10+11) 1,049,649 1,053,342 3,693 0.4 1,080,777 1,053,235 1,102,145 13 25,250,186 Total Defence funding (9 + 12) 25,815,326 26,559,816 744,490 2.9 24,826,188 26,586,956 27,436,667

Administered14 3,755,962 Administered special appropria ions 3,940,954 3,928,923 -12,031 -0.3 4,106,050 4,295,344 4,493,346 15 -1,226,966 Returns to the OPA -1,253,714 -1,292,077 -38,363 3.1 -1,361,415 -1,437,203 -1,515,091 16 1,200,271 Ow n source revenue 1,226,110 1,264,020 37,910 3.1 1,333,358 1,409,146 1,487,034 17 26,695 Interest earned for DHA loans[3] 27,604 28,057 453 1.6 28,057 28,057 28,057 18 44,100 Administered payments to CAC Act bodies - - - - - - - 19 3,800,062 Total Administered Funding (14+15+16+17+18) 3,940,954 3,928,923 -12,031 -0.3 4,106,050 4,295,344 4,493,346 20 29,050,248 Total Defence Resourcing (13 + 19) 29,756,280 30,488,739 732,459 2.5 28,932,238 30,882,300 31,930,013

Appropriation carried forward21

34,846 Appropriation receivable including previous year's outputs 20,457 20,457 - - 20,457 20,457 20,457

22 44,226 Cash in bank 52,226 52,226 - - 52,226 52,226 52,226 23 79,072 Total appropriations carried forward (21+22) 72,683 72,683 - - 72,683 72,683 72,683 24 29,129,320 Total Defence Resourcing (20+23) 29,828,963 30,561,422 732,459 2.5 29,004,921 30,954,983 32,002,696


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Table 5: Defence Resource Statement—Budget Estimates for 2011-12 as at Budget May 2011

Notes1. Previous year's outputs totalling to $2.1m (appropriation receivable) rolled up into Ordinary Annual Services.2. Prior Year Appropriation in 2011-12 is related to Operation no-win no-loss expenditure drawn in 2010-11 and appropriated in 2011-12 which will

be returned to Government.

Seria

l No.

Estimate of prior

year amounts available

in 2011-12

$'000

+

Proposed at Budget

2011-12$'000

=

Total estimate

2011-12$'000

Actualavailable

appropriation

2010-11$'000

ORDINARY ANNUAL SERVICES[1]

Outcome 1 - 21,052,011 21,052,011 19,771,495Outcome 2 - 1,578,954 1,578,954 1,565,268Outcome 3 - 9,829 9,829 15,252

1 Total Departmental outputs - 22,640,794 22,640,794 21,352,0152 Total ordinary annual services - 22,640,794 22,640,794 21,352,015

OTHER SERVICES[1]

Departmental non-operatingEquity injections - 2,909,317 2,909,317 2,755,907Previous years' programs - - - -

3 Total Departmental non-operating - 2,909,317 2,909,317 2,755,907Administered non-operatingPayments to CAC Act bodies - - - 44,100

4 Total Administered non-operating - - - 44,1005 Total other services (3+4) - 2,909,317 2,909,317 2,800,0076 Total Available Annual Appropriation (2+5) - 25,550,111 25,550,111 24,152,022

SPECIAL APPROPRIATIONSSpecial appropriations limited by criteria/entitlement

Defence Forces Retirement Benefits Act, 1948 Part 1 s.15D and VIC , s.82ZJ - 30,000 30,000 35,000Defence Force Retirement and Death Benefits Act, 1973 Part XII, s.125 - 1,591,000 1,591,000 1,655,000Military Superannuation and Benefits Act, 1991 Part V, s.17 - 2,194,443 2,194,443 1,958,223Defence Force (Home Loan Assistance) Act, 1990 Part IV, s.38 - 3,547 3,547 3,789Defence Home Ownership Assistance Scheme Act 2008 Part VI, s.84 - 109,933 109,933 103,950

7 Total Special Appropriations - 3,928,923 3,928,923 3,755,9628 Total Appropriations (6+7) - 29,479,034 29,479,034 27,907,984

Funding from other sources - 2,297,826 2,297,826 2,354,922Returns to the OPA - -1,343,714 -1,343,714 -1,257,335Previous years' outputs (Appropriation Receivable) 34,846 -14,389 20,457 34,846Cash available[2] 44,226 8,000 52,226 44,226Dividends - 47,593 47,593 52,677

9 Total Other Available Resources 79,072 995,316 1,074,388 1,229,33610 Total Resourcing (8+9) 79,072 30,474,350 30,553,422 29,137,320

Special AccountsOpening balance - 78,306 78,306 120,305Appropriation receipts - - - -Appropriation receipts - other agencies - - - -Non-appropria ion receipts to Special Accounts - 62,355 62,355 30,099

11 Total Special Accounts - 140,661 140,661 150,404


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Table 6: Third party payments to and from other agencies

DRAWDOWN OF APPROPRIATIONS CARRIED FORWARD

Table 7: Appropriations Receivable

Notes1. As published in Table 9 of the Portfolio Additional Estimates Statements 2010-11.2. Prior Year Appropriation in 2011-12 is related to Operation no-win no-loss expenditure drawn in 2010-11 and appropriated in 2011-12 which will

be returned to Government.

FUNDING FROM OTHER SOURCES

Own Source Revenue

Table 8: Variations in Own Source Revenue

Note1. As published in Table 10 of the Portfolio Additional Estimates Statements 2010-11.

2010-11$'000

2011-12$'000

Revenue received from Defence Housing Australia for the provision of goods and services (Departmental) 26,981 35,905Revenue received from Defence Housing Australia for interest on loans, dividends and competitive neutrality payments (Administered) 112,572 116,621Payments made to Defence Housing Australia for the provision of services (Departmental) 525,361 513,456Payments made to Defence Housing Australia for loans and equity injections (Administered) 44,100 -Payments made to Comsuper for the provision of services (Departmental) 29,325 28,860Payments made to the Australian Federal Police for the provision of services (Departmental) 47,808 43,514

2010-11Estimated

Actual$'000

2011-12Budget

Estimate$'000

2012-13Forward Estimate

$'000


$'000


$'00026,846 Previous Estimate[1] 20,457 20,457 20,457 20,4578,000 Prior year appropriation transfer to 2011-12[2] 8,000 - - -

- Return to government -8,00034,846 Closing balance appropriation receivable 20,457 20,457 20,457 20,457

2010-11Estimated

Actual$'000

2011-12Budget

Estimate$'000


$'000


$'000


$'0001,025,394 Previous estimate[1] 888,791 924,639 966,219 1,007,336

490 Variation in ow n source revenue 46,724 715 870 1,0281,025,884 Own source revenue 935,515 925,354 967,089 1,008,364


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Table 9: Variation in Estimates of Net Capital Receipts

Note1. As published in Table 11 of the Portfolio Additional Estimates Statements 2010-11.

2010-11Estimated

Actual$m

2011-12Budget

Estimate$m


$m


$m


$m62.1 Previous estimate[1] 76.1 70.7 44.4 36.3

-Movement in capital w ithdraw al associated w ith capital disposals program 27.7 -91.2 148.8 -

-Movement in proceeds associated w i h the capital disposals program -43.0 64.0 -128.5 35.6

- Variation in net capital receipts -15.4 -27.3 20.3 35.662.1 Total net capital receipts 60.7 43.4 64.7 71.9


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PURCHASER-PROVIDER ARRANGEMENTS

Total Planned Payments to the DMO

Table 10: Total Planned Payments to the DMO

Seria

l No. 2011-12

Budget Estimate

$m

2012-13 Forward Estimate

$m


$m


$m

Total

$mPlanned Defence Capability Plan (DCP) approvals 647.1 1,174.0 2,658.0 3,443.4 7,922.4Approved Major Capital Investment Projects (AMCIP) delivered by he DMO 4,329.1 2,894.6 2,381.9 2,575.4 12,181 0

1 Total Major Capital Investment Projects 4,976.1 4,068.6 5,039.9 6,018.8 20,103.4Approved Navy minor projects 5.4 5.2 1.3 0.9 12 9Approved Army minor projects 48 5 35.2 8.3 3.1 95.1Approved Air Force minor projects 15 5 4.1 3.6 - 23 3Approved Joint Logistics Command minor projects - 0.2 - - 0 2Approved Chief Information Officer minor projects 4.1 1.3 - - 5 5Approved Office of the Secretary and CDF minor projects 0 2 - - - 0 2

2Sub-total approved minor program delivered by the DMO 73.9 46.1 13.1 4.0 137.1Unapproved Navy minor projects 22 2 24.1 27.4 28.1 101.7Unapproved Army minor projects 14 9 31.9 68.1 68.5 183.4Unapproved Joint Logistics Command minor projects 2.4 3.6 4.4 4.4 14 8

3Sub-total unapproved minor program planned for transfer to the DMO 39.5 59.6 99.9 101.0 299.9

4Total minor program (2+3) to be delivered by the DMO 113.4 105.7 113.0 105.0 437.0

5 Total acquisition (DMO Program 1.1) (1+4) 5,089.5 4,174.3 5,152.9 6,123.8 20,540.4Navy sustainment 1,435.7 1,483.1 1,385.7 1,389.6 5,694.1Army sustainment 1,614 0 1,250.1 1,234.0 1,274.2 5,372 2Air Force sustainment 1,657.7 1,555.8 1,567.1 1,615.5 6,396.1Chief Information Officer sustainment 43.6 54.0 70.3 71.2 239.1Vice Chief of he Defence Force sustainment 81.4 85.2 90.2 96.3 353.1Office of he Secretary and CDF sustainment 22.7 21.3 18.3 20.3 82.7Joint Operations Command sustainment 5 2 5.4 5.7 5.9 22 2Defence Support Group sustainment 27 0 27.0 27.0 27.0 108 0Future sustainment costs associated w ith AMCIP 122.7 238.0 605.9 839.9 1,806.6

6 Total sustainment (DMO Program 1.2) 5,010.0 4,719.9 5,004.2 5,340.0 20,074.17 Total planned payments to the DMO (5+6) 10,099.5 8,894.1 10,157.1 11,463.8 40,614.5


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PAYMENTS TO DEFENCE HOUSING AUSTRALIA

Overview

Defence Housing Australia (DHA) provides housing and relocation services for ADF members. DHA has a formal agreement with Defence titled the Services Agreement for Housing and Related Requirements (the Services Agreement). The Services Agreement was amended in 2009 to incorporate the responsibility for the allocation and tenancy management of Service residences on behalf of Defence. Under the Service Agreement, DHA is to provide suitable housing for Defence members to meet the operational needs of Defence. Defence requires DHA to provide appropriate numbers of houses in suitable locations in accordance with Defence policy.

Control Arrangements

DHA is a statutory authority responsible, through its board, to the Minister for Defence and the Minister for Finance and Deregulation. It was established in 1987, commenced operations on 1 January 1988, and provides a range of housing and housing-related services to Defence and other Financial Management and Accountability Act 1997 agencies.

The Defence Housing Authority Amendment Act 2006 took effect on 23 November 2006. This act enables DHA to expand the scope of its operations to provide services that are ancillary to housing and housing-related services to both Defence and other Australian Government agencies as defined in the Financial Management and Accountability Act 1997. These changes created a smaller, streamlined and more commercially focused board.

Information on the DHA Board and Advisory Committee is available in the DHA section on page 212.

Resourcing

The 2011-12 estimate for the purchase of services from DHA is $513m as reported in Table 6 Third Party Payment .

1.3 Funding from Government

2011-12 BUDGET MEASURES AND OTHER BUDGET ADJUSTMENTS

Budget measures relating to Defence are detailed in Budget Paper No. 2 and are summarised in Table 11.

s to and from other agencies


ents 2011-12

28 Table 11: Defence 2011-12 Budget Measures and Other Budget Adjustments

Notes 1. Includes $8.0m of Prior Year Appropriation in 2011-12 relating to Operations2. Defence is absorbing $2.1m in 2011-12 and $1 9m in 2011-12. 3. Defence is absorbing $9.8m in 2011-12. 4. Defence is absorbing the cost.

Program2011-12

$m2012-13

$m2013-14

$m2014-15

$mTotal FE

$m2015-16

$m2016-17

$m2017-18

$m2018-19

$m2019-20

$m2020-21

$mTOTAL

$m

Budget MeasuresExpenditure MeasuresMiddle East Area of Operations - continuation of Australia's military contribution[1] 2 2 926.1 115.4 93.9 - 1,135.4 - - - - - - 1,135.4

to maintain security and stability 2.1 133.4 2 2 0.6 - 136.2 - - - - - - 136.2Solomon Islands - continued Australian Defence Force assistance to the Regional Assistance Misson to Solomon Islands 2.1 41 8 1 2 0.1 - 43.1 - - - - - - 43.1

[2] 2 2 -1.1 -1 9 -0.0 - -3.1 - - - - - - -3.1Coastal Surveillance - Operation Resolute[3] 3.1 - - - - - - - - - - - - Royal Australian Air Force Base Williamtown - Improving

[4] various - - - - - - - - - - - - Total Budget Measures 1,100.2 116.9 94.5 - 1,311.6 - - - - - - 1,311.6

Savings MeasuresIncreased efficiencies various -226.6 -320.7 -318.7 -319.1 -1,185.0 -268 2 -270 0 -286.5 -305.5 -309.0 -323.4 -2,947.7Efficiency dividend - temporary increase in he rate various -15 3 -30.4 -39.6 -49.6 -134.9 -45.6 -50.1 -47.3 -43.1 -42.5 -42.6 -406.2C-130J Hercules - cancellation of two additional aircraft various -2.4 -3 8 -16.9 -88.1 -111.3 -158.7 -144.1 -76.3 -24.7 -4.5 -0.5 -520.1Capital investment reprogramming various 69 8 -158 9 -323.8 -868.0 -1,280.8 841 0 1,001 0 411.0 136.0 - - 1,108.1Total Savings Measures -174.5 -513.7 -699.0 -1,324.8 -2,712.0 368.5 536.7 0.9 -237.4 -356.0 -366.5 -2,765.8Other Budget AdjustmentsUnited States Studies Centre - contribu ion various -0 3 -0 3 -0.3 - -1.0 - - - - - - -1.0

various -0.1 - - - -0.1 - - - - - - -0.1Overseas Property Office various -2 0 -2 0 -2.0 -2.0 -8.0 -2.0 -2 0 -2.0 -2.0 -2.0 -2.0 -19.9Foreign Exchange various -210 3 -194 2 -177.9 -168.6 -751.0 -242.7 -276 0 -286.5 -274.2 -283.6 -289 0 -2,403.0Property Disposals various 27.7 -91 2 148.8 - 85.2 - - - - - - 85.2

Total Other Budget Adjustments -185.0 -287.8 -31.5 -170.6 -674.9 -244.7 -278.0 -288.5 -276.2 -285.6 -291.0 -2,338.9Variation to Defence Funding 740.7 -684.7 -636.0 -1,495.4 -2,075.3 123.7 258.7 -287.6 -513.5 -641.6 -657.5 -3,793.1

Timor-Leste - continua ion of Australia's commitment to helping

Na ional Security - Baghdad Embassy - civilian security arrangements - final transi ion

National Disaster Recovery and Rebuilding - Commission of

Inquiry into Queensland Floods

aircraft noise management


29

Table 12: Budget Measures agreed since the 2010-11 Portfolio Additional Estimates[1]

Note 1. Budget Measures absorbed by the Department of Defence.

Measures agreed since Portfolio Additional Estimates Statements 2010-11

C-17 Globemaster III Fleet – acquisition of additional aircraft

The Government approved the purchased an additional C-17A Globemaster III aircraft from the 2011 United States Air Force production line. This additional C-17A aircraft will significantly enhance the Royal Australian Air Force's long range heavy airlift capacity and its ability to provide the Government with a wide range of options to support ADF operational tasks and in providing disaster relief and humanitarian assistance.

Recent events in Queensland and previous natural disasters in Australia's region have shown the C-17s to be an essential part of the Australian Government's capacity to respond to domestic and regional disasters. Additionally the C-17s continue to support Australian and Coalition forces in Afghanistan and the Middle East, meeting their primary purpose in providing military long-range heavy airlift.

Royal Fleet Auxiliary Largs Bay – acquisition

The Government agreed to the purchase of the Bay class amphibious ship Largs Bay which had become surplus to the United Kingdom (UK) requirements. Largs Bay represents a necessary boost to amphibious lift capability and will be able to respond to a range of regional short-notice contingencies, particularly natural disasters. This interim amphibious capability will replace the decommissioned HMAS Manoora and will be used until the introduction in to service of two Canberra class Landing Helicopter Docks (LHDs).

2011-12 Budget Expenditure Measures

Middle East Area of Operations - continuation of Australia's military contribution

Operation Slipper is the ADF's contribution to the international coalition against terrorism. The Government has provided $1,135.4m over the forward estimates for the net additional cost of extending the operation to 30 June 2012. The Government has continued its use of Reservists on this operation.

Timor Leste - continuation of Australia's commitment to helping to maintain security and stability

Operation Astute is the ADF contribution to assist the Government of Timor Leste in the restoration of stability, security and confidence to the country. The Government has provided $136.2m over the forward estimates for the net additional cost of extending the operation. The Government has continued its use of Reservists on this operation.

Solomon Islands - continued Australian Defence Force assistance to the Regional Assistance Mission to Solomon Islands

Operation Anode is the ADF's contribution to the Regional Assistance Mission to Solomon Islands. The Government will provide $43.1m over the forward estimates for the net additional cost of extending the operation until 30 June 2012. The Government has continued its use of Reservists on this operation.

Program

2010-11Revised

Estimate$m

2011-12Budget

Estimate$m

C-17 Globemaster III Fleet - acquisi ion of additional aircraft 1.4 - -Royal Fleet Auxiliary Largs Bay - acquisition 1.2 - -Total Budget Measures agreed since the 2010-11 Portfolio Additional Estimates Statements - -


30

Operation Kruger is the ADF's contribution to security for Australian Embassy personnel in Iraq. The ADF's security role will transition to a fully contracted security arrangement administered by the Department of Foreign Affairs and Trade. Defence will absorb the net additional cost of the operation and return to Government previous funding of $3.1m provided for Operation Kruger.

Coastal Surveillance - Operation Resolute

Operation Resolute is the ADF's ongoing contribution to Australian whole of government efforts to protect Australia's offshore maritime areas. It includes unauthorised arrivals, illegal fishing and smuggling. Defence will absorb the net additional cost of $9.8m extending the operation until 30 June 2012.

Royal Australian Air Force Base Williamtown - Improving aircraft noise management

This initiative is the development of options to address noise issues in the vicinity of RAAF Base Williamtown including the development and release of a new Australian Noise Exposure Forecast for the area surrounding RAAF Base Williamtown in 2025. Defence will absorb the cost associated with this budget measure.

Savings Measures

Increased efficiencies

The Government will realise additional efficiencies in corporate and support functions in the Defence portfolio, including through greater reductions in duplication and increased use of shared services.

This measure will result in savings of $1,185.0m over the forward estimates. Savings from this measure will be redirected to support other Government priorities and delivers on the Government's commitment to responsible economic management.

Efficiency dividend - temporary increase in the rate

The Government extended the application of the efficiency dividend for Defence portfolio, with an increase to the efficiency dividend from 1 per cent to 1.5 per cent in 2011-12 and 2012-13 and 1.25 per cent in 2013-14 and 2014-15.

This measure will result in savings of $134.9m over the forward estimates. Savings from this measure will be redirected to support other Government priorities and delivers on the Government’s commitment to responsible economic management.

C-130J Hercules - cancellation of two additional aircraft

The Government agreed to cancel the acquisition of two additional C-130J Hercules aircraft. This measure will save $111.3m over the forward estimates.

The latest Defence Capability Plan anticipated a final decision on acquisition of additional C-130J Hercules aircraft in the period 2013-2015. However, the opportunity to purchase an additional C-17 Globemaster aircraft from the 2011 United States Air Force production line has obviated the need for the acquisition of the Hercules aircraft. The C-17 will deliver increased lift capability earlier than planned.

Capital investment reprogramming

The Government will reprogram funding for the Defence capital investment program to better align it with Defence's strategic requirements. The reprogramming will result in savings of $1,280.8m over the forward estimates, to be reprogrammed beyond the forward estimates.

The reprogramming will support the Department of Defence in delivering the military capabilities set out under Force 2030, the Defence White Paper 2009.

National Security - Baghdad Embassy civilian security arrangements - final transition


31

Other Budget Adjustments

United States Studies Centre - contribution

Transfer to Prime Minister and Cabinet for Defence's contribution to the establishment of an USA Studies Centre. This will transfer $1.0m over the forward estimates.

Inquiry into Queensland Floods

Transfer to Attorney General’s Department for Defence's contribution to the Commission of Inquiry into the Queensland Floods. This will transfer $0.1m over the forward estimates.

Overseas Property Office

Following a review of the Overseas Property Office, the amortisation funding previously allocated to Defence will be discontinued and returned to the Department of Finance and Deregulation. This will return $8.0m over the forward estimates.

Foreign Exchange Movements

Under the 'no-win no-loss' arrangements, Defence is required to return to the Government any surplus foreign exchange supplementation for an appreciation of the Australian dollar relative to other currencies. Conversely, where the Australian dollar depreciated relative to other currencies, Defence is supplemented under these arrangements. Over the forward estimates a total of $751.0m will be returned to the Government under these arrangements.

Property Disposals

Adjustments have been made to the Property Disposal Program since the 2009-10 Budget that have resulted in Defence retaining $85.2 million over the forward estimates.

Natural Disaster Recovery and Rebuilding - Commission of


ents 2011-12

32 Table 13: Net Additional Cost of Operations from 1999-00 to 2014-15

Notes1. The 2010-11 Revised Estimate includes $6.0m for Up-Armoured Commercial Vehicles funded by Defence.2. The 2010-11 Revised Estimate includes $0.4m for Service Fee which has been directly appropriated by DMO.3. The Revised Estimate and Forward Estimates include foreign exchange adjustments.4. For 2011-12 Defence will absorb the cost of Operation Resolute.5. For 2011-12 and 2012-13 Defence will absorb the cost of Operation Kruger.6. An amount of $126.4m has been re-programmed from 2010-11 to 2011-12 to align sustainment funding with revised acquisition schedules.7. An amount of $6.9m is no longer required in 2010-11 as the acquisition was completed in 2009-10.8. An amount of $19.8m is no longer required as the acquisition was less than expected.9. An amount of $1.8m is being managed from 2009-10 due to acquisition schedule changes.

1999-00 to 2006-07 Actual Result

$m

2007-08 Actual Result

$m


$m


$m

2010-11 Revised

Estimate$m [3]

2011-12Budget

Estimate$m [3]


$m [3]


$m [3]


$m [3]Total

$mOperation Astute 3,405.5 205.6 164.7 144.9 170.5 160.2 10.7 0.9 - 4,263.0Operation Bel Isi 47.7 - - - - - - - - 47.7Operation Slipper[1][2] 805.3 394.9 701.9 1,125.3 1,251.1 1,221 8 299.6 139.2 - 5,939.2Operation Resolute[4] 96.9 7.0 10.0 10.3 15.3 9 8 - - - 149.3Operation Catalyst 1,560.7 501.5 290.9 11.4 - - - - - 2,364.5Operation Anode 148.2 23.7 25.1 27.9 42.6 43 5 1.4 0.2 - 312.5Operation Sumatra Assist 44.5 - - - - - - - - 44.5Operation Acolyte 10.5 - - - - - - - - 10.5Operation Deluge 2.7 4.0 - - - - - - - 6.7Operation Pakistan Assist 9.8 - - - - - - - - 9.8Operation Outreach - 12.3 2.3 - - - - - - 14.6Operation Kruger[5] - - - 29.8 13.2 2.1 1.9 - - 46.9Enhanced Force Protection in Afghanistan[6][7][8][9] - - - 80.3 355.6 482.4 190.6 - - 1,108.9Total Net Additional Costs 6,131.8 1,149.1 1,194.9 1,429.8 1,848.2 1,919.8 504.2 140.3 - 14,318.1Sources of Funding for Operations:Government Supplementation 6,122.0 1,127.5 112.5 1,386.7 1,576.7 1,551 9 311.7 140.3 - 12,329.4Department of Foreign Affairs and Trade 9.1 - - - - - - - - 9.1Department of Defence (Absorbed) 0.7 21.6 1,082.4 43.1 271.5 367 9 192.5 - - 1,979.7Total Cost 6,131.8 1,149.1 1,194.9 1,429.8 1,848.2 1,919.8 504.2 140.3 - 14,318.1


33

Operations Summary

The ADF is involved in a number of deployments around the world, including United Nations Peacekeeping, regional assistance missions, border protection and domestic security operations. The Government has provided $1,100.2m in 2011-12 for net additional cost of Operations. Defence plans to spend $1,437.4m in 2011-12 on Operations and $482.4m for enhance force protection capabilities in Afghanistan.

Middle East Area of Operations - continuation of Australia's military contribution

Operation Slipper is the ADF's contribution to the international coalition against terrorism. The Government has provided $1,221.8m in 2011-12 for the net additional cost of extending the operation to 30 June 2012. The Government has continued its use of Reservists on this operation.

East Timor - continuation of Australia's commitment to helping to maintain security and stability

Operation Astute is the ADF contribution to assist the Government of Timor Leste in the restoration of stability, security and confidence to the country. The Government has provided $160.2m in 2011-12 for the net additional cost of extending the operation until 30 June 2012. The Government has continued its use of Reservists on this operation.

Solomon Islands - continued Australian Defence Force assistance to the Regional Assistance

Operation Anode is the ADF's contribution to the Regional Assistance Mission to Solomon Islands. The Government will provide $43.5m in 2011-12 for the net additional cost of extending the operation until 30 June 2012. The Government has continued its use of Reservists on this operation.

Baghdad Embassy - transition towards civilian security arrangements

Operation Kruger is the ADF's contribution to security for Australian Embassy personnel in Iraq. The ADF's security role will transition to a fully contracted security arrangement administered by the Department of Foreign Affairs and Trade. Defence plans to spend $2.1m in 2011-12 for the net additional cost of the operation.

Coastal Surveillance

Operation Resolute is the ADF's ongoing contribution to Australian whole of government efforts to protect Australia's offshore maritime areas. It includes unauthorised arrivals, illegal fishing and smuggling. Defence plans to spend $9.8m in 2011-12 for the net additional cost of extending the operation until 30 June 2012.

Force Protection

The Australian Government is continuing its investment in enhanced force protection capabilities for our troops in Afghanistan. A comprehensive package of air combat, land forces, maritime forces and networked information capabilities will be delivered to ensure the Australian Defence Force of the 21st Century will have the capabilities required to meet future strategic challenges. Defence plans to spend $482.4 million in 2011-12 on enhanced force protection capabilities.


34

1.4 Capital Investment Program

The Capital Investment Program comprises the Defence Capability Plan (DCP), the Approved Major Capital Investment Program (AMCIP), the Capital Facilities Program, Other Capital purchases, and Retained Capital Receipts.

Table 14: Total Capital Investment Program

Notes1. Cross references with Table 10.2. Includes projects delivered by the DMO and Defence Groups and Services.3. Includes both Major and Minor Capital Facilities Program.4. This includes plant and equipment, Minor Capital Investment projects, infrastructure costs, non-capital facilities building projects, intangibles

and purchase of repairable items.5. The Capital Investment Program funding includes $60.7m (Budget Estimate) and $179.9m (Forward Estimates) in retained capital receipts.

Cross reference with Table 15.

MAJOR CAPITAL INVESTMENT PROGRAM

The Unapproved Major Capital Investment Program (also known as the DCP) is a costed, detailed development plan for Australia's military capabilities over a ten-year period. The plan is reviewed regularly to take account of changing strategic circumstances, new technologies and changed priorities, in the context of the overall Defence budget.

Further details in relation to the DCP can be found in Program 1.11 Capability Development.

The AMCIP consists of projects, usually costing more than $20m, which are funded from the DCP and which, following approval, are generally transferred to the DMO for the acquisition phase.

As an enabling organisation to the Department of Defence, the DMO contributes to the Department’s outputs. The DMO budget is detailed separately in Section 2: DMO Outcomes and Planned Performance, including an overview of the Top 30 Projects.

Seria

l No. 2011-12

Budget Estimate

$m


$m


$m


$mTotal

$mDefence Capability Plan

Planned payment to DMO for projects aw aiting Government approval[1] 647.1 1,174.0 2,658.0 3,443.4 7,922.4Other Defence groups 71.9 130.4 295.3 382.6 880 3

1 Total Defence Capability Plan 718.9 1,304.4 2,953.3 3,825.9 8,802.72 Approved Major Capital Investment Program[2] 4,409.6 2,939.9 2,406.7 2,585.3 12,341 53 Major Capital Investment Program (1+2) 5,128.6 4,244.3 5,360.0 6,411.3 21,144.1

Capital facilitiesApproved Capital Facilities Projects[3] 819.1 459.5 314.8 169.1 1,762 5Unapproved Capital Facilities Projects 361.2 704.8 570.6 434.2 2,070.8

4 Total Capital Facilities Program 1,180.3 1,164.3 885.4 603.3 3,833.45 Other investment[4] 739.8 787.9 924.4 378.4 2,830.56 Total Capital Investment Program (3+4+5)[5] 7,048.6 6,196.6 7,169.8 7,392.9 27,808.0

Capital component 6,665 9 5,749.4 6,474.1 6,545.5 25,434.9Operating component 382 8 447.1 695.7 847.5 2,373.0


35

CAPITAL FACILITIES PROGRAM

The Capital Facilities Program comprises approved and unapproved projects. This program gives priority to projects that support the AMCIP, sustain current capability requirements, support other Government initiatives, meet legislative obligations and assist initiatives that support Defence personnel. A significant proportion of the program funding is directed towards the provision of basic engineering and infrastructure services either in support of new projects or upgrades to existing facilities.

Further details in relation to Capital Facilities can be found in Program 1.6 Defence Support.

OTHER INVESTMENT

Other Investment consists of Plant and Equipment, including Information and Communication Technology equipment, Minor Capital Investment projects, infrastructure costs, non-capital facilities building projects, intangibles and purchase of repairable items. Minor capital projects cover new equipment, modifications to existing equipment or enhancements to new equipment. After approval, funding for minor projects is generally transferred to the DMO for the acquisition phase. Defence plans to spend $739.8m on other investment in 2011-12 as part of the $2,830.5m in spending over the Budget and forward estimates period.

RETAINED CAPITAL RECEIPTS

Table 15: Retained Capital Receipts

Seria

l No. 2011-12

BudgetEstimate

$m


$m


$m


$mTotal

$mProperty Sales

Proceeds from the sale of land and buildings 68.8 105.9 28.7 35.6 238 9Proceeds from the sale of housing 20.3 20.8 21.3 21.8 84 3Less capital return to Government -57.1 -112.0 -21.5 -21.9 -212.6

1 Proceeds retained by Defence 32.0 14.6 28.5 35.5 110.62 Proceeds from the sale of specialist

military equipment - - - - -3 Proceeds from the sale of infrastructure,

plant and equipment 28.7 28.7 36.2 36.4 130.04 Retained Capital Receipts (1+2+3) 60.7 43.4 64.7 71.9 240.6


36

1.5 People

WORKFORCE OVERVIEW

People in Defence - Generating the Capability for the Future Force provides Defence’s our first response to the Government's requirement to develop a strategic-level approach to People matters. It offers a vision for attracting and retaining People and provides guidance on Defence’s key People objective, namely to deliver sustainable People capability to Defence. It also provides guidance on efficiency savings to be achieved through the Human Resources Workforce and Shared Services stream of the Strategic Reform Program.

The Annual People Plan, which was first published in 2010-11, is the detailed implementation plan that supports our People vision. It describes the People related projects and initiatives being led by People Strategies and Policy Group (PSP) and undertaken across Defence to deliver a compelling and attractive employment offer, develop a work environment that delivers our commitments to our People and build an efficient and effective People system comprising policies, structures, processes, systems, behaviours and partnerships that enable us to more consistently deliver our commitments.

Against this, the challenge for Defence is to meet workforce requirements within the context of continuing relatively high operational tempo, skills shortages in a range of occupations and under the backdrop of an uncertain and challenging economic environment and outlook. While recruitment and retention initiatives have proven to be particularly successful in the past 12 months, there is no guarantee that this will continue into the future. However, through the implementation of Annual People Plan projects and initiatives, Defence will continue to work towards meeting its recruitment targets and maintaining low separation rates. In particular, Defence will seek to redress shortages within its critical categories and target women, indigenous Australians and those from non English speaking backgrounds to consider Defence careers.

Continuing the work to make the Defence workplace inclusive and diverse is a priority for 2011-12. A number of reviews will be conducted and will target issues relating to the treatment of women in the ADF, Leadership pathways for women in the ADF and APS, the use of alcohol in the ADF, the impact of social media on Defence, and personal conduct issues in the ADF.

ADF Workforce

To support the introduction of new capability over the coming decade, the full-time ADF workforce will approximately maintain the strength it has achieved through recent growth, of around 59,000 members, with some marginal adjustments year by year. Key projects contributing to recent increases in the size of the military workforce include the Hardened and Networked Army and stages 1 and 2 of Enhanced Land Force, as well as a range of initiatives arising from the 2009 White Paper. Against the growth are reductions in budgeted staffing due to civilianisation of military positions, Economy and Efficiency measures and the withdrawal from service of the F-111.

While the number of permanent ADF staff will decrease from 2010-11 to 2011-12, it is still projected to be 801 over the budgeted ADF workforce for 2011-12. This assumes budget coverage for Army of 704 Reservists on Operational Continuous Full Time Service, noting that this is a planning figure yet to be confirmed by Government. The overachievement is due to the unprecedented low separation rates experienced as a result of the successful Retention and Recruitment initiatives combined with the effects of the global economic downturn. A management plan is in place to return the ADF workforce to the budgeted size by the end of 2012-13.


37

Australian Public Service Workforce

The 2009 White Paper and 2010 Strategic Reform Program (SRP) Workforce and Shared Services Reform diagnostic program resulted in net increases to Defence's Australian Public Service (APS) workforce in the years to 2013-14. There are two main drivers for the increases: the need to invest in specific Force 2030 capability development initiatives, and the need to support SRP related reforms to the Defence workforce mix, creating significant organisational cost savings. The workforce reforms comprise:

• the civilianisation of more expensive non-combat-related ADF roles

• conversions within the civilian workforce from contractors to less costly APS positions.

Additional growth also results from underachievement against the budgeted workforce in 2010-11 leading to a deficit to be made up in 2011-12, and a minor increase in the APS workforce for Defence programs associated with Government 2010 election commitments.

In parallel with these growth factors, reductions to the net APS workforce will result from measures such as the introduction of a first phase of Shared Services reform in Defence, and improvements in sustainment and logistics.

From 2011-12, further reform to shared services and other efficiency measures will be undertaken to realise APS workforce reductions in corporate overhead functions in a way that does not reduce standards of service in support of operations or capability development.

To date, the SRP has sought to reduce duplication of effort in the Defence organisation in the areas of administrative and corporate functions. Apart from bringing forward SRP initiatives, there will be a further review of administrative and corporate functions for opportunities to streamline business processes, including the use of new ICT.

The further reform will lead to a reduction in overall forecast growth of 1,000 over the next three years. This reduction in growth builds on the temporary reduction of 432 in 2011-12 made prior to the Portfolio Additional Estimates Statements 2010-11.

Workforce Summary

The total Defence workforce, including the DMO, is forecast to be 103,695 in 2011-12, comprising:

• Permanent Forces (57 per cent) of:

- 14,220 Navy Personnel

- 30,617 Army Personnel

- 14,216 Air Force Personnel

• 22,350 Reserve Forces (22 per cent)

• 21,648 APS staff (21 per cent)

• 644 Contractors (less than 1 per cent)

The total planned strength of the Defence workforce is shown in Table 16.

DEFENCE PEOPLE

The attraction, recruitment and retention of staff will be a high priority for 2011-12. In particular, the main challenge facing Defence and the DMO is the recruitment of the right people in a tightening labour market. To assist, workforce plans identifying the skill sets required have been developed for all acquisition and sustainment activities.

Defence and the DMO will continue to be strongly committed to the professionalisation agenda to develop workforce skills. Graduate recruitment and trainee programs will be increased and targeted to develop high demand skills. Skilling programs will be further developed to support acquisition and


38

sustainment improvement, in areas such as supply chain and inventory management and procurement and contracting programs. Further selected training opportunities will be opened to Defence industry to assist in developing requisite skills.

Priorities for 2011-12 include:

• streamlining recruitment processes and improving recruitment outcomes

• building on Defence and the DMO's reputation as a preferred employer

• continuing to increase professionalisation of the DMO workforce in the areas of project management, engineering and technical, commerce and business, and logistics

• maintaining strong performance assessment and management policies and practices to support greater accountability of staff at all levels.


39

Table 16: Planned workforce allocation for the 2011-12 budget and forward estimates

Notes1. Numbers for ADF Permanent Force include ADF members in the DMO, and Reservists on Continuous Full Time Service, but exclude Active

and High Readiness Reserve members.2. Contractors are individuals under contract performing agency roles. Contractors are not APS employees.

Over the forward estimates, the total workforce is funded to grow by 1,343 from the forecast of 103,695 in 2011-12 to 105,038 in 2014-15.

2010-11Projected

result

2011-12Budget

estimate

2012-13Forwardestimate



ADF Permanent Force[1]

Navy 14,215 14,220 14,267 14,321 14,355

Army 30,235 30,617 30,571 30,640 31,076

Air Force 14,573 14,216 14,090 13,911 14,115

1 Total Permanent Force 59,023 59,053 58,928 58,872 59,546Active Reserve ForceNavy 2,150 2,200 2,200 2,200 2,200

Army 16,000 16,250 16,500 16,750 16,750

Air Force 2,200 2,300 2,400 2,500 2,500

2 Sub-total Active Reserve Force 20,350 20,750 21,100 21,450 21,450High Readiness ReserveNavy – – – – –

Army 900 1,000 1,150 1,240 1,240

Air Force 600 600 600 600 600

3 Sub-total High Readiness Reserve Force

1,500 1,600 1,750 1,840 1,840

4 Total Reserves (2 + 3) 21,850 22,350 22,850 23,290 23,2905 Total ADF Employees (1 + 4) 80,873 81,403 81,778 82,162 82,836

APS - Defence 15,146 16,001 16,114 15,972 15,611

APS - DMO 5,510 5,647 5,744 5,874 6,096

6 Total APS 20,656 21,648 21,858 21,846 21,707Contractors - Defence 651 593 488 450 447

Contractors - DMO 24 51 48 48 48

7 Total Contractors[2] 675 644 536 498 495

8 Total Civilian Employees (6 + 7) 21,331 22,292 22,394 22,344 22,202Total Workforce Strength (5 + 8) 102,204 103,695 104,172 104,506 105,038


40

Table 17: Breakdown of personnel numbers by Service and rank

Notes1. Permanent Forces and APS numbers are forecasts of the average strength for 2011-12.2. Senior Officers are of Colonel or Lieutenant Colonel rank equivalent and substantive APS Executive Level 1 and 2.3. ADF Recruitment and Retention Initiative.4. Reserve figures represent the actual numbers of Active and High Readiness Reservists who render service. Reservists on full-time service are

reported in the Permanent Force.5. The figures for Senior Executive Service include the Secretary of the Department of Defence.6. Contractors are individuals under contract performing agency roles. Contractors are not APS employees.

2010-11Projected Result

2011-12Budget Estimate

Navy[1]

One Star and above 52 52

Senior Officers[2] 522 529

Officers 2,783 2,798

Other Ranks 10,697 10,793

Gap Year Participants[3] 161 48

Sub-total: Permanent Navy 14,215 14,220

Reserve Forces[4] 2,150 2,200

Total Navy 16,365 16,420

Army[1]





Gap Year Participants[3] 288 201

Sub-total: Permanent Army 30,235 30,617


Total Army 47,135 47,867

Air Force[1]





Gap Year Participants[3] 58 –

Sub-total: Permanent Air Force 14,573 14,216


Total Air Force 17,373 17,116

APS[1]

Senior Executives[5] 164 165

Senior Officers[2] 6,253 6,416

Other APS Staff 14,239 15,067

Total APS 20,656 21,648

Contractors[6] 675 644

Total Workforce 102,204 103,695


41

WORKFORCE EXPENSES

Table 18: Workforce Expenses for the Department of Defence (including DMO)

Note1. This includes estimates for Reservists.

2011-12Budget

Estimate$m


$m


$m


$mMilitary employees

Salary, allow ances, superannuation and leave[1] 6,645.4 6,576.2 6,864.0 7,141.8Housing 696.6 714.3 751.7 727.6Health services 330.9 395.2 433.8 467.5Fringe Benefits Tax 348.3 347.0 359.2 367.1

Total military employee expense 8,021.2 8,032.6 8,408.8 8,703.9Civilian employees

Salary, allow ances, superannuation and leave 2,135.5 2,209.5 2,248.4 2,363.8Other expenses including Fringe Benefits Tax 12.7 12.8 13.0 13.4

Total civilian employee expenses 2,148.2 2,222.3 2,261.3 2,377.2Total employee expenses 10,169.4 10,254.9 10,670.1 11,081.1


42

Section 2: Outcomes and Planned Performance

2.1 Outcomes and Performance Information

Government outcomes are the intended results, impacts or consequences of actions by the Government on the Australian community. Commonwealth programs are the primary vehicle by which government agencies achieve the intended results of their outcome statements. Agencies are required to identify the programs which contribute to Government outcomes over the Budget and forward years.

Each outcome is described below together with its related programs, specifying the performance indicators and targets used to assess and monitor the performance of Defence in achieving Government outcomes.

Figure 3: Structure of Defence’s Outcomes

Program 1.15

Defence Force

Superannuation

Nominal Interest

Program 1.14

Defence Force

Superannuation

Benefits

Program 3.1

Defence Contribution

to National Support

Tasks in Australia

Program 2.1

Operations

Contributing to the

Security of the

Immediate

Neighbourhood

Program 2.2

Operations

Supporting Wider

Interests

Program 1.1

Office of the

Secretary & CDF

Program 1.2

Navy Capabilities

Program 1.3

Army Capabilities

Program 1.4

Air Force

Capabilities

Program 1 5

Intelligence

Capabilities

Program 1.6

Defence Support

Program 1.7

Defence Science

and Technology

Program 1.8

Chief Information

Officer

Program 1.9

Vice Chief of the

Defence Force

Program 1.10

Joint Operations

Command

Program 1.16

Housing

Assistance

Program 1.11

Capability

Development

Program 1.17

Other

Administered

Program 1.12

Chief Finance

Officer

Program 1.13

People Strategies

and Policy

Administered ProgramsDepartmental Programs Departmental ProgramsDepartmental Programs

Outcome 3

Support to the Australian community

and civilian authorities as requested by

Government

Outcome 1

The protection and advancement of Australia’s

national interests through the provision of military

capabilities and the promotion of security and stability

Outcome 2

The advancement of Australia’s strategic interests

through the conduct of military operations and other

tasks as directed by Government

DEFENCE


43

OUTCOME 1 STRATEGY

Outcome 1 addresses the strategic objectives set out in the 2009 Defence White Paper, namely:

• shaping and building a defence capability that provides options for a credible response wherever Australia's security interests are engaged

• building strong security relationships both regionally and globally.

The primary focus of Outcome 1 is on maintaining the capacity to support current commitments and provide response options to the Government to meet the range of potential future security contingencies. It also covers working collaboratively with our neighbours and the broader international defence community, and contributing to coalition operations in support of Australia's national interests. As well as the provision of military capabilities, this outcome encompasses all of the policy, command and support functions undertaken by the organisation.

Defence's administered appropriations relating to superannuation, housing support services for current and retired Defence personnel and Other Administered are covered by Outcome 1.

Apart from supporting current operations, which are described in detail under Outcomes 2 and 3, the priorities that will be progressed under Outcome 1 in 2011-12 are:

• working towards delivering the capabilities identified in the Defence White Paper that will form the foundation of our future Defence capabilities

• implementing the Strategic Reform Program (SRP) to improve effectiveness and efficiency and enhance governance

• improving cost-consciousness across Defence

• supporting the program of efficiency and economy measures to ensure that all areas of Defence are fully able to support and deliver future military capability requirements

• continuing the strong commitment on the recruitment and retention of ADF personnel

• implementing the Government’s response to the Review of the Defence Accountability Framework to increase the professional and personal accountability of Defence personnel, and to improve Defence management and decision-making processes.

Outcome Expense Statement

Table 19 provides an overview of the total expenses for Outcome 1, by Program.

Outcome 1: The protection and advancement of Australia’s national interests through the provision of military capabilities and the promotion of security and stability


44

Table 19: Total budgeted resources available for Outcome 1

2010-11Revised

Estimate$'000

2011-12Budget

Estimate$'000


$'000


$'000


$'000Program 1.1 Office of the Secretary and CDFRevenues from other sources 1,467 1,462 1,389 1,407 1,427Departmental outputs 176,353 172,623 169,271 167,400 169,798Program 1.2 Navy CapabilitiesRevenues from other sources 157,720 171,647 177,630 183,386 186,887Departmental outputs 3,804,946 4,051,659 4,149,257 4,120,065 4,138,510Program 1.3 Army CapabilitiesRevenues from other sources 150,328 165,222 174,938 191,605 200,129Departmental outputs 4,921,024 4,926,814 4,991,277 5,170,260 5,437,354Program 1.4 Air Force CapabilitiesRevenues from other sources 238,648 263,414 274,718 284,770 293,662Departmental outputs 3,806,055 4,007,321 4,053,528 4,132,325 4,267,454Program 1.5 Intelligence CapabilitiesRevenues from other sources 12,427 15,833 15,494 16,341 15,754Departmental outputs 510,285 530,650 517,213 543,817 565,061Program 1.6 Defence SupportRevenues from other sources 287,307 284,803 296,824 294,328 269,190Departmental outputs 3,385,488 3,528,819 3,495,341 3,545,361 3,483,029Program 1.7 Defence Science and TechnologyRevenues from other sources 46,436 33,668 34,940 36,141 37,229Departmental outputs 447,291 433,695 441,486 423,520 448,701Program 1.8 Chief Information OfficerRevenues from other sources 9,658 9,886 10,477 11,903 12,925Departmental outputs 830,130 779,918 748,506 668,470 616,370Program 1.9 Vice Chief of the Defence ForceRevenues from other sources 446,416 435,497 426,750 432,033 434,987Departmental outputs 844,363 855,607 949,455 969,036 1,004,345Program 1.10 Joint Operations CommandRevenues from other sources 385 380 386 395 407Departmental outputs 42,625 46,328 47,158 45,903 48,507Program 1.11 Capability DevelopmentRevenues from other sources 82,833 105,821 124,375 146,828 172,430Departmental outputs 531,733 747,849 1,111,390 1,971,890 2,576,197Program 1.12 Chief Finance OfficerRevenues from other sources 186,876 21,491 23,204 23,558 23,870Departmental outputs 211,756 644,488 591,015 843,198 717,342Program 1.13 People Strategies and PolicyRevenues from other sources - - - - -Departmental outputs 259,446 326,240 331,876 375,702 392,535


45

2010-11Revised

Estimate$'000

2011-12Budget

Estimate$'000


$'000


$'000


$'000

Defence Force Retirement Benefits Act, 1948 Part 1, s.15D and VIC, s.82ZJ (1)[1] 35,000 30,000 28,000 27,000 25,000Defence Force Retirements and Death Benefits Act, 1973 Part XII, s.125 (3) [1] 1,655,000 1,591,000 1,574,000 1,559,000 1,545,000Military Superannuation and Benefits Act, 1991 Part V, s.17[1] 1,958,223 2,194,443 2,383,223 2,585,103 2,795,883Total Administered expenses 3,648,223 3,815,443 3,985,223 4,171,103 4,365,883Administered revenues from other sources 1,090,000 1,165,332 1,234,338 1,305,198 1,376,479Program 1.14 & 1.15 2,558,223 2,650,111 2,750,885 2,865,905 2,989,404Program 1.16 Housing AssistanceDefence Force (Home Loan Assistance) Act , 1990 Part IV, s.38[1] 3,789 3,547 2,871 2,253 1,768Defence Home Ownership Assistance Scheme Act 2008 Part VI, s.84 103,950 109,933 117,956 121,988 125,695Total Administered expenses 107,739 113,480 120,827 124,241 127,463Administered revenues from other sources 9,226 9,811 10,349 10,808 11,266Program 1.16 98,513 103,669 110,478 113,433 116,197Program 1.17 Other AdministeredAdministered revenues from other sources 95,538 91,351 92,360 96,321 98,557Program 1.17 -95,538 -91,351 -92,360 -96,321 -98,557Total resourcingTotal Departmental outputs 19,771,495 21,052,011 21,596,773 22,976,947 23,865,203Total Administered 2,561,198 2,662,429 2,769,003 2,883,017 3,007,044Total Departmental revenue from o her sources 1,620,501 1,509,124 1,561,125 1,622,695 1,648,897Total Administered revenue from o her sources 1,194,764 1,266,494 1,337,047 1,412,327 1,486,302Equity injection 2,753,907 2,909,317 1,949,867 2,438,876 2,492,102Total resources for Outcome 1 27,901,865 29,399,375 29,213,815 31,333,862 32,499,548

Program 1.14 Defence Force Superannuation Benefits and 1.15 Defence Force Superannuation Nominal Interest


46

CONTRIBUTIONS TO OUTCOME 1

Program 1.1: Office of the Secretary and CDF

Program 1.1 Objective

The Office of the Secretary and CDF (OSCDF) Group's primary objective in delivering Program 1.1 is to support the Secretary and CDF so they can better respond to the demands of high operational tempo, deliver high quality policy advice to the Government, drive organisational reform and exercise strategic leadership.

The OSCDF Group manages the vast array of operational, policy, commercial, regulatory, risk and other matters associated with the Defence mission of defending Australia and its national interests.

A key focus during 2011-12 will be driving implementation of the Defence Strategic Reform measures across Defence.

The Group comprises the small personal offices of the Secretary and CDF; the Strategy Executive; the Strategic Reform and Governance Executive; the Audit and Fraud Control Division and a number of Military Justice agencies.

Reviews of the culture of the ADF and the Department of Defence will target issues relating to: the treatment of women in the ADF and Defence, and the leadership pathways available to women; the use of alcohol in the ADF; the impact of social media on Defence; and personal conduct issues in the ADF.

Another review will examine the management of complaints, with specific reference to the treatment of victims, transparency of processes and the jurisdictional interface between military and civil law.

Separately, an independent review will be conducted by the external legal firm DLA Piper to assess allegations of sexual and other forms of abuse that have been received since the ADFA 'Skype' incident, and to make recommendations as to how these allegations should be dealt with.


47

Table 20: Cost Summary for Program 1.1 Office of the Secretary and CDF

2010-11Revised

Estimate$'000

2011-12Budget

Estimate$'000


$'000


$'000


$'000Expenses

Employees 60,624 60,318 58,482 59,321 61,829Suppliers 112,383 108,873 107,299 104,727 104,594Grants 3,602 3,617 3,686 3,766 3,849Deprecia ion and amortisa ion 1,211 1,277 1,193 993 953Finance Cost - - - - -Write-dow n of assets and impairment of assets - - - - -Net losses from sale of assets - - - - -Other expenses - - - - -

Total expenses 177,820 174,085 170,660 168,807 171,225Income

RevenuesGoods and services 1,467 1,462 1,389 1,407 1,427Other revenue - - - - -Total Revenue 1,467 1,462 1,389 1,407 1,427GainsReversals of previous asset w rite-dow ns - - - - -Net gains from sale of assets - - - - -Other gains - - - - -Total gains - - - - -

Total income 1,467 1,462 1,389 1,407 1,427Program 1.1 Office of the Secretary and CDF 176,353 172,623 169,271 167,400 169,798


48

Program 1.1 Deliverables

• oversee, integrate and coordinate the SRP

• manage the SRP Strategic Planning Reform Stream

• ensure Group-specific SRP reform and savings initiatives have been achieved

• enhance Defence's governance framework, through clearer authority and accountability and more rigorous performance management, risk management, assurance and audit processes

• ensure Defence input to Cabinet and the National Security Committee of Cabinet is timely, relevant and appropriately robust

• ensure policy advice provided to the Government is accurate, timely and responsive, and offers practical and cost-effective approaches to fulfil the Government's defence responsibilities

• ensure both Defence strategic policy and corporate strategy align with Government direction and priorities, provide clear guidance for the activities of Defence, and are responsive to external developments

• provide overarching strategic guidance, policy and supporting plans to inform Defence decision making including the development and use of Defence capability and the deployment of the ADF

• develop Defence policy guidance in emerging key areas of space and cyber

• ensure Defence's international relationships complement broader foreign policy goals, promote security and enhance productive Defence partnerships, particularly regionally, including through the Defence Cooperation Program as discussed on page 49

• provide policy advice on arms control and international collaborative programs

• manage export control of defence and strategic goods

• implement the legislation for the Australia-United States Defence Trade Cooperation Treaty and appropriate Treaty guidance to Australian Defence industry

• continue implementation of the reforms to the Military Justice System

• promote and protect Defence's reputation by increasing public awareness of Defence activities and achievements

• strengthen Defence capabilities to support engagement in media-related activities

• provide overarching strategic guidance, policy and supporting plans to implement the recommendations of the reviews into the culture of the ADF and Defence.

Program 1.1 Key Performance Indicators

• the Ministers are satisfied with the timeliness and quality of advice, including Cabinet documentation, provided by the Department

• group-specific outcomes and programs are delivered within allocated resources and meet directed efficiency, economy measures and economy and cultural measures

• staff skills are developed and personnel management practices successfully balance competing priorities

• policy guidance is forward-looking, timely, innovative and practical.


49

Defence Cooperation Program

Defence's international engagement works as part of the Government's broader foreign policy goals to build confidence and transparency in the Asia-Pacific Region and globally. The Defence International Engagement Plan is a robust business plan, managing Defence's international engagement and the Defence Cooperation Program (‘the Program’).

The aims and objectives of the ‘the Program’ are to:

• contribute to regional security

• work with allies, regional partners and others to shape a stable environment

• consolidate acceptance of Australia as a key partner on regional security issues

• encourage and assist the development of defence self-reliance within regional countries.

These objectives are enhanced by assisting regional security forces in the areas of:

• defence reform and governance

• strategic planning

• analysis

• command and control

• counter terrorism

• maritime security

• peacekeeping

• humanitarian assistance and disaster relief

• communications

• logistic support

• education and training

• countering the threat of improvised explosive devices

• preparedness for chemical, biological, radiological and explosive incidents and pandemics.

By assisting the development of professional and sustainable defence forces and Pacific police forces in the region, ‘the Program’ is improving the ability of our partners to contribute to national and regional security objectives. Australian assistance includes ADF advisers, a range of training initiatives and bilateral exercises, capacity building initiatives, and equipment and infrastructure projects.

A key element of ‘the Program’ is the Pacific Patrol Boat Program, through which Australia has provided 22 Patrol Boats (with associated personnel and technical assistance) to 12 countries. The Program engages Pacific navies and police maritime wings and is designed to help Pacific island countries improve their ability to independently police their maritime zones. Other important areas of focus are the development of the East Timor Defence Force and our support to Papua New Guinea's Defence Reform Program.


50

Table 21: Defence Cooperation Program budget 2011-12[1]

Notes1. Military Employee Expenses have been transferred to parent Service Groups and are consequently not included in the table.2. The Defence International Training Centre provides training in Australia to the defence forces of South-East Asia and South Pacific nations and

to other selected overseas personnel. The Defence International Training Centre is managed by Air Force Group.

Table 22: South Pacific region budget 2011-12

Table 23: South-East Asia region budget 2011-12

Region 2010-11Estimated Actual

$’000


$’000Papua New Guinea 8,638 10,545

South Pacific Region 40,086 36,569

South-East Asia 19,037 17,400

Other regional activities 5,080 5,757

Defence International Training Centre[2] 4,848 5,091

Total 77,689 75,362

South Pacific 2010-11Estimated Actual

$’000


$’000East Timor 6,054 6,105

Vanuatu 675 1,046

Solomon Islands 478 865

Tonga 1,250 1,744

Samoa 136 69

Cook Islands 133 99

Republic of the Marshall Islands 351 300

Federates States of Micronesia 169 154

Tuvalu 344 297

Kiribati 280 257

Palau 164 131

DCP Housing 1,307 1,514

Pacific Patrol Boat Program 28,745 23,988

Total 40,086 36,569

South-East Asia 2010-11Estimated Actual

$’000


$’000Singapore 80 77

Philippines 4,673 3,178

Thailand 2,443 3,079

Malaysia 3,413 3,445

Indonesia 5,552 4,685

Vietnam 1,700 1,800

Cambodia and Laos 1,142 1,109

Brunei 34 27

Total 19,037 17,400


51

Program 1.2: Navy Capabilities


The Navy’s primary objective in delivering Program 1.2 is to provide maritime forces that contribute to the ADF’s capacity to defend Australia, contribute to regional security, support Australia’s global interests, shape the strategic environment and protect our national interests. This is achieved by providing maritime patrol and response, interdiction and strategic strike, protection of shipping and offshore territories and resources, maritime intelligence collection and evaluation, hydrographic and oceanographic operations, and escort duties. Peacetime activities include maritime surveillance and response within Australia’s offshore maritime zones, hydrographic, oceanographic and meteorological support operations, humanitarian assistance, and maritime search and rescue.

In 2011-12, the Navy will aim to maintain sufficient maritime combatant forces to deploy on operations, as directed by the CDF, while managing key challenges and capability risks such as the state of the amphibious and aviation forces, shortages of trained personnel and upgrades to a number of major fleet units. The amphibious capability will be enhanced in 2011-12 with the announcement in April 2011 by the Minister for Defence of the purchase of the Bay class Landing Ship Dock (LSD) Largs Bay, from the United Kingdom. The acquisition will ensure the Navy has the amphibious capability it requires for operations and humanitarian support in the Australian region as part of the overall amphibious capability transition to the Canberra class Landing Helicopter Dock (LHD) ships from 2014.

The Navy will continue to support ongoing ADF operations and conduct operational deployments as directed by the CDF, and maintain a rapid response to provide humanitarian assistance and disaster relief within the capacity of current capability. Focus will also continue towards the future introduction of new capabilities in the areas of: air warfare; littoral warfare; amphibious lift; anti-ship missile defence and naval aviation.

The New Generation Navy (NGN) program will continue to drive cultural reform within the Navy, dovetailing with the Strategic Reform Program and the work of the Directorate of Navy Continuous Improvement. These are the key programs that will drive the transformation of Navy in order to meet Navy, Defence and Government reform objectives. NGN includes projects that: embed Navy’s 10 Signature Behaviours; reform the reporting and promotions systems; develop the individual as the ethical leader; manage workforce respite and predictability; deliver efficiencies within the training pipeline; provide for flexible careers management; and contemporise the Navy Divisional System.


52

Table 24: Cost Summary for Program 1.2 Navy Capabilities

Program 1.2 Deliverables• maintain preparedness of Navy capability as directed by the CDF

• provide timely, accurate and high quality advice on Navy capabilities to the CDF, the Secretary and the Government

• deliver Group-specific reform and savings to the SRP, without detriment to agreed levels of Navy capability and safety.

Navy's capability-based deliverables are detailed in Tables 25, 26 and 27.

2010-11Revised

Estimate$'000

2011-12Budget

Estimate$'000


$'000


$'000


$'000Expenses

Employees 1,636,078 1,671,314 1,744,004 1,811,006 1,885,523Suppliers 1,178,646 1,422,620 1,486,735 1,405,195 1,430,637Grants - - - - -Deprecia ion and amortisa ion 962,097 919,197 877,546 861,348 778,978Finance Cost 2,095 14,320 13,262 14,740 15,187Write-dow n of assets and impairment of assets 183,750 195,855 205,340 211,162 215,072Net losses from sale of assets - - - - -Other expenses - - - - -

Total expenses 3,962,666 4,223,306 4,326,887 4,303,451 4,325,397Income

RevenuesGoods and services 41,604 50,561 52,770 56,459 58,974Other revenue 72 88 77 92 82Total Revenue 41,676 50,649 52,847 56,551 59,056GainsReversals of previous asset w rite-dow ns 116,044 120,998 124,783 126,835 127,831Net gains from sale of assets - - - - -Other gains - - - - -Total gains 116,044 120,998 124,783 126,835 127,831

Total income 157,720 171,647 177,630 183,386 186,887Program 1.2 Navy Capabilities 3,804,946 4,051,659 4,149,257 4,120,065 4,138,510


53

Table 25: Navy Deliverables (Unit Ready Days)[1]

Notes1. Unit Ready Days (URD) are the aggregate number of days that constituent force elements are available for tasking.2. The Navy does not have a mature system to forecast non-financial performance data with a high degree of accuracy beyond the current

financial year. The forecasts provided over the forward years are based on the best information available.3. Major Combatants include the Adelaide class frigates, Anzac class frigates, Hobart class air warfare destroyers (from 2014-15) and

submarines. One Adelaide class frigate is planned to be withdrawn from operational service from 2013-14 subject to the delivery schedule of the first Hobart class air warfare destroyer.

4. Minor Combatants include patrol boats, coastal mine hunters, and auxiliary minesweepers. Two coastal mine hunters, HMA Ships Hawkesbury and Norman, were placed in extended readiness from December 2009. The roles of the two Minesweeper Auxiliaries (MSAs), Bandicoot and Wallaroo, have been reduced from mine sweeping training and essential support to nuclear power warship visit support only. The MSAs were placed on 'short-term reactive notice for sea' from October 2010 until procurement of a replacement capability is undertaken; and remain available for national tasks as directed.

5. Amphibious and Afloat Support comprises the oil tanker, replenishment ship, amphibious landing ships, heavy landing ship, heavy landing craft and Canberra class landing helicopter dock (LHD) from 2014. The reducing number of URD over the forward estimates period is due to the scheduled withdrawal from operational service of a number of ships as part of the overall amphibious capability transition to the Canberra class LHD. The first LHD is anticipated to commence operational trials and evaluation from 2014-15.

6. Maritime Teams comprise clearance diving teams, the deployable geospatial support team, and mobile meteorological and oceanographic teams.

7. Hydrographic Force comprises the hydrographic ships, survey motor launches, chart production office, and meteorological and oceanographic centres.

Table 26: Navy Deliverables (products)

Notes1. The Navy does not have a mature system to forecast non-financial performance data with a high degree of accuracy beyond the current

financial year. The forecasts provided over the forward years are based on the best information available.2. The production of new electronic navigational chart cells and chart coverage of the Australian Charting Area will complete in 2011-12, when it is

anticipated that all cell boundaries will be defined and will remain unchanged. From 2012-13 onwards, chart production efforts will focus on maintenance, updates and continuous improvement of the content of existing products.

Deliverables 2010-11RevisedBudget

2011-12Budget[2]

2012-13Forward

year 1

2013-14Forward

year 2

2014-15Forward

year 3

18 Major Combatants[3] 3,715 3,771 4,325 3,681 3,604

22 Minor Combatants[4] 5,573 5,696 5,566 5,566 5,566

11 Amphibious and Afloat Support[5] 3,076 2,908 1,834 1,808 1,296

5 Maritime Teams[6] 1,820 1,830 1,825 1,825 1,825

9 Hydrographic Force[7] 2,883 3,060 2,939 3,051 2,883


2011-12Budget[1]

2012-13Forward

year 1

2013-14Forward

year 2

2014-15Forward

year 3Navigational Chart Production:

New paper charts/editions 50 50 50 50 50

New electronic navigational chart cells 100 50[2] - - -


54

Table 27: Navy Deliverables (flying hours)

Notes1. The Navy does not have a mature system to forecast non-financial performance data with a high degree of accuracy beyond the current

financial year. The forecasts provided over the forward years are based on the best information available.2. Seahawk flying hours will increase from 2011-12 following the completion of an upgrade and other issues that limited flying hours in previous

years. Seahawks will continue carrying an additional tasking burden in the absence of Super Seasprite helicopters until a replacement capability is introduced from 2014 under project A R 9000 Phase 8 Future Naval Aviation Combat System.

3. Sea Kings are planned to be withdrawn from operational service in December 2011 and will require less than the previous full year's flying hours. Multi Role Helicopters (MRH-90) are progressively replacing the Sea Kings. The MRH-90s currently allocated to Navy are planned to fly 700 hours in 2011-12, these hours are part of the total MRH-90 flying hours reflected in the Army Aviation section.


2011-12Budget[1]

2012-13Forward

year 1

2013-14Forward

year 2

2014-15Forward

year 3

16 Seahawks 3,600 4,200[2] 4,200 4,200 4,200

6 Sea Kings 1,100 400[3] - - -

13 Squirrels 4,000 4,000 4,000 4,000 4,000

1 Laser airborne depth sounder aircraft 980 1,120 1,120 1,120 1,120


• achieve levels of preparedness directed by the CDF for military response options with a warning time of less than 12 months

• achieve a level of training that maintains core skills and professional standards across all outputs

• achieve mission capability for assigned tasks

• achieve Hydroscheme 2011-2013 data and surveying tasking requirements to meet national hydroraphic surveying and charting obligations.


55

Program 1.3: Army Capabilities


Army's primary objective in delivering Program 1.3 is to contribute to the achievement of the Government's defence objectives through the provision of capabilities for land and special operations. Army also provides forces for peacetime national tasks, including forces with a capability to enhance the national domestic security response to terrorist, chemical, biological radiological or explosive incidents.

Army's first priority is to continue to support forces and individuals deployed on operations. During 2011-12 Army will remain heavily committed across a spectrum of operations at the domestic, regional and global level. Army will continue to sustain and preserve the ability to deploy and sustain a brigade group and a battalion group, in different areas of operation, for a prolonged period of time in our primary operational environment. During 2011-12 Army will continue with the Adaptive Army, Rebalancing the Army, and Reserve reforms to ensure that Army's internal structures and mix of full-time and part-time land force elements can meet its objectives. The Army will continue further development and refinement of the Army Sustainment Campaign Plan and the force generation cycle to ensure Army is capable of supporting current operations; is concurrently postured to meet the challenges of future operations; and can meet its Force 2030 milestones. In doing so Army will ensure it is able to employ land warfare capabilities required in an adaptive and changing environment.

Table 28: Cost Summary for Program 1.3 Army Capabilities

2010-11Revised

Estimate$'000

2011-12Budget

Estimate$'000


$'000


$'000


$'000Expenses

Employees 3,266,211 3,257,357 3,331,723 3,487,888 3,634,236Suppliers 1,100,775 1,249,172 1,240,262 1,273,446 1,406,527Grants 159 80 82 284 84Deprecia ion and amortisa ion 571,058 435,664 430,363 424,913 412,142Finance Cost 61 820 592 1,154 1,378Write-dow n of assets and impairment of assets 133,088 148,943 163,193 174,180 183,116Net losses from sale of assets - - - - -Other expenses - - - - -


RevenuesGoods and services 59,013 67,930 71,235 75,378 79,652Other revenue 15,391 15,637 15,982 16,384 16,793Total Revenue 74,404 83,567 87,217 91,762 96,445GainsReversals of previous asset w rite-dow ns 81,104 86,406 91,840 95,936 98,964Net gains from sale of assets -5,180 -4,751 -4,119 3,907 4,720Other gains - - - - -Total gains 75,924 81,655 87,721 99,843 103,684

Total income 150,328 165,222 174,938 191,605 200,129Program 1.3 Army Capabilities 4,921,024 4,926,814 4,991,277 5,170,260 5,437,354


56

Table 29: Army Deliverables (Rate of Effort - flying hours)

Notes1. Black Hawk sustainment extended one year.2. 173 Sqn ( B-206 Kiowa) Rate of Effort (ROE) authorised until 2013 when it reverts back to steady ROE.3. ROE may vary over the years depending on aircraft operational availability.4. Six MRH-90 are allocated for Navy use.5. Overachievement of Black Hawk ROE (+1100h) due to increased individual and collective training commitment.6. Underachievement of Kiowa ROE(-2000h) due to reduction of aircraft availability associated with Kiowa Navigation Rationalisation Project

(KNRP) modification.


• implement reform through the Adaptive Army framework, Army Continuous Modernisation Plan and the Army Plan while continuing preparation of Force Elements for operational commitments and contingencies

• deliver Group specific reform and savings to the SRP, without detriment to agreed levels of Army's capability, including the revamping of Army's governance, risk, budgeting and performance achievement management

• develop the Rebalancing the Army and Reserve Plan

• undertake collective training to ensure force elements are prepared for deployment

• improve the linkage between resource inputs and collective training outputs within Army's force generation and preparation continuum

• deliver a single training continuum that unifies the majority of Army's conventional individual and collective training, namely force generation

• conduct force generation and force preparation for Special Operations

• in consultation with the Capability Development Group and the Defence Materiel Organisation, continue to develop the Army's combat capabilities through improvements in mobility , firepower and force protection

• introduce new capabilities that meet operational requirements

• continue to contribute to domestic security operations

• maintain preparedness of Army capability as directed by the CDF.


2011-12Budget

2012-13Forward

year 1

2013-14Forward

year 2

2014-15Forward

year 36 CH-47D Chinook 1,570 1,570 1,570 1,570 1,570

34 S-70A-9 Black Hawk [1] 8,600[5] 8,100 7,125 4,375 2,250

41 B-206 Kiowa [2] 7,360[6] 9,360 9,360 6,360 6,360

22 Armed Reconnaisannce Helicopter (ARH) Tiger [3] 4,150 6,635 7,147 7,147 7,147

46 Multi Role Helicopter (MRH-90)[4] 1,500 3,000 5,000 7,000 9,000


• achieve levels of preparedness as directed by the CDF

• execute force generation and preparation in a manner that balances operational commitments and contingency planning


• provide timely, accurate and considered advice on Army capabilities to the CDF, Secretary and the Government.


57

Program 1.4: Air Force Capabilities


The Air Force primary objective is to defend Australia and the national interest by providing immediate and responsive military options across the spectrum of operations as part of a whole-of-government joint or coalition response, either from Australia or deployed overseas. This is achieved through the key air power roles-control of the air; precision strike; intelligence, surveillance and reconnaissance; and air mobility-all enabled by combat support and operational support functions. The capabilities provided by the Air Force offer a unique combination of flexibility, reach, precision and speed of response, and the ability to generate integrated kinetic and non-kinetic air and space effects across the sea, land, air, space and cyber operating domains.

Air Force capabilities are also employed in a range of non-military activities such as search and rescue, disaster relief, humanitarian assistance, coastal and maritime surveillance, evacuation of civilians from trouble spots and other protective functions.

As part of the ongoing SRP, the Air Force is conducting a wholesale review of the processes for delivering capability, and is moving to a new, more comprehensive business model. Subsequently, through a multi-year program, the Air Force will implement a series of sustainable reforms and will continue to foster a cost-conscious culture.

Table 30: Cost Summary for Program 1.4 Air Force Capabilities

2010-11Revised

Estimate$'000

2011-12Budget

Estimate$'000


$'000


$'000


$'000Expenses

Employees 1,695,546 1,684,470 1,752,232 1,816,869 1,883,950Suppliers 1,252,211 1,602,870 1,588,698 1,630,721 1,711,609Grants - - - - -Deprecia ion and amortisa ion 875,928 745,124 737,782 709,216 698,683Finance Cost 245 3,281 2,369 4,617 5,511Write-dow n of assets and impairment of assets 220,773 234,990 247,165 255,672 261,363Net losses from sale of assets - - - - -Other expenses - - - - -


RevenuesGoods and services 100,982 121,226 127,965 135,259 142,796Other revenue - - - - -Total Revenue 100,982 121,226 127,965 135,259 142,796GainsReversals of previous asset w rite-dow ns 137,666 142,188 146,753 149,511 150,866Net gains from sale of assets - - - - -Other gains - - - - -Total gains 137,666 142,188 146,753 149,511 150,866

Total income 238,648 263,414 274,718 284,770 293,662Program 1.4 Air Force Capabilities 3,806,055 4,007,321 4,053,528 4,132,325 4,267,454


58

Table 31: Air Force Deliverables (flying hours)

Notes1. Figures include: Training; Forward Area Control; and Aerospace Operational Test Support aircraft. The revised 2010-11 figure and the

reduction from 2011-12 and forward years is due to reduced student pilot throughput. 2. The Air Force is investigating extending the planned withdrawal date from June 2013 due to delays in the AIR 8000 airlift replacement project.3. The figures for 2013-14 and forward years will depend on the C-130H withdrawal and the redeployment of the C-130H workforce to support the

C-130J.4. The increase above 4,000 hours per year is dependant on acquiring a fifth aircraft.5. Due to delays in Project AIR 5402, the revised 2010-11 figure will not be achieved. Future figures will depend on the finalisation of the aircraft

delivery schedule and associated training programs.6. The B737 BBJ lease contracts will expire in 2014 and the 2014-15 figures will depend on transitioning to the replacement capability.7. The lease contracts for this aircraft will expire in 2014, and 2014-15 figures will depend on transitioning to the replacement capability.8. This figure increased in 2011-12 to allow for full operational capability achievement by December 2012.9. The reduction in 2011-12 and forward years is due to the reduced postgraduate pilot throughput.


2011-12Budget

2012-13Forward

year 1

2013-14Forward

year 2

2014-15Forward

year 364 PC-9[1] 21,852 17,852 17,852 17,852 17,852

16 B300 King Air 350 10,400 11,400 11,400 11,400 11,400

12 C-130H Hercules[2] 3,200 3,200 3,200 Plannedwithdrawal

Plannedwithdrawal

12 C-130J Hercules[3] 7,350 7,350 7,350 7,350 7,350

4 C-17 Globemaster III[4] 4,000 4,500 4,800 4,800 4,800

5 KC-30A[5] 500 2,160 2,950 3,100 3,100

2 B737 BBJ[6] 1,600 1,600 1,600 1,600 1,600

3 CL604 Challenger[7] 2,403 2,403 2,403 2,403 2,403

19 P-3 Orion 7,900 7,900 7,900 7,900 7,900

6 B737 Airborne Early Warning & Control Aircraft

2,000 2,600 3,600 3,600 3,600

71 F/A-18A/B Hornet 13,000 13,000 13,000 12,000 12,000

24 F/A-18F Super Hornet[8] 2,100 4,800 4,800 4,800 4,800

18 F-111 800 Withdrawn Withdrawn Withdrawn Withdrawn

33 Hawk Lead-in Fighter[9] 8,000 7,500 7,500 7,500 7,500


• achieve levels of preparedness as directed by the CDF for military response options within a warning time of less than 12 months


• meet operational requirements on time and within agreed resources

• grow the cost-conscious culture

• execute force generation and preparation whilst maintaining a balance between operational commitments and contingency planning

• provide accurate and timely advice that meets CDF and Government requirements.


59

Program 1.5: Intelligence Capabilities


Intelligence and Security Group delivers Program 1.5 through the two main objectives of delivering intelligence capability for Defence and Government; and leading the development of security policy, standards and plans to meet Defence's protective security requirements and provide information security services to Government.

As Defence's ability to preserve its intelligence capability edge is critically dependent on the availability of skilled and experienced ADF and civilian personnel, the Group has increased and broadened its recruitment and retention strategies through programs, such as targeted university recruitment drives, incentives for staff with specific language and technical talents, and enhanced use of online recruitment tools. These initiatives will continue in 2011-12.

The Defence Security Authority leads the Defence security community in minimising the security risks to Defence's people, information and material. The Authority is responsible for developing security policy, reporting on security performance, investigating serious security incidents and undertaking personnel security vetting for the majority of Commonwealth agencies and related industry.

Following Government endorsement in May 2011, Defence will commence implementation of the recommendations contained in Dr Allan Hawke's Woomera Prohibited Area Review. A focus of this activity will be establishing the new Woomera Prohibited Area Coordination Office.

Table 32: Cost Summary for Program 1.5 Intelligence Capabilities

2010-11Revised

Estimate$'000

2011-12Budget

Estimate$'000


$'000


$'000


$'000Expenses

Employees 245,336 253,962 265,228 274,891 289,499Suppliers 233,418 252,188 237,771 258,859 265,130Grants - - - - -Deprecia ion and amortisa ion 38,960 34,975 23,898 20,118 19,253Finance Cost - - - - -Write-dow n of assets and impairment of assets 4,998 5,358 5,810 6,290 6,933Net losses from sale of assets - - - - -Other expenses - - - - -



Total income 12,427 15,833 15,494 16,341 15,754Program 1.5 Intelligence Capabilities 510,285 530,650 517,213 543,817 565,061


60


• provide timely, accurate and high quality intelligence and security support in accordance with Government priorities to support the ADF, policy and wider security operations

• deliver enhanced capabilities to better exploit next generation technologies, improve intelligence assessment, and enhance the security of the Government's information

• provide advice and assistance to the Government on the security and integrity of electronic information, cryptography and communications technology

• meet the Australian Government Security Vetting Agency's key performance results as specified in the agency's Service Level Charter

• ensure the effectiveness of the intelligence and security governance and compliance framework

• strengthen the workforce through targeted recruitment, retention and training initiatives

• ensure effective and efficient transfer of expertise, capabilities and intelligence across key international partnerships, and strengthen collaboration with national agencies

• contribute to SRP outcomes

• establish the Woomera Prohibited Area Coordination Office and commence implementation of the Woomera Prohibited Area Review recommendations.


• deliver intelligence and security services to meet Defence and Government requirements

• develop next generation intelligence, geospatial and security capabilities

• strengthen the approach to security across Defence and Government

• achieve best practice in governance and compliance

• ensure that the intelligence and security workforce is developed and skilled

• deliver capability dividends through international and national partnerships.


61

Program 1.6: Defence Support


Program 1.6 is delivered by the Defence Support Group (DSG). DSG is responsible for delivering most of the shared services that support the ADF and Defence Groups, and is fundamental to generating Defence capability through the services it provides.

DSG supports Defence through the provision of a range of products and services including: legal services; personnel administration; housing; a range of personnel support functions; business services; base support services including catering, accommodation, cleaning and grounds maintenance; and managing, developing and sustaining the Defence estate, including the substantially increased Major Capital Facilities Program.

Linked to: Administered Programs 1.14 and 1.15 (Defence Force Superannuation Benefits) and Program 1.16 (Housing Assistance).

Table 33: Cost Summary for Program 1.6 Defence Support

2010-11Revised

Estimate$'000

2011-12Budget

Estimate$'000


$'000


$'000


$'000Expenses

Employees 1,001,186 990,944 976,693 1,005,514 973,042Suppliers 1,733,307 1,849,146 1,812,232 1,781,393 1,711,165Grants 1,417 1,440 1,473 1,509 1,548Deprecia ion and amortisa ion 795,360 822,400 857,904 897,535 906,389Finance Cost 63,755 69,554 63,048 66,035 64,941Write-dow n of assets and impairment of assets 67,270 73,229 79,880 86,746 94,155Net losses from sale of assets - - - - -Other expenses 10,500 6,909 935 957 979


RevenuesGoods and services 263,068 266,702 283,026 299,498 317,789Other revenue 9,670 6,373 6,535 6,715 6,902Total Revenue 272,738 273,075 289,561 306,213 324,691GainsReversals of previous asset w rite-dow ns 3,557 4,395 5,482 6,406 7,406Net gains from sale of assets 11,012 7,333 1,781 -18,291 -62,907Other gains - - - - -Total gains 14,569 11,728 7,263 -11,885 -55,501

Total income 287,307 284,803 296,824 294,328 269,190Program 1.6 Defence Support 3,385,488 3,528,819 3,495,341 3,545,361 3,483,029


62


• provision of timely, accurate and high quality advice on Defence Support matters to the CDF, the Secretary and the Government

• continue to drive DSG reform as part of the broader Defence Strategic Reform Program including leading the Non-Equipment Procurement and Estate streams of reform and contributing to the Shared Services Reform stream

• development and delivery of the 2011-12 Major Capital Facilities Program within scope and budget as outlined in the following tables

• provision of facilities, housing and other DSG support services to support the Enhanced Land Force

• development of environmental policies and strategies in accordance with Defence's obligations towards the Environment Protection and Biodiversity Conservation Act 1999 and other environmental policies

• management of Defence's property leasing, acquisition and disposal programs

• development of options for changes to the estate over a 25-30 year period through a comprehensive review of the Defence estate

• provision of specialist legal support to Defence and legal support for ADF operations

• formulate concept, policy, legislation and procedure for the Defence legislative program, including a new Chapter III military court

• provision of, through the centre of excellence, non-equipment procurement and contracting advice and support, and continuation of the improvement of procurement practices across Defence

• provision of garrison and other base support services to support Defence bases and establishments throughout Australia

• provision of nationally delivered whole-of-Defence corporate services, including accounts processing and travel

• establishment of business centres for simple procurement purchasing services and accounts receivable and the transition of accounts processing work from Groups/Services

• implementation of key pay structures and other military pay reforms in accordance with policy and business requirements, including rectifying current deficiencies in the ADF payroll system, and accelerating the introduction of an improved pay system in support of the ADF Payroll Remediation Task Force

• continue development of enhanced support to Defence families through development of a national service delivery model

• processing applications for Defence medals that reward excellence, achievement and outstanding service

• administration of the Defence Home Ownership Assistance Scheme

• continue implementation of the Base Accountabilities Model across all Defence bases to provide a clear separation of responsibility for base management and support services from responsibility for capability

• implementation of DSG elements of the base security improvement program

• provision of medical/rehabilitation and redeployment/redundancy product management, conduct and performance support and continued expansion of opportunities through the Defence Work Experience Program.


63

CAPITAL FACILITIES PROGRAM DELIVERABLES

The Capital Facilities Program comprises of approved and unapproved major and medium projects.

Major capital facilities projects are defined as having expenditure over $15 million and are subject to Government approval and review by the Parliamentary Standing Committee on Public Works (PWC). Medium facilities projects have an expenditure of between $250,000 and $15 million. Projects between $8 million and $15 million are subject to Government approval, but are not reviewed by the PWC. Details of these projects are provided in this section.

The Capital Facilities Program gives priority to projects that support the Approved Major Capital Investment Program, sustain current capability requirements, support other government initiatives, meet legislative obligations and assist initiatives that support Defence personnel. A significant proportion of the program funding is directed towards the provision of basic engineering and infrastructure services, either in support of new projects or upgrades to existing facilities.

Approved major capital facilities projects

Table 34 and the following descriptions provide details on progress and expenditure during 2011-12 on major capital facilities projects.


• improve business outcomes as part of broader Defence reform, including ongoing implementation of the revised responsibilities and accountabilities for base support

• deliver products and services on time and on budget to support the development and delivery of Defence capability

• develop industry engagement and collaborative relationships to ensure the effective and efficient delivery of products and services

• support ADF operational capability, including through the deployment of ADF lawyers to provide access to relevant and timely legal support

• provide ADF members with high quality service residences, relocation and travel services using cost-effective contract arrangements

• manage, develop and sustain the Defence estate to meet Defence and Government requirements by developing and delivering major estate and environment programs on time, to budget and compliant with all appropriate regulatory requirements

• provide professional support services to ADF members and families, including delivery of family support programs and bereavement support in the event of death and serious casualties

• ensure timely recognition of ADF members and ex-serving members in accordance with the Australian and Imperial Honours and Awards systems and civilian long service recognition.


64

Table 34: Approved major capital facilities projects by state and federal electorate

TotalEstimated

Expenditure

$m

EstimatedCumulative

Expenditure to30 June 2011

$m

2011–12Budget

Estimate

$m

NEW SOUTH WALES

Gilmore

HMAS Albatross

Aircraft Pavements and Airfield Lighting [1][2] - 4.8 0.6

Hunter

Singleton

Enhanced Land Force Stage 1 Works [1][3] - 55.8 7.2


MacKellar

Pittwater Annexe

HMAS Penguin and Pittwater Annexe Redevelopment [1][5] - 0.1 5.0

Riverina

Kapooka


Warringah

HMAS Penguin

HMAS Penguin and Pittwater Annexe Redevelopment [1][5] - 0.4 21.0

Total New South Wales - 173.2 99.0VICTORIACorangamite

Defence Facilities at HMAS Harman and Other Locations [1][6] - 29.6 0.8

IndiBandiana

Joint Logistics Unit Victoria Warehousing 36.4 31.5 2.2

Gaza Ridge Barracks

Facilities for Project Overlander (Land 121) [1][7] - - 16.4

JagajagaWatsonia

Defence Force School of Signals 101.3 90.5 [8] 9.9


McEwenPuckapunyal




65

Total Victoria 137.7 195.0 79.3QUEENSLANDBlair Amberley

RAAF Base Amberley Redevelopment Stage 3 331.5 284.7[9] 39.1

Australian Super Hornet Facilities [10] 110.1 99.9[11] 7.4

Heavy Airlift Capability - Permanent Facilities [1][12] - 138.3 12.0[13]




BrisbaneEnoggera

Redevelopment Stage 1 80.2 74.8 1.9


FordeCanungra


GroomOakey


HerbertTownsville

Lavarack Barracks Redevelopment Stage 4 207.2 203.6 3.6

Multi Role Helicopter Facilities [1][14] - 29.1 1.6



KennedyTownsville Field Training Area (High Range)

Enhanced Land Force Stage 2 Work [1][4] - 3.3 1.3

LilleyDamascus Barracks


RankinGreenbank Training Area


Wide BayWide Bay Training Area


Total Queensland 729.0 1,279.0 395.7SOUTH AUSTRALIA

TotalEstimated

Expenditure

$m

EstimatedCumulative


$m

2011–12Budget

Estimate

$m


66

Barker

Murray Bridge Training Area

Hardened and Networked Army Facilities [1][15] - 15.8 1.0

WakefieldEdinburgh Defence Precinct

Hardened and Networked Army Facilities [1][15] - 517.0 46.0

RAAF Base Edinburgh




Total South Australia 99.6 595.9 112.7WESTERN AUSTRALIAHasluckRAAF Base Gin Gin


PearceRAAF Base Pearce



Total Western Australia 142.2 145.5 11.4NORTHERN TERRITORYSolomonDarwin

Robertson Barracks Redevelopment 72.1 32.7 36.3

RAAF Base Darwin Redevelopment Stage 2 49.8 21.7 16.4

Heavy Airlift Capability - Permanent Facilities [1][12] - 40.3 1.7

Total Northern Territory 121.9 94.7 54.4AUSTRALIAN CAPITAL TERRITORYCanberra

Defence Facilities at HMAS Harman and Other Locations [1][6] - 28.9 49.0

Australian Defence Force Academy: Living-In Accommodation Refurbishment 34.7 6.6 9.1

FraserHMAS Creswell

Redevelopment 83.6 79.5 3.6

Majura Field Training Area


Royal Military College


Total Australian Capital Territory 118.3 135.2 65.5

TotalEstimated

Expenditure

$m

EstimatedCumulative


$m

2011–12Budget

Estimate

$m


67

Notes1. These projects cross state boundaries. Expenditure estimates for 2011-12 are provided in the table per location.2. Aircraft Pavements and Airfield Lighting has an approved budget of $32 2m covering four locations: HMAS Albatross, Army Aviation Centre

Oakey, RAAF Base Pearce and RAAF Gin Gin.3. Enhanced Land Force Stage 1 has an approved budget of $793.1m covering the following locations: RAAF Base Richmond (construction

completed), Holsworthy, Singleton, Kapooka, Puckapunyal, RAAF Base Amberley, Lavarack Barracks, Townsville High Range Training Area, RAAF Base Edinburgh and Campbell Barracks.

4. Enhanced Land Force Stage 2 has an approved budget of $1,457 8m covering the following locations: Singleton, Garden Island (completed), HMAS Penguin (completed), Watsonia, Puckapunyal, RAAF Base Amberley, Enoggera, Canungra, Lavarack Barracks, Townsville Field Training Area, Greenbank Training Area, Wide Bay Training Area, Cultana Training Area, RAAF Base Edinburgh, Majura Field Training Area and Royal Military College Duntroon.

5. HMAS Penguin and Pittwater Annexe Redevelopment has an approved budget of $63 3m covering two locations: HMAS Penguin and the Pittwater Annexe.

6. Defence Facilities at HMAS Harman and Other Locations has an approved budget increase to $134.7m. This project covers two locations: Army facilities in Victoria and Defence facilities at HMAS Harman, ACT.

7. Facilities for Project Overlander (Land 121) has an approved budget of $50 3m. This project covers three locations: Gaza Ridge Barracks, North Bandiana; Damascus Barracks, Meeandah and RAAF Base Amberley.

8. Estimated cumulative expenditure to 30 June 2011 for Defence Force School of Signals adjusted to reflect delays in certification causing the final stage of the project to be re-scheduled.

9. Estimated cumulative expenditure to 30 June 2011 for RAAF Base Amberley Redevelopment Stage 3 adjusted to reflect the impact of ongoing environmental, heritage and contractual issues.

10. The $117.1m budget for Australian Super Hornet Facilities includes both the development and delivery phase budgets leaving a delivery budget of $110.1m.

11. Estimated cumulative expenditure to 30 June 2011 for Australian Super Hornet Facilities adjusted to reflect the impact of contamination and wet weather.

12. Heavy Airlift Capability - Permanent Facilities has an approved budget of $268.2m covering five locations: RAAF Base Amberley, RAAF Base Edinburgh, RAAF Base Darwin, RAAF Base Townsville and RAAF Base Pearce. Construction works at RAAF Bases Amberley, Townsville, Edinburgh and Darwin are complete.

13. Due to savings in the project, the Public Works Committee agreed the delivery of the C17 Cargo Compartment Trainer from the Heavy Airlift Capability project.

14. Multi Role Helicopter Facilities has an approved budget of $168.7m covering four locations: HMAS Albatross Nowra, RAAF Base Townsville, the Army Aviation Centre (Oakey) and Gallipoli Barracks, Enoggera. The budget includes $31.5m for simulation facilities being delivered and reported by the DMO. Construction works at HMAS Albatross, Army Aviation Centre Oakey and Gallipoli Barracks, Enoggera are complete.

15. The $623.7m budget for Hardened and Networked Army Facilities includes the development and delivery phase budgets leaving a delivery phase budget of $597.4m. Hardened and Networked Army Facilities project covers three locations: Edinburgh Defence Precinct, Murray Bridge Training Area and Cultana Training Area. The project does not include similarly named works at Robertson Barracks.

VARIOUS LOCATIONS [1]

Aircraft Pavements and Airfield Lighting [1][2] 32.2 - -

Enhanced Land Force - Facilities Stage 1 [1][3] 793.1 - -

Enhanced Land Force - Facilities Stage 2 [1][4] 1,457.8 - -

HMAS Penguin and Pittwater Annexe Redevelopment [1][5] 63.3 - -

Defence Facilities at HMAS Harman and Other Locations [1][6] 134.7 - -

Facilities for Project Overlander (Land 112) [1][7] 50.3 - -

Multi Role Helicopter Facilities [1][14] 137.2 - -

Heavy Airlift Capability - Permanent Facilities [11] 268.2 - -

Hardened and Networked Army Facilities [1][15] 597.4 - -

Total Various 3,534.2 - -TOTAL 4,882.9 2,618.5 818.0

TotalEstimated

Expenditure

$m

EstimatedCumulative


$m

2011–12Budget

Estimate

$m


68

Victoria

Bandiana - Joint Logistics Unit Victoria Warehousing

This project will provide new and upgraded warehousing, storage and ancillary support facilities at Bandiana. Key facilities have been completed with demolition of redundant facilities yet to be completed. Construction commenced in mid-2009 and completion is scheduled for late-2011.

Watsonia - Defence Force School of Signals

This project will provide new working accommodation, improved security arrangements and upgraded living-in accommodation for the Defence Force School of Signals at Simpson Barracks. Construction commenced in October 2008 and completion of the refurbishment elements is scheduled for early 2012.

Queensland

Amberley - RAAF Base Amberley Redevelopment Stage 3

This project will provide new trainee living-in accommodation and messing facilities, physical fitness facilities, office, medical and working accommodation, consolidation of maintenance facilities, construction of a new fuel farm and a base security upgrade. Construction commenced in 2008. Some key facilities were completed in 2009 and works will continue to be completed progressively through to late 2011.

Amberley - Australian Super Hornet Facilities

This project will provide new, expanded and modified facilities and infrastructure at RAAF Base Amberley to support the introduction of the Super Hornet aircraft. Key facilities have been progressively completed from late 2009 and construction is scheduled to be completed by mid 2011.

Enoggera - Base Redevelopment Stage 1

This project will provide new working accommodation for Headquarters 7th Brigade, upgrade base engineering services, and upgrade messing facilities. Construction of the major elements, new working accommodation for Headquarters 7th Brigade, an upgrade of base engineering services and an upgrade to the messing facilities, were completed in late 2010, with demolition of redundant facilities remaining. Completion is scheduled for late 2011.

Townsville Lavarack Barracks Redevelopment Stage 4

This project will provide upgraded working accommodation for Army elements located at Lavarack Barracks. Construction commenced in 2007 with the major elements 4th Field Regiment and 3rd Combat Engineer Regiment facilities being completed in late 2010. Completion is scheduled for late 2011.

South Australia

Edinburgh - RAAF Base Edinburgh Redevelopment Stage 2

This project will provide new working accommodation and upgrades to engineering services. Delay in obtaining environmental clearance has resulted in a delay to the commencement of construction. Construction commenced in late 2010, with a revised completion date of mid-2012.


69

Western Australia

Pearce - RAAF Base Pearce Redevelopment Stage 1

This project will provide new and refurbished operational, training, domestic support and aircraft maintenance facilities, improvements and upgrading of engineering services and demolition of redundant facilities. Construction commenced in 2008 and completion is scheduled in early 2012.

Northern Territory

Darwin - Robertson Barracks Redevelopment

This project comprises three individual project elements: the Robertson Barracks redevelopment project; LAND 907 facilities project; and the Hardened and Networked Army facilities project (refer Note 15 Table 34). The Robertson Barracks redevelopment project will provide new and upgraded facilities for training, emergency response, working accommodation and equipment support. The LAND 907 facilities project will provide parking and working accommodation for heavy tank transport vehicles and other tank support services. The Hardened and Networked Army facilities project will provide additional working accommodation and other support facilities. Construction commenced in 2009. The LAND 907 component is complete. Completion is scheduled by late 2011.

Darwin - RAAF Base Darwin Redevelopment Stage 2

This project will provide new and upgraded existing facilities including fuel farms and workshops. Construction commenced in late 2010, with completion scheduled in mid 2012.

Australian Capital Territory

Australian Defence Force Academy: Living-In Accommodation Refurbishment

This project will refurbish existing living-in accommodation for the Australian Defence Force Academy cadets. Construction commenced in late 2010. As a result of protracted tender negotiations, completion is scheduled in mid 2014.

HMAS Creswell Redevelopment

This project will provide new and upgraded facilities for the initial entry training of Navy officers and senior sailors in the areas of leadership, management and personal development. The works include upgrades to base engineering services and infrastructure, new and refurbished classrooms, office and living-in accommodation and specialised training facilities. Construction commenced in 2009 and completion is scheduled by late-2011.

Various locations

Aircraft Pavements and Airfield Lighting

This project will involve the resurfacing of asphalt pavement and replacement of airfield lighting at RAAF Base Pearce, RAAF Gin Gin, HMAS Albatross and the Army Aviation Training Centre (Oakey). Construction commenced in March 2011, with completion expected in late 2011.

Enhanced Land Force - Facilities Stage 1

This project will provide modern, purpose-built facilities and supporting infrastructure for the relocation of the 3rd Battalion of the Royal Australian Regiment from Sydney to Townsville. The works involve the construction of new and refurbished accommodation and training facilities, as well as the construction of common use facilities and site infrastructure upgrades at Townsville and other Defence sites across five states.


70

Facilities at Kapooka, Singleton, Holsworthy and Puckapunyal will provide modern accommodation and supporting infrastructure for increased Army initial employment training. At RAAF Bases Amberley, Edinburgh and Richmond, new facilities will be provided for joint enabling elements supporting the enhanced land force capabilities. Construction commenced in mid-2009. The bulk of the project will be completed by 2011, with some minor elements due for completion in 2013.

Enhanced Land Force - Facilities Stage 2

This project will provide modern purpose-built facilities and supporting infrastructure for the 8th/9th Battalion of the Royal Australian Regiment and supporting elements of the Army's 7th Brigade at Gallipoli Barracks in Enoggera, Brisbane. The project will involve the construction of new and refurbished accommodation and training facilities, as well as common use facilities and site infrastructure upgrades at Enoggera and other Defence sites across four states and both mainland territories.

Facilities at Townsville, Singleton, Duntroon and Watsonia will provide modern accommodation and supporting infrastructure for increased Army career training. In Sydney and at RAAF Bases Amberley and Edinburgh and at nine Defence Training Areas, new and refurbished facilities and site infrastructure upgrades will be provided for Army and joint enabling elements supporting the enhanced land force capabilities. Construction commenced in mid 2010 and is scheduled to be completed by late 2014.

HMAS Penguin and Pittwater Annexe Redevelopment

This project will provide a comprehensive upgrade of base wide engineering services infrastructure, security works and working accommodation for training and support functions. Construction is expected to commence in mid-2011 and be completed in late 2013.

Defence Facilities at HMAS Harman and Other Locations

This project will provide an extension to the existing Defence Network Operation Centre that controls and monitors communication activities within Defence, as well as providing new data storage facilities for other capability projects and additional support facilities for the Army. The expenditure forecast for the facilities at HMAS Harman has been revised to reflect an extension to the design phase of the project and the consequent revision to the current construction schedule. Completion is now scheduled for late 2012. Construction on the Army facilities commenced in mid-2009 and is on schedule for completion in mid-2011.

Facilities for Project Overlander (LAND 121)

This project will provide the facilities to enable vehicle and conversion training for drivers and vehicle maintainers. The project received Parliamentary clearance in March 2011. Construction is expected to commence in 2011, with completion scheduled in 2012.

Multi Role Helicopter Facilities

This project will provide a range of helicopter shelters, maintenance and operational facilities, simulator buildings and deeper maintenance facilities to support the introduction of the Multi Role Helicopter aircraft. The works involve new facilities and refurbishment of existing facilities. The proposed facilities and infrastructure will be located at HMAS Albatross (Nowra), Gallipoli Barracks, Enoggera (Brisbane), RAAF Base Townsville and the Army Aviation Centre (Oakey). The remaining works are scheduled to be progressively completed by late 2011.


71

Heavy Airlift Capability - Permanent Facilities

This project will provide new facilities for the C-17 Globemaster III aircraft. The works include a headquarters, maintenance facilities, air movements and cargo facilities, a simulator, warehousing and support facilities and airfield pavement works at the Amberley home base. The upgrading of airfield pavements, movements and cargo facilities and supporting infrastructure at RAAF Bases Edinburgh, Townsville, Darwin and Pearce will also be included. Construction commenced in 2008. The Cargo compartment Trainer was approved by the Parliamentary Works Committee in May 2010 and added to the project scope. The project will be completed in mid-2012.

Hardened and Networked Army Facilities

This project will provide facilities and infrastructure to support the establishment of a mechanised battle group in the Edinburgh Defence Precinct. Some additional infrastructure will also be provided at Murray Bridge and, subject to land acquisition, in the Cultana Training Area. Construction commenced in late 2008. Progressive occupation of facilities commenced in December 2010 and completion of the remaining elements is scheduled by 2012.


72

STATUS OF MAJOR PROJECTS FORESHADOWED FOR GOVERNMENT AND PARLIAMENTARY STANDING COMMITTEE ON PUBLIC WORKS (PWC) CONSIDERATION IN 2011-12

During 2011-12, Defence expects to present a number of facilities proposals to the Government and the PWC. Table 35 provides details of the proposed major capital projects expected to be referred to the PWC in 2011-12. In some cases, the projects may require the Government's approval before referral to the Committee.

Table 35: Program of Major Works by state, federal electorate and locality

Notes1. Hearing dates will be subject to the committee's consideration and agreement. 2. Defence proposes to seek exemption from the PWC scrutiny of this project on the grounds that the work is declared repetitive in accordance

with Section 18(8A) of the Public Works Act 1969.

Actual/Indicative

Referral Date

Actual/Indicative Hearing

Date [1] Current StatusNEW SOUTH WALES

Gilmore HMAS Albatross Redevelopment Stage 3 Mid 2011 Late 2011 In development

VICTORIAGippsland

RAAF Base East Sale Redevelopment Late 2011 Late 2011 In development

TASMANIABass

Scottsdale Specific Nutritional Capability Mid 2011 Mid 2011 In development

NORTHERN TERRITORYSolomon

Robertson Barracks Electrical Reticulation and Supply Upgrade Early 2011 Mid 2011 In development

Larrakeyah Barracks NORFORCE Redevelopment Mid 2012 Mid 2012 In development

AUSTRALIAN CAPITAL TERRITORY Fraser

Australian Defence Force Academy Redevelopment March 2011 May 2011 In development

VARIOUS LOCATIONS Aircraft Pavements and Airfield Lighting at RAAF Base Amberley, RAAF Base Darwin and RAAF Base Townsville [2] - - In development

Facilities for Force Protection Research and Training (JP154) Late 2011 Late 2011 In development

Facilities for Air Warfare Destroyer (SEA 4000) In development

Facilities for Amphibious Deployment and Sustainment Facilities (JP 2048) Late 2011 Early 2012 In development

Facilities for Future Naval Aviation Combat System Support (AIR 9000 Phase 8) Early 2012 Mid 2012 In development

Facilities for Replacement Towed Artillery (Land 17) Mid 2011 Late 2011 In development

Facilities for Chinook Helicopter (Air 9000 Phases 5B and 5C) Late 2011 Early 2012 In development


73

New South Wales

HMAS Albatross Redevelopment Stage 3

This project will replace ageing and out-dated engineering services infrastructure and provide a combination of new and refurbished facilities to support operational and training outcomes as well as enabling functions. Construction is expected to commence in early 2012, with completion expected in mid-2015.

Victoria

RAAF Base East Sale Redevelopment

This project will provide in-ground engineering services upgrades, new working accommodation, new training and maintenance facilities, security upgrades, new air traffic control complex, new commercial and community facilities, a new chapel, new firing range, new Living in Accommodation and demolition of redundant facilities. Construction is expected to commence in mid-2012, with completion expected in mid-2015.

Tasmania

Scottsdale Specific Nutritional Capability

This project provides a reinvestment in the existing DSTO nutritional capability at Scottsdale through the construction of replacement food technology laboratories and working facilities. Construction is expected to commence in late 2011, with completion expected in late 2013.

Northern Territory

Robertson Barracks Electrical Reticulation and Supply Upgrade

This project will provide an upgraded high voltage electrical supply and distribution system. Construction is expected to commence in late 2011, with completion expected in mid-2013.

Larrakeyah Barracks NORFORCE Redevelopment

The project will provide replacement facilities in response to the poor conditions, OHS deficiencies and the numerous functional and operational constraints imposed by the existing facilities. Construction is expected to commence in late 2012, with completion expected in late 2014.

Australian Capital Territory

Australian Defence Force Academy Redevelopment

This project will provide a combination of new and upgraded facilities to meet current and future military and academic training needs. The works will include an upgrade of the Cadets' Mess new training facilities and the refurbishment of working accommodation. Construction is expected to commence in mid-2012, with completion scheduled in 2014.


74

Various Locations

Aircraft Pavements and Aircraft Lighting at RAAF Base Amberley, RAAF Base Darwin and RAAF Base Townsville

The project will involve the resurfacing of asphalt pavement and the replacement of airfield lighting at RAAF Base Amberley, RAAF Base Darwin and RAAF Base Townsville. Construction is expected to commence in March 2011, with completion scheduled in late 2011.

Facilities for Force Protection Research and Training (JP 154)

This project will provide test and evaluation facilities at Nurrungar (Woomera, South Australia) and Edinburgh (Adelaide, South, Australia), plus storage and training facilities at fourteen other sites across Australia. Construction is expected to commence in mid-to-late 2011, with completion expected in late 2012.

Facilities for Air Warfare Destroyer (SEA 4000)

This project will provide new and upgraded wharf side facilities to support berthing and sustainment at Garden Island, Sydney, for the new Hobart Class Air Warfare Destroyer. The works also include the provision of training facilities at HMAS Watson and Randwick Barracks. Construction is expected to commence in mid-2012, with completion expected in mid-2014.

Facilities for Amphibious Deployment and Sustainment (JP 2048)

This project will provide new and upgraded wharf side facilities to support berthing, and sustainment at Garden Island, Sydney, for the new Canberra Class Landing Helicopter Dock Ship. The works also include the provision of training facilities at HMAS Watson. Construction is expected to commence in mid-2012, with completion expected in mid-2014.

Facilities for Future Naval Aviation Combat System Support (Air 9000 Phase 8)

This project will provide new and upgraded facilities for operational maritime helicopter squadrons at HMAS Stirling and HMAS Albatross. The works include the provision of facilities for explosive ordnance storage, aircraft hangars, aircraft workshops, synthetic training, and working accommodation. Construction is expected to commence in early 2013, with completion expected in late 2014.

Facilities for Replacement Towed Artillery (Land 17)

The project will provide new and upgraded facilities to support the introduction into service of the new towed artillery. The works will be at three sites: Gallipoli Barracks, Enoggera, Bridges Barracks Puckapunyal and Gaza Ridge Barracks Bandiana. Construction is expected to commence in early 2012, with completion expected in early 2013.

Facilities for Chinook Helicopter (Air 9000 Phases 5B and 5C)

The project will provide new and upgraded facilities to support the introduction into service of the Chinook Helicopter. The works will be at two sites RAAF Base Townsville and Gallipoli Barracks Enoggera. Construction is expected to commence in mid-2012, with completion expected in late 2013.


75

APPROVED PROJECTS BEING DEVELOPED FOR PRIVATE FINANCING ARRANGEMENTS

Project Single Living Environment and Accommodation Precinct (Single LEAP) Phase 2

Project Single LEAP Phase 2 is an extension of the delivery of new single living-in accommodation facilities at various sites around Australia. Due to changes in Defence strategic priorities, the scope of Phase 2 was amended in October 2009 and is now intended to deliver a further 3,015 units at 14 bases around mainland Australia. Table 36 provides details of the 14 elements of Phase 2.

Table 36: Single LEAP Phase 2 by state, federal electorate and locality[1][2]

Notes1. The original scope of Single LEAP Phase 2 was 3,535 units at 17 locations. Randwick Barracks, RAAF Base Pearce and RAAF Base Laverton

have been removed from the scope, and the number of units at the Edinburgh Defence Precinct increased.2. Construction is proposed to commence around September 2011 with the last site due for completion by end 2013. Under the Public Private

Partnership arrangement, annual payments to the Strategic Partner will commence after Commercial Acceptance of each site.

State Electorate LocalityNEW SOUTH WALES Gilmore Nowra: HMAS Albatross

Riverina RAAF Base Wagga

Kapooka: Blamey Barracks

VICTORIA Indi Albury/Wodonga: Bandiana

Jagajaga Watsonia: Simpson Barracks

McEwen Puckapunyal

QUEENSLAND Herbert Townsville: Lavarack Barracks

SOUTH AUSTRALIA Wakefield RAAF Base Edinburgh

WESTERN AUSTRALIA Brand Garden Island: HMAS Stirling

Curtin Swanbourne: Campbell Barracks

NORTHERN TERRITORY Solomon Darwin: Robertson Barracks

Darwin: HMAS Coonawarra

AUSTRALIAN CAPITAL TERRITORY

Fraser Royal Military College Australian Defence Force Academy


76

APPROVED MEDIUM CAPITAL FACILITIES PROJECTS

Table 37: Spending in 2011-12 for medium facilities projects

TotalEstimated

Expenditure

$’000

EstimatedCumulative


$’000

2011–12Budget

Estimate

$’000

NEW SOUTH WALESHughesHolsworthy

Countermine Capability Facilities (Land 144) [1][2][3] - 150 135

NewcastleRAAF Base Williamtown

Additional Working Accommodation Tactical Fighter Systems Program Office 1,199 600 500

RiverinaRAAF Base Wagga

Headquarters Ground Training Wing 1,000 800 200

WentworthVictoria Barracks

Military Law Centre/Asia Pacific Centre for Military Law 7,825 2,050 2,400

Total New South Wales 10,024 3,600 3,235

QUEENSLAND

Capricornia

Shoalwater Bay Training Area

Camp Growl Stage 2 7,977 7,539 300

GroomOakey

Fuel Farm Upgrade 9,257 6,655 150

HerbertLavarack Barracks

Countermine Capability Facilities (Land 144 [1][2][3] - 47 189

RankinGreenbank Training Area

Countermine Capability Facilities (Land 144) [1][2][3] - - 496

RyanEnoggera

Countermine Capability Facilities (Land 144) [1][2][3] - 10 22

Total Queensland 17,234 14,251 1,157

WESTERN AUSTRALIA


77

Notes1. This project crosses state and electoral boundaries. Expenditure estimates for 2011-12 are provided in the table by location.2. Project approved after publication of the Portfolio Additional Estimates Statements 2011-11.3. Countermine Capabilities Upgrade has a budget of $21.42m covering five locations: Holsworthy Barracks; Lavarack Barracks; Greenbank

Training Area; Gallipoli Barracks, Enoggera; and Robertson Barracks.

Curtin

Campbell Barracks

Helicopter Underwater Escape Training Facility 9,723 8,748 504

PearceRAAF Base Pearce

Potable Water Supply Upgrade 3,144 610 2,500

Total Western Australia 12,867 9,358 3,004

NORTHERN TERRITORY

Lingiari

RAAF Base Tindal

Mount Bundey Training Area - Medical Facility 4,260 - 3,725

SolomonDarwin

Naval Fuel Installation Rectification 10,690 10,411 200

Robertson Barracks

Countermine Capability Facilities (Land 144) [1][2][3] - - 370

1st Aviation Regiment Facilities Upgrade 2,250 1,981 249

Total Northern Territory 17,200 12,392 4,544

VARIOUS [1]

Countermine Capability Facilities (Land 144) 1,420 - -

Total Various 1,420 - -TOTAL 58,745 39,601 11,940

TotalEstimated

Expenditure

$’000

EstimatedCumulative


$’000

2011–12Budget

Estimate

$’000


78

PROPOSED MEDIUM CAPITAL PROJECTS FOR CONSIDERATION IN 2011-12

Table 38 lists new medium capital facilities projects foreshadowed for consideration in 2011-12.

Table 38: Proposed medium capital projects for consideration in 2011-12

Note1. This project will now be delivered as a component of the Heavy Airlift Capability.

State Federal Electorate

Locality Status

New South Wales Calare Bathurst Regional Airport: Australian Air Force Cadets In development

Hughes Holsworthy HQ6 Aviation Regiment Facilities In development

Newcastle RAAF Base Williamtown: Corrosion Control Facility Upgrade In development

Warringah HMAS Penguin – ADF Centre for Mental Health Facility In development

Queensland Blair RAAF Base Amberley: C-17A Cargo Compartment Trainer Facility [1] Approved

Capricornia Shoalwater Bay Training Area: Maritime Warfare Facilities (Triangular Island) In development

Ryan Enoggera: Training Facilities (Land 200)In development

South Australia Grey Woomera Prohibited Area: Disposal Explosive Ordnance Storage Facilities In development

Wakefield Port Wakefield: Vibration Test Facility In development

Northern Territory Lingiari RAAF Base Tindal: Corrosion Control Facility Remediation In development

Solomon RAAF Base Darwin: Flood Mitigation Works In development

Various Special Operations: National Storage Facilities In development

ASLAV Additional Facilities In development


79

Program 1.7: Defence Science and Technology


The Defence Science and Technology Organisation's (DSTO) principal objective in delivering Program 1.7 is to provide expert, impartial science and technology (S&T) advice, and innovative solutions to the Government, Defence and Australia's national security agencies to support the provision of military capabilities and the promotion of security and stability.

For Defence, this is achieved by enhancing capability, reducing risk and saving resources through applied research focussed on support to military operations, the current force, capability development and acquisition.

DSTO's enabling research program also contributes to future-proofing Defence, being aimed at developing the organisation's S&T capability in alignment with Defence's evolving technology requirements, including those arising from the challenges of emerging technologies.

In order to achieve its objectives, DSTO draws upon the scientific ability and reputation of its staff, world class research facilities, and extensive networks with external organisations such as international defence research agencies, industry and academia.

Table 39: Cost Summary for Program 1.7 Defence Science and Technology

2010-11Revised

Estimate$'000

2011-12Budget

Estimate$'000


$'000


$'000


$'000Expenses




Total income 46,436 33,668 34,940 36,141 37,229Program 1.7 Defence Science and Technology 447,291 433,695 441,486 423,520 448,701


80


• provide timely, accurate and high-quality S&T advice on Defence related matters to the Secretary, CDF, and Government

• provide effective, relevant and timely S&T solutions and technical support to military operations, to the current force and to non-Defence national security agencies

• provide effective, relevant and timely S&T support to capability development and acquisition decision making, including technical risk assessment and certification for Defence Capability Plan projects

• deliver a program of enabling research aimed at enhancing future Defence capabilities and maintaining world-class research expertise and facilities

• manage productive engagement with external organisations, in particular international partners, local industry and academia, via appropriate avenues including the management of the Capability and Technology Demonstrator Program

• contribute to SRP outcomes by:

- continuing to monitor and track Science and Technology Stream reforms implemented under SRP to ensure these reforms achieve their intended benefits

- continuing to seek and implement improvements in the way DSTO does business

• continuing to achieve reforms in other SRP streams including; ICT, Workforce and Shared Services, Capability Development and Non-Equipment Procurement and understanding how this impacts on DSTO.

Program 1.7 Key Performance Indicators• advice to Defence and the Government on S&T matters is of high quality

• the applied research program is balanced in meeting the needs of Defence in support of operations, the current force, capability development and acquisition, and of non-Defence national security

• Group-specific S&T outputs and programs are delivered on time and within agreed resources

• outputs of the research program can be identified as innovative solutions that can be used to enhance Defence capability, reduce risk and save resources

• enabling research is focussed on supporting future Defence capability

• DSTO's S&T capability is contributed to by:

- a workforce with world-class expertise and facilities

• highly leveraged S&T engagement with international defence research organisations, industry and academia.


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Program 1.8: Chief Information Officer


The Chief Information Officer Group's objective in delivering Program 1.8 is to provide Defence with dependable, secure and integrated information and communications technology (ICT) capabilities to support the conduct of ADF operations, and Defence business.

The 2009 Defence ICT Strategy identified five clear objectives for Defence's future ICT environment:

• greater ICT scalability, flexibility and adaptability

• improved information speed and accuracy

• continued technological capability edge

• enhanced interoperability

• improved business support.

The Group is focusing on delivering a program of ICT across Defence to deliver the Defence ICT Strategy and implement the Defence ICT Stream reform. This will result in the simplification, consolidation and standardisation of the Defence platform. The delivery of these programs will also assist other Defence reform streams to achieve their objectives due to many Strategic Reform Program activities having ICT dependencies.

The key objectives for the CIO Group in 2011-12 are:

• support to military operations

• enable the Raise-Train-Sustain, administration and business operations of Defence

• lead and deliver ICT to the future force

• lead and deliver the ICT components of the Strategic Reform Program

• lead and optimise Defence's ICT investment.


82

Table 40: Cost Summary for Program 1.8 Chief Information Officer

2010-11Revised

Estimate$'000

2011-12Budget

Estimate$'000


$'000


$'000


$'000Expenses

Employees 120,429 113,844 113,888 103,497 108,074Suppliers 567,621 533,669 507,785 499,577 435,778Grants - - - - -Deprecia ion and amortisa ion 137,429 129,834 126,427 66,524 73,556Finance Cost 5,951 3,907 1,725 - -Write-dow n of assets and impairment of assets 8,358 8,550 9,158 10,775 11,887Net losses from sale of assets - - - - -Other expenses - - - - -



Total income 9,658 9,886 10,477 11,903 12,925Program 1.8 Chief Information Officer 830,130 779,918 748,506 668,470 616,370


83


• provide ICT support to military operations

- support ADF preparedness through the provision of strategic planning and implementation of Communications and Information Systems; and the management of Electromagnetic Spectrum and satellite usage

- maintain support to ADF operations through the provision of agreed ICT support; the delivery of network defensive operations; and the maintenance of a disaster recovery capability

- deliver the ICT elements of endorsed projects that directly support military operations • enable the Raise-Train-Sustain, administration and business operations of Defence

- deliver ICT services in accordance with the Defence ICT Services Delivery Charter

- manage Defence ICT under a centralised governance and strategy framework in accordance with the Chief Information Officer's role as Coordinating Capability Manager for Defence ICT

- maintain the integrity and security of the Defence Information Environment• lead and deliver ICT to the future force

- progress the Integrated Defence Architecture

- establish priorities and engagement strategies for ICT interoperability with allies and coalition partners through the management of the multinational engagement program

- develop strategic partnerships with industry

- deliver the ICT elements of endorsed projects in the Defence Capability Plan.• lead and deliver the ICT components of the Strategic Reform Program

- reform Defence ICT through establishing effective portfolio and program management; and driving change in support of ICT reform

- develop improved project approval processes (Faster Time to Market) through the implementation of the Whole-of-Government costing methodology and improved internal project approval processes

- deliver the ICT elements of endorsed projects that support ICT and Defence reform• lead and optimise Defence's ICT investment

- rebalance spending between investment and sustainment through the standardisation and consolidation of Defence ICT; and the sustainment of existing ICT capabilities in a fit-for-purpose state

- align ICT solutions with strategic priorities.

Program 1.8 Key Performance Indicators• deliver strategic communications support to military operations• align Defence ICT strategy and capability with Defence priorities• the Integrated Defence Architecture regulates the planning, development and configuration of

Defence's ICT capabilities• strategic investment in consolidated networks, infrastructure, service orientated architecture,

applications and information management enables transition to a Single Information Environent• develop and sustain ICT capabilities in accordance with agreed stakeholder priorities• improve assurance regarding the state of ICT security within Defence and enhance controls that

improve ICT security outcomes• deliver ICT services and service support in accordance with the Defence ICT Services Delivery

Charter and the Defence ICT Services Catalogue• build an improved Defence Information Environment governance framework that can effectively

support ADF operations and Defence business reform objectives through to 2030.


84

Program 1.9: Vice Chief of the Defence Force


The Vice Chief of the Defence Force Group's mission is to develop, deliver and enable Defence joint capability in order to protect and advance Australia's strategic and national interests. The Group enables Defence to meet its objectives through the provision of military strategic effects and commitments advice and planning, joint military professional education and training, logistics support, health support, ADF Cadet and Reserve policy, joint capability management, and joint and combined ADF doctrine.

In addition, the Group has responsibility for the Asia Pacific Civil-Military Centre of Excellence, the Australian Defence Simulation Office, the ADF Parliamentary Program, the Federation Guard, ADF ceremonial activities, the ADF Investigative Service and the Strategic Communications Branch.

Table 41: Cost summary for Program 1.9 Vice Chief of the Defence Force

2010-11Revised

Estimate$'000

2011-12Budget

Estimate$'000


$'000


$'000


$'000Expenses

Employees 378,236 458,181 533,620 570,755 610,140Suppliers 611,733 569,544 596,611 597,461 612,696Grants - - - - -Depreciation and amortisation 16,726 15,892 22,756 27,891 26,459Finance Cost - - - - -Write-dow n of assets and impairment of assets 284,084 247,487 223,218 204,962 190,037Net losses from sale of assets - - - - -Other expenses - - - - -


RevenuesGoods and services 290,627 292,525 291,671 302,417 309,587Other revenue 49,634 50,432 51,546 52,837 54,154Total Revenue 340,261 342,957 343,217 355,254 363,741GainsReversals of previous asset w rite-dow ns 106,155 92,540 83,533 76,779 71,246Net gains from sale of assets - - - - -Other gains - - - - -Total gains 106,155 92,540 83,533 76,779 71,246

Total income 446,416 435,497 426,750 432,033 434,987Program 1.9 Vice Chief of the Defence Force 844,363 855,607 949,455 969,036 1,004,345


85

Program 1.9 Deliverables• provide military strategic advice and coordination that enables the Government to continuously

review its national strategic interests

• manage the SRP deliverables outlined in the mandates for the reform streams under Logistics, Reserves, and Preparedness and Personnel and Operating Costs, and deliver agreed SRP savings and reforms within the VCDF Group

• deliver coordinated logistic advice and services to the ADF, and provide Defence Strategic J4 services

• provide policy advice and services to optimise the health of ADF personnel

• enhance Defence, inter-agency and combined capability coordination

• manage Defence professional and vocational education and training

• enhance the capacity of Reserves to support Defence capability

• provide a coordinated, coherent and well-governed approach to Youth Development Programs for the Defence organisation in order to provide a positive youth development experience

• promote best-practice civil-military engagement through the Asia Pacific Civil-Military Centre of Excellence.

Program 1.9 Key Performance Indicators• ensure the ADF operational tempo is managed within concurrency constraints

• ensure Group-specific SRP reform and savings have been achieved

• ensure ADF operations and exercises receive effective logistics support and services

• ensure ADF operations and exercises receive effective health support and services

• enhance ADF joint and combined operational capability

• ensure ADF personnel are suitably trained to operate in a joint and/or combined operational environment

• ensure planning and policy frameworks are developed to enhance the contribution of the Reserves to Defence and the wider community

• develop governance and accountability frameworks to enhance the youth development experience within the ADF Cadets

• ensure the Asia Pacific Civil-Military Centre of Excellence delivers its goals effectively and efficiently in accordance with Government instructions

• ensure ADF investigations are supported by effective and efficient administration

• deliver Group-specific outcomes and programs on time and within agreed resources.


86

Program 1.10: Joint Operations Command


Joint Operations Command (JOC) consists of the Headquarters (HQJOC), Border Protection Command, Northern Command, Maritime/Submarine Operations, Joint Movements Group, and Joint Task Forces. Headquarters Special Operations Command, the Air and Space Operations Centre and the Maritime Operations Group are collocated with HQJOC and provide the Chief of Joint Operations (CJOPS) with advice on environmental matters. Headquarters 1st Division within Army is force assigned to CJOPS for military planning.

CJOPS commands JOC which supports him in the planning and conduct of military campaigns, operations, joint exercises, preparation of military options for contingencies and crisis management. Liaison Officers from the Australian Federal Police and AusAID are assigned to HQJOC to enable interagency planning for operations.

CJOPS is responsible to the CDF for the effective conduct of military planning and is the CDF's principal adviser on operational matters. In addition, on behalf of the CDF, HQJOC is responsible for the ADF's commitment to the Coastwatch civil surveillance program and Border Protection Command tasking, Search and Rescue and Emergency Defence Assistance to the Civil Community.

JOC ensures safe and effective conduct of joint and combined exercises through planning, conduct and evaluation of joint and combined exercises in accordance with the endorsed Program of Major Service Activities.

The Customs and Border Protection component of the Border Protection Command program is reported in the Customs and Border Protection Service section of the Attorney-General Portfolio Budget Statements (PBS).

Linked to: Outcomes 2 and 3, Attorney-General’s PBS.


87

Table 42: Cost Summary for Program 1.10 Joint Operations Command

Program 1.10 Deliverables• effective command and control of ADF forces

• conduct of operations and other activities as directed by the Government

• conduct of joint and combined exercises contribute to Group-specific SRP reform and cost reductions.


• enhance command and staff methodologies

• joint preparedness levels meet the CDF's Preparedness Directive

• ADF forces are effectively deployed and sustained

• ADF forces are withdrawn for reconstitution when they are no longer required.

• joint and combined exercises are conducted in accordance with the Program of Major Service Activities

• deliver requested outcomes and programs on time, within agreed resources.

2010-11Revised

Estimate$'000

2011-12Budget

Estimate$'000


$'000


$'000


$'000Expenses

Employees 8,151 8,013 8,541 8,866 9,118Suppliers 33,235 37,143 37,599 36,356 38,512Grants - - - - -Deprecia ion and amortisa ion 1,624 1,552 1,404 1,076 1,284Finance Cost - - - - -Write-dow n of assets and impairment of assets - - - - -Net losses from sale of assets - - - - -Other expenses - - - - -


RevenuesGoods and services 385 380 386 395 407Other revenue - - - - -Total Revenue 385 380 386 395 407GainsReversals of previous asset w rite-dow ns - - - - -Net gains from sale of assets - - - - -Other gains - - - - -Total gains - - - - -

Total income 385 380 386 395 407Program 1.10 Joint Operations Command 42,625 46,328 47,158 45,903 48,507


88

Program 1.11: Capability Development


Capability Development Group develops and manages the Defence Capability Plan (DCP) and prepares Defence capability investment approval proposals for Government consideration. The Group maintains a sponsor role during the acquisition process and maintains close relationships with a range of stakeholders including the DMO and Capability Managers.

The Group will continue to refine the capability development process and ensure that it is well understood and applied uniformly across Defence. It will also seek to ensure that the process is understood by, and meets the expectations of, external stakeholders. The Group will continue to build on its relationship with stakeholders, industry and capability development organisations in other countries.

Table 43: Cost Summary for Program 1.11 Capability Development

2010-11Revised

Estimate$'000

2011-12Budget

Estimate$'000


$'000


$'000


$'000Expenses

Employees 16,208 17,430 19,339 16,846 17,356Suppliers 367,968 369,435 546,950 1,227,382 1,608,357Grants - - - - -Deprecia ion and amortisa ion 102,865 303,736 477,507 646,999 854,926Finance Cost - - - - -Write-dow n of assets and impairment of assets 127,525 163,069 191,969 227,491 267,988Net losses from sale of assets - - - - -Other expenses - - - - -

Total expenses 614,566 853,670 1,235,765 2,118,718 2,748,627Income

RevenuesGoods and services - - - - -Other revenue - - - - -Total Revenue - - - - -GainsReversals of previous asset w rite-dow ns 82,833 105,821 124,375 146,828 172,430Net gains from sale of assets - - - - -Other gains - - - - -Total gains 82,833 105,821 124,375 146,828 172,430

Total income 82,833 105,821 124,375 146,828 172,430Program 1.11 Capability Development 531,733 747,849 1,111,390 1,971,890 2,576,197


89

THE UNAPPROVED MAJOR CAPITAL INVESTMENT PROGRAM (ALSO KNOWN AS THE DEFENCE CAPABILITY PLAN)

The Unapproved Major Capital Investment Program is a costed, detailed development plan for Australia's future military capabilities over a ten-year period. The plan is reviewed regularly to take account of changing strategic circumstances, new technologies and changed priorities, in the contact of the overall Defence budget. The plan sets out the proposed investment in new capability, reviewed and revised as part of the financial year 2011-12 budget.

Since the release of the 2009 White Paper, over 40 major projects, phases of projects and supporting studies have been approved with an all-up cost of approximately $7b. Further projects will be proposed for approval in financial year 2011-12.

Tables 44 and 45 provide details of the projects likely to be considered, against which Defence is planning to spend, subject to approval by Government.


• provision of timely, accurate and high quality advice on all aspects of capability development to the Secretary, CDF and Government

• development of an affordable and executable DCP

• management of the Unapproved Major Capital Investment Program and Net Personnel Operating Cost (as discussed below)

• development of Defence capability investment proposals for consideration by the Government

• update and publication of the Defence Capability Development Handbook 2011

• implement the strategy-led capability development process and relevant reforms identified in the Defence Procurement and Sustainment Review 2008 (the Mortimer Review)

• deliver Group-specific SRP reform.


• submit capability investment proposals to deliver Force 2030 according to the White Paper, on schedule, within agreed resources and to an agreed standard

- develop first and second pass DCP project approvals in line with Tables 44 and 45.

- introduce a new DCP reporting system to ensure transparency and accountability of DCP proposals

- introduce process reforms to improve the timelines and quality of capability submissions, and reflect these reforms in an update to the Defence Compatibility Development Handbook 2011

• increase the accuracy of costings within the Major Capital Investment Program

- facilitate cost estimation training to ensure 60 per cent of CDG desk officers undertake the training and 75 per cent undertake skilling training by the end of 2011-12.


90

Table 44: Significant Defence Capability Plan projects in development for second pass approval

Project Number Project TitleSecond Pass Approval

Air Combat Capability Goal

Air 5276 Phase CAP 2

AP-3C Capability Assurance Program 2011-12 to 2012-13

Air 5416 Phase 4B2 C-130J Large Aircraft Infrared Countermeasures 2011-12 to 2012-13

Air 5440 Phase 1 C-130J Block Upgrade Program 7.0 2011-12 to 2012-13

Air 9000 Phase 7 Helicopter Aircrew Training System 2011-12 to 2012-13

Air 9000 Phase 8 Future Naval Aviation Combat System 2010-11 to 2011-12

Air 9000 Phase SCAP Seahawk Capability Assurance Program 2011-12 to 2011-12

JP 129 Phase 4 Tier 1 Unmanned Aerial Vehicle 2011-12 to 2013-14

JP 3027 Phase 1 JDAM Enhancements 2011-12 to 2011-12

JP 66 Phase 1 Replacement Air Defence Targets 2011-12 to 2011-12

Land Forces Capability Goal

Land 17 Phase 1B Digital Terminal Control System 2010-11 to 2011-12

Land 17 Phase 1C Self Propelled Howitzer 2010-11 to 2011-12

Land 121 Phase 5A Light and Lightweight Tactical Training Vehicles 2010-11 to 2011-12

Maritime Forces Capability Goal

JP 2048 Phase 3 Amphibious Watercraft Replacement 2011-12 to 2012-13

Sea 1351 Phase 1 Replacement East Coast Tugs 2011-12 to 2012-13

Sea 1352 Phase 1 Evolved Sea Sparrow Missile Upgrade and Inventory Replenishment

2011-12 to 2015-16

Sea 1357 Phase 1 Close-In Weapons System Phalanx Block Upgrade 2011-12 to 2014-15

Sea 1358 Phase 1 Mini Typhoon for ANZAC Class 2011-12 to 2013-14

Sea 1439 Phase 3.1 Collins Obsolescence Management 2011-12 to 2013-14

Sea 1439 Phase 6 Collins Sonar Replacement 2011-12 to 2013-14

Sea 1448 Phase 4A ANZAC Electronic Support System Improvements 2011-12 to 2012-13

Networked Information Capability Goal

DEF 7013 Phase 4 Joint Intelligence Support System 2011-12 to 2012-13

JP 2008 Phase 3H Military Satellite Capability – Wideband Terrestrial Terminals 2010-11 to 2011-12

JP 2044 Phase 3A.1 Project Eagle Eye 2010-11 to 2011-12

JP 2044 Phase 4A Digital Topographic Systems Upgrade 2010-11 to 2011-12

JP 2047 Phase 3 Terrestrial Communications 2011-12 to 2011-12

JP 2065 Phase 2 Integrated Broadcast Service 2011-12 to 2013-14

JP 2069 Phase 2 High Grade Cryptographic Equipment 2011-12 to 2012-13


JP 2072 Phase 2A Battlespace Communications System (Land) 2011-12 to 2012-13

JP 2090 Phase 1C Combined Information Environment 2011-12 to 2012-13

JP 2099 Phase 1 Identity Management – Project CERTE 2011-12 to 2012-13

JP 5408 Phase 3 ADF Navigation Warfare Capability 2010-11 to 2013-14

Sea 1439 Phase 5B.2 Collins Communications and Electronic Warfare Improvement Program

2011-12 to 2013-14

Sea 1442 Phase 4 Maritime Communications Modernisation 2011-12 to 2012-13

Across All Capability Goal


91

Note1. Project Development activities and some sensitive projects are not included in this list.

Table 45: Significant Defence Capability Plan projects in development for first pass approval

JP 2080 Phase 2B.1 Defence Management Systems Improvement – PMKeys Replacement

2011-12 to 2012-13

JP 2080 Phase 3 Defence Management Systems Improvement – Financial System

2011-12 to 2012-13

Project Number Project Title First Pass Approval

Air Combat Capabilty Goal

Air 5232 Phase 1 Air Combat Officer Training System 2010-11 to 2011-12

Air 5276 Phase CAP 2

AP-3C Capability Assurance Program 2010-11 to 2011-12

Air 5405 Phase 1 Replacement Mobile Regional Operations Centre 2011-12 to 2012-13

Air 5431 Phase 2/3 Fixed Base Defence Air Traffic Management and Control System

2010-11 to 2011-12

Air 5438 Phase 1A Lead-In-Fighter Capability Assurance Program 2011-12 to 2011-12

Air 8000 Phase 2 Battlefield Airlift - Caribou Replacement 2011-12 to 2011-12

JP 129 Phase 4 Tier 1 Unmanned Aerial Vehicle 2011-12 to 2011-12

JP 3027 Phase 1 JDAM Enhancements 2011-12 to 2011-12

Land Forces Capability Goal

JP 154 Phase 2 Joint Counter Improvised Explosive Device Capability 2011-12 to 2012-13

JP 2110 Phase 1B Chemical, Biological, Radiological and Nuclear Defence 2011-12 to 2012-13

JP 3011 Phase 1 Joint Non-Lethal Capability 2011-12 to 2012-13

JP 3025 Phase 1 Deployable Incident Response Regiment Capability 2011-12 to 2011-12

Land 121 Phase 5A Light and Lightweight Tactical Training Vehicles 2010-11 to N/A

Land 125 Phase 4 Soldier Enhancement Version 3 2010-11 to 2012-13

Land 136 Phase 1 Land Force Mortar Replacement 2010-11 to 2011-12

Land 53 Phase 1BR NINOX Night Fighting Equipment Technology Refresh 2011-12 to 2012-13

Maritime Forces Capability Goal

Sea 1000 Phase 1/2 Future Submarine – Design 2011-12 to 2014-15

Sea 1350 Phase 1 Navy Surface and Subsurface Ranges 2011-12 to 2011-12

Sea 1351 Phase 1 Replacement East Coast Tugs 2011-12 to 2012-13

Sea 1352 Phase 1 Evolved Sea Sparrow Missile Upgrade and Inventory Replenishment

2011-12 to 2015-16

Sea 1354 Phase 1 Submarine Escape Rescue and Abandonment System 2010-11 to 2011-12

Sea 1357 Phase 1 Close-In Weapons System Phalanx Block Upgrade 2011-12 to 2014-15

Sea 1358 Phase 1 Mini Typhoon for Anzac Class 2011-12 to 2013-14

Sea 1397 Phase 5B Nulka Missile Decoy Enhancement 2011-12 to 2012-13

Sea 1408 Phase 2 Torpedo Self Defence 2011-12 to 2012-13

Sea 1439 Phase 3.1 Collins Obsolescence Management 2010-11 to 2011-12

Sea 1439 Phase 6 Collins Sonar Replacement 2010-11 to 2011-12

Sea 1448 Phase 4B Anzac Air Search Radar Replacement 2010-11 to 2011-12

Sea 1778 Phase 1 Deployable MCM – Organic Mine Counter Measures 2010-11 to 2011-12

Project Number Project TitleSecond Pass Approval


92

Note1. Project Development activities and some sensitive projects are not included in this list.

Networked Information Capability Goal

DEF 7013 Phase 4 Joint Intelligence Support System 2010-11 to 2011-12

JP 90 Phase 1 ADF Identification Friend or Foe and Automatic Dependant Surveillance - Broadcast

2011-12 to 2012-13

JP 1770 Phase 1 Rapid Environmental Assessment 2011-12 to 2012-13

JP 2008 Phase 3H Military Satellite Capability – Wideband Terrestrial Terminals 2010-11 to 2011-12

JP 2008 Phase 5B Military Satellite Capability – Wideband Terrestrial Infrastructure 2010-11 to 2012-13

JP 2044 Phase 4A Digital Topographic Systems Upgrade 2010-11 to 2011-12

JP 2064 Phase 3 Geospatial Information, Infrastructure and Services 2011-12 to 2012-13

JP 2068 Phase 2B.2 Computer Network Defence 2010-11 to 2011-12



JP 2072 Phase 2A Battlespace Communications System (Land) 2011-12 to 2012-13

JP 2078 Phase 2 Hyper–Spectral Imaging 2011-12 to 2012-13

JP 2089 Phase 3A Tactical Information Exchange Domain (Data Links) 2010-11 to 2011-12

JP 2089 Phase 3B Tactical Information Exchange Domain (Data Links) 2011-12 to 2012-13

JP 2096 Phase 1 Surveillance Enhancement 2010-11 to 2011-12

Land 75 Phase 4 Battlefield Command System 2011-12 to 2012-13

Across All Capability Goal

JP 157 Phase 1 Replacement National Support Base Aviation Refuelling Vehicles

2011-12 to 2011-12

JP 2060 Phase 3 ADF Deployable Health Capability 2011-12 to 2011-12

JP 2080 Phase 2B.1 Defence Management Systems Improvement – PMKeys Replacement

2010-11 to 2011-12

JP 2080 Phase 3 Defence Management Systems Improvement – Financial System

2010-11 to 2011-12

JP 2085 Phase 2/3 Explosive Ordnance Warstock 2011-12 to 2012-13

JP 3021 Phase 1 Joint Combined Training Capability 2010-11 to 2011-12

JP 3024 Phase 1 Woomera Test Range 2010-11 to 2011-12

JP 3028 Phase 1 Defence Simulation Program 2011-12 to 2012-13

Land 998 Phase 1 Replacement Aviation Fire Trucks 2010-11 to 2011-12

Project Number Project Title First Pass Approval


93

THE APPROVED MAJOR CAPITAL INVESTMENT PROGRAM

The Approved Major Capital Investment Program is comprised of those projects, usually costing $20m or more, which are funded from the Unapproved Major Capital Investment Program and which, following approval, are generally transferred to the DMO for the acquisition phase. Projects costing between $5m and $8m require approval by the Minister for Defence. Projects costing between $8m and $20m are jointly approved by the Minister for Defence and the Minister for Finance and Deregulation. The Cabinet Approval threshold is $50m and above.

Funding for approved major capital investment projects, including project management and overhead costs, is provided by Defence to the DMO under separate Materiel Acquisition Agreements for each project.

As an enabling organisation to Defence, the DMO contributes to Defence's outputs. The DMO budget is detailed separately in Section 2: DMO Outcomes and Planned Performance, including an overview of the top 30 projects.


94

Program 1.12: Chief Finance Officer


The Chief Finance Officer Group (CFOG) is responsible for giving strategic financial advice and information to Ministers, the Secretary, the CDF and Defence Senior Leaders. It provides a whole-of-Defence focus for planning, management, monitoring and reporting of key deliverable to the Government, including Defence's outputs.

The CFOG is responsible for Defence's financial governance and assurance and manages Defence's budget and its financial policies, principles and practices in accordance with the Financial Management and Accountability Act 1997.

The CFOG drives Defence's financial management and improvement programs through uniform financial management approaches, a streamlined accountability structure, a financial controls framework, and training and skilling programs.

Portfolio budget pressures and risks are managed through a strong culture of prioritising resource management.

The CFOG works with all Groups and Services to identify cost drivers for all key business elements.

Table 46: Cost Summary for Program 1.12 Chief Finance Officer

2010-11Revised

Estimate$'000

2011-12Budget

Estimate$'000


$'000


$'000


$'000Expenses



RevenuesGoods and services 67,953 - - - -Other revenue 112,293 12,534 12,824 13,145 13,473Total Revenue 180,246 12,534 12,824 13,145 13,473GainsReversals of previous asset w rite-dow ns 6,630 8,957 10,380 10,413 10,397Net gains from sale of assets - - - - -Other gains - - - - -Total gains 6,630 8,957 10,380 10,413 10,397

Total income 186,876 21,491 23,204 23,558 23,870Program 1.12 Chief Finance Officer 211,756 644,488 591,015 843,198 717,342


95


• Defence Financial Statements

• Defence Portfolio Budget Statements

• Defence Portfolio Additional Estimates Statements

• Defence Control Effectiveness Report

• Defence Chief Executive Instructions

• Monthly/Annual input to whole-of-Government reporting.


• provide timely and high quality financial advice to the Minister, the Secretary and CDF

• produce Defence's Budget, Financial Statements and the annual Defence Management and Finance Plan within agreed statutory timeframes

• maintain un-qualified Financial Statements.


96

Program 1.13: People Strategies and Policy


People Strategies and Policy (PSP) Group's two primary objectives in delivering Program 1.13 are to: deliver sustainable People capability to support the achievement of Defence's key outcomes as articulated in the 2009 White Paper; and lead workforce and shared services reform in the Human Resource function across the organisation as part of the Strategic Reform Program (SRP).

PSP Group's vision for achieving these two key objectives is delivered in People in Defence - Generating Force for Future Capability, which provides the Group's strategic blueprint for achieving key People outcomes. This key strategic level document is supported by the Annual People Plan, which provides the detailed implementation plan for achieving PSP Group's vision and primary objectives. Projects and initiatives identified in the Annual People Plan focus on three key facets. These are to:

• define an attractive and compelling employment offer

• develop a work environment that delivers our commitment to our people

• develop an effective and efficient People system to achieve more consistently effective outcomes for our People.

Through its key strategic documents, PSP Group will guide the development of Defence wide People strategies and policies. The Group will also evaluate the effectiveness projects and initiatives identified in the Annual People Plan to ensure they address issues associated with attraction and recruitment, retention, remuneration and reward, People development and leadership capability.

PSP Group comprises the personal offices of Deputy Secretary People Strategies and Policy, Head People Capability, Head People Policy and Head Workforce and Shared Services Reform, as well as the Defence Education Training and Development Branch, Defence Force Recruiting Branch, Fairness and Resolution Branch, Occupational Health and Safety Branch, Personnel Policy and Employment Conditions Branch, Workforce Planning Branch and Workforce and Shared Services Branch.


97

Table 47: Cost Summary for Program 1.13 People Strategies and Policy

2010-11Revised

Estimate$'000

2011-12Budget

Estimate$'000


$'000


$'000


$'000Expenses

Employees 47,200 87,825 99,754 128,785 135,640Suppliers 212,087 238,306 231,972 246,707 256,593Grants - - - - -Deprecia ion and amortisa ion 159 109 150 210 302Finance Cost - - - - -Write-dow n of assets and impairment of assets - - - - -Net losses from sale of assets - - - - -Other expenses - - - - -


RevenuesGoods and services - - - - -Other revenue - - - - -Total Revenue - - - - -GainsReversals of previous asset w rite-dow ns - - - - -Net gains from sale of assets - - - - -Other gains - - - - -Total gains - - - - -

Total income - - - - -Program 1.13 People Strategies and Policy 259,446 326,240 331,876 375,702 392,535


98


• provide timely, accurate and high quality advice on key People issues to the Secretary, the CDF and the Government

• complete the projects and initiatives described in the Annual People Plan in order to deliver sustainable people capability through the development of:

- an attractive and compelling employment offer

- a work environment that delivers on its commitments to our People

- an effective and efficient People system

• lead the implementation of Human Resource Workforce and Shared Services reform and savings across the organisation as part of SRP

• deliver Group-specific reform and savings as part of SRP.


• advice to the Secretary, CDF and Government on People issues is timely and of a high quality

• projects and initiatives described in the Annual People Plan, which are aimed at delivering a sustainable People capability for Defence, are completed in a timely manner and achieve the desired outcomes

• Human Resource Workforce and Shared Services reforms are achieved in a timely manner, and are effective in reducing costs and improving efficiency across Defence

• Group specific outcomes and programs (including those related to Workforce and Shared Services reform) are achieved in a timely manner.


99

Administered Program 1.14: Defence Force Superannuation BenefitsAdministered Program 1.15: Defence Force Superannuation – Nominal Interest

Administered Programs 1.14 and 1.15 Objective

The objective of programs 1.14 and 1.15 is to administer and report member and employer contributions to the two military superannuation schemes: the Defence Force Retirement and Death Benefits Scheme (DFRDB) and the Military Superannuation and Benefits Scheme (MSBS), the liability to the Commonwealth for benefits under these schemes, and the payment of the MSBS Retention Benefit.

The DFRDB was closed to new participants in 1991. Since then, MSBS has been available to all full-time members of the ADF. Both schemes are managed on Defence's behalf by ComSuper.

Since 1991, Defence has paid the MSBS Retention Benefit to eligible MSBS members after 15 years of continuous eligible service. The purpose of the Retention Benefit is to encourage members to serve until they have completed 20 years of service. Due to legislative amendments passed in 2005, the Retention Benefit is not available to members who enlisted after 6 October 2005.

Linked to: Program 1.6 Defence Support.

Table 48: Cost Summary for Program 1.14 Defence Force Superannuation Benefits and 1.15 Defence Force Superannuation — Nominal Interest

Administered Programs 1.14 and 1.15 Deliverables

• report on superannuation contributions, related interest and the movement in liabilities associated with the two military superannuation schemes.

Administered Programs 1.14 and 1.15 Key Performance Indicators

• provision of timely payments of member contributions to ComSuper and quality services for the administration of the DFRDB and MSBS.

2010-11Revised

Estimate$'000

2011-12Budget

Estimate$'000


$'000


$'000


$'000Expenses

Net foreign exchange losses - - - - -Retention benefits 39,223 52,443 64,223 77,103 95,883Military superannuation benefits 3,609,000 3,763,000 3,921,000 4,094,000 4,270,000


RevenuesInterest - - - - -Net foreign exchange gain - - - - -Military superannuation contributions 1,090,000 1,165,332 1,234,338 1,305,198 1,376,479

Total income 1,090,000 1,165,332 1,234,338 1,305,198 1,376,479Program 1.14 Defence Force Superannuation Benefits and 1.15 Defence Force Superannuation Nominal Interest 2,558,223 2,650,111 2,750,885 2,865,905 2,989,404


100

Administered Program 1.16: Housing Assistance

Administered Program 1.16 Objective

The Defence Home Ownership Assistance Scheme was established in order to support the Government's retention and recruitment initiatives and influence ADF members' decision to stay beyond critical career points. The scheme came into effect on 1 July 2008.

The Scheme provides eligible ADF members and ex-serving members with assistance to either purchase a home, purchase land for the purpose of building a home, or to renovate or extend an existing home.

The Scheme contains a three-tiered subsidised loan limit structure that provides increasing entitlements as members serve beyond key exit points.

Following a competitive tendering process, the Department of Veterans' Affairs was appointed Scheme Administrator and a panel of three Home Loan Providers was established: National Australia Bank, Australian Defence Credit Union and the Defence Force Credit Union.

Table 49: Cost Summary for Program 1.16 Expenses

Administered Program 1.16 Deliverables

• provide ADF members with assistance to achieve home ownership that reflects the contemporary housing and home finance markets

• provide progressively higher levels of assistance for eligible members serving beyond the critical career points of four, eight and twelve years of service

• provision of quality services for the administration of the Scheme, including the accurate and timely processing of member applications and issuing of Subsidy Certificates.

Administered Program 1.16 Key Performance Indicators

• members respond to and take up the scheme

• ensure that interest rates provided to ADF members by the Home Loan Providers are competitive with other interest rates in the market.

2010-11Revised

Estimate$'000

2011-12Budget

Estimate$'000


$'000


$'000


$'000Expenses

Net foreign exchange losses - - - - -Housing subsidies 107,739 113,480 120,827 124,241 127,463


RevenuesInterest - - - - -Net foreign exchange gain - - - - -Dividends - - - - -License fees 9,226 9,811 10,349 10,808 11,266Other - - - - -

Total income 9,226 9,811 10,349 10,808 11,266Program 1.16 Housing Assistance 98,513 103,669 110,478 113,433 116,197


101

Administered Program 1.17: Other Administered

Administered Program 1.17 Objective

Other administered comprises four elements:

• interest earned on overdue accounts and on official bank accounts held to facilitate operational requirements and project payments in foreign currency

• interest, dividends and tax equivalent payments received from DHA for Government loans to fund the building of new accommodation

• revenue received from the United Nations for Defence's involvement in peacekeeping operations

• revenue received from special public monies for unidentified Comcare receipts.

Table 50: Cost Summary for Program 1.17 Other Administered

Note1. Previous Program 1.17 Kings Highway Upgrade is complete. Program 1.18 Other Administered reported under Program 1.17.

Administered Program 1.17 Deliverables • report on interest and other receipts transferred to the Official Public Account.

Administered Program 1.17 Key Performance Indicators • accurate accounting and reporting of ‘Other Administered’.

2010-11Revised

Estimate$'000

2011-12Budget

Estimate$'000


$'000


$'000


$'000Expenses - - - - -Total expenses - - - - -Income

RevenuesInterest 5,292 5,299 5,306 5,313 5,321Dividends 47,593 50,067 53,755 56,936 56,204Other 42,653 35,985 33,299 34,072 37,032

Total income 95,538 91,351 92,360 96,321 98,557Program 1.17 Other Administered -95,538 -91,351 -92,360 -96,321 -98,557


102

OUTCOME 2 STRATEGY

The ADF is required to undertake a wide range of military and humanitarian assistance operations as directed by the Government to ensure the defence of Australia and its national interests. The ADF's military operations and other tasks contribute to the achievement of the Government's strategic objectives, defined in the White Paper as defending Australia, contributing to the security of the immediate neighbourhood and supporting wider interests.

OUTCOME 2 RESOURCES



Outcome 2: The advancement of Australia’s strategic interests through the conduct of military operations and other tasks as directed by Government

Program 2.1: Operations contributing to the security of the immediate neighbourhood


Ensure that the Government, through the ADF, has an active and effective role in regional stability, integrity and cohesion of the region.

Australia shares the immediate neighbourhood with Indonesia, New Zealand, Papua New Guinea, East Timor and the island countries of the South West Pacific.

2010-11Revised

Estimate$'000

2011-12Budget

Estimate$'000


$'000


$'000


$'000Program 2.1 Operations contributing to the security of the immediate neighbourhoodRevenue from other sources 1,180 5,500 - - -Departmental outputs 213,101 203,669 12,117 1,114 -Program 2.2 Operations supporting w ider interestsRevenue from other sources - 40,891 - - -Departmental outputs 1,352,167 1,375,285 299,605 139,200 -Total resourcingTotal Departmental outputs 1,565,268 1,578,954 311,722 140,314 -Total Departmental revenue from other sources 1,180 46,391 - - -Equity injection 2,000 - - - -Total resources for Outcome 2 1,568,448 1,625,345 311,722 140,314 -


103

Table 52: Cost Summary for Program 2.1 Operations contributing to the security of the immediate neighbourhood


Operation Commenced ObjectiveGateway 1981 Conduct northern Indian Ocean and South China Sea maritime

surveillance patrols.

Anode 2003 Support the coalition police forces in maintaining the rule of law in Solomon Islands.

Astute 2006 Contribute security support to the Government of Timor Leste and the United Nations Mission in East Timor.

Tower (previously Chiron) 2006 Contribute to the United Nations Integrated Mission in East Timor.

Program 2.1 Key Performance Indicators• ADF operations meet their stated objectives within the Government's guidance



2010-11Revised

Estimate$'000

2011-12Budget

Estimate$'000


$'000


$'000


$'000Expenses

Employees 53,536 63,038 - - -Suppliers 160,745 146,131 12,117 1,114 -Grants - - - - -Deprecia ion - - - - -Finance cost - - - - -Write-dow n of assets and impairment of assets - - - - -Net losses from sale of assets - - - - -Other expenses - - - - -

Total expenses 214,281 209,169 12,117 1,114 -Income

RevenuesGoods and services 1,180 5,500 - - -Other revenue - - - - -Total revenue 1,180 5,500 - - -GainsReversals of previous asset w rite-dow ns - - - - -Net gains from sale of assets - - - - -Other gains - - - - -Total gains - - - - -

Total income 1,180 5,500 - - -Program 2.1 Operations contributing to the security of the immediate neighbourhood 213,101 203,669 12,117 1,114 -


104

Program 2.2: Operations Supporting Wider Interests


Operations supporting wider interests are designed to contribute to United Nations and international efforts to uphold global security.

Table 53: Cost Summary for Program 2.2 Operations Supporting Wider Interests

2010-11Revised

Estimate$'000

2011-12Budget

Estimate$'000


$'000


$'000


$'000Expenses

Employees 281,667 211,431 - - -Suppliers 1,007,688 1,009,317 256,103 95,698 -Grants 43,502 43,502 43,502 43,502 -Deprecia ion - - - - -Finance cost - - - - -Write-dow n of assets and impairment of assets 19,310 151,926 - - -Net losses from sale of assets - - - - -Other expenses - - - - -

Total expenses 1,352,167 1,416,176 299,605 139,200 -Income

RevenuesGoods and services - 40,891 - - -Other revenue - - - - -Total revenue - 40,891 - - -GainsReversals of previous asset w rite-dow ns - - - - -Net gains from sale of assets - - - - -Other gains - - - - -Total gains - - - - -

Total income - 40,891 - - -Program 2.2 Operations supporting w ider interests 1,352,167 1,375,285 299,605 139,200 -


105

Program 2.2 DeliverablesOperation Commenced ObjectivePaladin 1956 Contribute to the United Nations Truce Supervisory Organisation in

the Middle East.

Mazurka 1982 Contribute to the Multinational Force and Observers in the Sinai.

Slipper 2001 Contribute to the international coalition against international terrorism and assist with the reconstruction of Afghanistan.

Azure 2005 Contribute to the United Nations mission in Sudan.

Palate II 2005 Provide a Military Liaison Officer to the United Nations Assistance Mission in Afghanistan.

Hedgerow 2008 Contribute to the hybrid United Nations and African Union Mission in Darfur (Sudan).

Riverbank 2008 Contribute to the United Nations Assistance Mission for Iraq.

Kruger 2009 Support Australian Government relations with Iraq through the delivery of tailored security support to the diplomatic mission.

Program 2.2 Key Performance Indicators• ADF operations meet their stated objectives within the Government's guidance




106

OUTCOME 3 STRATEGY

Defence can be called upon to provide emergency and non-emergency assistance to the Government and the Australian community in non-combat related roles. The tasks Defence may be requested to undertake could include emergency assistance, search and rescue, disaster recovery, surveillance, security or non-emergency law enforcement roles. Tasks may be directed by the Government or requested by other civil authorities, government departments or agencies through Emergency Management Australia. The Government may also require Defence to support significant international events conducted within Australia such as the 2011 Commonwealth Heads of Government meeting being held in Perth later this year.

OUTCOME 3 RESOURCES



Outcome 3: Support for the Australian community and civilian authorities as requested by Government

Program 3.1: Defence contribution to national support tasks in Australia


Undertake tasks which include planning and conduct of operations which aim to provide the security of the Australian coastline from illegal immigration, smuggling, quarantine evasion and other intrusions to Australian sovereignty, counter-terrorism responses, search and rescue and natural disaster relief. Defence contributes to the Coastwatch civil surveillance program and Border Protection Command tasking, providing maritime surveillance assets that are tasked routinely in accordance with the Government's direction.

Defence, through the Defence Assistance to the Civil Community program, supports the Commonwealth with emergency and non-emergency tasks and events of national significance as requested by relevant authorities and the general public.

2010-11Revised

Estimate$'000

2011-12Budget

Estimate$'000


$'000


$'000


$'000Program 3.1 Defence contribution to national support tasks in AustraliaRevenues from other sources - - - - -Departmental outputs 15,252 9,829 - - -Total resourcingTotal Departmental outputs 15,252 9,829 - - -Total Departmental revenue from other sources - - - - -Total resources for Outcome 3 15,252 9,829 - - -


107

Table 55: Cost Summary for Program 3.1 Defence contribution to national support tasks in Australia


Operation Commenced ObjectiveSolania 1988 Conduct South West Pacific maritime surveillance patrols.

Resolute 2006 Contribute to the whole-of-government maritime surveillance and response.

Program 3.1 Key Performance Indicators• Defence's contribution to national support tasks in Australia meets Government directives

• Defence's response to requests for Defence Force Aid to Civilian Authorities is effectively managed, sustained and reported

• Defence's response to requests for Defence Assistance to the Civil Community is effectively managed, sustained and reported.

2010-11Revised

Estimate$'000

2011-12Budget

Estimate$'000


$'000


$'000


$'000Expenses

Employees 231 1,269 - - -Suppliers 15,021 8,560 - - -Grants - - - - -Deprecia ion - - - - -Finance cost - - - - -Write-dow n of assets and impairment of assets - - - - -Net losses from sale of assets - - - - -Other expenses - - - - -

Total expenses 15,252 9,829 - - -Income

RevenuesGoods and services - - - - -Other revenue - - - - -Total revenue - - - - -GainsReversals of previous asset w rite-dow ns - - - - -Net gains from sale of assets - - - - -Other gains - - - - -Total gains - - - - -

Total income - - - - -Program 3.1 Defence contribution to national support tasks in Australia 15,252 9,829 - - -


108

Section 3: Explanatory Tables and Budgeted Financial StatementsSection 3 presents explanatory tables and budgeted financial statements which provide a comprehensive overview of agency finances for the 2011-12 budget year. It explains how budget plans are incorporated into the financial statements and provides further details of the reconciliation between appropriations and program expenses, movements in administered funds, special accounts and government Indigenous expenditure.

3.1 Departmental Explanatory Tables

Table 56: Summary of estimated Special Account Balances[1][2][3][4][5]

Notes1. 2011-12 estimates in bold.2. 2010-11 estimates in italics.3. These are all Special Public Monies.4. The 2011-12 figures include an estimate of $76,000 for interest earned on the Official Public Account (OPA).

- Endowments $15,000- Fedorczenko $8,000- YEYS $53,000

5. The 2010-11 figures include $48,969 for interest earned on the OPA.- Endowments $10,179- Fedorczenko $5,580- YEYS $33,210

(A) = Administered(D) = Departmental

Outcome

Opening2011-122010-11

$'000

Receipts2011-122010-11

$'000

Payments2011-122010-11

$'000

Adjustments2011-122010-11

$'000

Closing Balance2011-122010-11

$'000

1 76,327 62,248 -82,687 - 55,888

118,830 29,554 -72,057 - 76,327

1 318 28 -45 - 301

322 29 -33 - 318

1 158 8 -6 - 160156 7 -5 - 158

1 1,503 71 -428 - 1,146

997 509 -3 - 1,503

Total Special Accounts 2011-12 78,306 62,355 -83,166 - 57,495Total 2010-11 estimate actual 120,305 30,099 -72,098 - 78,306

Services for Other Entities and Trust Moneys (A) - Defence Special Account– Financial Management and Accountability Act 1997

Defence Endowments Special Account (A) – Financial Management and Accountability Act 1997[4][5]

Fedorczenko Legacy Special Account (A) – Financial Management and Accountability Act 1997[4][5]

Young Endeavour Youth Program Special Account (A) – Financial Management and Accountability Act 1997[4][5]


109

3.1.1 AUSTRALIAN GOVERNMENT INDIGENOUS EXPENDITURE

Table 57: Australian Government Indigenous Expenditure (AGIE)

Note1. The majority of costs are subsequently recovered from Department of Families, Housing, Community Services and Indigenous Affairs.

Defence Indigenous Employment Strategy

The Directorate of Indigenous Affairs within the Fairness and Resolution Branch has been established to provide a single point of contact for Defence Indigenous Employment matters, and is responsible for implementation of the Defence Reconciliation Action Plan across Defence. The Directorate of Indigenous Affairs develops and manages Defence Indigenous policy in line with the Commonwealth's Indigenous agenda, and is responsible for the implementation of the Defence Indigenous Employment Strategy. This strategy addresses the recruitment of Indigenous Australians to the ADF and to the Defence APS workforce. It also focuses on retention strategies for Indigenous ADF members and APS employees, ensuring that strong support mechanisms are in place.

Defence Indigenous Development Program

Aligned to the Government's Closing the Gap Program, the Defence Indigenous Development Program is a whole-of-government initiative that will provide the opportunity for Indigenous people from remote communities to acquire skills that are transferable back to their community. An increase in the recruitment of Indigenous people from remote communities into the ADF is an additional benefit of the program. Currently, the Department of Education, Employment and Workplace Relations and the Department of Defence are engaged in the ongoing development and implementation of the program.

Army Community Assistance Program

The Army Community Assistance Program is a cooperative initiative between the Department of Families, Housing, Community Services and Indigenous Affairs and the Army to improve environmental health conditions within remote Aboriginal communities.

The program seeks to maximise the benefits to Indigenous communities by focusing on projects that allow the Army to make best use of its construction expertise and capability, by capitalising on the Army's ability to holistically deliver a range of services to remote Indigenous communities that would not normally be available in a single project.

ProgramBill No. 1

$'000Outcome 1Defence Indigenous Employment Strategy 1.13 Departmental 2011-12 Budget Estimate 2,702 Departmental 2010-11 Estimated Actual 2,639Defence Indigenous Development Program 1.13 Departmental 2011-12 Budget Estimate 5,994 Departmental 2010-11 Estimated Actual 5,849Army Community Assistance Project[1] 1.3 Departmental 2011-12 Budget Estimate 3,270 Departmental 2010-11 Estimated Actual 2,223Indigenous Liaison Officers 1.6 Departmental 2011-12 Budget Estimate 720 Departmental 2010-11 Estimated Actual 1,235Total 2011-12 Budget Estimate 12,686Total 2010-11 Estimated Actual 11,946


110

Indigenous Liaison OfficersIndigenous Liaison Officers develop and maintain links with local Indigenous communities and are responsible for consulting with Indigenous Groups on issues pertaining to the use and upkeep of Defence training areas on heritage land as part of the Defence Heritage Management Plans and Indigenous Land Use Agreements.

3.1.2 GRANTS

Defence grants are paid from departmental funds and are approved by the Minister for Defence.

Grants can be:

• payments made to an organisation or individual and include ad hoc grants that are made on a one-off basis, as well as grants renewed under continuing programs

• payments which organisations or individuals received after satisfying eligibility and/or reporting requirements, and include awards, departmental (non-legislated) rebate schemes and non-recipro-cal scholarships.

The Government requires Defence to report on all grant approvals. Table 58 provides information on grants approved to date for 2011-12.

Table 58: Grants Approved for the 2011-12 Budget

Australian Strategic Policy Institute (ASPI)A grant of $3,356,100 was awarded for funding of the Australian Strategic Policy Institute (ASPI). ASPI's purpose is to provide fresh, independent and non-partisan ideas, and to promote discussion within Government, academia and the wider public on Australia's Defence and strategic policy issues (multi-year grant).

Royal United Services Institute (RUSI) of AustraliaA grant of $93,000 was awarded to the RUSI of Australia to provide critical assistance in supporting Defence by promoting discussion of national security and defence matters and improving public awareness and understanding of such issues. The RUSI of Australia achieves its aims by conducting seminars and lectures in all major capital cities and/or major Defence bases, as well as through maintaining libraries of strategic and defence issues, and circulating transcripts and news bulletins (multi-year grant).

Sir Arthur Tange Defence PhD Scholarships

A grant of $63,800 was awarded to the Sir Arthur Tange Defence PhD scholarships, of the Australian National University, to encourage research into defence and security issues of particular relevance to Australia and support the next generation of strategic thinkers (multi-year grant).

Strategic and Defence Studies Centre Post Doctoral FellowshipA grant of $174,438 was awarded to the Strategic and Defence Studies Centre, of the Australian National University, to enable the development of future academics in the field of Australia's long term strategic and defence challenges (multi-year grant).

2010-11 Estimated

Actual $’000

2011-12Budget

Estimate $’000

3,300 Australian Strategic Policy Institute (ASPI) 3,35691 Royal United Services Institute (RUSI) of Australia 9364 Sir Ar hur Tange Defence PhD Scholarships 64

190 Strategic and Defence Studies Centre Post Doctoral Fellow ship 1743,645 Total Grants 3,687


111

3.2 Budgeted Financial Statements

3.2.1 ANALYSIS OF DEPARTMENTAL BUDGETED FINANCIAL STATEMENTS

Table 59: Variation in Departmental Comprehensive Income Statement (Showing Net Cost of Services) for the period ended 30 June


$'000

2011-12Budget

Estimate$'000

Variation$'000

Variation%

EXPENSESEmployee benefits 9,344,499 9,597,092 252,593 2.7Supplier expenses 8,929,426 9,766,478 837,052 9.4Grants 48,639 48,639 - -Deprecia ion and amortisa ion 3,513,688 3,441,255 -72,433 -2.1Finance costs 87,017 91,882 4,865 5.6Write-dow n of assets and impairment of assets 1,245,263 1,244,054 -1,209 -0.1Other 6,909 6,909 - -

Total expenses 23,175,441 24,196,309 1,020,868 4.4LESS:OWN-SOURCE INCOMEOwn-source revenue

Sale of goods and rendering of services 846,191 892,915 46,724 5.5Rental income 6,373 6,373 - -Other revenue 78,691 78,691 - -

Total own-source revenue 931,255 977,979 46,724 5.0Gains

Reversals of previous asset w rite-dow ns 578,003 574,954 -3,049 -0.5Sale of assets 9,682 2,582 -7,100 -73.3

Total gains 587,685 577,536 -10,149 -1.7Total own-source income 1,518,940 1,555,515 36,575 2.4Net cost of (contribution by) services 21,656,501 22,640,794 984,293 4.5Revenue from Government 21,656,501 22,640,794 984,293 4.5Surplus (Deficit) attributable to the Australian Government - - - -OTHER COMPREHENSIVE INCOMEChanges in asset revaluation reserves - - - -Total other comprehensive income - - - -Total comprehensive income attributable to the Australian Government - - - -


112

Expenses

Expenses are due to increase by $1,020.9m or 4.4 per cent due to:

• an increase in employee expenses of $252.6m, including:

- Operations supplementation under the no-win no-loss arrangements ($274.5m)

- internally managed reprogramming to align with Defence requirements ($14.7m)

- funding required for additional continuous full-time deployed personnel ($1.6m)

- adjustment to accrual estimates following a review of Fringe Benefits tax payments (-$0.3m)

- movements in foreign exchange parameters ($-1.8m)

- impact of the realisation of efficiencies in corporate support functions and in support Governments' commitment to responsible economic management (-$14.9m)

- revised accrual calculations for employee provisions (-$21.2m)

• an increase in suppliers expenses of $837.1m, including:

- Operations supplementation under the no-win no-loss arrangements ($864.2m)


- funding to the Government for the Overseas property office (-$2.0m)

- movements in foreign exchange parameters (-$28.7m)

- impact of the realisation of efficiencies in corporate support functions and in support Governments' commitment to responsible economic management (-$161.1m)

• a decrease in the estimate of depreciation and amortisation of $72.4m due to revised estimates of Defence's asset purchases, asset values and useful lives

• an increase in Finance costs of $4.8m due to:

- payout of the Housing Annuity Lease ($8.8m)

- adjustments to the restoration and decontamination provision (-$4.0m)

• a decrease in the estimate of write-down and impairment of assets of $1.2m following a review of Defence's assets and historical write-downs.

Income

Total own-source income in 2011-12 is estimated to increase by $36.6m or 2.4 per cent due to:

• an increase in total own-source revenue of $46.7m resulting from:

- recoveries from other Governments for logistic support for Operations ($46.4m)



• a decrease in the reversal of previous asset write-downs of $3.0m following a review of Defence's assets and historical write-downs

• a decrease in the sale of assets of $7.1m due to the commercial vehicle disposal program.


113

Table 60: Variation in budgeted departmental balance sheet (as at 30 June)


$'000

2011-12Budget

Estimate$'000

Variation$'000

Variation%

ASSETSFinancial assets

Cash and cash equivalents 52,228 52,226 -2 -Trade and other receivables 188,730 202,926 14,196 7.5Tax assets 45,574 45,573 -1 -Appropria ion receivable 20,457 20,457 - -Other receivables 240,764 200,568 -40,196 -16.7

Total financial assets 547,753 521,751 -26,002 -4.7Non-financial assets

Land and buildings 16,218,501 15,834,983 -383,518 -2.4Infrastructure, plant and equipment 6,153,144 6,037,291 -115,853 -1.9Specialist military equipment 42,064,265 41,366,780 -697,485 -1.7Intangibles 504,692 494,619 -10,073 -2.0Heritage and cultural 900,600 900,600 - -Inventories 5,507,911 5,466,811 -41,100 -0.7Prepayments 164,021 164,021 - -

Total non-financial assets 71,513,134 70,265,105 -1,248,029 -1.7Assets held for sale 28,465 28,465 - -

Total assets 72,089,352 70,815,320 -1,274,032 -1.8LIABILITIESPayables

Suppliers 842,043 801,641 -40,402 -4.8Other 318,987 321,501 2,514 0.8

Total payables 1,161,030 1,123,142 -37,888 -3.3Interest bearing liabilities

Leases 826,250 826,250 - -Total interest bearing liabilities 826,250 826,250 - -Provisions

Employee provisions 2,364,561 2,316,090 -48,471 -2.0Restoration, decontamination and decommissioning 788,634 787,509 -1,125 -0.1Other 14,834 14,834 - -

Total provisions 3,168,029 3,118,432 -49,597 -1.6Total liabilities 5,155,309 5,067,824 -87,485 -1.7NET ASSETS 66,934,043 65,747,496 -1,186,547 -1.8EQUITY

Contributed equity 18,591,159 17,225,661 -1,365,498 -7.3Reserves 14,042,887 14,042,887 - -Retained surplus (accumulated deficit) 34,299,997 34,478,948 178,951 0.5

Total equity 66,934,043 65,747,496 -1,186,547 -1.8


114

Assets

Total assets are estimated to be $70.8b this is $1.3b or 1.8 per cent lower then projected in the Portfolio Additional Estimates Statements 2010-11.

Total financial assets are $26.0m lower than projected at Portfolio Additional Estimates Statements 2010-11 due to:

• revised estimates in relation to the property disposals program

Total non financial assets are $1.2b lower than projected at Portfolio Additional Estimates Statements 2010-11 resulting from:

• a decrease in the budgeted value of land and buildings of $383.5m due to:

- revised estimates in relation to the property disposals program ($53.6m)

- internally managed reprogramming to align with Defence requirements (-$437.1m)

• a decrease in the budgeted value of infrastructure, plant and equipment of $115.9m due to:

- internally managed reprogramming to align with Defence requirements and foreign exchange movements (-$143.6m)

- revised asset values following a review of historical write-downs, impairment and useful life ($27.7m)

• a decrease in the budgeted value of specialist military equipment of $697.5m due to:


- foreign exchange movements (-$317.8m)

- Government agreement to capital reprogramming and internally managed reprogramming to align with Defence requirements (-$23.3m)

- impact of the realisation of efficiencies in corporate support functions and in support of the Governments' commitment to responsible economic management (-$438.9m)

• a decrease in the budgeted value of intangible assets of $10.1m due to:

- internally managed reprogramming to align with Defence requirements and foreign exchange movements (-$14.4m)


• a decrease in the budget value of inventory $41.1m due to:

- revised asset values following a review of historical write-downs, impairments and depreciation (-$20.6m)

- impact of foreign exchange movements (-$5.8m)

- internally managed reprogramming to align with Defence requirements (-$14.7m).

Liabilities

Total liabilities are estimated to be $5.1b this is $87.5m or 1.7 per cent lower than projected in the Portfolio Additional Estimates Statements 2010-11.

Total payables are $37.9m lower than projected in the Portfolio Additional Estimates Statements 2010-11 resulting from:

• a decrease in supplier payables of (-$40.4m) related to an adjustment in accrual estimates following a review of suppliers payments

• an increase in other payables of ($2.5m) related to an adjustment to accrual estimates following a review of Fringe Benefits Tax payments


115

Total provisions are $49.6m lower than projected in the Portfolio Additional Estimates Statements 2010-11 resulting from:

• a decrease in employee provisions of (-$48.5m) related to revisions to accruals based changes to budget requirements

• a decrease in restoration, decontamination and decommissioning of (-$1.1m) following a review of historical achievement

Equity

Equity is estimated to be $65.7b this represents a decrease of $1.2b or 1.8 per cent from the estimate published in the Portfolio Additional Estimates Statements 2010-11, resulting from:



- reallocation between outcome appropriation and equity injections to reflect category changes (-$458.3m)

- reduced equity returned to Government as a result of the revised property disposals program ($27.7m).


116

Table 61: Variation in budgeted departmental statement of cash flows (for the period ended 30 June)

2011-12PreviousEstimate

$'000

2011-12Budget

Estimate$'000

Variation$'000

Variation%

OPERATING ACTIVITIESCash received

Goods and services 808,606 855,330 46,724 5 8Appropriations 21,656,501 22,648,794 992,293 4.6Net GST received 513,903 568,476 54,573 10.6O her cash received 80,185 80,185 - -Cash transfer from the Official Public Account (receivables) 6,389 6,389 - -

Total cash received 23,065,584 24,159,174 1,093,590 4.7Cash used

Employees 9,271,886 9,543,130 271,244 2 9Suppliers 7,999,347 8,855,448 856,101 10.7Net GST paid 513,903 568,476 54,573 10.6Grants 48,639 48,639 - -O her cash used 6,909 6,909 - -Cash transfer to the Official Public Account (receivables) 85,679 58,026 -27,653 -32.3

Total cash used 17,926,363 19,080,628 1,154,265 6.4Net cash from (used by) operating activities 5,139,221 5,078,546 -60,675 -1.2INVESTING ACTIVITIESCash received

Proceeds from sales of land and buildings 125,019 89,088 -35,931 -28.7Proceeds from sales of infrastructure, plant and equipment 35,839 28,739 -7,100 -19.8

Total cash received 160,858 117,827 -43,031 -26.8Cash used

Purchase of land and buildings 1,236,046 1,116,415 -119,631 -9.7Purchase of infrastructure, plant and equipment 330,491 324,313 -6,178 -1.9Purchase of specialist military equipment 5,397,600 5,193,700 -203,900 -3 8Purchase of intangibles 31,446 31,446 - -Purchase of inventory 1,306,381 1,253,513 -52,868 -4 0Selling costs on sale of assets 34,230 25,952 -8,278 -24.2Finance costs 75,478 75,478 - -

Total cash used 8,411,672 8,020,817 -390,855 -4.6Net cash from (used by) investing activities -8,250,814 -7,902,990 347,824 -4.2FINANCING ACTIVITIESCash received

Appropriations - contributed equity 3,188,466 2,909,317 -279,149 -8.8Total cash received 3,188,466 2,909,317 -279,149 -8.8Cash used

Repayment of debt 76,873 76,873 - -Cash to the Official Public Account - - - -

Total cash used 76,873 76,873 - -Net cash from (used by) financing activities 3,111,593 2,832,444 -279,149 -9.0Net increase (decrease) in cash and cash equivalents held - 8,000 8,000 -

Cash and cash equivalents at beginning of the reporting period 52,226 44,226 -8,000 -15 3Effect of exchange rate movements on cash and cash equivalents - - - -

Cash and cash equivalents at the end of the reporting period 52,226 52,226 - -


117

Operating Activities

Net cash from or (used by) Operating activities will decrease by $60.7m or 1.2 per cent than projected at Portfolio Additional Estimates Statements 2010-11.

Operating Cash Received will increase by $1,093.6m due to:

• an increase in goods and services of $46.7m resulting from:

- recoveries from other governments for logistic support for Operations ($46.4m)


• an increase in appropriation of $992.3m resulting from:

- operations supplementation under the no-win no-loss arrangement ($1,092.3m)

- prior year appropriation related to operations under no-win no-loss to be extinguished in 2011-12 ($8.0m)

- reallocation between outcome appropriation and equity injections to reflect category transfers ($458.3m).

- Government initiative for the establishment of the overseas property office (-$2.0m)

- Government agreed reprogramming of funding to better align with Defence's requirements (-$133.9m)



• an increase in net GST received of $54.6m relating to the adjustment of the GST position

Operating Cash Used will increase by $1,154.3m resulting from:

• an increase in employees of $271.3m due to:

- operations supplementation under the no-win no-loss arrangement ($274.5m)


- funding required for additional continuous full-time deployed personnel ($1.6m)

- allocation of funding for management of fraud related debts ($0.1m)



• an increase in suppliers of $856.1m due to:

- operations supplementation under the no-win no-loss arrangement ($864.2m)

- funding for Collins Class Submarine from capital ($100.0m)

- funding for Hornet upgrade from capital ($68.0m)


- transfer of funding for the overseas property office (-$2.0m)



• an increase in net GST payments $54.6m due to increased supplier payments

• a decrease in payments to the official public account of $27.6m due to the revised property disposals program.


118

Investing Activities

Net cash from or (used by) Investing Activities will decrease by $347.8m or 4.2 per cent than projected at Portfolio Additional Estimates Statements 2010-11.

Investing cash received will decrease by $43.0m due to:

- a reduction in commercial vehicle sales (-$7.1m)

- revised property disposals program inclusive of disposal costs (-$35.9m)

Investing cash used will decrease by $390.8m resulting from:

• a decrease in purchase of land and buildings of $119.6m due to internally managed reprogramming to align with Defence requirements

• a decrease in purchase of infrastructure, plant and equipment of $6.2m due to:



• a decrease in purchase of specialist military equipment of $203.9m resulting from:

- internally managed reprogramming and reallocation across categories to align with Defence requirements ($184.1m)


- Hornet upgrade funding from suppliers (-$68.0m)

- Collins class submarine funding from suppliers (-$100.0m)


• a decrease in purchase of inventory of $52.9m due to:

- movements in foreign exchange parameters (-$3.6m).



• a decrease in selling costs on sale of assets of $8.3m due to a forecast decrease in selling costs associated with the revised property disposals program.

Financing Activities

Net cash from or (used by) Financing Activities will decrease by $279.1m or 9.0 per cent than projected at Portfolio Additional Estimates Statements 2010-11.

• Equity Injections will decrease by $279.1m due to:


- impact of the realisation of efficiencies in corporate support functions and in support of the Governments' commitment to responsible economic management ($27.2m)

- Commission of Inquiry into the Queensland floods ($0.1)

- C-130J Hercules cancellation of two additional aircraft (-$2.4m)

- reallocation between outcome appropriation and equity injections to reflect category changes (-$458.3m).


119

3.2.2 DEPARTMENTAL BUDGETED FINANCIAL STATEMENTS

Table 62: Budgeted Departmental Comprehensive Income Statement (showing net cost of services) for the period ended 30 June

Note1. Losses and gains from sale of assets are derived from Army and Defence Support programs. The total net gains presented for Army (Table 28)

and Defence Support (Table 33) have been separately presented as the gross loss and gains position within this Table.

2010-11Estimated

Actual$'000

2011-12Budget

Estimate$'000


$'000


$'000


$'000EXPENSES

Employee benefits 9,481,415 9,597,092 9,632,989 10,012,068 10,369,472Supplier expenses 8,771,212 9,766,478 8,960,186 9,688,949 9,979,412Grants 48,680 48,639 48,743 49,061 5,481Depreciation and amortisation 3,529,116 3,441,255 3,603,272 3,707,967 3,823,768Finance costs 72,107 91,882 80,996 86,546 87,017Write-dow n of assets and impairment of assets 1,060,666 1,244,054 1,142,499 1,194,408 1,247,971Losses from sale of assets - - 2,338 14,384 58,187Other 10,500 6,909 935 957 979

Total expenses 22,973,696 24,196,309 23,471,958 24,754,340 25,572,287LESS:OWN-SOURCE INCOME

Own-source revenueSale of goods and rendering of services 881,807 892,915 874,561 918,446 958,101Rental income 7,170 6,373 6,535 6,715 6,902Other revenue 179,890 78,691 80,429 82,458 84,502

Total own-source revenue 1,068,867 977,979 961,525 1,007,619 1,049,505Gains

Reversals of previous asset w rite-dow ns 546,982 574,954 601,938 629,460 657,579Sale of assets[1] 5,832 2,582 - - -

Total gains 552,814 577,536 601,938 629,460 657,579Total own-source income 1,621,681 1,555,515 1,563,463 1,637,079 1,707,084Net cost of (contribution by) services 21,352,015 22,640,794 21,908,495 23,117,261 23,865,203

Revenue from Government 21,352,015 22,640,794 21,908,495 23,117,261 23,865,203Surplus (Deficit) attributable to the Australian Government - - - - -OTHER COMPREHENSIVE INCOMEChanges in asset revaluation reserves - - - - -Total other comprehensive income - - - - -Total comprehensive income attributable to the Australian Government - - - - -


120

Table 63: Budgeted departmental balance sheet (as at 30 June)

2010-11Estimated

Actual$'000

2011-12Budget

Estimate$'000


$'000


$'000


$'000ASSETSFinancial assets

Cash and cash equivalents 44,226 52,226 52,226 52,226 52,226Trade and other receivables 165,341 202,926 234,096 269,500 305,387Tax assets 45,573 45,573 45,573 45,573 45,573Appropriation receivable 34,846 20,457 20,457 20,457 20,457Other receivables 165,568 200,568 175,568 165,568 165,568

Total financial assets 455,554 521,750 527,920 553,324 589,211Non-financial assets

Land and buildings 15,413,555 15,834,983 16,577,860 17,209,242 17,038,704Infrastructure, plant and equipment 6,080,217 6,037,291 5,865,740 5,681,230 5,460,829Specialist military equipment 38,948,191 41,366,780 42,570,691 44,558,294 47,315,297Intangibles 534,241 494,619 440,316 396,683 359,823Heritage and cultural 900,601 900,600 900,599 900,598 900,597Inventories 5,317,457 5,466,811 5,591,540 5,712,779 5,843,760Prepayments 164,021 164,021 164,021 164,021 164,021

Total non-financial assets 67,358,283 70,265,105 72,110,767 74,622,847 77,083,031Assets held for sale 28,465 28,465 28,465 28,465 28,465

Total assets 67,842,302 70,815,320 72,667,152 75,204,636 77,700,707LIABILITIESPayables

Suppliers 773,407 801,641 789,389 835,421 823,712Other 320,613 321,501 321,345 324,827 327,777

Total payables 1,094,020 1,123,142 1,110,734 1,160,248 1,151,489Interest bearing liabilities

Leases 803,123 826,250 741,305 688,962 584,873Total interest bearing liabilities 803,123 826,250 741,305 688,962 584,873Provisions

Employee provisions 2,263,016 2,316,090 2,416,515 2,517,284 2,629,330Restoration, decontamination and decommissioning 771,105 787,509 799,353 822,437 849,991Other 14,834 14,834 14,834 14,834 14,834

Total provisions 3,048,954 3,118,432 3,230,701 3,354,554 3,494,154Total liabilities 4,946,097 5,067,824 5,082,740 5,203,764 5,230,516NET ASSETS 62,896,205 65,747,496 67,584,412 70,000,872 72,470,191EQUITY

Contributed equity 14,374,370 17,225,661 19,062,577 21,479,037 23,948,356Reserves 14,042,887 14,042,887 14,042,887 14,042,887 14,042,887Retained surplus (accumulated deficit) 34,478,948 34,478,948 34,478,948 34,478,948 34,478,948

Total equity 62,896,205 65,747,496 67,584,412 70,000,872 72,470,191


121

Table 64: Budgeted departmental statement of cash flows (for the period ended 30 June)

2010-11Estimated

Actual$'000

2011-12Budget

Estimate$'000


$'000


$'000


$'000OPERATING ACTIVITIESCash received

Goods and services 843,584 855,330 843,391 883,042 922,214Appropria ions 21,341,915 22,648,794 21,908,495 23,117,261 23,865,203Net GST received 583,944 568,476 521,922 564,363 584,097Other cash received 182,300 80,185 81,963 84,047 86,150Cash transfer from the Official Public Account (receivables) 65,000 6,389 - - -

Total cash received 23,016,743 24,159,174 23,355,771 24,648,713 25,457,664Cash used

Employees 9,349,779 9,543,130 9,532,720 9,907,817 10,254,476Suppliers 7,914,352 8,855,448 8,130,241 8,791,396 9,098,779Net GST paid 507,548 568,476 521,922 564,363 584,097Grants 48,680 48,639 48,743 49,061 5,481Other cash used 10,500 6,909 935 957 979Cash transfer to he Official Public Account (receivables) 93,269 58,026 112,951 22,416 22,783

Total cash used 17,924,128 19,080,628 18,347,512 19,336,010 19,966,595Net cash from (used by) operating activities 5,092,615 5,078,546 5,008,259 5,312,703 5,491,069INVESTING ACTIVITIESCash received

Proceeds from sales of land and buildings 125,802 89,088 126,676 49,986 57,410Proceeds from sales of infrastructure, plant and equipment 28,947 28,739 28,747 36,160 36,371

Total cash received 154,749 117,827 155,423 86,146 93,781Cash used

Purchase of land and buildings 1,075,880 1,116,415 1,471,033 1,337,959 548,677Purchase of infrastructure, plant and equipment 173,332 324,313 308,278 280,831 253,787Purchase of specialist military equipment 5,333,586 5,193,700 3,958,839 4,853,454 5,741,031Purchase of intangibles 12,204 31,446 11,286 1,892 1,981Purchase of inventory 1,253,480 1,253,513 1,195,369 1,208,507 1,266,607Selling costs on sale of assets 23,184 25,952 14,647 39,277 101,317Finance costs 70,882 75,478 69,152 63,462 59,463

Total cash used 7,942,548 8,020,817 7,028,604 7,785,382 7,972,863Net cash from (used by) investing activities -7,787,799 -7,902,990 -6,873,181 -7,699,236 -7,879,082FINANCING ACTIVITIESCash received

Appropria ions - contributed equity 2,755,907 2,909,317 1,949,867 2,438,876 2,492,102Total cash received 2,755,907 2,909,317 1,949,867 2,438,876 2,492,102Cash used

Repayment of debt 68,723 76,873 84,945 52,343 104,089Cash to the Official Public Account - - - - -

Total cash used 68,723 76,873 84,945 52,343 104,089Net cash from (used by) financing activities 2,687,184 2,832,444 1,864,922 2,386,533 2,388,013Net increase (decrease) in cash and cash equivalents held -8,000 8,000 - - -

Cash and cash equivalents at the beginning of the repor ing period 52,226 44,226 52,226 52,226 52,226Effect of exchange rate movements on cash and cash equivalents - - - - -

Cash and cash equivalents at the end of the reporting period 44,226 52,226 52,226 52,226 52,226


122

Table 65: Departmental statement of changes in equity—summary of movement (Budget year 2011-12)

Retained earnings

$'000

Asset revaluation

reserve$'000

Contributed equity/capital

$'000

Total equity

$'000Opening balance as at 1 July 2011

Balance carried forw ard from previous period 34,478,948 14,042,887 14,374,370 62,896,205Adjustment for changes in accounting policies - - - -

Adjusted opening balance 34,478,948 14,042,887 14,374,370 62,896,205Comprehensive Income

Comprehensive income recognised directly in equity:Gain/loss on revaluation of property - - - -

Sub-total comprehensive income - - - -Surplus (Deficit) for the period - - - -

Total comprehensive income recognised directly in equity - - - -Transactions with owners

Distribution to ownersReturns on capital:

Restructuring - - - -Other - - -58,026 -58,026

Contributions by ownersAppropriation (equity injection) - - 2,909,317 2,909,317Other: - - - -

Sub-total transaction w ith owners - - 2,851,291 2,851,291Transfers betw een equity components - - - -

Estimated closing balance as at 30 June 2012 34,478,948 14,042,887 17,225,661 65,747,496


123

Table 66: Departmental Capital Budget Statement

Note1. Includes the following sources of funding:

- annual and prior year appropriations- donations and contributions- gifts- internally developed assets- s31 relevant agency receipts- proceeds from the sale of assets.

2010-11Estimated

Actual$'000

2011-12Budget

Estimate$'000


$'000


$'000


$'000CAPITAL APPROPRIATIONS

Equity Injections - Bill 2 2,755,907 2,909,317 1,949,867 2,438,876 2,492,102Total capital appropriations 2,755,907 2,909,317 1,949,867 2,438,876 2,492,102Represented by:

Purchase of non-financial assets 2,687,184 2,832,444 1,864,922 2,386,533 2,388,013Annual f inance lease costs 68,723 76,873 84,945 52,343 104,089Other items - - - - -

Total Items 2,755,907 2,909,317 1,949,867 2,438,876 2,492,102PURCHASE OF NON-FINANCIAL ASSETS

Funded by capital appropriations 2,755,907 2,909,317 1,949,867 2,438,876 2,492,102Funded by f inance lease costs 63,495 100,000 - - -Funded internally from departmental resources[1] 3,839,095 3,756,557 3,799,569 4,035,260 4,053,374

Total 6,658,497 6,765,874 5,749,436 6,474,136 6,545,476Reconciliation of cash used to acquire assets to asset movement table

Total purchases 6,658,497 6,765,874 5,749,436 6,474,136 6,545,476less additions by f inance lease 63,495 100,000 - - -less additions by creditors/borrow ings - - - - -plus borrow ing/f inance costs 70,882 75,478 69,152 63,462 59,463plus Annual f inance lease costs 68,723 76,873 84,945 52,343 104,089less Gifted assets - - - - -less s32/restructuring - - - - -

Total cash used to acquire assets 6,734,607 6,818,225 5,903,533 6,589,941 6,709,028


ents 2011-12

124 Table 67: Statement of Departmental Asset Movements (2011-12)

Notes1. Reclassification include assets first found.2. Other disposals includes write-offs.

Land and buildings

$'000

Specialist military

equipment$'000

Infrastructure Plant and

Equipment$'000

Intangibles$'000

Heritage and cultural

assets $'000

Total$'000

As at 1 July 2011Gross book value 16,189,271 74,341,208 6,955,803 1,008,195 900,602 99,395,079Accumulated depreciation/amortisation and impairment 775,716 35,393,017 875,587 473,956 1 37,518,277Opening net book balance 15,413,555 38,948,191 6,080,216 534,239 900,601 61,876,802CAPITAL ASSET ADDITIONSEstimated expenditure on new or replacement assets

By purchase - appropriation equity 1,116,415 5,193,700 324,313 31,446 - 6,665,874By purchase - donated funds - - - - - -By finance lease - - 100,000 - - 100,000

Total Additions 1,116,415 5,193,700 424,313 31,446 - 6,765,874Other MovementsAssets held for sale 15,860 11,978 627 - - 28,464Reclassif ications[1] - 408,589 31,675 - - 440,264Deprecia ion and amortisa ion 536,377 2,407,460 426,349 71,068 1 3,441,255Disposal of entities or other operations (including restructuring) 90,803 - 33,490 - - 124,293Other disposals[2] 51,947 764,262 38,448 - - 854,658As at 30 June 2012Gross book value 17,147,076 79,167,257 7,339,226 1,039,641 900,602 105,593,802Accumulated depreciation/amortisation and impairment 1,312,093 37,800,477 1,301,936 545,024 2 40,959,532Closing net book value 15,834,983 41,366,780 6,037,290 494,617 900,600 64,634,270


125

ANALYSIS OF ADMINISTERED ACTIVITY

Administered items are those managed by Defence on behalf of the Government. They relate to activities governed by eligibility rules and conditions established by the Government or Parliament. Defence has four administered programs as follows:

• Defence Force Superannuation Benefits

• Defence Force Superannuation Nominal interest

• Housing Assistance

• Other (DHA Competitive Neutrality and other financial transactions)

These are described in detail in Programs 1.14 to 1.17.

Administered Income and Expenses

Defence is budgeting to receive $1,266.5m in income for administered items and plans to have expenses of $3,928.9m in 2011-12. Details are shown in Table 68 and an explanation of the major variations to the last published plan provided.

Table 68: Variation in schedule of budgeted income and expenses administered on behalf of the Government (for the period ended 30 June)

Note1. This includes an amount for a DHA competitive neutrality payment.


$'000

2011-12Budget

Estimate$'000

Variation$'000

Variation%

INCOME ADMINISTERED ON BEHALF OF GOVERNMENTRevenueNon-taxation

Interest 5,815 5,299 -516 -8.9Dividends 49,040 50,067 1,027 2.1Military superannuation contributions 1,136,131 1,165,332 29,201 2.6Fees 11,708 9,811 -1,897 -16.2Other[1] 29,531 35,985 6,454 21.9

Total non-taxation 1,232,225 1,266,494 34,269 2.8Total revenues administered on behalf of Government 1,232,225 1,266,494 34,269 2.8EXPENSES ADMINISTERED ON BEHALF OF GOVERNMENT

Subsidies 132,511 113,480 -19,031 -14.4Military retention benefits 52,443 52,443 - -Military superannuation benefits 3,756,000 3,763,000 7,000 0.2

Total expenses administered on behalf of Government 3,940,954 3,928,923 -12,031 -0.3


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Income

Income administered on behalf of Government will increase by $34.3m primarily due to:

• an increase in military superannuation contributions primarily as a result of consideration of 2010-11 projected achievement and an increase in the ADF permanent force ($29.2m)

• an increase in the Defence Housing Australia (DHA) competitive neutrality payment ($6.5m).

Expenses

Expenses administered on behalf of the Government will decrease by $12.0m primarily due to:

• higher number of loans retired in the revised estimate resulting in a net decrease in the subsidy expense (-$19.0m)

• an increase in military superannuation benefit expense of ($7.0m) is attributable to:

- lower than expected exit rates from the DFRDB scheme in 2010-11 resulting in increased interest cost on the higher unfunded superannuation liability ($11.0m)

- a minor decrease in the MSBS superannuation expense due to lower than expected general wage growth rate (-$4.0m).

Table 69: Variation in schedule of budgeted assets and liabilities administered on behalf of the Government (as at 30 June)

Notes1. Defence Force Retirement and Death Benefits.2. Military Superannuation and Benefits Scheme.

Defence is budgeting to have $2,493.4m in assets and plans to have liabilities of $46,034.0m in 2011-12. Details are shown in Table 69 and an explanation of the major variations to the last published plan provided.


$'000

2011-12Budget

Estimate$'000

Variation$'000

Variation%

ASSETS ADMINISTERED ON BEHALF OF GOVERNMENTFinancial assets

Cash and cash equivalents - - - -Receivables 66,545 63,906 -2,639 -4.0Investments accounted for using the equity method 2,174,330 2,174,330 - -Loans 84,580 84,580 - -

Total financial assets 2,325,455 2,322,816 -2,639 -0.1Non-financial assets

Prepayments 170,549 170,549 - -Total non-financial assets 170,549 170,549 - -Total assets administered on behalf of Government 2,496,004 2,493,365 -2,639 -0.1LIABILITIES ADMINISTERED ON BEHALF OF GOVERNMENTProvisions

Superannuation - DFRDB[1] 25,791,000 25,970,000 179,000 0.7Superannuation - MSBS[2] 20,099,000 20,023,000 -76,000 -0.4

Total provisions 45,890,000 45,993,000 103,000 0.2Payables

O her 40,970 40,970 - -Total payables 40,970 40,970 - -Total liabilities administered on behalf of Government 45,930,970 46,033,970 103,000 0.2


127

Assets

Total assets are estimated to be $2,493.4m reflecting a decrease of $2.6m due to revised Dividend revenue receivable from DHA.

Liabilities

Total liabilities are estimated to be $46,034.0m reflecting an increase in the budget estimate of $103.0m due to:

• the increase in the DFRDB and DFRB unfunded liability as a result of lower than expected exit rates which has led to postponed benefit payments and a corresponding increase in the unfunded liability in the balance sheet ($179.0m)

• a decrease in the MSBS superannuation liability due to the revised lower than expected general wage growth (-$76.0m).

Table 70: Variation in schedule of budgeted administered cash flows (for the period ended 30 June)

Note1. Includes receipts from Defence Housing Australia, interest on loans taken out prior to 30 June 2008 and competitive neutrality payments.


$'000

2011-12Budget

Estimate$'000

Variation$'000

Variation%

OPERATING ACTIVITIESCash received

Interest 5,815 5,299 -516 -8.9Military superannuation contributions 1,136,132 1,165,332 29,200 2.6Fees 11,708 9,811 -1,897 -16.2Other[1] 53,666 64,042 10,376 19.3

Total cash received 1,207,321 1,244,484 37,163 3.1Cash used

Subsidies paid 132,511 113,480 -19,031 -14.4Military benefits 1,982,100 1,987,100 5,000 0.3

Total cash used 2,114,611 2,100,580 -14,031 -0.7Net cash from or (used by) operating activities -907,290 -856,096 51,194 -5.6INVESTING ACTIVITIESCash received

Dividends 46,393 47,593 1,200 2.6Total cash received 46,393 47,593 1,200 2.6Net cash from or (used by) investing activities 46,393 47,593 1,200 2.6Net increase (decrease) in cash held -860,897 -808,503 52,394 -6.1

Cash at the beginning of the reporting period - - - -Cash from the Official Public Account for appropriations 2,114,611 2,100,580 -14,031 -0.7Cash to the Official Public Account -1,253,714 -1,292,077 -38,363 3.1Effect of exchange rate movements on cash and cash equivalents - - - -

Cash and cash equivalents at the end the of the reporting period - - - -


128

Operating Activities

Cash received

Net cash from or (used by) Operating activities will increase by $51.2m Details are shown in Table 70 and an explanation of the major variances provided.

Operating cash received will increase by $37.2m primarily due to:

• an increase in military superannuation contribution receipts as a result of an increase in the ADF permanent force ($29.2m)

• an increase in other cash received of $10.4m primarily a result of an increase in the DHA competitive neutrality ($10.0m) and interest received on pre 2008-09 DHA loans ($0.4m)

• a decrease in licence fee receipts in line with the reduction in the revised DHOAS subsidy loan expenditure which is based on a percentage of the home loan subsidy expenditure (-$1.9m).

Cash Payments

Operating cash used will decrease by $14.0m due to:

• a decrease in home loan subsidy payments caused by a decrease in DHOAS subsidy expenditure due to the increased number of loans retired and offset by an increase in the number of loans taken up in the revised estimate (-$19.0)

• an increase in superannuation benefit payments due to a minor adjustment to DFRDB pension payments in the revised estimate ($5.0m).

Investing Activities

Cash Received• Increase in DHA dividends ($1.2m)

Table 71: Schedule of budgeted income and expenses administered on behalf of the Government (for the period ended 30 June)

Note1. This includes an amount for a DHA competitive neutrality payment.

2010-11Estimated

Actual$'000

2011-12Budget

Estimate$'000


$'000


$'000


$'000INCOME ADMINISTERED ON BEHALF OF GOVERNMENTRevenueNon-taxation

Interest 5,292 5,299 5,306 5,313 5,321Dividends 47,593 50,067 53,755 56,936 56,204Military superannuation contributions 1,090,000 1,165,332 1,234,338 1,305,198 1,376,479Fees 9,226 9,811 10,349 10,808 11,266Other[1] 42,653 35,985 33,299 34,072 37,032

Total non-taxation 1,194,764 1,266,494 1,337,047 1,412,327 1,486,302Total revenues administered on behalf of Government 1,194,764 1,266,494 1,337,047 1,412,327 1,486,302EXPENSES ADMINISTERED ON BEHALF OF GOVERNMENT

Subsidies 107,739 113,480 120,827 124,241 127,463Military retention benefits 39,223 52,443 64,223 77,103 95,883Military superannuation benefits 3,609,000 3,763,000 3,921,000 4,094,000 4,270,000

Total expenses administered on behalf of Government 3,755,962 3,928,923 4,106,050 4,295,344 4,493,346


129

Table 72: Schedule of budgeted assets and liabilities administered on behalf of the Government (as at 30 June)


2010-11Estimated

Actual$'000

2011-12Budget

Estimate$'000


$'000


$'000


$'000ASSETS ADMINISTERED ON BEHALF OF GOVERNMENTFinancial assets

Cash and cash equivalents - - - - -Receivables 61,432 63,906 67,594 70,775 70,043Investments accounted for using the equity method 2,174,330 2,174,330 2,174,330 2,174,330 2,174,330Loans 84,580 84,580 84,580 84,580 84,580

Total financial assets 2,320,342 2,322,816 2,326,504 2,329,685 2,328,953Non-financial assets

Prepayments 156,892 170,549 165,226 152,523 150,540Total non-financial assets 156,892 170,549 165,226 152,523 150,540Total assets administered on behalf of Government 2,477,234 2,493,365 2,491,730 2,482,208 2,479,493

ProvisionsSuperannuation - DFRDB[1] 25,947,000 25,970,000 25,975,000 25,944,000 25,880,000Superannuation - MSBS[2] 18,204,000 20,023,000 21,987,000 24,090,000 26,336,000

Total provisions 44,151,000 45,993,000 47,962,000 50,034,000 52,216,000Payables

Other 40,970 40,970 40,970 40,970 40,970Total Payables 40,970 40,970 40,970 40,970 40,970Total liabilities administered on behalf of Government 44,191,970 46,033,970 48,002,970 50,074,970 52,256,970

LIABILITIES ADMINISTERED ON BEHALF OF GOVERNMENT


130

Table 73: Schedule of budgeted administered cash flows (for the period ended 30 June)

Note1. Includes receipts from Defence Housing Australia, interest on loans taken out prior to 30 June 2008 and competitive neutrality payments.

2010-11Estimated

Actual$'000

2011-12Budget

Estimate$'000


$'000


$'000


$'000OPERATING ACTIVITIESCash Received

Interest 5,292 5,299 5,306 5,313 5,321Military superannuation contributions 1,090,000 1,165,332 1,234,338 1,305,198 1,376,479Fees 9,226 9,811 10,349 10,808 11,266Other[1] 69,770 64,042 61,356 62,129 65,089

Total cash received 1,174,288 1,244,484 1,311,349 1,383,448 1,458,155Cash Used

Subsidies paid 107,739 113,480 120,827 124,241 127,463Military benefits 1,832,600 1,987,100 2,012,900 2,086,400 2,182,900

Total cash used 1,940,339 2,100,580 2,133,727 2,210,641 2,310,363Net cash from or (used by) operating activities -766,051 -856,096 -822,378 -827,193 -852,208INVESTING ACTIVITIESCash Received

Dividends 52,677 47,593 50,066 53,755 56,936Total cash received 52,677 47,593 50,066 53,755 56,936Cash Used

Loans 44,100 - - - -Total cash used 44,100 - - - -Net cash from (used by) investing activities 8,577 47,593 50,066 53,755 56,936Net increase (decrease) in cash held -757,474 -808,503 -772,312 -773,438 -795,272

Cash at he beginning of the repor ing period 1 - - - -Cash from he Official Public Account for appropriations 1,984,439 2,100,580 2,133,727 2,210,641 2,310,363Cash to he Official Public Account -1,226,966 -1,292,077 -1,361,415 -1,437,203 -1,515,091Effect of exchange rate movements on cash and cash equivalents - - - - -

Cash and cash equivalents at the end of the reporting period - - - - -


131

3.2.3 NOTES TO THE FINANCIAL STATEMENTS

Note 1 - Key Accounting Policies

1.1 Budgeted Financial Statements Overview

Budgeted financial statements have been included to show the planned financial performance over the 2011-12 budget year, and each of the following forward years from 2012-13 to 2014-15.

The budgeted financial statements are provided to show the revenues, expenses, assets, liabilities and equity of Defence. These budgeted statements contain estimates for both departmental and administered activities prepared in accordance with the requirements of the Government's budgeting and reporting framework.

Departmental activities are those over which Defence has discretion, responsibility and authority and are controlled by Defence in its own right. Departmental financial statements represent the financial performance of Defence in delivering its outputs. Departmental expenses include employee and supplier expenses and other administrative costs, which are incurred by Defence in providing its goods and services.

Administered activities involve the management or oversight by Defence, on behalf of the Government, according to set Government directions, of which Defence does not have management control. These include military superannuation contributions, payments received from the United Nations and foreign governments, bank interest and dividends paid by Defence Housing Australia (DHA).

The continued existence of Defence in its present form, and with its present outcomes and related programs, is dependant on Australian government policy and on continuing appropriations by Parliament for Defence's administration and the running of programs.

Note that the term 'budgeted financial statements' and 'statements' are used interchangeably.

1.2 Appropriations in the Accrual Budgeting Framework

Under the Government's accrual budgeting framework, separate annual appropriations are provided for:

• departmental outputs appropriations (representing the Government's funding for outputs from agencies)

• departmental capital appropriations (representing increases in equity through funding non-expense payments )

• administered expense appropriations (representing estimated administered expenses relating to an existing outcome or a new outcome)

• administered capital appropriations (representing investments by the Government for either addi-tional equity in or loans to agencies).

Special appropriations fund the majority of payments from the Consolidated Revenue Fund (especially those that are entitlement driven).

1.3 Basis of Preparation of the Financial Statements

The budgeted statements have been prepared in accordance with:

• Finance Minister's Orders (FMOs), (Financial Statements for reporting periods ending on or after 1 July 2010)

• Applicable Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB)

• Portfolio Budget Statements 2011-12 Budget Guidance.


132

The budgeted financial statements have been prepared on an accrual basis and are in accordance with the historic cost convention, except for certain assets which, as noted (refer to items 1.8 and 1.10), are at fair value. Except where stated, no allowance is made for the effect of changing prices on the results or financial position.

Administered revenues, expenses, assets and liabilities and cash flows reported in the Schedule of Administered Items are accounted for on the same basis and using the same policies as for departmental items, except as otherwise stated in Note 1.17.

1.4 Revenue

Revenue from Government

Amounts appropriated for departmental outputs for the year (adjusted for any formal additions and reductions) are recognised as revenue when Defence gains control of the appropriation, except for certain amounts which relate to activities that are reciprocal in nature, in which case revenue is recognised only when it has been earned.

Defence draws down appropriations on a just-in-time basis. The undrawn departmental appropriations are reflected as a receivable and are available to be drawn down to meet future obligations. Appropriations receivable are recognised at their nominal amounts.

Sale of Goods and Rendering of Services

Revenue from the sale of goods or rendering of services is recognised upon delivery of the goods to the customer or provision of services.

Gains

Gains from disposal of non-current assets are recognised when control of the asset has passed to the buyer.

1.5 Transactions with the Australian Government as Owner

Equity Injection

Amounts appropriated as Equity injections (less any formal reductions) are recognised directly in contributed equity in that year.

Other Distributions to Owners including Return of Capital

Distributions to owners excluding dividends (including returns to Official Public Account (OPA)) are debited to Contributed Equity.

1.6 Cash and Cash Equivalents

Cash and cash equivalents include cheques, notes and coins held, as well as any deposits held at call with a bank or financial institution. Cash and cash equivalents are recognised at the nominal amount.

1.7 Receivables

Receivables for goods and services are generally receivable within the short term and are measured at their nominal amounts less any impairment losses.

1.8 Acquisition of Assets

Assets are recorded at cost on acquisition except as stated below. The cost of acquisition includes the fair value of assets transferred in exchange and liabilities undertaken. Financial assets are initially measured at their fair value plus transaction costs where appropriate.


133

1.9 Property, Plant and Equipment including Land, Buildings and Infrastructure

Asset Recognition Threshold

Purchases of property, plant and equipment, including land, buildings and infrastructure are recognised initially at cost in the Balance Sheet where they meet the individual asset recognition threshold. Individual items are capitalised where their value is equal to or exceeds $5,000 for buildings, infrastructure and heritage and cultural assets; $2,000 for other plant and equipment; and $0.01 for specialist military equipment and land.

Subsequent Valuations

Land, buildings, infrastructure, heritage and cultural and other plant and equipment are measured and disclosed at fair value less any accumulated depreciation and accumulated impairment losses. Specialist Military Equipment is carried at cost less any accumulated depreciation and accumulated impairment losses, in accordance with the Finance Minister's Orders.

Following initial recognition at cost, valuations are conducted with sufficient frequency to ensure that the carrying values of assets do not materially differ from the assets fair value as at reporting date.

Depreciation

Property, plant and equipment items having limited useful lives are systematically depreciated over their estimated useful lives on a straight-line basis.

Heritage and cultural assets within Defence have been assessed to have indefinite lives and are therefore not subject to depreciation. These heritage and cultural assets are stored, managed, displayed, repaired and restored in ways that will maintain their cultural or heritage value over time for an indefinite period.

Impairment

Property, plant and equipment items are assessed annually for indications of impairment. Where indications of impairment exist, the asset's recoverable amount is estimated and compared to the asset's carrying amount. If the recoverable amount is less than its carrying amount, the carrying amount is reduced to the recoverable amount and the reduction is to be shown as an impairment loss expense.

Decontamination, Restoration and Decommissioning Costs

Where a legal or constructive obligation arises upon acquisition to restore an asset back to its original condition, or dismantle an asset at the end of its useful life, the net present value of estimated restoration costs are capitalised and added to the cost of the underlying asset and depreciated over the asset's useful life.

Where a legal or constructive obligation arises as a consequence of Defence operations (i.e. use of the assets) the costs of restoration is recognised as an expense in the period in which the obligation arises.

At the same time a corresponding provision is recognised for these costs. The carrying amount of the provision is adjusted to reflect the passage of time and any incremental costs are recognised as finance costs.

Assets Under Construction

Assets Under Construction (AUC) are carried at cost, and are not depreciated or revalued. They include expenditure to date on major military capability and facilities projects. AUC projects are reviewed annually for indicators of impairment. Prior to rollout into service, the accumulated AUC balance is reviewed to ensure accurate capitalisation.


134

Asset Disposals

The gain or loss on disposal of property, plant and equipment is determined as the difference between the carrying amount of the asset at the time of disposal and the proceeds of disposal less any selling costs.

1.10 Intangible Assets

Defence's intangibles primarily comprise externally acquired and internally-developed computer software for internal use. Intangibles with gross values greater than $150,000 are capitalised.

Acquired intangible assets may form part of the acquisition of particular tangible assets. Where the intangible asset is inseparable from the underlying tangible asset, it is reflected in the value of the tangible asset.

Defence carries intangible assets at cost or at fair value, where an active market exists, less any subsequent accumulated amortisation and accumulated impairment losses.

The service potential of intangible assets is reviewed annually. If an intangible asset is regarded as being impaired, the asset is written down to reflect its remaining service potential.

Intangibles are amortised on a straight-line basis over their anticipated useful life.

1.11 Inventory

Defence holds inventory for its own use and does not ordinarily hold inventory for sale. Inventory held for use is valued at cost adjusted where applicable for loss of service potential. Any sales of inventory relates to disposal of inventory surplus to requirements and minor fuel sales to foreign governments.

Costs incurred in bringing each item of inventory (primarily explosive ordnance and general stores) to its present location and condition that are capable of being allocated on a reasonable basis are assigned to inventory. The costs of inventories are assigned by using the weighted average cost formula.

1.12 Suppliers and Other Payables

Defence's suppliers and other payables are generally payable within the short term and are recognised at the amount of cash or cash equivalents required to settle the liability. Liabilities are recognised to the extent that the goods or services have been received (irrespective of being invoiced).

1.13 Employee Benefits

Defence's workforce comprises two employment components: Australian Public Service (APS, i.e. civilians) and Australian Defence Force (ADF, i.e. military) personnel. Employee benefits for each workforce component are based on the relevant employment agreements and legislation.

Liabilities for wages and salaries (including non-monetary benefits), annual leave and other entitlements expected to be settled within 12 months of the reporting date are measured at their nominal amounts which are calculated with regard to the rates expected to be paid on settlement of the liability. All other employee benefits (including long service leave) are measured at the present value of the estimated future cash outflows to be made in respect of services provided by employees up to the reporting date.

Leave

The liability for employee benefits includes provision for annual leave and long service leave. No provision has been made for sick leave as all sick leave is non vesting and the average sick leave taken in future years by employees of Defence is estimated to be less than the annual entitlement for sick leave.

The leave liabilities are calculated on the basis of employees' remuneration, including Defence's employer superannuation contribution, at the estimated rates that will be applied at the time that leave


135

is taken, to the extent that the leave is likely to be taken during service rather than paid out on termination.

The liability for long service leave is determined by reference to the work of the Australian Government Actuary. The estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and inflation.

Superannuation on-costs have been added to the provisions for annual leave and long-service leave in respect of both APS and ADF employees.

Separation and Redundancy

Provision is made for separation and redundancy benefit payments when Defence has developed a detailed formal plan for the terminations and has informed those affected that the terminations will be carried out.

Superannuation

Permanently-appointed APS employees and Defence contribute to the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), the PSS Accumulation Plan (PSSap) and other superannuation schemes held outside the Commonwealth. The CSS and PSS are defined benefit schemes for the Australian Government. The PSSap is a defined contribution scheme.

The liability for defined benefits is recognised in the financial statements of the Australian Government and is settled by the Australian Government in due course. This liability is reported by the Department of Finance and Deregulation as an administered item.

Defence makes employer contributions to the Australian Government at rates determined by an actuary to be sufficient to meet the cost to the Government of the superannuation entitlements of Defence's employees. Defence accounts for these contributions as if they were contributions to defined contribution plans in accordance with AASB 119.

The Defence Force Retirement and Death Benefits Scheme (DFRDB) and the Military Superannuation Benefits Scheme (MSBS) are defined benefit superannuation plans for ADF members. Defence accounts for these contributions in the Budgeted Departmental Statements as if they were contributions to defined contribution plans in accordance with AASB 119. The liability for DFRDB and MSBS is recognised in the Budgeted Schedules of Administered Items.

1.14 Leases

A distinction is made between finance leases and operating leases. Finance leases effectively transfer from the lessor to the lessee substantially all the risks and benefits incidental to ownership of leased assets. In operating leases, the lessor effectively retains substantially all such risks and benefits.

Where an asset is acquired by means of a finance lease, the asset is capitalised and recognised at the lower of the fair value of the leased asset and the present value of minimum lease payments at the inception of the contract and a corresponding liability is also recognised at this time for the same amount. The discount rate used to calculate the present value of the minimum lease payments is the interest rate implicit in the lease. Assets acquired under a finance lease are amortised over the useful life of the asset. Lease payments are allocated between the principal component and the interest expense. Finance leased assets include certain properties, information technology equipment and specialist military support assets.

Operating lease payments are expensed on a straight line basis over the term of the lease, which is representative of the pattern of benefits derived from the leased assets. These include leases over general plant and equipment, computer hardware, office machines and communication equipment.


136

1.15 Foreign Currency

Defence does not budget for foreign exchange gains or losses in the budgeted financial statements.

1.16 Taxation

Defence's activities are exempt from all forms of taxation except fringe benefits tax, goods and services tax (GST), and certain excise and customs duties.

Revenues, expenses and assets are recognised net of GST except:

• where the amount of GST incurred is not recoverable from the Australian Taxation Office

• for receivables and payables (which are shown inclusive of GST in the Budgeted Balance Sheet).

1.17 Schedule of Budgeted Administered Activities

Administered revenues, expenses, assets, liabilities and cash flows are disclosed in the Schedules of Administered Items and related notes.

Cash transfers to and from the OPA are reported as adjustments to the administered cash held by Defence on behalf of the Government and reported as such in the Budgeted Cash Flow Statement in the Schedule of Administered Items and in the Administered Reconciliation Table.

Administered Revenue

All administered revenues relate to activities performed by Defence on behalf of the Australian Government. Administered revenues mainly comprise military superannuation contributions, payments received from the United Nations and foreign governments, bank interest and dividends paid by DHA.

Administered Expenses

All administered expenses relate to activities performed by Defence on behalf of the Australian Government. Administered expenses mainly comprise unfunded military superannuation benefits, ADF housing subsidies and ADF retention benefits.

Administered Investments

Defence reports the Australian Government's capital investment in DHA. The investment is classified as 'available for sale' and is measured at fair value using the net assets valuation approach in accordance with the FMOs. The investment is subject to impairment testing.

Military Retention Benefits

Certain categories of ADF personnel who are members of the Military Superannuation and Benefits Scheme and have had 15-years of service, receive retention benefits as an incentive for continued service. Retention benefit payments are initially recorded as prepayments and written down over the period of service.

Military Superannuation

The Defence Force Retirement and Death Benefits Scheme (DFRDB) and the Military Superannuation Benefits Scheme (MSBS) are defined benefit superannuation plans for ADF members. Contributions, benefit payments and the provision for unfunded obligations are reflected in the Budgeted Schedule of Administered Items.

The DFRDB is a fully unfunded scheme but the MSBS is a partly-funded scheme. MSBS member contributions are paid into the MSB Fund that is controlled by the MSB Board and are therefore not reflected in the Budgeted Schedule of Administered Items. The Australian Government on behalf of the


137

MSB Fund makes funded benefit payments to members of the scheme and is reimbursed by the MSB Fund for these payments.

The Australian Government Actuary (AGA) estimates the unfunded provisions and expected future cash flows as at 30 June each year. These estimates are reflected in the Budgeted Schedule of Administered Items. The AGA completes a full review of the unfunded liabilities (a long-term cost report) every three years.

Defence Home Owner Subsidy Scheme

Defence administers the Defence Home Owner Subsidy scheme and the Defence Home Ownership Assistance scheme on behalf of the Government.

Subsidy liabilities are recognised to the extent that: (i) the services required to be performed by the recipient have been performed; or (ii) eligibility criteria have been satisfied, but payments due have not been made.

Payments to CAC Act Bodies

Defence is the responsible agency for DHA CAC Act body appropriation payments. CAC Act body appropriation payments and receipts to or from DHA are classified either as administered expenses or revenues, loans receivable or an adjustment to the carrying amount of the investment held in Defence. Pre 2008-09 loan appropriation payments and receipts are recognised only in the Budgeted Cash Flow Statement.


138

3.3.3 CONSOLIDATED BUDGETED FINANCIAL STATEMENTS FOR THE DEPARTMENT OF DEFENCE (INCLUDING DMO)

Table 74: Consolidated Comprehensive Departmental Income Statement (showing net cost of services) for the Department of Defence (including DMO) for the period ending 30 June

2010-11Estimated

Actual$'000

2011-12Budget

Estimate$'000


$'000


$'000


$'000EXPENSES

Employee benefits 9,989,415 10,169,355 10,254,935 10,670,105 11,081,094Supplier expenses 8,687,193 9,710,214 8,883,954 9,610,877 9,879,471Grants 64,880 77,309 78,519 75,591 33,569Deprecia ion and amortisa ion 3,531,520 3,443,720 3,605,799 3,710,557 3,826,422Finance costs 72,107 91,882 80,996 86,546 87,017Write-dow n of assets and impairment of assets 1,060,666 1,244,054 1,142,499 1,194,408 1,247,971Losses from sale of assets - - 2,338 14,384 58,187Other 10,500 6,909 935 957 979

Total expenses 23,416,281 24,743,443 24,049,975 25,363,425 26,214,710LESS:OWN-SOURCE INCOMEOwn-source Revenue

Sales of goods and rendering of services 496,511 453,601 411,295 435,890 454,391Rental income 7,170 6,373 6,535 6,715 6,902Other revenue 233,546 133,688 137,076 140,578 144,133

Total own-source revenue 737,227 593,662 554,906 583,183 605,426Gains

Reversals of previous asset w rite-dow ns 546,982 574,954 601,938 629,460 657,579Sale of assets 5,832 2,582 - - -Other gains 2,250 2,250 2,250 2,250 2,250

Total gains 555,064 579,786 604,188 631,710 659,829Total own-source income 1,292,291 1,173,448 1,159,094 1,214,893 1,265,255Net cost of (contribution by) services 22,123,990 23,569,995 22,890,881 24,148,532 24,949,455Revenue from Government 22,199,297 23,569,995 22,890,881 24,148,532 24,949,455Surplus (Deficit) attributable to the Australian Government 75,307 - - - -OTHER COMPREHENSIVE INCOMEChanges in asset revaluation reserves - - - - -Total other comprehensive income - - - - -Total comprehensive income attributable to the Australian Government 75,307 - - - -


139

Table 75: Consolidated budgeted departmental balance sheet for the Department of Defence (including DMO) as at 30 June

2010-11Estimated

Actual$'000

2011-12Budget

Estimate$'000


$'000


$'000


$'000ASSETSFinancial assets

Cash and cash equivalents 136,666 144,666 144,666 144,666 144,666Trade and other receivables 171,972 209,557 240,727 276,131 312,018Tax assets 136,003 136,003 136,003 136,003 136,003Appropriation receivable 603,337 599,249 609,602 612,669 616,324Other receivables 166,796 201,796 176,796 166,796 166,796


Land and buildings 15,413,555 15,834,983 16,577,860 17,209,242 17,038,704Infrastructure, plant and equipment 6,088,118 6,045,512 5,874,289 5,690,115 5,470,059Specialist military equipment 38,948,191 41,366,780 42,570,691 44,558,294 47,315,297Intangibles 534,638 495,097 440,877 397,329 360,557Heritage and cultural 900,601 900,600 900,599 900,598 900,597Inventories 5,317,457 5,466,811 5,591,540 5,712,779 5,843,760Prepayments 1,568,842 1,568,842 1,568,842 1,568,842 1,568,842

Total non-financial assets 68,771,402 71,678,625 73,524,698 76,037,199 78,497,816Assets held for sale 28,465 28,465 28,465 28,465 28,465

Total assets 70,014,641 72,998,361 74,860,957 77,401,929 79,902,088LIABILITIESPayables

Suppliers 1,968,466 1,996,700 1,984,448 2,030,480 2,018,771Other 631,298 634,942 635,567 641,493 646,911

Total payables 2,599,764 2,631,642 2,620,015 2,671,973 2,665,682Interest bearing liabilities

Leases 803,123 826,250 741,305 688,962 584,873Total interest bearing liabilities 803,123 826,250 741,305 688,962 584,873Provisions

Employee provisions 2,436,776 2,497,796 2,608,204 2,710,017 2,823,683Restoration, decontamination and decommissioning 771,105 787,509 799,353 822,437 849,991Other 14,834 14,834 14,834 14,834 14,834

Total provisions 3,222,714 3,300,138 3,422,390 3,547,287 3,688,507Total liabilities 6,625,601 6,758,030 6,783,710 6,908,222 6,939,062NET ASSETS 63,389,040 66,240,331 68,077,247 70,493,707 72,963,026EQUITY

Contributed equity 14,529,738 17,381,029 19,217,945 21,634,405 24,103,724Reserves 14,042,887 14,042,887 14,042,887 14,042,887 14,042,887Retained surplus (accumulated deficits) 34,816,415 34,816,415 34,816,415 34,816,415 34,816,415

Total equity 63,389,040 66,240,331 68,077,247 70,493,707 72,963,026


140

Table 76: Consolidated budgeted departmental statement of cash flows for the Department of Defence (including DMO) for the period ended 30 June

2010-11Estimated

Actual$'000

2011-12Budget

Estimate$'000


$'000


$'000



Goods and services 418,078 405,715 369,772 397,419 414,849Appropria ions 22,189,197 23,577,995 22,890,881 24,148,532 24,949,455Net GST received 1,293,824 1,263,346 1,137,437 1,264,317 1,370,499Other cash received 235,956 135,182 138,610 142,167 145,781Cash transfer from the Official Public Account (receivables) 65,000 6,389 - - -


Employees 9,848,805 10,104,691 10,143,902 10,562,366 10,962,010Suppliers 7,903,390 8,796,934 8,051,759 8,711,074 8,996,588Net GST paid 1,145,889 1,263,346 1,137,437 1,264,317 1,370,499Grants 64,880 77,309 78,519 75,591 33,569Other cash used 50,411 6,909 935 957 979Cash transfer to he Official Public Account (receivables) 93,269 58,026 112,951 22,416 22,783

Total cash used 19,106,644 20,307,215 19,525,503 20,636,721 21,386,428Net cash from (used by) operating activities 5,095,411 5,081,412 5,011,197 5,315,714 5,494,156INVESTING ACTIVITIESCash received

Proceeds from sales of land and buildings 125,802 89,088 126,676 49,986 57,410Proceeds from sales of infrastructure, plant and equipment 28,947 28,739 28,747 36,160 36,371

Total cash received 154,749 117,827 155,423 86,146 93,781Cash used

Purchase of land and buildings 1,075,880 1,116,415 1,471,033 1,337,959 548,677Purchase of infrastructure, plant and equipment 176,128 327,179 311,216 283,842 256,874Purchase of specialist military equipment 5,333,586 5,193,700 3,958,839 4,853,454 5,741,031Purchase of intangibles 12,204 31,446 11,286 1,892 1,981Purchase of inventory 1,253,480 1,253,513 1,195,369 1,208,507 1,266,607Selling costs on sale of assets 23,184 25,952 14,647 39,277 101,317Finance costs 70,882 75,478 69,152 63,462 59,463

Total cash used 7,945,344 8,023,683 7,031,542 7,788,393 7,975,950Net cash from (used by) investing activities -7,790,595 -7,905,856 -6,876,119 -7,702,247 -7,882,169FINANCING ACTIVITIESCash received

Appropria ions - contributed equity 2,755,907 2,909,317 1,949,867 2,438,876 2,492,102Total cash received 2,755,907 2,909,317 1,949,867 2,438,876 2,492,102Cash used

Repayment of debt 68,723 76,873 84,945 52,343 104,089Cash to the Official Public Account - - - - -

Total cash used 68,723 76,873 84,945 52,343 104,089Net cash from (used by) financing activities 2,687,184 2,832,444 1,864,922 2,386,533 2,388,013Net increase (decrease) in cash and cash equivalents held -8,000 8,000 - - -

Cash and cash equivalents at the beginning of the repor ing period 144,666 136,666 144,666 144,666 144,666Effect of exchange rate movements on cash and cash equivalents - - - - -

Cash and cash equivalents at the end of the reporting period 136,666 144,666 144,666 144,666 144,666


141

Table 77: Consolidated budgeted income and expenses administered on behalf of the Government for the Department of Defence (including DMO) for the period ended 30 June

Note1. This amount includes a receipt from DHA for their competitive neutrality payment.

Table 78: Consolidated budgeted assets and liabilities administered on behalf of the Government for the Department of Defence (including DMO) as at 30 June


2010-11Estimated

Actual$'000

2011-12Budget

Estimate$'000


$'000


$'000


$'000INCOME ADMINISTERED ON BEHALF OF GOVERNMENTRevenueNon-taxation

Interest 6,792 6,799 6,806 6,813 6,821Dividends 47,593 50,067 53,755 56,936 56,204Military superannuation contributions 1,090,000 1,165,332 1,234,338 1,305,198 1,376,479Fees 9,226 9,811 10,349 10,808 11,266Other[1] 42,653 35,985 33,299 34,072 37,032

Total non-taxation 1,196,264 1,267,994 1,338,547 1,413,827 1,487,802Total revenues administered on behalf of Government 1,196,264 1,267,994 1,338,547 1,413,827 1,487,802EXPENSES ADMINISTERED ON BEHALF OF GOVERNMENT

Subsidies 107,739 113,480 120,827 124,241 127,463Military reten ion benefits 39,223 52,443 64,223 77,103 95,883Military superannuation benefits 3,609,000 3,763,000 3,921,000 4,094,000 4,270,000

Total expenses administered on behalf of Government 3,755,962 3,928,923 4,106,050 4,295,344 4,493,346

2010-11Estimated

Actual$'000

2011-12Budget

Estimate$'000


$'000


$'000


$'000ASSETS ADMINISTERED ON BEHALF OF GOVERNMENTFinancial assets

Receivables 61,594 64,068 67,756 70,937 70,205Investments accounted for using the equity method 2,174,330 2,174,330 2,174,330 2,174,330 2,174,330Loans 84,580 84,580 84,580 84,580 84,580


Prepayments 156,892 170,549 165,226 152,523 150,540Total non-financial assets 156,892 170,549 165,226 152,523 150,540Total assets administered on behalf of Government 2,477,396 2,493,527 2,491,892 2,482,370 2,479,655

ProvisionsSuperannuation - DFRDB[1] 25,947,000 25,970,000 25,975,000 25,944,000 25,880,000Superannuation - MSBS[2] 18,204,000 20,023,000 21,987,000 24,090,000 26,336,000

Total provisions 44,151,000 45,993,000 47,962,000 50,034,000 52,216,000Payables

O her 40,970 40,970 40,970 40,970 40,970Total payables 40,970 40,970 40,970 40,970 40,970Total liabilities administered on behalf of Government 44,191,970 46,033,970 48,002,970 50,074,970 52,256,970

LIABILITIES ADMINISTERED ON BEHALF OF GOVERNMENT


142

Table 79: Consolidated budgeted administered statement of cash flows for the Department of Defence (including DMO) for the period ended 30 June

Note1. This includes an interest amount of $28.1m received from DHA on loans taken out prior to 30 June 2008.

2010-11Estimated

Actual$'000

2011-12Budget

Estimate$'000


$'000


$'000



Interest 6,792 6,799 6,806 6,813 6,821Military superannuation contributions 1,090,000 1,165,332 1,234,338 1,305,198 1,376,479Fees 9,226 9,811 10,349 10,808 11,266Other[1] 69,770 64,042 61,356 62,129 65,089


Subsidies paid 107,739 113,480 120,827 124,241 127,463Military benefits 1,832,600 1,987,100 2,012,900 2,086,400 2,182,900

Total cash used 1,940,339 2,100,580 2,133,727 2,210,641 2,310,363Net cash from or (used by) operating activities -764,551 -854,596 -820,878 -825,693 -850,708INVESTING ACTIVITIESCash received

Dividends 52,677 47,593 50,066 53,755 56,936Total cash received 52,677 47,593 50,066 53,755 56,936Cash used

Loans 44,100 - - - -Total cash used 44,100 - - - -Net cash from (used by) investing activities 8,577 47,593 50,066 53,755 56,936Net increase (decrease) in cash held -755,974 -807,003 -770,812 -771,938 -793,772

Cash at the beginning of the reporting period 1 - - - -Cash from the Official Public Account for appropriations 1,984,439 2,100,580 2,133,727 2,210,641 2,310,363Cash to the Official Public Account -1,228,466 -1,293,577 -1,362,915 -1,438,703 -1,516,591Effect of exchange rate movements on cash and cash equivalents - - - - -

Cash and cash equivalents at the end of the reporting period - - - - -


143


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