Chapter 1 Secretary s Review

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1 Chapter 1 Secretary s Review

2 PAGE 2 DEPARTMENT OF FINANCE AND ADMINISTRATION ANNUAL REPORT Secretary s Review The activities of the Department of Finance and Administration (Finance) have a broad reach throughout the Australian Government and indirectly impact on the lives of most Australians. This is most obvious in terms of our advice to the government on expenditure priorities and policy proposals. Of similar importance is our work maintaining the framework for the management of the government s finances; facilitating efficient government operations, in particular in relation to acquisition, management and divestment of government assets; supporting ministers, senators, members and their staff; and encouraging the effective and efficient use of information and communication technologies in the delivery of government services to all Australians. This Annual Report outlines Finance s significant achievements over the year. Their realisation was helped by the Finance Valued Behaviours, which were adopted on 1 July Under these valued behaviours, a Finance officer is expected to: nurture productive working relationships; communicate effectively; achieve results and demonstrate creativity; exhibit both personal drive and integrity; display an ability to learn; and demonstrate relevant skills and experience. As a department, Finance encourages staff to demonstrate these valued behaviours. They form the basis of our recruitment, promotion and performance management processes, and of our learning and development programmes. The valued behaviours also help us to fulfil our role in government. The highlights of are outlined below. The 2004 Election Federal elections generate a significantly increased workload for Finance, regardless of when they are held, and the 9 October 2004 election was no different. In preparation for the election, and in consultation with the Department of the Prime Minister and Cabinet and the Australian Government Solicitor, Finance reviewed the guidelines and conventions that apply to the use of entitlements during an election campaign. As a result of that review, a number of minor clarifications were made to the guidelines and conventions. After the 29 August 2004 announcement of the election by the Prime Minister, all senators and members were provided with copies of the revised guidelines and conventions for use during the election campaign. After the Prime Minister announced the election, Finance and the Department of the Treasury (Treasury) completed work on the Pre-election Economic and Fiscal Outlook (PEFO), as required by the Charter of Budget Honesty Act The PEFO was published by the secretaries of the departments of Finance and Administration and the Treasury on 10 September Throughout the caretaker period, the secretaries also published detailed costings on 143 government and opposition election commitments, as requested, respectively, by the Prime Minister and the Leader of the Opposition.

3 ANNUAL REPORT DEPARTMENT OF FINANCE AND ADMINISTRATION PAGE 3 Following the 9 October 2004 election, Finance provided advice concerning travel, use of facilities, superannuation, staffing issues and the return of departmental assets to defeated and retiring members and their staff and assisted with their transition from parliamentary duties. Finance also made a significant effort to meet the Commonwealth s obligations as an employer under the Members of Parliament (Staff) Act 1984 to calculate and pay termination monies to 281 staff of members in the ten weeks following the election. Finance helped ensure a smooth transition into parliament for newly elected senators, members of the House of Representatives, and their staff. This was achieved through group seminars, presentations, one-on-one meetings and induction sessions. Through these forums, senators, members and their staff were provided with information to assist them to access the facilities necessary to carry out their duties. During the election campaign, the department prepared to facilitate any Finance and Administration Portfolio ministerial and administrative changes that a Prime Minister might decide to make. After the poll the department facilitated the smooth transition of the new Parliamentary Secretary to the Minister for Finance and Administration into the portfolio. It also ensured the smooth incorporation of the Australian Government Information Management Office into the department and supported the creation of the new Department of Human Services as part of an expanded Finance and Administration Portfolio. Delivery of the Budget In the lead up to the Budget, Finance supported the Expenditure Review Committee s (ERC) budget deliberations by costing all new policy and savings proposals in relation to expenses and non-tax revenue, and by providing briefing on the policy and financial implications of these proposals. Finance also prepared sixteen submissions and memoranda for consideration by ERC that contributed to the final shape of the Budget and the financial management parameters for the Australian Government for and future years. The Boxing Day 2004 Tsunami Finance played a role in the development of the government s response to the Boxing Day 2004 Tsunami tragedy, including by providing advice on funding arrangements for activities that the government undertook as a result. The department also managed the preparation of the two appropriation bills that made available the $1 billion assistance package announced by the Prime Minister on 5 January 2005 and other additional funding required by agencies to respond to the crisis. Finance continues to be actively involved in advising on procurement, budgeting and financial management issues related to the Australian Government s assistance programme. In addition, the Secretary is a member of the Secretaries Committee, which provides advice to the ministerial Joint Commission on the selection of projects to be funded by the Australia-Indonesia Partnership for Reconstruction and Development. Financial Governance Finance continues to develop the Australian Government s financial governance framework. During , the department completed development of the initial stages of the new Central Budget Management System (CBMS) as part of implementing the recommendations of the Budget Estimates and Framework Review. The CBMS will be progressively introduced from July 2005 and it is planned to be used for the Budget. The new system will improve the timeliness and accuracy of budget information provided to government. During 2004, Finance developed the Australian Government s enhanced procurement policy framework, which commenced operating on 1 January This framework helps to implement the government s international obligations, particularly in respect of the procurement chapters of the Australia-United States Free Trade Agreement and the Singapore-Australia Free Trade Agreement. Finance continues to provide a high level of support to agencies to help ensure the smooth implementation of the revised framework.

4 PAGE 4 DEPARTMENT OF FINANCE AND ADMINISTRATION ANNUAL REPORT Following the release on 12 August 2004 of the government s response to the Review of the Corporate Governance of Statutory Authorities and Office Holders, conducted by Mr John Uhrig AC, Finance developed guidance to assist departments with implementation of the review s governance principles and application of the review s governance templates. Finance also reviewed departments draft assessments against the principles, in consultation with the relevant department, to ensure a consistent and robust approach is taken to the application of the Uhrig principles. Finance advised the government on, and managed the development of, legislation to put the government s announcement of choice of superannuation fund for new Australian Government employees into effect. The commencement of the Superannuation Act 2005 and the Superannuation (Consequential Amendments) Act 2005 on 29 June 2005 gave effect to this policy. The Telstra Scoping Study Finance managed the preparation of a scoping study into the possible sale of the government s remaining shareholding in Telstra. The study was announced by the government on 13 December 2004 and the advisers to the study were appointed over the period 9 February 2005 to 6 May The scoping study report was completed and provided to government by 30 June More Efficient Government Operations During , Finance developed the Australian Government Property Ownership Framework. This framework facilitates efficient and cost-effective property ownership practices and replaced the Australian Government Property Principles from 1 July The department also established a Private Financing Advisory Services Panel on 24 February 2005 and published a set of four private financing guidance papers, which were launched on 6 May 2005 by the Parliamentary Secretary to the Minister for Finance and Administration. The panel and guidance papers should assist agencies to efficiently obtain expert advice in specialist fields and to use best practice methodologies when considering private financing proposals. A More Efficiently Functioning Parliament Finance successfully implemented a new on-line human resource (HR) system to administer the HR requirements of the employees of senators and members and introduced an on-line domestic travel booking tool for senators and members offices in The department also continued to provide a range of support services, such as the provision of electorate office facilities and administration of travel and accommodation entitlements, to current ministers, senators, members and their staff, and to former ministers, senators and members. Use of Information and Communication Technologies by the Government During , Finance developed strategies and frameworks to strengthen the links between the government s business drivers and information and communication technologies. The Australian Government e-authentication Framework was launched by the Special Minister of State on 21 March 2005 and provides guidance on transacting securely with government. The Access and Distribution Strategy, which seeks to improve the delivery of information technology services, was endorsed by the Information Management Strategy Committeee on 23 June The National Service Improvement Framework, which assists agencies with collaborative service delivery arrangements, was developed during and was endorsed by the Council of Australian Governments on 24 August The second version of the Australian Government Technical

5 ANNUAL REPORT DEPARTMENT OF FINANCE AND ADMINISTRATION PAGE 5 Interoperability Framework, which assists agencies to interact more easily with other agencies in delivering services, was developed during and was released by the Special Minister of State on 1 August Finance s Performance as an Employer The June 2004 Staff Attitude Survey was an important source of feedback for the department s Executive Board on how staff see the department as an employer. A comparison of the 2004 survey and the 2002 survey shows that Finance s performance has improved in most areas, including in terms of perceptions of: senior executive management of staff; managers treating staff with respect; working towards a shared goal; being respected by peers; access to relevant training; managers acting with honesty and integrity; commitment to the Finance Valued Behaviours; fairness of remuneration; and being kept up to date on departmental issues. These improvements were very significant in many cases and reflected: changes in Finance s remuneration framework; increased investment in learning and development; the introduction of the Finance Valued Behaviours on 1 July 2003; improvements to people management practices; and other initiatives introduced by Executive Board in response to the 2002 staff survey. However, the 2004 survey also identified that Finance needs to continue to improve its performance and/or reconsider existing practices in the areas of work and home life balance, staff turnover, performance management, and corporate culture. The department has introduced several initiatives to address the matters raised in the 2004 survey, including: increased opportunities for coaching to assist managers in providing feedback to staff; facilitating job transfers within the department; enhanced guidance on the distinctions between the ratings of our performance management scheme; and drawing on staff exit surveys and other available material to improve the department s people management practices and policies. The department has also introduced a purchased leave policy, a formal policy on time off in lieu, a Christmas closedown, and a supplementary leave policy to particularly target work and home life balance. The department is committed to addressing the issues identified in the staff survey in order to improve staff satisfaction. Finance s graduate recruitment programme continues to be a major part of its recruitment activity. Finance employed fifty-six graduates in 2005 and is aiming to employ eighty-five graduates in Finance also offers cadetships to assist in increasing the number of specialist employees with high-level financial skills in Finance and in the broader Australian Public Service (APS). There are currently six 2004 Finance cadets employed in the department and two 2005 Finance cadets completing their studies. One Indigenous cadet under the National Indigenous Cadetship Program is also completing her studies. The graduate development programme provides both graduates and cadets with the necessary skills and knowledge to underpin their future careers within Finance and the APS. Developing new and existing staff is important to maintaining and enhancing the department s capability to contribute to the government s outcomes. The principal focus during has been on leadership programmes (particularly for Executive Level 2 staff), the enhancement of Finance s graduate development programme and developing a calendar of training programmes for APS Level 1 6 staff. Formal and anecdotal feedback received from participants has been consistently positive. Organisational Changes in During , the structure of the department was amended to reflect three new responsibilities. On 1 July 2004, the Office of Evaluation and Audit (Indigenous Programs) joined the department from the Aboriginal and Torres Strait Islander Commission. It forms a part of the Financial Management Group. The Australian Government Information Management Office (AGIMO) was transferred from the Communications, Information Technology and Arts Portfolio to Finance on 27 October 2004, and is a separate business group. On 4 April 2005, the Telstra Scoping Study Taskforce was established to focus on the delivery of the Telstra Scoping Study to government and its subsequent consideration.

6 PAGE 6 DEPARTMENT OF FINANCE AND ADMINISTRATION ANNUAL REPORT Departmental Financial Performance Finance recorded an operating surplus for of $127.2 million compared to an operating surplus of $22.8 million in Revenue increased by $100.0 million as a result of increased appropriations from government, asset sales, and a reversal of a prior year provision for asbestos related diseases common law claims. Expenditure fell by $12.0 million. Whilst employee expenses increased, reflecting particularly salary movements and the incorporation of the AGIMO into the department, these additional running costs were offset by an improved claims experience by Comcover. Income tax equivalent expense increased in line with improved results from the management of the non-defence property portfolio and recovery of prior years losses by Comcover. A more detailed analysis of the department s financial performance is at Chapter 7. The department s Financial Statements were audited by the Australian National Audit Office (ANAO) and an unqualified audit opinion was issued. However, in the course of a general performance audit of the management of net appropriation agreements made under section 31 of the Financial Management and Accountability Act 1997 (FMA Act), the ANAO found that the department s section 31 agreements, upon which it was relying for an appropriation authority, were invalid. The ANAO, in auditing Finance s financial statements over these past years and having access to all of the accounts and records, has not previously raised concerns about the validity of these section 31 agreements. This omission highlights the complexity of this issue, even though both the ANAO and Finance have approached their accountabilities in a professional manner. As a result of the invalidity of the agreements, the department had no valid appropriation for the expenditure of some amounts (an inadvertent breach of section 83 of the Constitution) and the ANAO found that accounts and records were not kept as required (a breach of section 48 of the FMA Act). These breaches are of a technical nature and did not lead to a qualification of the financial statement figures or affect the provision of a true and fair audit opinion. The ANAO states that Finance s control framework and internal controls generally operate satisfactorily and provide reasonable assurance as to the accuracy and reliability of the accounts and records. A section 31 agreement, which has been recognised by the ANAO as valid, was signed into effect on 29 June Future Issues and Directions An important part of our work each year is the support provided for ERC s budget deliberations. During , Finance will cost all new policy and savings proposals in relation to expenses and non-tax revenue. Finance will also prepare briefing on the policy and financial implications of initiatives being considered for the Budget, including for Senior Ministers Review and ERC, as well as to the Minister for Finance and Administration. The advice continues to be in the form of Finance Green Briefs. Finance will continue to undertake preparatory work for a potential Telstra sale. This preparatory work is consistent with the Minister for Finance and Administration s announcement on 17 August 2005 that the government would be moving to the next stage of preparing for a possible Telstra sale and that the government would make a further decision early in 2006 about proceeding to sale. A major part of the preparatory work for Finance will be the management of procurement processes and planning for a potential sale. As part of this work, on 27 August 2005 Finance placed advertisements seeking tenders for joint global coordinators and other selling roles. Other procurement processes will also be

7 ANNUAL REPORT DEPARTMENT OF FINANCE AND ADMINISTRATION PAGE 7 commenced during to ensure that the department is prepared for any government decision. The appointment of these firms does not bind the government to proceed with a sale. During , the department will contribute to the establishment of the Future Fund and its supporting arrangements, including the Future Fund Management Board and the Future Fund Management Agency. The government announced on 10 May 2005 its intention to create the fund within the Finance and Administration Portfolio, with the defined purpose of accumulating assets sufficient to offset the government s unfunded superannuation liability. The department intends to have the Future Fund Management Agency operational as close as possible to the date of passage of the legislation establishing the fund. To help ensure that this occurs, the department is working closely with the Treasury, which is developing the legislation for the Future Fund. Finance is working to develop a renewed agenda for the electronic delivery of government services. The agenda will be published in the last quarter of It will cover the years from 2005 to 2010 and will build on the Better Services, Better Government Strategy The principal themes will be exploiting the capability of information and communication technology (ICT) to improve service delivery, realising value from the government s investment in ICT and providing citizens and business with ready access to government information, across all tiers of government. During , Finance will complete three major early initiatives arising from the renewed electronic service delivery agenda. These initiatives are the development of a framework to improve confidence in electronic transactions between individuals and the government, the development of better ways of harnessing value from major government projects that depend on ICT, and the development of an integrated service delivery strategy for the APS. Finance will be implementing the new Central Budget Management System (CBMS) progressively in , following its development through and Implementation will involve testing individual modules and parallel running with the existing systems, before rolling CBMS out to agencies. The major modules in the CBMS, the Appropriations and Cash Management (ACM) module, Budget Estimates and Actuals Management (BEAM) module, and the Budget Policy and Coordination Database (BPCD) module (which supports budget management processes), are expected to be operational in late The ACM module was fully operational prior to the publication of this report. Finance will continue to manage the construction of various major capital works projects during , including the Christmas Island Immigration Reception and Processing Centre. During Finance made substantial progress with project management, planning, documentation and initial site works for the centre. The project is expected to be complete towards the end of the 2006 calendar year. During , Finance will continue to improve the delivery of services to senators, members and their staff, by implementing key initiatives of the Ministerial and Parliamentary Services (M&PS) Business Improvement Program. An internet portal is being developed to provide a single gateway to M&PS services. This will feature a single sign-on facility, enabling authorised users to log on once to access the full range of information and transaction services that will be made available progressively through the portal. By mid 2006, the new human resource (HR) system, emops, will be available on-line, providing parliamentarians and their staff with direct access to a range of HR functions, such as applying for leave and overtime and having it authorised electronically. This will be a major advance from the current manual processes. Finance will represent the Special Minister of State in consultations with staff employed under the Members of Parliament (Staff) Act 1984 (MOP(S) Act) over a new certified agreement. Consultations on a new agreement are due to commence no later than 20 February 2006, six months prior to the nominal expiry date of the current agreement (20 August 2006).

8 PAGE 8 DEPARTMENT OF FINANCE AND ADMINISTRATION ANNUAL REPORT During , work will continue on the delivery of the Special Minister of State s professional development programme for staff employed under the MOP(S) Act. The department has released a training calendar and the training programme includes courses on effective writing, interpreting legislation, understanding administrative law, speech writing and project management. These courses are delivered through various training providers contracted by the department and are specially tailored to suit the needs of MOP(S) Act employees. The department will continue to provide induction training and office management training direct to MOP(S) Act employees. New sourcing arrangements for the provision of IT services to the department, as foreshadowed in last year s Annual Report, were delivered on schedule in November These new arrangements have already resulted in improved services at reduced cost. To further ensure reliable IT services, Finance will invest significantly over the next eighteen months to upgrade its IT infrastructure, consolidate its data centres, rationalise and refresh servers, and complete the implementation of disaster recovery strategies. I expect that the year will be full of challenges for the department some of which are known, while others remain unknown at this time. Finance staff have a strong and growing capability, as members of a central agency, to respond to the challenges set by the government. I am sure that staff will meet these challenges with the same diligence and professionalism that they showed during I would like to thank all Finance staff for their contribution to public policy and administration over I look forward to sharing with them the challenges that brings. I J Watt Secretary

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